Time to come clean on party funding

South Africa is about to enter into the biggest ever public-procurement processes in its history — involving Eskom and Transnet — with a planned capital-expenditure programme of more than R624-billion. It will dwarf the so-called arms deal, which is now to be the subject of a judicial inquiry headed by Justice Willie Seriti.

The opportunities for corruption are almost endless; the tenderpreneurs must be licking their lips and flexing their contact books. Back in 1999, one of the major drivers for the arms-deal corruption was payments made to the ANC. Because only a handful — maybe even just one or two — ANC leaders knew where the party’s funding was coming from in those days, it is unlikely that the truth will ever emerge as to how much money the ANC itself culled from the arms deal.

Since then, slowly, ever so slowly, the ANC has begun to reconcile itself to the idea that it should live up to the promise that Kgalema Motlanthe, then-ANC secretary general, made to the Cape High Court in 2005: that there should be statutory regulation of private donations to political parties.

The ANC has become increasingly adept at raising money from private donors in creative ways. Yet, given the lack of regulation of private funding to political parties, the ANC — and all other political parties — are able to raise money without being held to account for what they raise or how they spend it.

The intersection of money and politics does not necessarily result in corruption — and political parties need money to operate effectively. A strong democracy requires healthy political parties. In turn, political parties require resources to sustain and operate a basic party structure sufficient to represent people, develop the capacity to contest elections, and contribute creatively to policy debate.

But how parties raise money and how transparent they are regarding their sources of funding remain crucial if policy-making is to be open and principled. Given the high levels of inequality in South Africa, those who are able to buy influence through political donations are more likely to do so, thereby drowning out the voices of the poor and marginalised.

This is the danger of the lack of accountability within the current laissez-faire situation. Given the multifaceted nature of the challenge, it requires a creative and urgent response from civil society and from within political parties themselves (not only the ANC) as to how we can arrive at some form of regulation that will, at the very least, result in greater accountability and perhaps, in the longer term, a change in the political culture to do with party funding.

Substancial funding
There is already substantial public funding of political parties, and has been ever since the 1997 Public Funding of Represented Political Parties Act was passed — around R70-million in the current financial year. There have been gentle calls for an increase in this figure from across the political spectrum. Some believe it will result in less dependence on either corporate or dodgy donors. Minority parties hope it will increase the overall amount available and therefore enhance their ability to compete.

There is a respectable case for increasing public funding but, as a result of the various scandals related to the funding of political parties, it is hard to imagine that the taxpayer would have much appetite for increased public funding in the continued absence of broader framework of regulation and governance.

Five years ago, Idasa decided against appealing the decision of the Cape High Court that political parties are entirely private associations and their sources of funding are not subject to disclosure in terms of the Promotion of Access to Information Act, 2000. We did so on the basis of the ruling by the court that legislation initiated in Parliament, rather than litigation, was a more appropriate mechanism to address the issue of regulating political donations.

Idasa also took the ANC at its word when it stated in court papers that it was committed to the initiation and passage of such legislation in Parliament. Subsequent to that, at the ANC’s Polokwane conference in 2007, it resolved to “champion the introduction of a comprehensive system of public funding of representative political parties— as part of strengthening the tenets of our new democracy. This should include putting in place an effective regulatory architecture for private funding of political parties— The incoming NEC must urgently develop guidelines and policy on public and private funding, including how to regulate investment vehicles.”

Since then, there has been very little movement on possible regulation; yet it remains difficult to see how the ANC, as it approaches Mangaung and a review of its policy positions, will be able to justify its inability to find sufficient consensus within the party to initiate the regulatory process. So what then might be the way forward?

International experience has shown that there is no panacea for the influence of money on the political system. In the United States, United Kingdom and Germany, regulation has helped create greater transparency, yet scandals still occur. It therefore seems as though the missing ingredient is the demand, from citizens themselves, that those in power be held to account for the way in which policy is made and who influences the outcome of decisions that affect their lives — whether that applies to “fracking” in the Karoo or a bid for power stations by Chancellor House.

