The ANC has admitted in a discussion paper on political funding that disclosures about party-linked investment firms have embarrassed it and it will discuss whether it needs front companies such as Chancellor House.
Instead, it might consider joint ventures with the private sector to raise funds, the paper states.
The document, which will be tabled at the ANC policy conference in Midrand next week, was drawn up by ANC treasurer Mathews Phosa after a workshop with the party’s provincial and regional treasurers.
It states that the most difficult funding challenges “concern the role of party-owned or party-linked companies”.
“At one extreme, such companies can be investment vehicles owned and controlled by the party itself. At the other extreme, such a company might be a privately owned business, run by a dedicated ANC cadre, whose board feels an obligation to donate a share of honestly accrued profits to the movement. A number of other relationships lie in between these two extremes.”
Conflict of interest
It asks whether party-owned companies are desirable: “How does one handle conflicts of interest and consequent inefficiencies in handling public resources? Let us honestly debate this issue without being expedient. We also need to factor in modern-day conflict of interest principles [because of the] public embarrassment this can cause, especially during election periods.”
It states that, typically, party-linked companies involve the diversion of a significant share of the profits they generate to the pockets of individuals and the war chests of emerging factions and adds that, at provincial and local level, where they can generate “significant factional instability, such companies should not be created”.
The ANC has come under fire because its investment arm, Chancellor House, has benefited from state tenders, including the R40-billion contract won by Hitachi Power to build boilers for the Medupi and Kusile power stations. Chancellor House has a stake in Hitachi Power.
The party also took strain in 2005 over the “Oilgate” scandal when the Mail & Guardian revealed how money paid by state oil company PetroSA to Sandi Majali’s Imvume Management was diverted to ANC coffers before the 2004 elections.
PetroSA paid out a total of R15-million for oil condensate, which the ANC-linked Imvume had a contract to supply to the PetroSA production plant in Mossel Bay. About R11-million of that was transferred to the ANC as a donation.
To reduce the ANC’s dependency on its investment arms and private donations, the paper lists a number of proposals for joint fundraising ventures with the private sector that would draw on the party’s million-strong membership base.
Phosa said these had emerged from an ANC workshop involving business tycoon and Human Settlements Minister Tokyo Sexwale.
The proposals include insurance packages through which the ANC, in partnership with an established insurance underwriter, could offer life endowment and funeral insurance to its members. It could also use its membership base to establish retail loyalty programmes, or consider setting up provincially managed business ventures such as conferencing and hotel accommodation.
But, the paper states, ANC members should be made aware of the potential problems of such ventures, such as “poor management of the membership database of the organisation, unscrupulous and dishonest members who are entrusted with the fortunes of the organisation, and conflict of interest within the structures of the movement with regard to business opportunities”.
Transparency and guidelines
The paper follows Phosa’s suggestion that parties should be required to reveal their funding sources – but only if they receive a more generous subsidy from taxpayers, particularly to cover election-related expenditure.
Political parties are allocated limited public funds under the proportional representation electoral system and are required to account for them, but there are no laws that force them to reveal private donors.
The discussion paper states that one of the recommendations the policy conference could adopt is that of “transparency and guidelines for party-linked investment vehicles, [and] investments from which parties derive funds or party-linked vehicles that pursue such investments should also be regulated.
“At the least, such regulation should include stringent transparency requirements. A code or guidelines for appropriate investment activities should also be considered.”
The M&G Centre for Investigative Journalism (amaBhungane) produced this story. All views are ours. See www.amabhungane.co.za for our stories, activities and funding sources.