Johannesburg mayor Herman Mashaba has accused Public Enterprises Minister Pravin Gordhan of being "economical with the truth" in explaining how state owned arms firm Denel received a R290-million unsecured loan from the city's sinking fund management company.

In a written response to questions in parliament, Gordhan said the loan was duly approved and registered with the Johannesburg Stock Exchange Securities.

Mashaba, who has taken issue with the loan dispersed before a coalition led by his Democratic Alliance party took over control of Johannesburg from Gordhan's African National Congress, said the minister's "willingness to pronounce on a very limited assessment of the legality of this loan misses the most fundamental point for someone charged with overseeing the prudent use of public money".

"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, placed in a sinking fund, which the multi-party government uses to redeem the city’s inherited creditors book, totalling over R18-billion," Mashaba said.

"For R290-million of these funds to be offered through an unsecured loan without the knowledge of the city of Johannesburg to Denel, a State-owned entity with a less then reputable record of financial management, is an indictment on the principles of prudent use of public money."

"The fact that Denel could not repay the loan when it became due, is evidence of this fact," Mashaba added.

He said the city was undertaking a forensic investigation into who profited from this loan by way of facilitation fees "that appear to have become all too common with Gupta-linked entities", alluding to a wealthy family accused of abusing its close ties with former president Jacob Zuma to wield undue influence on the State.

"The legality of this unsecured loan is still being investigated by the city of Johannesburg and we will await the outcome of the forensic investigation before we share minister Gordhan’s confidence in the legality of this loan," Mashaba added.