Citizens need to be in a position to join the dots between decisions made as a result of undue influence by companies or other secret private donors and the fact that this may well lead to poor delivery of basic public services.

Right to know
The Right to Know (R2K) campaign, which has been leading the opposition to the Protection of State Information Bill, represents a broad front of civil-society organisations and has shown what can be done when citizens rally on a single issue.

It also shows that it is possible to join the dots between what may at first sight appear to be a “chattering classes” or abstract issue and the bread and butter of socioeconomic inequality and injustice.

Perhaps the time has come for a broad campaign for both regulation of private funding of political parties and greater transparency regarding tender processes and the way public policy is made.

This may help not only to “popularise” the issue but also to put pressure on progressive thinkers within the ANC – although the truth is that they are only too aware of the relationship between secret dodgy donations and corruption and unjust enrichment at the expense of the poor. What matters is whether they can prevail within the ANC and whether they are willing and able to speak out on the matter.

Yet it is not enough simply to advocate for change. The time has clearly come for concrete options to be put on the table and for all sectors of society (business, civil society, political parties) to be engaged in the process of advocating for legislative reform. A quick comparative glance at the complex system in the US probably indicates that the simpler the legislation the better. In the Netherlands, the regulatory framework remains relatively lax, with the majority of donations to political parties coming from membership dues and public subsidies. The “autonomy” option favoured by Sweden has its roots in that country’s traditions of openness.

The German system, interestingly enough, publicly suggested by Mathews Phosa a few months ago, might provide a way forward. As a “transparency option”, it is noteworthy for its comprehensive regulations and controls in both the public and private realms, as well as for its emphasis on “the right of the people to know” and “the quest for transparency achieved by rules enshrined in national legislation”.

On the assumption that a ban on private funding of political parties would constrain the rights of both the donor and the party, such donations are permitted as long as they are disclosed to voters.

Given these various options, what is the best way forward for South Africa? A middle option that balances tight regulations with a laissez-faire system might include:

Public funding

  • Funding restricted to parties, taking into account the proportional-representation electoral system;
  • Funding for electoral and/or operational costs, depending on resource availability and priorities;
  • Creative and extensive use of indirect public-funding opportunities;
  • Allocations must be open and transparent, through a system of extensive public disclosure, including of expenditure;
  • A proper distribution formula in place for allocations;
  • Principles of proportionality and equity should be taken into account with allocations (for instance, last election count, membership fees, private donations);
  • A weighting formula to give more advantage smaller parties;
  • Maintaining the ratio between public and private support and reducting parties’ reliance on private sources to a tolerable level; and
  • Taking into account the cost burden on the state.

Private funding

  • Both foreign and local funding allowed;
  • Yet there should be limitations on the sources and type of funding (possibilities include in-kind contributions and shares as a means to source funds);
  • Foreign funding limited to governments or parliamentary groups, registered expatriate voters and endowment funds;
  • Foreign funding should be to the benefit of all parties and the principle of proportionality and equity should be achieved;
  • Funders should be identified at all times, as well as the type and amount of funding;
  • Funding of operational costs of parties by local private donors should be outlawed; and
  • Certain donors should be excluded, such as anonymous donors (above certain fairly low levels), and those that infringe the Constitution.

Another option for South Africa is that party donations, both public and private, be channelled into a national democracy fund and managed by an independent body according to guidelines and regulations. This would mean that corporate organisations that donated funds as part of their social responsibilities would pledge their financial support to this fund without directly funding a particular political party.

The structure of public-funding regimes and private-funding regulations for political parties is contingent upon the country’s political context and electoral history. Given that South Africa stands at the cusp of the most significant public-procurement process since the arms deal, the time has come for us to exercise our minds urgently on the question of party-funding reform.

Judith February is head of Idasa’s Political Information and Monitoring Service

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Judith February
Judith February

Judith February is based at the Institute for Security Studies and is a visiting fellow at the Wits School of Governance.

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