Regulations: discussion

Ad Hoc Committee on the Funding of Political Parties

03 November 2017
Chairperson: Mr V Smith (ANC)
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Meeting Summary

The Chairperson informed the Committee that 17 of the 21 submitters had agreed to make an oral submission on the Political Party Funding Bill on the 7 and 8 November 2017. Those who had previously made oral submissions would be restricted to comments on the draft Bill, while those that had not previously presented would be given more scope. However, the Committee was not going to be taken back to the beginning again. Presenters would be required to critique the Draft Bill. Permission had been granted for the Committee to sit for a full day each day in view of the time constraints.

In his overview of the submissions, the Parliamentary Legal Advisor noted that all the public comments supported the establishment of a Multi-Party Democracy Fund whereby donors could enhance and promote democracy. However, they differed on how the fund should operate and allocate funds. Most inputs suggested that the allocative formula for the Multi-Party Democracy Fund should differ from the formula used to allocate the public funds for political parties. All agreed the funds should be subjected to robust transparency and had to be disclosed. There were two competing views on disclosure. There were those that proposed total disclosure of all donations regardless of value, but a substantial number of submitters argued for a relatively low threshold. It was suggested that funds from the Multi-Party Democracy Fund should be skewed towards equitability. Public funds should be allocated on a proportional basis but that the difference between proportional and equitable should be marginally smaller. Most comments proposed scrapping the section that allowed a political party to accept a donation from a foreign entity for the purpose of training or skills development.

The draft Amended Regulations were presented by the Legal Advisor. These were to have been dealt with after the Bill had been completed but there had been criticism in the submissions that Clause 23 of the Bill had moved a number of important decisions to the Regulations and the public argued for an opportunity to scrutinise the Regulations before the Bill was enacted. The Legal Advisor noted that three policy issues had to be addressed and reach consensus on:
• allocative formula in respect of proportionality and equitability.
• threshold for disclosure, which should be relatively low to ensure transparency and accountability.
•  reasonable cap to limit the risk of undue political influence.

The Committee debated at length the formula for allocation of funds with the smaller parties advocating a 50:50 split between equitability and proportionality, with the EFF and DA not having a firm proposal on this yet and the ANC suggesting 80:20. It was agreed that a task team with one member from each party would be set up and they would use a spreadsheet of the actual amounts arising from the different formulas.

On the disclosure threshold and upper limit cap, if the submissions wanted a R10 000 threshold, the IFP said that would be a huge administrative burden for political parties. Councillors and Members of Legislatures contributed to party funding sometimes even more than R100 000 per annum. So, it suggested the lower limit should be R100 000 and the upper limit should be R20 million. The EFF suggested a lower upper limit cap of R5 million. The question was how much of a contribution would capture a party?  would be there would be quarterly reporting on private funds received and distributed to parties, subject to IEC approval in the next meeting with the IEC. Previously parties had had to spend 50% of the allocated money each year but in the light of the tightened regulations, that requirement would fall away and be replaced by a requirement that parties account for unspent funds. Consensus could not be reached on a minimum threshold above which funds had to be disclosed or a maximum amount that could be donated. The Chairperson suggested a minimum threshold of R60 000 per annum and a cap for political party funding of R5 million, with no cap for Multi-Party Democracy Funding. Parties were requested to take the amounts to their principals so that the matter could be finalised at the next meeting. Neither consensus nor a proposal was possible in respect of the formula to allocate funds equitably and proportionately. The ANC was willing to move from a 90/10 split in respect of proportionately versus equitably but was unwilling to meet the IFP proposal of a 50/50 split. The FF+ believed that the Constitution had intended for a 50/50 split as the two principles were clearly indicated, without a weighting attached to either principle, in Section 236. The party was therefore reluctant to move from its position of 50/50.

The Committee took a decision to develop a model that would show exactly how much money would be distributed according to various formulae in the hope that the actual figures would provide insight into the implications of the split between equitably and proportionately. A task team of one Member per party present in the Committee would try to come up with a proposal for the formula.
 

Meeting report

The Chairperson welcomed Mr Mdakane who replaced Mr B Bongo on the Committee. He noted that the Legal Advisors had compiled a summary of the 21 written comments, that had no status, but was to assist Members in analysing the inputs.

