/ 18 December 2017

ANC’s running costs rising sharply

Runaway: The party’s largest operational cost is salaries followed by advertising
Runaway: The party’s largest operational cost is salaries followed by advertising

The internal battles of the ANC are a risk to the ruling party’s struggling financial state, according to a copy of the party’s financial report — which the Mail & Guardian obtained prior to its presentation to the ANC 54th national conference.

The weak financial state of the economy — which critics have blamed in part on President Jacob Zuma’s administration — has also “heavily impacted” donor flows, which account for 65% of the party’s revenues, said the report.

The report, which was to be presented by outgoing treasurer general Zweli Mkhize on Sunday, warned that the party’s finances were being undermined by its own internal battles.

“Fundraising for the ANC is a political programme dependent on the public appeal of the ‘BRAND ANC’,” the party’s financial report said. “As such challenges of infighting, factionalism, misconduct and ill-discipline, perceptions of corruption, arrogance and various other ills have a negative effect on the support the ANC receives. We need to urgently address these challenges and remain vigilant to avoid the erosion of the support that the ANC enjoys.”

Despite the risks to the funding outlook, the party in fact reported higher revenues than ever before.

Some R521-million was raised in the year ended March 2017, compared with R395.6-million for the year before. Nevertheless the party was R47-million in the red as a result of rising expenses.

Operational costs of running the movement are stubbornly high, increasing by R407-million since 2008.

The report shows the largest cost driver since 2013 was salaries and wages, which grew 34% between January 2013 and October this year. The salary cost constitutes 31% of the party’s expenses.

The second-fastest growing expense over that period were advertising and promotions, which had increased 23%. Events and travel expenses had each grown by 10%.

Operating costs rose sharply in the current financial year, too; R103-million was spent in relation to local government elections, which took place in August last year.

The party report said the ANC had been unable to save any of the funds raised. “This has been a result of the high operational costs associated with running the organisation as well the paying off of the old debts and legal settlements,” it said.

The financial report also shows that the party has settled R68-million out of R80-million in lawsuit demands.

Outstanding debts can be hefty. For example, the report says one travel agency is demanding R5.2-million from the ANC Women’s League. Party lawyers have advised that the league enter into a payment agreement with the agency.

The party has been working hard to manage its debt, including through discussions with creditors and paying monthly instalments on money owed.

Legacy debt had built to almost R250-million but the party has managed to reduce this by more than R175-million, to current levels of just over R73-million. Of this outstanding debt, R30-million is a revolving credit facility for the payment of salaries.

Nevertheless the ANC still has outstanding liabilities of about R255-million, including money owed to creditors for the 2014 national elections and the 2016 local government elections.

About R43-million is a result of long-term outstanding debt. Creditors from the 2014 election are owed about R7.8-million, creditors from the 2016 election are owed almost R59-million, operational creditors are owed roughly R42-million and statutory creditors are owed almost R63-million.

The party is also battling a slowing economic climate.

“The effects of the subdued economic growth have had a huge impact on South African companies’ earnings and profitability. This in turn has had an impact on the ANC’s fundraising initiatives,” the financial report said. “This does not bode well for future fundraising initiatives and presents a major risk to the ANC’s financial stability and cash flow that must always be mitigated.”

After donor funding, Independent Electoral Commission grants make up 17% of ANC revenues, membership fees and levies each bring in 5%, while smaller sources, such as the Progressive Business Forum, bring in the rest.

Only about one third of membership fees collected have been repatriated to the provinces, which in return repatriate funds to their branches, the report noted. But not all money owed to branches has been repatriated because of the “financial constraints” the party has found itself in during the period.

“A lot of funds had to be utilised to pay off old debts, attend to statutory unpaid debt with Sars [the South African Revenue Service] and the Provident Fund, as well settle a lot of litigation cases for both the ANCYL[ANC Youth League] and the ANC,” the report said.

The report highlighted the importance of expanded public funding for political parties “to promote and support democracy. Such funding will be accompanied by full financial accountability and transparency by political parties, including regulation of private financing of political parties.”

Last month the political party funding Bill was approved by Parliament’s ad-hoc committee on political party funding.

The Bill is aimed at regulating the public and private funding of political parties, including through prohibiting certain donations made directly to political parties, as well
as prohibiting donations from organs of state, state-owned enterprises and foreign governments and agencies.