The ANC’s treasurer, Mathews Phosa, has called for legislation that could significantly increase taxpayers’ financial support for political parties but also, for the first time, force parties to reveal their sources of private funding. Phosa’s comments, in a recent interview in Johannesburg, come as the ANC approaches its June policy conference where private political funding is expected to be discussed. Political parties have been unwilling to propose any significant changes to the funding system since the Public Funding of Represented Political Parties Act was passed in 1997. Parties are allocated limited public funds through the proportional representation electoral system and are required to account for the expenditure. However, no laws or regulations compel them to reveal private donors. In the interview, Phosa complained that taxpayers were not required to help to cover the costs incurred by parties during elections and that they relied on private funding for it. “When elections come we raise our first cent and last million on our own — the taxpayer doesn’t pay and that is a weakness,” he said. In the year ending March 2011, the ANC received a total of R61.8-million from Parliament for constituency work from the R98.9-million allocated to political parties with parliamentary representation. “The public can’t ask for transparency if they don’t come to the party. Only when they come to the party can one say: let’s see how much political parties get,” said Phosa. Parties had to be supported by a comprehensive public funding system coupled with the regulation of private funding, he said. The first step should be to increase allocations under the existing legal framework for the day-to-day running of parties, followed by legislation mandating the use of public money to support parties during elections. Phosa added: “I’m not saying the taxpayer must pay alone — there would still be some room for private funding.” He said the ANC was discussing the issue ahead of the policy conference in June. “We will submit documents in the relevant commission on what we think is the solution on both increased public funding and a new approach to the public paying for elections.” At its national conference in Polokwane in 2007, the ANC resolved “to put in place effective regulatory architecture for private funding of political parties to enhance accountability and transparency”, but there has been little progress on this issue. “One way of looking at it is that we must come out from underground … The Democratic Alliance, Congress of the People, ANC are almost like non-governmental organisations — they have zero lines of revenue. Then you hear that there is a company that funds them. The parties will say: ‘So what? Where do you expect us to get the money from? It’s the rule of survival.’ Money must come from somewhere,” said Phosa. He added that the issue of public funding had to be debated and was likely to cause infighting in parties. “There is no cap in terms of how much a person or corporate can donate to the ANC and this is where the danger lies … At the moment the guy with the money has a lot of influence — you may not see it, but it is there,” said Phosa. The ANC has drawn criticism for funding itself through business fronts, such as Chancellor House Holdings, using state contracts. One example was the R40-billion Hitachi Power deal to build boilers for the Medupi and Kusile power stations. The party also came under fire in 2005 when the Mail and Guardian revealed that R11-million of public money had been diverted to ANC coffers ahead of the 2004 elections. Investigations showed that state oil company PetroSA advanced R15-million to Imvume Management, a company with close ties to the ANC. Phosa said the media had a “fetish” about Chancellor House, which was “a company with its own life. We have nothing to do with how it’s run. People just politicise it. It accounts to the taxpayer and gives money to whoever it wants.” On the issue of private donations to political parties, he said there had to be disclosure, a cap on funding, or both. “These are big ethical issues that would arise once the public starts paying for elections.” Phosa added that the ANC had researched regulatory systems used in other countries, but South Africa had to “indigenise our own experience”. The private funding debate came under the spotlight in 2005 when High Court Judge Ben Griesel dismissed an application by the Institute for Democracy in South Africa and other organisations aimed at forcing parties to disclose the identity of private donors. However, Griesel said that, as a matter of principle, parties should disclose their funding through legislation. Said Phosa: “In the research we have done on other countries there is control on private funding. Without it there is corruption, co-option and mortgaging democracy, meaning that those with money will own democracy. The elite will run us.” 
Taking lessons from others
South Africa needs to find “holistic” solutions to the problems caused by private funding of political parties instead of simply introducing caps and requiring disclosure, University of Cape Town political analyst Anthony Butler said after the ANC announced that it would discuss the issue of private donations to parties at its policy conference in June. South Africa has legislation to regulate public funding, but not private donations to parties. Arguing that capping and disclosure might not be enough, Butler said that “donations can be hidden or disguised. Parties or candidates can fail to disclose payments. They can produce inaccurate accounts, identify loopholes or use financial instruments that regulators and auditors cannot understand.” He said donations could also be disguised as loans, hidden in commercial transactions or packaged to fall below thresholds and that opaque legal trusts could be created to shield them from scrutiny. Funds could also be diverted to political foundations or other party-aligned institutions. Butler said controls on private donations tended to “push money underground”, creating instability in party structures. He said bans and caps on party donations tended to result in the diversion of funds to non-governmental organisations, political foundations or party-aligned news media, encouraging “spillover legislation” as governments tried to clamp down on private funding of these institutions. Butler said that because parties had to organise and educate citizens, formulate policy and campaign for office, democratic politics were expensive. The required funding could be traded for influence over policy, licences or government contracts. He said a strong case could be made for increasing the size and scope of public funding of political parties, but, unfortunately, state transfers did not usually replace private funding — they were often simply added to it. In his book Paying for Politics, Butler explores the relationship between money and politics. He finds that South Africa can learn from other middle-income developing countries. “In Mexico, we learn that access to resources, particularly from parastatals but also from private donors, can reshape the party system and allow one party to win elections again and again.” From Russia, the lesson is that party-funding controls can be used to control, intimidate and subdue opposition parties. Malaysia showed that internal elections in the ruling party can be more important than state elections — and that these, too, can become controlled by money. — Tabelo Timse 
The M&G Centre for Investigative Journalism, supported by M&G Media and the Open Society Foundation for South Africa, produced this story. All views are the centre’s. www.amabhungane.co.za.