Document handed out: Committee Working Document (not available to the public)
The purpose of the meeting was to consider all the information received from public hearings, to refer to current legislation and to make political decisions about key issues. The basis for work would be a confidential draft document prepared by the research team of the Committee. The document would be updated for the meeting the following day.
The first debate was on whether there would be one fund or two funds to manage public and private funding to political parties. It was an easy decision to create two funds, one for public funds and the other to accept private donations for distribution to parties. It was agreed that the central multi-party democracy fund be a statutory fund. The allocation formula for this fund would be discussed at a later stage. The Committee debated the various streams of public funding. It was established that the IEC received funding allocated to parties in terms of Section 236 of the Constitution, while Parliament managed additional funds for the constituency allowance and for the administration of political parties. It was agreed the status quo would remain. The new “animal” was one that provincial legislatures had created by making funds available to political parties at provincial level from provincial budgets. The amount, formula and its purpose differed from province to province. There was consensus that all public funds, including provincial funds, would be regulated nationally, even if the funds were distributed at a provincial level.
In the interim, funding from foreign governments and other sources into the central multi-party democracy fund would be allowed. It was agreed that there was no need for a cap and that no state-owned enterprises could donate to the central fund. The Committee grappled with the directives on the use of funds.
In the discussion on investment arms of political parties, it was noted that these could be a front for channelling money from tenders into the political party. Other suggested that proper disclosure should be done but investment arms could not be prevented from receiving tenders. The Committee tended to agree that the irregular source of funding could not be controlled in this Act. It was generally agreed that it was not possible to prevent all companies that did business with the state from donating to the state and that the only regulation was the requirement of transparency and disclosure.
It was agreed that foreign governments could not give directly to political parties. Foreign individuals could give to parties. All donations had to be disclosed. Disclosure was essential for all individuals and all companies above a bottom cap. It was recommended that there be no upper limit to donations but there was a need for a bottom limit below which nothing needed to be declared. The question was whether there should be a lower cap for all or just for individuals.
Consensus was not reached on whether donors had to be disclosed or not. The sticking point was the debate between the right to privacy and the need for accountability which would require disclosure and transparency. The Democratic Alliance was adamant that there was no evidence of a credible link between non-disclosure and corruption. However, there were direct links between contact with opposition parties and prejudice against a person in business, that is, economic bullying. The Chairperson said the concern about economic bullying had to be dealt with in another way.
The following items were flagged for discussion in the next meeting: • What did equitable mean? • Bottom cap • 90/10 split • Management and control of private central fund • Balance between right to privacy versus disclosure • Investment arms • Provincial funding.
The Chairperson informed the Committee that Parliament’s Records Section was still looking for the Minutes taken at the meeting when the original political party funding legislation was decided upon. Furthermore, all information on the provincial regulatory framework for funding political parties had not yet been received. The Eastern Cape had indicated that they had no legislation but that they worked on the basis of policy. The Chairperson was still awaiting the information on the rands and cents involved in provincial party funding. The IEC documentation was still outstanding.
Various documents had been sent to Committee Members, including the legal opinion, which was not under dispute, and documents prepared by the Committee research team for use by Members only.
Mr N Singh (IFP) noted that the Constitutional and Legal Services Office (CLSO) had not offered an opinion on equitable and proportional but he believed that the Committee knew the answers.
The Chairperson replied that when they got to that document they could request further advice from CLSO.
He referred to the Working Document commencing with “Preamble”. The intention was to take the information from all submissions and the current Public Funding of Represented Political Parties, Act 103 of 1997, and try to come up with something that they could give to the CLSO to convert into a draft Bill.
Mr Singh asked if they were developing a new document or whether they were going to amend current legislation. The Chairperson’s understanding from the previous meeting was that they would amend the current legislation and add new sections, where appropriate. The Committee agreed to work through the legislation in conjunction with the draft document prepared by the research team.
Committee Working Document: discussion
The Chairperson noted that a Preamble had been included in the Working Document but suggested that the Committee should begin with Section 2 and that once decisions had been made, the Committee could return to the Preamble and ensure alignment between the Preamble and the revised contents of the legislation.
One or two funds
The Chairperson referred to Section 2 of the Act which spoke to the matter of a fund. A decision had to be made on whether there should be one fund or two funds.
