/ 14 December 2017

What the historic party funding Bill means for SA politics

In September
In September

Thirteen years after the first punch was thrown in the battle for party funding legislation, a new Political Party Funding Bill has been tabled in the National Assembly at last.

On November 15 2004, the Institute for Democracy in South Africa (Idasa) filed a notice of motion in the Western Cape High Court (then named the Cape of Good Hope Provincial Division), seeking an order that legislation should require political parties to disclose the details of all funding that they receive. Idasa failed, but far from signalling the end of the matter, Idasa will be remembered for “throwing the first punch” in a debate that would span over a decade.

Only days before its deadline at the end of November 2017, the Ad-hoc Committee on the Funding of Political Parties concluded its four-month process of public consultations, debates, legal analysis and political “to-and-froing”.

Parliament receives much criticism for its lack of efficiency, much of it deserved, but in this case none can be levelled against this committee, chaired by ANC MP Vincent Smith.

The result is a historic Bill, the magnitude of which has been somewhat lost among the high-profile day-to-day drama of South African politics.

The funding of political parties, both pre- and post-1994, has always been contaminated by a cloud of secrecy. Is the ANC being bankrolled by the Guptas? Is the Democratic Alliance captured by “white monopoly capital”? Are the Economic Freedom Fighters, as they assert, a “poor party”?

It has never been known exactly who finances those who represent us in Parliament. This means it has never been possible to tell whether political parties act in the best interests of the public, or whether they act in the best interests of those who fill their pockets.

But all that is about to change.

So what is in this new Bill, and how will it differ from the previous regulation of political party funding? What measures does it put in place to achieve its aim of revealing any corruption and undue influence that so many fear loiter at the intersection of politics and business?

Whilst the Bill aims to create a fully comprehensive legislative framework for the funding of political parties, the overarching need was to infuse the Constitutional value of transparency into the funding of political parties, who ultimately formulate the policy and appoint the leaders which shape South Africa.

Prior to this Bill, political parties in the country have never been required to disclose the sources and amounts of the donations that they receive from private donors. Citizens have had to go to the ballot box without knowing who are “paying the pipers”.

The new Bill will require political parties to disclose the amounts and sources of donations that they receive above a prescribed threshold of R100 000 per donor over the course of a financial year. Political parties will be required to present this information in a report to the Independent Electoral Commission, which in turn will be obliged to publish these reports on a quarterly basis.

This disclosure obligation imposed on political parties is coupled with an innovative provision requiring simultaneous disclosure by donors, with the exception of individual citizens. The purpose of this provision, originally advocated at the public hearings by the Council for the Advancement of the South African Constitution (Casac), will serve as a dual accountability measure, to ensure that political parties are reporting the donations that they receive accurately.

This combination of disclosure obligations on both political parties and donors will elevate South Africa’s party funding legislation to be amongst the most transparent and accountable in the world.

Many expressed concerns that prohibiting donors to political parties from retaining their anonymity will drive some of those donors away. To offset this obstacle, a new Multiparty Democracy Fund has been created.

This fund may receive donations from anonymous donors, as well as donors who do not wish to donate funds to a particular political party. All parties represented in the National Assembly and provincial legislatures will then get a cut of this money in accordance with a formula that considers, in part, the proportionality of seats held by political parties across these legislatures.

The Multiparty Democracy Fund presents a promising opportunity for all parties to benefit from private donations. It has been pointed out that advertising the Fund and incentivising donations to it will require a fair degree of effort, especially in the initial stages. But past and recent threats to our hard-won multi-party democracy could prove to be the motivation citizens need to convince them of the importance of supporting the fund. It is also hoped that corporate South Africa can assist in bolstering this fund, which will strengthen and preserve the critical diversity of views held in Parliament.

It is not just private donations on which political parties rely to finance their wide-ranging, and often costly, operations. Since 1994, parties have received annual allocations of public funds.

The problem with public funding is that it has been allocated according to the infamous “90/10 split”. Section 236 of the Constitution, which provides for the funding of political parties, states that the purpose of such funding is to “enhance multi-party democracy”, and must be allocated in a manner that is in part equitable and in part proportional.

At the 1994 constitutional negotiations, the ANC and the National Party agreed in section 236 of the Constitution that “proportionality”, or the number of seats won by a party, should get a 90% weighting and the “equitable” allocation (in other words the amount that is shared equally) be given a mere 10% weighting.

In reality, the “90/10 split” favoured larger parties at the expense of smaller ones by giving such high priority to allocating public funds according to the degree of each party’s representation.

