On 17 May 2016 in a much disrupted parliamentary session, James Selfe of the Democratic Alliance eventually asked President Zuma about his claim that he paid for the building of Nkandla through a mortgage bond.

Selfe asked how the bond had been obtained. Zuma said through a PtO.

A PtO is a “Permission To Occupy”. A PtO is a personal right over certain rural and unsurveyed land which allows a user to use or occupy the land in question.

As a personal right a PtO is not registrable in a deeds registry: only real rights and limited real rights can be registered in a deeds registry. Most PtOs are issued for occupation; others are issued for land use.

The PtO is one of the least formal, least bureaucratic, most flexible and easily comprehensible tenure right because of its very personal nature.

All other tenure rights are based on a genuine cadastral diagram (a cadastral diagram records property boundaries, subdivision lines, buildings, and related details) and are approved according to relevant land survey legislation and spatial planning policy. A PtO, on the other hand, is only based on a sketch plan.

The PtO lapses when its holder dies and cannot be inherited by the holder’s heirs.

Crucially, PtO tenure is not an economically viable form of land holding as it is not acceptable as real security or collateral by any financial institution – one cannot obtain a home loan or mortgage bond against a PtO.

A PtO is not proof of titled ownership in land and therefore cannot be classed as a title deed to land. Thus PTO land is not eligible for registration in a deeds registry.

Security over immovable property can only be obtained by a special mortgage of immovable property as set out in the Deeds Registries Act, 1937.

A bond does not transfer title in the mortgaged property to the lender. It only confers a limited real right to the lender to have the property sold in execution, and the proceeds of that sale then applied, to settle or reduce the debt secured by the bond.

A mortgage bond is ‘perfected’ by registering it at the same deeds registry where the immovable property, over which the bond is granted, is registered. There is no other way to confer a valid security over immovable property.

The Mail & Guardian reported that Zuma first applied for a home loan on Nkandla in 2001, when it was worth between R 650 000 and R 750 000. This was according to a bank valuation and insurance assessments.

By December 2002, he was granted a home loan by First National Bank (FNB) despite being in dire financial straits, not having a formal lease on the land, and a bank policy not to bond property owned by tribal trusts.

The granting of the bond coincided with erstwhile presidential spokesperson Mac Maharaj's tenure as a director of FirstRand Limited, the holding company of FNB. Maharaj did not respond to questions on whether he did or could have influenced the granting of a loan. FNB refused to comment.

In the original indictment against Schabir Shaik, the National Prosecuting Authority (NPA) set out evidence of attempts to finance the construction of Nkandla. The NPA submitted that the loan was only granted because of a R 400 000 surety signed by businessman Vivian Reddy.

In the Shaik judgment Judge Hilary Squires said: "... [I]t is common cause, or amply proved, that it was [Vivian] Reddy who eventually arranged for the payment of the bulk of the cost of Zuma's Nkandla home for it was Reddy who arranged the bond … by the time Reddy applied for the bond on Zuma's behalf … The first application for the Zuma bond was for R 650 000 ... "

Although the high court finding didn’t name FNB, the indictment did.

Subsequently the Mail & Guardian reported FNB as saying that could not be true: "FNB does not grant home loans to individual applicants for housing developments that are carried out on tribal land, as the properties are not held under separate title. FNB cannot register a bond over the individual homes," said Jan Kleynhans, chief executive of FNB Home Loans. "Legally, people who currently live on land owned by a tribal authority have no claim to ownership of the land."

Nkandla stands on land owned by the Ingonyama Trust, the body that administers Zulu tribal land. The trust has confirmed that Zuma holds a formal lease on the portion underneath his compound, but does not hold the title deed.

That does not necessarily preclude a different form of financing from FNB, however. "In principle, the bank grants several types of loans to customers, such as personal loans, rights of cession and traditional mortgage loans," Kleynhans said.

"Only on reasonable grounds does the bank grant such loans which are not traditionally bonded [mortgage loans] and where there is an adequate form of security on the loan. 

"These loans are reviewed on a case-by-case basis and granted based on low risk and minimal exposure to the bank." 

In the case of a mortgage, the bank has the option to seize and sell the property in the case of a default in repayment. In the case of a loan it does not.

Zuma said: “I engaged the banks and I am still paying a bond on the first phase of my home," said Zuma, speaking off-the-cuff during parliamentary questions. "… I am still paying a bond to this day.”

So we are left with a bond for R 900 000 allegedly issued by FNB, which denies it would have done so, secured by R 400 000 surety signed by benefactor Vivian Reddy. The bond or loan was awarded on a property worth less than R 1-million.

The Public Protector’s report on Nkandla, “Secure in Comfort”, reported that R 215 million had been spent on Nkandla and the estimated cost to complete it was R 246 million.

Regarding the allegation that the President may have misled Parliament and accordingly violated the Executive Ethics Code when he announced that the renovations at his private residence were financed through a bank mortgage bond, the Public Protector was unable to make a finding.

She did establish through the Register of Financial Interests that the President had declared a mortgage bond in respect of Nkandla since 2009, but “I am not able to establish if costs relating to his private renovations were separated from those of the state in the light of using the same contractors around the same time and the evidence of one invoice that had conflated the costs although with no proof of payment”.

The non-security upgrades Zuma was prepared to pay for were the visitors' centre, the amphitheatre, the cattle kraal, chicken run and the swimming pool.

According to the Report the visitors’ centre and swimming (fire) pool alone cost over R 9.5 million to build. A “bond” for R 900 000 may have been useful in the early days of the renovation. Considering the value of the upgrades Zuma was prepared to pay for and after the amount of the bond or loan was spent, where did the rest of the money come from, other than the taxpayer?

In a statement on 17 May 2016, the Presidency said evidence of the bond would be "readily made available to an authorised agency or institution empowered by the law of the land", but not to the media for reasons of client confidentiality, and respect for Zuma's privacy.

Written by Sara Gon, a Policy Fellow at the IRR, a think tank that promotes economic and political liberty. Follow the IRR on Twitter @IRR_SouthAfrica.