Dr C Mulder (FF+) suggested that the IEC be left with what it currently had and that a second fund be established to manage the central fund for private donations. The current legislation did not cater for two funds. Dr Mulder noted that they would be dealing with two different kinds of fund, i.e. private and public funds. Having listened to the input of the IEC, he was of the opinion that a separate fund should be established for private donations, which would operate differently from the IEC-managed fund.
Ms L Mathys (EFF) supported a single IEC fund as that would streamline the funding to political parties. She felt strongly that accounting to different bodies was very messy and entailed additional work. The legislation already allowed for managing both public and private donations.
Mr A Lees (DA) was concerned about the lack of capacity in the IEC, but believed that if there was only one body managing the funds, there would not be a duplication of costs in reporting. Mr Lees was adamant that the IEC could not both offer support and regulate political parties. If that was what they had to do, he believed all the funds should be moved to a different body.
Mr B Bongo (ANC) noted the motivation by Dr Mulder for two funds. The Committee needed to separate the funds to make the administration of each fund clear.
The Chairperson accepted the consensus that all public funds, including provincial funds, would be regulated nationally, even if the funds were distributed at a provincial level. He asked if all funds would be given to IEC or whether there should be a separate fund for private funding.
Dr Mulder pointed out that the IEC currently administered the proportional and equitable funds that were disbursed in accordance with Section 236 of the Constitution. The other funding for constituency and administrative purposes for both the National Assembly and provincial legislatures was in response to a different section in the Constitution which based the funding solely on representation. As he understood it, constituency and administrative allowances to political parties would not be given to the IEC to manage. The funds provided to parties at political level would, however, have to be part of the IEC-managed fund.
Mr Lees noted that there would be several sources from which political parties would receive funds. Currently political parties had to have a separate bank account for each source of public funding. Political parties needed to have separate bank accounts for all funds. As he understood it, the Committee would not be talking about how provincial legislatures distributed funding to political parties, which would need a change of the Act, but were talking about one fund or two funds to manage that funding currently administered by the IEC. Most provincial legislatures had a political party fund that needed to be included in the central fund. What was the basis for that funding? It was a question of whether provincial legislature funding was a constituency fund or if it was similar to the IEC fund which was both proportional and equitable. The source of those provincial funds would then have to be budgeted for at national level. That would be a major change in funding by provincial legislatures to political parties.
Mr Singh understood that there were different sources of funding for political parties, each one appropriated from a different budget. Essentially the Committee was talking about funding of represented political parties. During the IEC presentation, the Committee had realised that there was accommodation in the legislation for the IEC to manage private funding. The IEC would deal with public funds.
Ms Mathys did not agree with Mr Singh. Public funding came from three sources. Private funding needed to be addressed. The Act needed to be changed because too many bank accounts were required of parties. All public funding should come from a single source.
Ms L Maseko (ANC) wanted to align with Dr Mulder’s proposal. Two funds were needed.
Mr Lees suggested that perhaps the Committee should be starting with what funds were coming in and then get to the matter of one fund or two funds.
Dr Mulder explained that public funding consisted of three components: IEC-managed funds, constituency allowances from Parliament and provincial legislatures, and provincial legislature funding for political parties. Constituency allowances (both national and provincial) were determined by section 116(c) of the Constitution that provided funds for political party purposes on a proportional basis. He proposed that the status quo remain.
The Committee agreed that the status quo remain for public funding.
Mr Lees objected to making a decision about one source of funding before the Committee understood about other sources of political funding. He said that there were more than three sources and they needed to take all of those sources into account before commencing with decision-making.
The Chairperson explained that all of those funds, which came from the national or provincial legislatures and were intended for the functioning of political parties, would be put into a single basket of funding.
Dr Mulder then explained that the provincial legislatures were handing out approximately R600 million in public funds. He assumed that a sizable percentage of that could be the constituency allowance. The Committee did not know exactly what was going on with those funds and hence it had requested that information. He was suggesting that it was possible that those provincial funds should be managed together with the funds currently managed by the IEC.
Mr M Dlamini (EFF) pointed out that the principle was that they were public funds so they should all fall into one basket to facilitate management and monitoring. The main distinction should be between public and private funding because it was with the latter that all the problems were raised during the hearings.
