Share this article

​​This week the City of Johannesburg's Mayor, Herman Mashaba challenged the Minister of Public Enterprises Pravin Gordhan to prioritise the precious rates and taxes, after that state-run arms firm Denel failed to budget for the repayment of a R290 mi​lion​​ ​loan owed to the City. 


Photo by

This follows the lending of residents’ money to Denel, through Gupta linked Regiments Capital, via an unsecured loan made without the City’s knowledge and irrespective of the financial risk posed to residents’ money. In 2013 and 2014, Denel issued senior unsecured notes with a maturity date of 10 June 2018. Regiments Capital, in their capacity as fund managers of the City’s sinking fund, then purchased these notes to the value of R290 million for the fund.

As part of the City’s investment structure, the City utilises a sinking fund to pay back inherited debts and investments made to the City, amounting to over R18 billion. Regiments was appointed to perform the fund management contract following a tender process allegedly tailored for it as the incumbent.

However, on the 5 June, 2018, the Department of Public Enterprises (DPE) informed the City, in their capacity as the shareholder representative to Denel, that the institution was not in a position to settle the notes on the due date because of serious liquidity challenges. 

After consultations with the DPE and Minister of Public Enterprises himself, Mr Pravin Gordhan, the City reached an agreement to roll over the repayment of the loan amount so as to prevent capital loss for the City, prevent Denel from defaulting while also giving the entity time to implement a business rescue strategy aimed at improving its liquidity and financial situation.

But the latest revelations have made the agreed repayment deadline of 10 December 2018 increasingly moot. City of Johannesburg Mayor Mashaba said: "The City of Johannesburg’s sinking fund is derived from the rates and taxes paid for by the residents of Johannesburg. It is their money. Any investment which undermines security of said finances ultimately harms our residents."​