Summary of submissions by Parliamentary Legal Advisor
The Legal Advisor, Michael Prince, presented a summary of the 21 written inputs to the Committee. He stated that all the public comments supported the establishment of a Multi-Party Democracy Fund whereby donors could enhance and promote democracy. However, they differed on how the fund should operate and allocate funds. Inputs suggested that the prohibition of direct funding to political parties was the best way to avert undue influence on the political system. There was a suggestion that non-represented parties should be funded. However, the Bill dealt only with represented political parties. There was a belief that purposes for which the funds might be used, and the allocative formula of the Multi-Party Democracy Fund, should differ from those of the public funds for political parties. The same allocative formula would not serve the rationale for promoting multi-democracy. The fund should be subjected to robust transparency. All donations above the threshold had to be disclosed.

There were two competing views on disclosure. Firstly, there were those that proposed total disclosure of all donations regardless of value. A substantial number of submitters argued for a threshold but that it should be relatively low. Suggestions were R5 000 and R10 000, while others maintained that the amount should be linked to indicators such as the average household monthly income as a threshold. It was proposed that disclosure occur on a quarterly basis. Some submitters suggested that the donors should also be duty-bound to disclose, making for dual disclosure. It was suggested that funds from the Multi-Party Democracy Fund should be skewed towards equitability. The public fund should be allocated on a proportional basis but that the difference between proportional and equitable should be marginally smaller. Most comments proposed scrapping the section that allowed a political party to accept donations from a foreign entity for the purpose of training or skills development. Others raised a concern about the rationale for foreign governments to donate to the Multiparty Democracy Fund. The idea of capping was strongly supported. A maximum limit to the quantum of donation over a funding cycle should be introduced. Submitters proposed including political parties and independents at local government level. The Legal Advisor noted that the local level of government was not in the mandate of the committee. Mr Prince said that three policy issues had to be addressed and to reach consensus on:
• allocative formula in respect of proportionality and equitability.
• threshold for disclosure, which should be relatively low to ensure transparency and accountability.
•  reasonable cap to limit the risk of undue political influence.

Mr Prince noted the Committee position on some of the inputs. The terms of reference limited the Committee to enquiring into the national and provincial legislatures, which meant that the Bill could not address the local government level. Gender representivity was raised, and had been raised in the Committee. It was suggested that the prescribed formula be included in the Bill and not left to Regulations, but the Committee had thought that it was adequate to put the formula in the Regulations. On the proposal for the removal of the clause that allowed a person who gave funds the Multiparty Democracy Fund to remain anonymous, he noted that the Committee decision to include the clause had not been a compelling one. On the threshold for not disclosing donations, the Committee had felt that it was justifiable because of the burden of disclosing small amounts. He noted a request for disclosure by the IEC as well, making it a dual disclosure.

There was a suggestion that investment vehicles should be regulated and the Committee had discussed that in some detail. Mr Prince suggested that the Committee might reconsider allowing foreign entities to fund training, which was the exception to the default position on the Bill.

The Chairperson stated that the information was simply in preparation for the public hearings the following week. From 14 November, the Committee would consider the recommendations made by the public.

Public hearing programme
The Chairperson remarked that 21 written submissions had been received. Those that had submitted in the first hearings could only talk to the draft Bill; those that had not previously submitted could give broader input, but the Committee was not going to be taken back to the beginning again. Of the 21, four submitters had chosen not to make an oral presentation: South African Human Rights Commission, Gender Equality Commission, Keith Gottschalk, Business Unity South Africa. That meant that there would be 17 oral submissions on the following Tuesday and Wednesday, 7 and 8 November 2017. Permission had been granted to sit a full day on both days in view of the time constraints. The Chairperson said that they wanted everyone to focus on the Draft Bill and critique it.

Draft Amended Regulations: briefing
Mr Prince had distributed the draft Amended Regulations to Committee Members which were the Regulations from the original Act to which he had proposed amendments. He noted the criticism in the submissions that Clause 23 of the Bill had moved a great deal of policy decisions to the Regulations.

The Chairperson pointed out that the draft Amended Regulations had been written on the basis of inputs thus far. However, there would be further consideration of the Regulations after the Bill had been finalised. The President would sign the Regulations as well as the Bill. The discussions at the meeting that day would not close the door to inputs or decisions on the Regulations.