Mr Lees asked if the legislation would be amended to separate public and private funding. He said that the DA would reserve its judgement on that point until they could see the whole picture.
Ms Mathys asked for clarity.
The Chairperson explained that they were attempting to separate private and public funding into two pots.
Ms Mathys understood that the Act currently allowed for public and private funds but that each source of funding had to be managed separately and differently by the IEC.
Dr Mulder explained that the Act stated that the IEC could receive private donations but that they would go into the same pot as the public funding and be handled in the same way. The general view of the Committee was that two separate accounts were needed so that public and private funding could be accounted for and managed separately. There would be no need for donors to pay into the public fund account. The Act would have to be amended to avoid confusing donors.
Mr Dlamini asked from where the private funding would come. He understood that political parties found their own funds. The IEC, because of accountability, should maintain control of all funding, although the IEC could keep two bank accounts.
The Chairperson explained that more than R1 billion of public money was given to represented political parties for various purposes. However, political parties spent over R2 billion. So how did they account for the second billion? It was made up of donations to political parties. So, what the Committee was considering was to say to donors that they could continue donations directly to political parties but they had to disclose that they were donating the money. If donors did not want to disclose that they were donating money, they could put the money into the central democracy fund. He asked that the Committee agree that they would want two separate bank accounts.
Ms Mathys agreed with the decision to have two bank accounts.
Mr Lees was not happy that they were talking about bank accounts. He had other suggestions but could live with the bank account concept for the moment. He did want the Committee to consider the cost of running separate bank accounts. He cautioned the Committee against speaking as if decisions had been made.
Mr Dlamini asked about disclosure and whether there was a need to disclose when donating to a party. Would donors not disclose when they donated to the central fund?
The Chairperson replied that they would come to decisions around disclosure later in the discussion as he wanted to focus on one item at a time. He agreed that there would have to be an amendment to the Act to accommodate the second fund. The legislative requirement on the use of GAAP accounting principles would need to be changed to the current accounting principles.
Dr Mulder suggested an additional section be added to the Act to deal with second fund/bank account, which would largely replicate the private funding chapter.
Mr Singh agreed that that would be the best option.
Ms Mathys asked why additional legislation was needed for the second fund.
The Chairperson explained that the source of funds would be different.
The Chairperson suggested they move on to who would manage the funds
Dr Mulder proposed that there be statutory legislation to establish a statutory fund. All details would be included in the Act.
Prof N Khubisa (NFP) agreed that the fund should be confined within the ambit of the law.
Ms Mathys asked if statutory status would affect any company, etc.
The Chairperson assured her that it would have no impact on companies, investment arms etc.
Mr Lees suggested that the Committee was talking about two separate funds. Dr Mulder had suggested a second chapter but that the Committee should move on from discussing the establishment of a fund.
Mr Bongo suggested that the Committee move on, but that the Committee Members could come back to any matter if things changed as they worked through the document.
Ms Maseko wanted assurance that the research team was following and would produce a document that reflected the decisions of the Committee.
The Chairperson noted that the Committee had agreed upon a statutory fund. The research team could insert the practical details.
Management and control of that fund
The Chairperson said that the purpose of that fund was so that donors were not publicly mentioned. He asked if the management of the fund would have to keep a record of those persons who had donated to it so that the fund manager knew from where the funds were coming.
Dr Mulder suggested that all companies donating to that fund should declare this. He could see no reason why a company would wish to donate anonymously to a multi-party democracy fund. Companies had to disclose when contributing to political parties. Would it not create a negative perception if companies donated in secret to the fund? The Chairperson agreed that no faceless person would want to donate to that fund as they would not be able to get anything out of it. Another option was not to include anything in the legislation about declarations, although at least a register of donors would be necessary.
Mr Bongo felt there was a need for a register for those donating to a political party. There was no reason for disclosure to the multiparty democracy fund. It would be dependent on the wishes of the donor. Perhaps the names of donors should be made published. In Parliament, there was a public and private declaration of Members’ Interests.
Mr Singh was sure that nobody would want their name excluded from a multiparty democracy fund. He had a different opinion on donating directly to parties.
The Chairperson reminded the Committee that they were dealing with the central private donation fund and looking at the management of it.
