Mashaba's comment on council's loan to Denel is ‘political points scoring’, Pravin Gordhan says
‘There are no indications that any breaches were committed in corporate governance rules or in Treasury’s public finance management regulations,’ Gordhan says
Public enterprises minister Pravin Gordhan has accused Johannesburg mayor Herman Mashaba of reducing the “professional and sound relationship” between the city and state-owned arms manufacturer Denel to “petty political point scoring”.
Gordhan’s accusation comes after Mashaba said earlier this week that Gordhan was “economical with the truth”, after the minister said in a written parliamentary reply that a R290m loan granted by the city to Denel was lawful.
Mashaba said on Tuesday it remained to be seen if the loan, which was granted to Denel in 2012 by the city from the city’s sinking fund, which was being managed by Gupta-linked Regiments Capital, was legal, but that “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”.
The loan was part of the unsecured component of the domestic medium-term note programme, Gordhan had said in his parliamentary reply.
The loan had to be paid back in June, but an extension was granted to December after Gordhan asked for Mashaba’s “indulgence” in rolling over the maturity of the note, given Denel’s serious liquidity challenges.
On Wednesday evening, however, Gordhan hit back in a statement in which he told Mashaba that the loan was concluded by a previous administration in Johannesburg, as well as a former Denel board, that Regiments Capital was appointed by the city and that the city should therefore investigate whether the contractual relationship between the metro and Regiments was properly entered into.
In terms of the loan, Gordhan said he had explained in his parliamentary answer that in 2007-2008, the Treasury and the department of public enterprises approved a domestic medium-term note for R2.2bn that allowed for both secured and unsecured loans, which was registered with the JSE.
Gordhan said at the time the loan was entered into in September 2012, Denel was a profitable state-owned enterprise, with a healthy balance sheet.
“Based on historical records, there are no indications that any breaches were committed in corporate governance rules or in Treasury’s public finance management regulations,” Gordhan said.
He said that “despite a decent and professional discussion” in June, Mashaba “saw fit to attack the integrity and the reasonable arrangements with the city” on two occasions, referring to Gordhan’s letter, which was leaked to the media, as well as the most recent statement that he was “economical with the truth’’, which Gordhan saw as implying that he misled or lied to parliament.
“I strenuously reject these insinuations,” Gordhan said, adding that he maintained that his written response to parliament was correct and that the loan facility was legal.
“If the city finds that its relationship with Regiments was improper, we will completely support any corrective action the city wishes to take.’’