Mr Prince mentioned that three issues were important in the Regulations: the formula for distribution, a threshold for disclosure, the cap on donations from a single source. It was a draft purely for discussion. It would be ratified at the end of the process.

Definitions
The Committee went through the Definitions in the Regulations.

Mr J Selfe (DA) pointed out a typographical error of 2007 instead of 2017.

Dr P Mulder (FF+) pointed out that there had been a proposal for a new definition for 'threshold'. Should there not also be a definition for 'upper limit'?

The Chairperson asked if Members wanted a definition of 'upper limit'.

Mr T Godi (APC) stated that it was required because the section on disclosure talked about what should and should not be disclosed, so a definition was essential, unless they decided on no capping of funding.

Mr Prince replied that they could include the definition in the Regulations or they would craft an amendment in the Act, if they could not find a link.

The Chairperson reminded everyone that the draft Regulations before them was not the final product but just for discussion. He especially asked that civil society should take note.

Ms Janine Ogle, My Vote Counts Coordinator, stated that she could not follow as she did not have the document. The Chairperson responded that it was an in-house document that had no status as it was a draft. Civil society would receive the document before the public hearings on 7 and 8 November 2017.

Dr Mulder suggested that civil society could refer to the published Bill.

Mr N Singh (IFP) asked for confirmation that everyone from civil society had all the other documents. He did not want people to later complain that they had not had the documents.

The Chairperson confirmed that they had all other documents and that they would have the draft regulations by the time they came to fight with the Committee on 7 and 8 November 2017.

Regulation 1: Notification and Allocation of Funds.
The Chairperson read from the regulations. Details of the distribution of funding had to be gazetted within two weeks of the finalisation of the year-end financial statements.

Mr Singh (IFP) understood the regulation about the notification on the distribution of public funds in the government gazette within two weeks of a year end. However, donations would be made throughout the year. Would all funds be held in the central fund and only be distributed once a year? A party might need funds in the course of the year, especially if an election took place in May or June. There could not be only one announcement two weeks after the end of a year.

Dr Mulder stated the Regulations had originally dealt with parliamentary funds only which was a fixed annual sum. The Committee needed to determine a different formulation when it came to private funding because there would not be fixed amounts and fixed times. The Multi-Party Democracy Funding had to be handled differently.

Mr Godi agreed with Dr Mulder. It was something that the IEC could work on in the administrative regulations. The money would not go via Parliament but directly to the IEC and so, the IEC would have to make decisions on how and when it was distributed and gazetted; but perhaps the Committee could have a conversation with the IEC. He was reluctant to be too prescriptive before they had had a conversation with the IEC.

Ms L Mathys (EFF) was of the view that gazetting within two weeks of the financial end of each quarter would not be too much of an administrative burden. She added that, in any case, the IEC paid out the statutory funds quarterly so it should not be a problem.

Mr D Gumede (ANC) agreed with quarterly publication, but subject to agreement by IEC.

The Chairperson noted that the Committee’s view was quarterly, but the matter would be put to IEC. Parliamentary funds would be gazetted annually.

Regulation 2: Formula for Allocation of Funds
The Chairperson noted that public comments had suggested that the split between equitable and proportional should be 50/50. The Committee had agreed that 90/10 was not equitable, but what was the actual figure. That was the hard bargaining that had to take place. What did members think would be an acceptable figure? It was not going to be 90/10. That much had been agreed upon.

Mr Godi stated that he had no intention of putting forward a figure. That should be the last part of the discussion. He believed that the context was necessary. In Committee meetings, Members had been less adversarial than one might have expected. The Committee was coming to the crunch and he appealed to Members not to lose their heads over the figures. Comrade Mdakane would greatly assist by being magnanimous. Winston Churchill, the British Prime Minister at the end of the Second World War, had said that one had to be magnanimous in victory. At the end of the day, it was a political process, not a legal process but Members had to give legal meaning to their political objectives. If one looked at the Constitution, and that was what had been directing him from the beginning, no one could say whether equitability or proportionality weighed more than the other, from a strictly legal point of view. He understood, though, that Members were working from a political perspective and it was necessary to take reality into account. Proportionality was a problem within the House and he, as the APC Member, struggled to get enough time to say something sensible so that kind of reality would come to the fore when talking about the matter. But they had done all the hard work and could not stumble at the end. He was speaking as someone who had been most severely and cruelly affected by the 90/10 split. He was not seeking the ultimate but hoped that the Committee could continue to work with the straight approach that it had been following. Could the Committee please continue in that good spirit? He was hoping that Mr Selfe would suggest 50/50 because the Constitution had laid out the two concepts equally. That was the point at which he wished to start.