Mr Lees said that it was critical that the source of funds had to be from legal sources but there was a right to privacy, particularly where there was no opportunity to influence unduly, as in the central fund. It was the particular right of the donor to do it privately. He did not agree that disclosure should be necessary when donating to the central fund.
Prof Khubisa asked that Committee members confine themselves to discussion about management of the fund. He could not see why a donor would not want to declare, so donors had to declare. There was a need for transparency and openness because the legislation was being drafted in order to move towards transparency and openness.
Ms Mathys suggested there was a need to flag points where decisions would be taken informed by political decisions, such as transparency. They would have a heated discussion on transparency and other matters, in the follow-up meeting and decisions taken at that point could inform the details currently under discussion. Otherwise the Committee would be having half-hearted discussions on the contested issues.
Allocation of the monies in the central fund
The Chairperson agreed that the discussion should move forward and turn to the allocation of the monies in the central fund. To whom were they going to give the funds?
Dr Mulder suggested that the Committee might agree that the funds be used for the same reasons as were currently contained in the legislation.
Mr Lees agreed that the reason for allocation should be the same.
Mr Singh agreed in principle but flagged the need to determine the allocation formula at a later stage.
Ms Maseko asked about new parties.
Dr Mulder noted that during the IEC presentation there was great deal of talk about unrepresented parties, i.e. those that did not have a representative in Parliament or the provincial legislatures, but wanted some of the funding. However, as relevant as the topic might be, it was not within the mandate of the Committee as established by the National Assembly on 6 June 2017. He suggested that where there were important issues outside its mandate, the Committee should write include these concerns in its final report to the National Assembly.
The Committee agreed.
Allocation of funds to the provinces
Dr Mulder pointed out that the issue was whether the allocation of funds was on a proportional basis or was proportional and equity. As Mr Godi had previously pointed out, currently the 90 in the 90/10 formula was allocated proportionately according to the number of representatives in the National Assembly and the provincial legislatures but the 10 of the 90/10 split was simply divided proportionately amongst the number of representatives each party had in the provincial legislatures. There were two questions on the formula: firstly, the split between proportional and equity, and secondly, how to distribute the equitable part and to include representatives in the National Assembly. The discussion should be flagged. He asked the Chairperson if the Committee could think about possible incentives to donors but bear in mind that some incentives such as tax incentives would need statutory changes.
The Chairperson asked if the money put into the central fund should be disbursed to parties annually.
Dr Mulder stated that the IEC currently paid the funds to parties on a quarterly basis and that parties had to account for those funds before the next disbursement. He suggested that the same practice apply to the central fund for private donations. The Committee agreed.
Purpose or use of private funding
Mr D Gumede (ANC) suggested that the Committee determine the purposes for which the private funds could be used. It should not be the same as for public funding.
Dr Mulder stated that Section 5(1)(b) of the current Act established what the public funds could be used for. In addition, parties could not roll over more than 50% of the funds annually. He did not see why the same conditions should not apply to the central fund.
Mr Bongo thought that perhaps the current criteria for expenditure were too vague and not measurable. Parties would be able to buy T-shirts to “develop the political will”. The criteria were also not measurable.
Ms Mathys noted that the current Act indicated use of funds and the IEC gave guidance on line items for accounting. She has asked that the Committee considered the use of private funding for legal costs as the job of parliamentary representatives was to hold the Executive accountable. It was not currently a line item in the IEC budget.
The Chairperson asked if there should be prohibitions on what parties may not spend the money.
Prof Khubisa suggested that the criteria should be the same for all parties. They had to be specific about the use of private funds by parties. Giving parties a blank cheque would be problematic in the long run.
Mr Lees agreed with Dr Mulder that the Act, as it was currently, was great. The legislation was more specific in the use of funds, but legal costs were not included.
The Chairperson stated that they would consider the matter of legal fees when they got to the Regulations.
Dr Mulder reminded the Chairperson that the reference to independent candidates in the draft notes had to be removed as the Committee was not including local government in its legislation.
The Chairperson asked the Committee to respond to the two issues raised by submissions on enforcing gender sensitivity and a fund for a foundation for policy development and training.
Dr Mulder noted that foundations were widely used especially in the United States. However, if one gave money to a political party, that party would spend all of it on campaigning and not on a foundation, unless that was specified. Did the Committee want to see foundations created?
The Chairperson held that issue be flagged.
