Minister Gordhan must urgently secure R290 million owed to residents
7 November 2018
Today, I received concerning reports that Denel, within its midterm budget, has failed to budget for the repayment of R290 million loan owed to the City. The loan was to be repaid by the 10th of December 2018.
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.
Subsequent to the issuance of the notes, Regiments Capital, in their capacity as fund managers of the City’s sinking fund, 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.
On the 5th of 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. In approaching the City, DPE’s objective was to negotiate a rollover of the investment in order to prevent Denel from defaulting while Denel stabilised its financial and liquidity position.
Following consultation 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.
The latest news received by the City on this loan is of great concern, particularly given the Minister’s commitment to ensuring that the loan is repaid by early December.
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.
Given this recent news, the Minister must urgently explain how Denel intends on meeting the agreed repayment deadline of 10 December 2018.
The City Manager has already written to the Department of Public Enterprises in this regard and we expect a response by the end of this week.
Since entering office as the Executive Mayor of Johannesburg, my promise has been to rid the administration from the deep rooted corruption inherited from previous administration.
I will continue to ensure that residents of this City grow in their confidence for the multi-party government to lead ethically, putting the needs of the residents first.
Issued by Luyanda Mfeka, Director: Mayoral Communications, Office of the Executive Mayor, 7 November 2018