Mr Singh asked why Mr Godi wanted Mr Selfe to ask for 50/50 and not him. The IFP had argued from the beginning for 50/50. He wanted to thank the Chairperson for agreeing that 90/10 was not equitable or proportional or fair. IFP had asked for 50/50. The Committee had agreed that whatever formula was decided upon would be applicable to both funds. He had heard that one public proposal was two formulae but he thought it should be a single formula. However, he would wait to be convinced when that came up at the hearings. According to the Legal Advisor, the majority of the submissions had proposed 50/50. The majority had spoken and the ruling party always said that when the majority spoke, that was what had to be done so he thought that it justified his decision. However, as Mr Godi had said, the Committee had to put a weighting on equitable and on proportional. Someone had said that his party would go to court but was holding back, hoping for a solution. He was prepared to hear other views but 50/50 was his starting point.

Dr Mulder stated that the formula was like one horse and one rabbit. At the start of the discussion on the Bill, the focus had been on the formula, but in the process the Committee had come up with a much better funding Bill that did not focus just on that formula. The Constitution had to be the guiding principle on the matter. Proportionality was a significant principle in the Constitution. It was reflected everywhere from funding to speaking time to the number of members. Proportionality was taken into consideration in everything except Section 236 of the Constitution. Section 236 spelt out that there had to be funding for political parties to enhance multiparty democracy, and not to safeguard a two-party system or to enhance the dominant party. National legislation should provide for funding of parties on an equitable and proportional basis. It was different from every other section of the Constitution. Everywhere else in the Constitution, reference was made to proportionality. The Constitution stated equitable first and then proportional in Section 236. The principles were set out alongside one another. Legally they were put on the same level.

Dr Mulder had noted when the original Regulations were drafted with a 90/10 split, that they were unconstitutional and could not be defended in terms of the Constitution. He had wanted to go to court on the point many times but his party had demurred. At the time of the last election, he had again raised the matter of the unconstitutionality of the funding formula. At that point, the current process had started and it was decided to wait and to find out what the process brought about. The decision in the Funding Bill would determine whether or not it was necessary to go to court. Dr Zweli Mkhize, ANC Treasurer General, had said the formula was up for negotiation but he had said that 50/50 was out. That was a positive open move. Technically, the Committee could come to an agreement to say that equitable meant a particular percentage, i.e. whatever they decided. They would then, by virtue of that decision, determine the percentage for proportionality. The Committee wanted to give a value to the two principles that had equal weighting in the Constitution. He therefore could not move from his position of 50/50.

Mr Selfe was also going to refer Dr Mkhize’s words. The argument raised by Dr Mulder was a very compelling argument. In 1998, the National Party and the ANC had made a deal to create the 90/10 split and rammed it through. DA had been a small party and had got a small slice. Now it was a slightly bigger party and got slightly more. However, one of the parties making the deal in 1998 was no longer a political party. It was always best to remember things changed in politics. The Committee needed to decide, not from a party’s particular current position, but according to what was in the best interests of the country. The DA did not take policy positions until a draft was in its final form so he could not give a definitive answer but he did know that 90/10 was grossly unfair at the time and remained unfair. He agreed with Dr Mulder about the concept of giving equal weight to equitable and proportionality. However, he recommended that Members did not make legislation from the vantage point of one’s current position as, in politics, one’s position was always fluid.

Mr Gumede stated that the ANC was always prepared to listen, to compromise and to be democratic. The ANC had listened and the ANC looked at what was equitable and fair, right, just and reasonable. He presented a scenario. One party was influential in only one town compared to a party that had equal influence across the country so it was fair, right and equitable for the larger party to get a larger proportion related to the demands of its larger constituency. ANC believed that 90/10 was worth changing and after listening they had agreed to move, but to look at equitability and proportionality before deciding. They disagreed with 50/50 but had proposed 80/20 which doubled the 10. The ANC would listen, but Members had to remember that ANC was majority party and the amounts had to be equitable and proportional.