It was clear from the outset that the “90/10 split” would need to be amended. Unsurprisingly, most opposition parties felt that the correct formula would be a 50/50 split, while the ANC was reluctant to deviate too drastically from the current formula. Eventually, a compromise was reached. The Bill stipulates that public funds will be allocated two-thirds (66.7%) based on proportionality and one third (33.3%) equally.

The net result is that smaller parties will now receive more funding from the public purse, which will give them a realistic chance of expanding in the “political market”.

The Bill bans certain categories of donors from donating directly to a political party, including state-owned enterprises and organs of state.

The most controversial prohibition was that relating to foreign donors. South Africa has always permitted donations to political parties from foreign entities, an issue which proved to be contentious for the committee. On the one hand, there was the need to protect the sovereignty of South Africa’s democracy. On the other, foreign aid from wealthy states can be deeply beneficial to our politics.

Again a smart compromise was reached. Donations from foreign governments and foreign government agencies will be banned outright. However, other foreign entities will be able to donate directly to political parties, but only for the specific purposes of skills and policy development and training.

The hope is that this will curb the possibility of foreign agencies funding political movements in South Africa according to their own agendas, whilst retaining the opportunity for foreign funders to assist in building the capacity of our democratic institutions.

In order to prevent the “capture” of political parties by financially powerful donors, an upper limit is set on the amount a single donor can donate to a political party over a financial year. R15-million per donor per year may be on the high side, but compared to the amount that some parties receive from donations, it is arguably sufficient to prevent a single donor from dominating the funding of a political party in any given year. The cap on foreign donations is lower – R5-million per year.

With the exception of foreign donations, political parties will remain largely free to spend their private donations for any lawful purpose. The purposes for which political parties may spend public money are much more circumscribed. The overriding purpose is to switch the focus of political party spending from campaigning to capacity-building and education.

Parties that fail to comply with the provisions of the Bill are subject to a variety of mainly financial penalties, including the suspension of public funding and administrative fines potentially in excess of R1 million.

Criminal offences are also entrenched in the Bill. For example, accepting donations from banned donors and concealing donations that are required to be disclosed are listed as criminal offences which could be punished by up to five years’ imprisonment.

The Bill is innovative and quite simply genius in the way it has dealt with the range of complex issues raised during this process. However, it is inevitable that some would remain unsatisfied. The Bill certainly addresses the most pressing need of infusing the principle of transparency into the funding of political parties, but a few potential problems and loopholes do exist.

The threshold amount of R100 000, below which political parties are not required to disclose donors, has been criticised by some as too high. Naturally, one would want to know who is donating as much as R95 000 to a political party.

Another problem emerging from the threshold is the opportunity for donors to channel a series of donations, each below the threshold but cumulatively above it, through different entities in order to avoid disclosure. For example, a holding company could channel donations through various subsidiaries or individual donors may wish to use family members to split the total donation. There were public submissions suggesting that the definition of who amounts to a single donor be extended to certain related persons, but this was not included in the Bill and leaves a potential loophole.

It still remains to be seen whether Parliament intends to increase the amount of public funds allocated to political parties. At the start of the committee process, there were strong and widely held rumours that this indeed was Parliament’s intention. These rumours, somewhat disconcertingly, have been met with silence from the committee.

The possibility exists that the amount of taxpayers’ money that political parties receive will be substantially increased, many predicting that this is necessary to make up for revising the “90/10 split” so as to allow larger parties to recoup any losses that they would suffer from a more equitable formula.

Another factor that had a bearing on the committee debate was the recent judgment of the Western Cape High Court in the My Vote Counts case. In September, the court held that the Promotion of Access to Information Act (PAIA) is unconstitutional insofar as it fails to provide for the disclosure of political parties’ funding. The committee determined that this judgment would not influence the content of this Bill because Parliament is obligated, in accordance with this judgment, to amend PAIA within an 18-month period. The PAIA procedure can also be used to access such information.

PAIA could, in due course, be used to gather information that is not regulated by the Political Party Funding Bill: the disclosure of donations below the R100 000 threshold as well as the disclosure of donations made to political parties who operate at municipal level.

Having been tabled in the National Assembly, the Bill is expected to be debated in the National Council of Provinces and the National Assembly early next year. The expectation is that it will be passed into law in mid-2018.

With the myriad technical and political issues related to the Bill, one can expect extensive debate in both houses – but it seems that the long wait for transparency in the funding of political parties is finally coming to an end.

Mike Law is a political analyst and researcher who worked with the Council for the Advancement of the South African Constitution during this parliamentary process.

First published in Notes from the House.