Minister of Public Enterprises Pravin Gordhan has told Members of Parliament in a written reply to questions that the R290m loan which the Johannesburg Metropolitan Municipality paid to Denel was lawful.
The loan, which came from the previous local government administration at the Gauteng metro, has been a bugbear for incumbent executive mayor Herman Mashaba.
According to Mashaba, the money from the unsecured loan was meant to mature in June. This was the same time that the metro was alerted that Denel would not be able to honour the debt, Mashaba said.
In his reply to a question from Congress of the People MP Willie Madisha, Gordhan said National Treasury and the Department of Public Enterprises approved a domestic medium term not a decade ago.
"The facility was approved by the Board of Denel on 4 September 2012. Government had approved the domestic medium term note in 2007-08 for R2.2bn, which provided for both secured and unsecured components," said Gordhan.
"[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 Securities," said Gordhan.
The minister said the identification and contracting of the up-takers of the facility was the responsibility of the board without further involvement of the ministers of finance and public enterprises.