Johannesburg/Denel loan was legal and above board – Gordhan

Public Enterprises Minister Pravin Gordhan has refuted suggestions of impropriety suggestions by Johannesburg mayor Herman Mashaba saying the loan from South Africa’s economic hub to troubled State-owned Denel was legal.

“Mashaba again resorted to reduce a professional and sound relationship between Johannesburg and Denel, a State-owned company reporting to the Department of Public Enterprises (DPE), to petty political point scoring,” Gordhan’s spokesman Adrian Lackey said in a statement.

The loan from Johannesburg, via Regiments Capital, to Denel in 2012 was concluded by a previous city administration and a previous Denel board; Regiments Capital has since been identified as a Gupta-linked company retained by Johannesburg not by the Department of Public Enterprises or Denel and Johannesburg should investigate whether the contractual relationship between itself and Regiments was proper – “that is the City of Johannesburg’s responsibility,” the statement said.

According to information provided by Denel, the loan was properly and lawfully entered into.

Gordhan’s response to a written question in Parliament explains in the 2007/08 financial year, National Treasury and his department approved a Domestic Medium Term Note for R2.2 billion that allowed for both secured and unsecured loans. This was registered with the Johannesburg Stock Exchange Securities.

The Denel board approved the R290 million facility on September 4, 2012, when Denel “was a profitable state owned company with a healthy balance sheet”.
“Based on historical records, there are no indications any breaches were committed in corporate governance rules or in Treasury’s public finance management regulations,” the statement said adding: “Despite a decent and professional discussion in June this year, Mayor Mashaba saw it fit to attack the integrity and reasonable arrangements with the City of Johannesburg on two occasions”.

Gordhan rejects insinuations of being “economical with the truth” and that he “begged” the Johannesburg mayor’s “indulgence not to liquidate Denel”.