Patel's pension plan 'workable'

Johannesburg - Economic Development Minister Ebrahim Patel's idea of using private retirement funds to help finance development projects is not necessarily a bad one, economist Mike Schussler said on Friday.

This followed media reports that Patel was exploring ways of investing private retirement funds in development projects by possibly issuing development bonds.

"It's not necessarily a bad idea but you need to be careful that there is a positive return on the money," Schussler said.

"In other words the development bond would have to pay more than inflation."

Economist Dawie Roodt, however, thought Patel's idea was "terrible".

"Who can guarantee a positive return on the money?" he asked.

"Politicians are not good at identifying winners and here we have the idea that pension funds be forced to invest 5% of their savings into a politically determined project."

Roodt said while he was not against social investment, the correct vehicle had to be used.

"And the correct vehicle is the Budget of the minister of finance.

"Patel's suggestion is nothing more than an additional tax," he added.

Roodt said that pre-1994, pension funds had been required to invest certain portions of their assets in government bonds. "This was prescribed investment and fortunately we got rid of it," Roodt said.

- Sapa