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In March, the Minister of Economic Development, Ebrahim Patel, proposed that private pension funds would be encouraged to invest in development bonds to fund government expenditure. In response to my question on whether these financial instruments had already been designed, the Minister of Finance, Pravin Gordhan, responded that there was no need for such vehicles and that the sufficiently liquid domestic financial market ensured the availability of funding to finance government borrowing requirements. He added that government’s borrowing requirements had
been determined through the due process prescribed by law (i.e. the prescribed budget process).

Minister Patel subsequently went silent on his proposed return to apartheid-era financial interventionism in private pension funds. He only briefly mentioned retirement funds in his latest plan – his so-called New Growth Path – where he makes vague reference to government’s increased investment in development finance institutions. Gordhan 1 - Patel 0

In November, Minister Patel announced that only half of the R500 million fine imposed on Pioneer Foods would be paid to the National Revenue Fund. The other R250 million would be paid to the Industrial Development Corporation to create an Agro-processing Competitiveness Fund. Minister Patel was either not aware of, or chose to ignore, section 213 (1) of the Constitution which states that “there is a National Revenue Fund into which all money received by the national government must be paid, except money reasonably excluded by an Act of Parliament”. Minister Gordhan has successfully opposed Patel’s plan to violate the Constitution, with a recent announcement that the full R500 million would be paid to the National Revenue Fund. Gordhan 2 - Patel 0

The fight is not over yet - section 213 (2) of the Constitution only permits withdrawals from the National Revenue Fund in terms of an appropriation by an Act of Parliament. When it recently passed the Adjustments Appropriation Bill, Parliament did not include this amount in the adjusted appropriation to the Ministry of Economic Development. Minister Patel will now need to wait until the next appropriation, after the budget announcement in February, for access to the R250 million he clearly wants earmarked.

There is little doubt that the gloves are off in the fight between Ministers Gordhan and Patel. The fight has however just begun. Minister Gordhan has the Constitution and the Public Finance Management Act in his corner. Minister Patel has a fundamentally flawed plan in his. The next round is likely to unfold around Minister Gordhan’s budget announcement early next year. The question is, will Minister Gordhan include significant aspects of Minister Patel’s New Growth Path proposal in his budget, or will Minister Gordhan continue the fight and set up a sensible budget?

The Democratic Alliance will submit questions at the earliest opportunity in the next parliamentary term to ask why there was no consultation between the Ministers before Minister Patel’s attempt to reallocate funds away from the National Revenue Fund. We will also oppose any attempt to earmark funds for Minister Patel if our scarce public financial resources can be better applied elsewhere.