Dr Mulder reminded the Committee that it might wish to include in its report to Parliament about political party funding at local government level.
The Chairperson noted to the parliamentary legal advisor that the outcome of the deliberations by the Members would be the development of a draft document for public distribution. At a later stage, the Committee would determine whether it was to be a draft Bill or whatever else was required. The draft document had to look like a Bill.
Private party funds, i.e. donations by corporations or individuals directly to political parties
The Chairperson said the issues to be looked at included disclosure, misuse of state funds, investment arms, caps on party funding and directives from donors regarding the use of the donation.
He said those points had been put on hold while the source of funds going into the private central fund was discussed. Should foreign governments be banned from contributing?
Mr Lees noted that it was an impartial fund not aimed at regime change. Why restrict foreign government or any foreign sources of funding, provided that it was declared?
Ms Maseko believed that the submissions had suggested that foreign government donations were a no-no.
Dr Mulder suggested that if the Committee was serious about multiparty democracy, then they should not ban any legal donations into that fund. He believed the ban on donations by foreign governments applied to donations directly to political parties.
The Chairperson said one needed a compelling reason for a no-no. In the interim, he suggested that funding from foreign governments into the central fund be allowed. The submissions had suggested that other foreign donations to the private central fund were acceptable and the only question was whether there should be a cap on the donation.
The Committee agreed that there was no need for a cap.
The Chairperson asked should state-owned enterprises donate to the central fund.
The Committee agreed that they should not.
The Chairperson suggested that no taxpayer money in any form could go into fund.
Ms Mathys suggested that the Committee should also ban companies with large government shareholders.
Mr Lees warned that the Public Investment Corporation (PIC) had investments in many, many companies and it would be too complex to manage such an approach.
The Chairperson confirmed that no taxpayer money, in any form, could go into the fund, i.e. SOEs and government departments. There would be no restriction on companies doing business only with government.
Direct funding to political parties
The Chairperson stated that it was not the Committee’s mandate to outlaw the investment arms of political parties. Public concern around investment arms was that they were inclined to get business or tenders from the government because of their connections.
Dr Mulder pointed out that the concern was about where the investment arm got their money.
Mr Lees believed that an investment arm was another donor to political parties. There was legislation to deal with tenders. Chancellor House was a separate entity from the ANC but might channel funds to the party.
The Chairperson’s concern was that the public saw that the Committee had attempted to address the problem of investment arms.
Ms Mathys said that investment arms could invest in parties, but the problem was how they had got the money. She suggested that an investment arm should not have been given any tenders by the State.
Dr Mulder noted that investment arms could be a front for channelling money from tenders into the political party. That was the problem that the Committee was faced with.
Mr Bongo warned against being over-sensitive and over-legislating. Proper disclosure should be done but investment arms could not be prevented from receiving tenders. Perhaps a proper declaration had to be made. He suspected that the concern was really about corruption. He said he disagreed with Dr Mulder for the first time.
Mr Lees said that the concern was about how the investment arm obtained monies. If it were prohibited, the party would find another way of channelling money from companies doing tenders. As much as all Members wanted a corruption-free environment, the party funding legislation was not the place to deal with it.
The Chairperson agreed with Messrs Bongo and Lees. He noted that the matter of clean tenders was critical. He believed that the irregular source of funding could not be controlled. The legislation could only deal with from where a party got its money, so a full declaration was essential.
Ms Mathys said that it was contradictory that SOEs were banned but investment arms were permitted to donate. The Committee had to take cognisance of the highlighted state of corruption and formulate legislation in that context. Tenders were the most corrupt form of corruption in South Africa and the reason for the poor state of the country. Investment arms should be banned from doing business with the State.
The Chairperson agreed with the sentiments of Ms Mathys but asked how the Committee would do it. How did one link the investment arm companies to the political party? The Committee had to be able to defend its decision on investment arms.
Dr Mulder agreed that it was not possible to prevent all companies that did business with the state from donating to the state. The mandate from the National Assembly talked about investment arms owned by political parties. Perhaps the only regulation was the requirement of transparency and disclosure.
The Chairperson asked Members to think about the issue.
Ms Mathys said that political leaders were corrupt so they would ensure that their investment arms followed corrupt practices.
Mr Bongo felt that the Committee was in agreement. He did not want over-regulation. They had to be able to monitor all requirements. He asked Ms Mathys to be objective. He was proposing that there had to be full disclosure.
