State capture has put the City of Johannesburg’s funds at risk‚ according to mayor Herman Mashaba.

He said in a statement on Friday afternoon that in 2012 the city gave indebted state-owned arms manufacturer Denel an unsecured loan of R290m via Gupta linked associates.

Mashaba alleged that former mayor Parks Tau tailored a tender in favour of Gupta-linked Regiments Capital to manage the city’s R18bn fund for paying back loans and investments.

“Regiments was appointed to perform the fund management contract – following a tender process seemingly tailored for it as the incumbent. At the time‚ it was alleged that Regiments’ bid was arguably the most expensive out of 11 competitors‚ including large banks and specialist fund managers‚ who were disqualified.”

Regiments Securities acted as the middleman in arranging that the R290m be paid to Denel.

“Of course‚ it is deeply disturbing to now find out that City funds have been placed at risk in this process and it is extremely difficult to dissociate Regiments from Gupta influence.”

Mashaba said the City had been informed that Denel was unable to honour its payments.

Denel has R2.34bn of bonds maturing in September‚ a tough ask for a company in the midst of a liquidity crisis. The company‚ beset by allegations of mismanagement and corruption‚ required a government guarantee of R850m in December to raise money to pay salaries and its suppliers. 

“Since entering office as the executive mayor of Johannesburg‚ my administration has been plagued by challenges inherited from the previous administration in our City. One of the largest being the deep-rooted corruption‚ which had become a norm in the City‚” Mashaba said.

“While the previous administration‚ under the leadership of Park Tau‚ turned a blind eye and continuously denied these allegations‚ my administration has already exposed fraud‚ corruption‚ theft and maladministration to the tune of R18 billion.”