Finance Minister Pravin Gordhan and Economic Development Minister Ebrahim Patel have resolved differences over the flow of the R500-million in fines arising from the so-called ‘Pioneer settlement’, while also opening the door for the Competition Commission to stipulate, or earmark, how penalties from future infringements should be directed.

Initially, Pioneer had agreed to pay R250-million to the National Revenue Fund as an administrative penalty and the R250-million balance to the Industrial Development Corporation (IDC) to create an ‘Agro-processing Competitiveness Fund’.

However, questions then arose about the legality of proceeds flowing directly to the IDC and bypassing the fund as prescribed in South African competition legislation.

These questions were resolved at a meeting of the National Treasury, the Economic Development Department (EDD) and the commission on Tuesday, where it was agreed that the full R500-million should be paid by the JSE-listed food producer into the National Revenue Fund. The EDD would then submit a Budgetary proposal and business case motivating for the creation of a R250-million fund to administered by the IDC.

The Competition Tribunal, which has the power to endorse or overrule the commission’s settlement agreements, simultaneously confirmed an amended order, stipulating that Pioneer pay the full fine, arising from its anticompetitive behaviour, including its highly controversial role in bread price fixing, directly into the National Revenue Fund.

The parties confirmed that the settlement, which was first announced by Patel and Competition Commissioner Shan Rambaruth in early November, had been “resolved in an unprecedented and innovative way”. They added that it should be supported and that “nothing should be done to dilute the sanctions on the firms that violate the rights of consumers in terms of the Competition Act”.

It was also agreed that the commission should be “empowered with appropriate legal mechanisms to exercise its remedy options” and that there should be collaboration in the “medium term to formulate appropriate legislative and other measures” to ensure that role could be performed.

The National Treasury would now submit the proposals to the Ministers’ Committee on the Budget and to Cabinet for consideration and approval “in accordance with the agreement of Cabinet held on November 24, 2010”.

In a bid to quell ongoing suggestions of a split between Patel and Gordhan the joint statement also contained the following sentence: “The Minister of Economic Development and the Minister of Finance support the above agreement, and believe it will further the public interest.”

For Pioneer, the agreement does not diminish the penalties levied, which together will involve reparations worth a combined R1-billion.