Johannesburg mayor Herman Mashaba. Picture: SUPPLIED
Johannesburg mayor Herman Mashaba. Picture: SUPPLIED

Johannesburg mayor Herman Mashaba has taken public enterprises minister Pravin Gordhan to task over a loan that the City of Johannesburg granted to state arms manufacturer Denel, under the previous ANC-led municipality in 2012.

In a written response to a parliamentary question‚ Gordhan said that a R290m loan granted by the city to Denel was lawful.

But on Tuesday, Mashaba released a statement titled, “Minister Gordhan being economical with the truth.”

“I note with concern reports in the media about a recent reply by the minister of public enterprises‚ Mr Pravin Gordhan‚ in Parliament‚” Mashaba said. “In his response, minister Gordhan indicated that the R290m unsecured loan from Regiments Capital [The City of Johannesburg’s sinking fund management company] to Denel was entirely legal. However‚ minister Gordhan’s willingness to pronounce on a very limited assessment of the legality of this loan misses the most fundamental point for someone charged with overseeing the prudent use of public money.”

According to reports‚ Gordhan had told COPE MP Willie Madisha that the loan had been approved by the board of Denel on September 4 2012.

“Government had approved the domestic medium-term note in 2007-2008 for R2.2bn‚ which provided for both secured and unsecured components‚” Gordhan was quoted as saying.

He continued: “[The loan] was part of the unsecured component of the domestic medium-term note programme. This loan‚ like all the other loans under the domestic medium-term note programme‚ was duly registered with the Johannesburg Stock Exchange.”

Mashaba said it remained to be seen whether the loan was legal.

“For R290m of these funds to be offered through an unsecured loan without the knowledge of the City of Johannesburg to Denel‚ a state-owned entity with a less then reputable record of financial management‚ is an indictment on the principles of prudent use of public money. The fact that Denel could not repay the loan when it became due‚ is evidence of this fact,” Mashaba said.

“The legality of this unsecured loan is still being investigated by the City of Johannesburg and we will await the outcome of the forensic investigation before we share minister Gordhan’s confidence in the legality of this loan.”