[OPINION] The beginning of the end for the toxic impact of money on politics

“We are late, but better late than never,” said African National Congress (ANC) chief whip Jackson Mthembu.

This was in 2017 when Mthembu announced that a resolution would be passed to establish a multi-party ad hoc committee to develop legislation for increased public funding of political parties and the regulation of private funding to political parties. This came like a bolt out of the blue late, although the ANC resolved to tackle the thorny issue of money and politics at both its Polokwane and Mangaung conferences.

The issue has had a long and vexed history. This past week the National Assembly passed a Bill which would finally regulate private funding to political parties in some way. The matter has thus come full circle.

South Africa has had no legislation regulating private donations to political parties. Private individuals and companies have been able to donate as much in secret as they wish, which left the door wide open for corruption and the buying of influence.

In a country already divided by high levels of inequality, wealthy individuals have sought to influence policy in myriad ways, thus ‘drowning out’ the voices of the already poor and marginalised. We now know that back in 1999, one of the major drivers for the arms deal corruption was payments made to the ANC. It has manifested itself in many sinister ways.

In 2015 Hitachi agreed to pay $19 million to settle the US Securities and Exchange Commission charges that it violated American anti-bribery law through improper payments tied to the supply of boilers to Medupi and Kusile here in South Africa. Hitachi agreed to the settlement without admitting to or denying the SEC’s allegations. The SEC claimed Hitachi had violated the Foreign Corrupt Practices Act by inaccurately recording improper payments made to Chancellor House Holdings. The SEC also alleged that in 2008 Hitachi paid an additional $1 million in ‘success fees’ to Chancellor House, which was improperly booked as consulting fees. Hitachi settled the matter and there is therefore no admission of guilt. The $19 million settlement, however, raised more questions than answers regarding alleged payments made to the ANC as a result of the deal.

In January 2016, the ANC’s disgraced Beaufort West mayor Truman Prince brazenly wrote a letter on a municipal letterhead in which he offered potential donors to the ANC a more than decent quid pro quo of contracts in exchange for donations. Recently, more brazen allegations of ‘state capture’ have shown a far cruder and more dangerous expression of the buying of influence.

Clearly, the toxic impact of money on politics has many shades and manifestations. To untangle this web will take some doing.

The debate started around 1997 when the Public Funding of Represented Parties Act was passed in Parliament. The Act allows for money to be appropriated from the public purse for the maintenance of political parties between elections. At the time many argued that the Act ought to have included some regulation of private donations to political parties. Valli Moosa, then Constitutional Development Minister, refused to accede to this and so the law allows for money from the public purse to be allocated to political parties on a 90:10 split.

Therefore, 90% of the funding is allocated proportionately, that is, according to the percentage of votes received in elections, and 10% is distributed equitably between parties represented in Parliament. This amount is currently around R140 million. In addition, public funding is also allocated to parties represented in the national legislature. That is done via Parliament’s Budget vote and last year amounted to R395 million. The amounts are meant to be used for constituency work, political party support and leadership support. It is distributed through the party’s caucus. Many have called for greater accountability regarding the distribution of these funds. Public funds are also appropriated through provincial legislatures.

Yet parties say that public funding remains insufficient and so they have to raise money from private sources, especially at election time. The ANC in its submission, however, acknowledged that increasing public funding may well meet with opposition from citizens who are wary and weary of political parties in general. In addition, the ANC conceded that “enhanced public funding should only be considered in the context of an improved regulatory architecture for the financial operations of parties”. In addition, it said that the arguments for an increase in public funding would need to be compelling given South Africa’s socio-economic context and also the severe ‘fiscal constraints’ we face.

In 2005, the Institute for Democracy in Africa (Idasa) took the five major political parties to court to reveal their sources of funding in terms of the Promotion of Access to Information Act. Idasa’s contention was that political parties are public bodies and therefore the public has the right to know who funds them, or, alternatively, that they were private bodies, but the right to vote included knowing who funds political parties. In a somewhat narrow judgment from Judge Griessel in the Cape High Court, it was found that political parties were private bodies and there was no need for them to disclose their sources of funding.

At the time the ANC undertook to lead on the matter in Parliament. Idasa took the ANC at its word. That this never happened is a sad indictment on the ANC. With hindsight it was a mistake to take the ANC at its word, and Idasa ought to have taken the matter on appeal.

The new legislation requires political parties to disclose the amounts and sources of donations above a threshold of R100,000 per donor in a financial year. This information will be compiled by the IEC and published quarterly. This will no doubt add to the administrative burden of the IEC, but the institution is the logical choice for housing such information. Donors also have to disclose donations made.

The Bill also establishes a new Multiparty Democracy Fund for donors who do not wish to donate funds to a particular political party. Political parties represented in the National Assembly and provincial legislatures will be allocated money from this fund in accordance with a formula that considers, in part, the proportionality of seats held by political parties across these legislatures. In addition, the public funding allocation to parties has been changed from 90:10 to 2/3 being split proportionately and 1/3 equally amongst represented parties.

In addition, 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. Financial penalties and criminal sanction attaches to the Bill.
It is a fair and good start to a thorny issue. Of course, the law will only be as strong as the enforcement mechanisms, but there is no doubt that the committee has done good work in airing the issues and coming to the useful compromise that the Bill is.

Strong democracies require healthy political parties. In turn, political parties require resources to sustain and operate a basic party structure, to contest elections and to contribute to policy debate. While regulation will not be the panacea for all ills, secrecy only breeds mistrust and an environment that is ripe for corruption.

Judith February is based at the Institute for Security Studies. Follow her on Twitter: @judith_february