Mr Lees suggested that there should be no mention of the investment arms as they would be treated like any other company. Dr Mulder suggested that political parties should be required to disclose any investment arms that they had. He agreed with Mr Bongo that there was a danger of over-regulating. People would find ways around regulations.
The Chairperson determined that somewhere in the document it had to be stated that all political parties had to declare their investment arms.
Mr Lees pointed out the question of ownership was fraught with problems and so the only answer was requiring a declaration by political parties.
Source of private donations to political parties
The Chairperson said membership fees would be permitted. What about foreign donations?
Mr Bongo stated the source could not be from criminal acts. Foreign governments could not give directly to political parties. Foreign individuals could give to parties. All donations had to be disclosed. The capping would be the main issue and had to be regulated.
Mr Lees suggested that the Act should state what was not allowed. Unacceptable should be the proceeds of crime, foreign governments, SoEs and government departments. In terms of disclosure, it was essential to find a balance between the right to privacy and the need for transparency. Where did the obligation to disclose start and finish? He suggested that there be no disclosure of membership fees. The Committee should look at a cap below which there would be no disclosure. Another question was to whom they disclosed. The disclosure process in Parliament was a good example.
Dr Mulder’s view was that membership fees and levies/contribution of a percentage of members’ salaries, and constituency allowances should not be declared.
The Committee agreed.
Donations from individual companies should be declared and disclosed. IEC funds were already public knowledge. The Lottery should not be allowed to make contributions.
The Committee agreed.
The Chairperson raised the matter of top and bottom capping. There would be no disclosure below the bottom cap. Was there a need for a top cap that set the maximum amount that could be donated? Disclosure was essential for all individuals and all companies above the bottom cap. He acknowledged the constitutional right to privacy but disclosure promoted transparency and would prove to be a deterrent to corruption. It was about disclosure versus non-disclosure which reflected transparency versus corruption. He believed there should be a declaration.
Dr Mulder recommended that there be no upper limit to donations but there was a need for a bottom limit below which nothing needed to be declared. It was better to regulate directly on spending on election campaigns than to include it in funding. There was an argument for both privacy and disclosure.
Mr Lees agreed that there need be no upper limit. He was adamant that there was no evidence of a credible link between non-disclosure and corruption. Therefore, right to privacy was better than trying to combat corruption when the Committee did not know if it would stop corruption. There were direct links between contact with opposition parties and prejudice against a person in business.
The Chairperson determined that there was agreement on a bottom cap and an upper cap.
Ms Mathys said her preference was total disclosure. She believed that companies had to declare regardless of how much they donated, i.e. no cap should apply. Private donations could have a lower cap.
Dr Mulder declared that privacy or no privacy was the essence of the decision and it should be held in abeyance.
The Chairperson agreed that corruption was a concern but the concern about economic bullying had to be dealt with in another way. The point of disclosure was about accountability. It was not possible to account and not disclose. Would it be in the Act or in the Regulations? As far as purpose was concerned, could the Committee legislate about what a political party could do with the money? Submissions had complained that all money was used for elections.
Mr J Steenhuisen (DA) suggested that once the parties had received the money, it had to be left to political parties. Political parties should be responsible and ensure capacity building.
Ms Mathys suggested that the purpose should indicate that the funds should be used for party-related activities.
Mr Steenhuisen was adamant that that was the thin edge of the wedge as far as over-regulation was concerned.
Ms Mathys believed that their positions were close.
The Chairperson suggested that the purpose be omitted for the time being. There was a suggestion that there be no top caps.
Ms Maseko said that everyone should declare above the lower cap.
Mr Lees noted that the right to privacy was not absolute but the test regarding privacy was lower for individuals than corporations and so there should be different caps for individuals and corporates.
The Chairperson summarised the question of caps: was the lower cap for all or just for individuals?
He said the following items needed consideration before the next meeting:
• What did equitable mean?
• Bottom cap
• 90/10 split
• Management and control of private central fund
• Balance between right to privacy versus disclosure
• Investment arms
• Provincial funding.
The research team would provide an updated document before the next meeting.
The Chairperson announced that the next meeting would commence at 9am and he had applied for permission to work from 7pm to 9pm, if necessary.