Ms Mathys stated that the position of the EFF was pretty much what had been discussed in the Committee. Her party believed that they had to take cognisance of what the Constitution was speaking about on proportionality and equitability. So, the final draft had to be in line with the Constitution. In terms of footprint, she had heard the arguments that bigger parties should have more funding because they had a larger footprint. However, due to lack of resources, small parties could not grow and hence parties fell away. The Constitution talked about strengthening democracy and so parties that found themselves in Parliament needed to grow, but to do so, they needed funding. Some parties had managed to get a bigger footprint. She commented that she probably needed more guidance on the legal side of the matter but perhaps it was a political decision. Proportionality was addressed in the constituency allowances where sufficient funds were given according to a party’s footprint to support the work of each party. They not talking about supporting constituencies but were speaking to what the Constitution wanted to achieve.

Mr R Mdakane (ANC) noted that, as a new Committee member, he was not fully informed on all the details of the discussion on the matter but he agreed that the Committee should try to cover both principles of equitability and proportionality. There would be no harm in engaging with parties in moving from 90/10 and to allow some time to consider the matter as it was very complex and, in any case, proposals made by the Committee would have to be subjected to discussion by the political parties. His view was that they should learn how provincial legislatures were dealing with it, and local government. However, he recognised that laws had to be about the future and not the past. The current situation could change but laws should be able to stand the test of time. The total portion of the money should be allocated for both equitability and proportionality. In 20 years’ time, the decision should still be seen as fine. Parties should not have a fixed view. It should not matter whether one was in power in the future or not. Parties would increase and decrease, so it was about the principle. The drafters of the Constitution were clear and had not intended to confuse people. Political parties could not say that it was proportional and nothing else; nor could it be equitable and nothing else. Government could not have the same proportion of both equitable and proportional. Those who were good at accounting should be able to work it out.

Mr Singh wanted to place it on record that Dr Mulder and himself represented seven other parties and that they had caucused with the other parties. He thanked the Chairperson for the way that he was chairing the meeting and was pleased that everyone agreed that something was not right and that it had to be put right. He followed up on Mr Mdakane’s reasoning. They needed to come up with a percentage. He had previously come up with the idea of top slicing a portion of the money and dividing amongst all the parties while the rest of the money would be divided proportionally. The Committee was moving away from 90/10 and talking about 80/20. He was talking about 50/50, so perhaps they could find each other. Maybe two-thirds for the ANC and one-third for the remaining parties was an option. Alternatively, the Committee could get the legal drafters to look at sharing equally a top slice and proportionally the rest of the funding. Ms Mathys had made a good point about footprint. It was important to look to the future when the size of parties would change. The formula could not be amended after each election.

Mr Godi agreed with Mr Singh that parties could be in a different position after the elections. He wanted to reiterate his position. He thanked Mr Mdakane for capturing some of the nuances in a way that he had not been able to do. The problem with interpreting the Constitution was that Parliament was not the final arbitrator. One did not want some rich person to challenge the decision in court as he found it disempowering for Parliament to be seen in court as not having done its job properly. So, the Committee had to consider the legal interpretation of the clause because it would be a legal interpretation that would win the day, not a political interpretation. How did they find each other in such a way that even if some of the parties were not completely satisfied, they were able to say that they should move on? Numbers were like bones that were bare. They needed to be covered in meat. The discrepancy of the figures should not be bare. He had heard Mr Singh, but did not think that the one-third/two-thirds would remove the friction of dichotomy. It had to be something that everyone could live with. 90/10 had been a starting point but with experience, Members knew that it had to be amended. The decision that the Members made should be durable over at least 20 years. At the end of the day it might not be about what the majority party wanted because it was a constitutional matter. He did not want it to go to court. Mr Gumede had asked about the meaning of equitable. How did one give it meaning? The Committee should give it life. He proposed that the Committee had to get the context and understanding right before going to figures.

The Chairperson was not sure how to take it forward. If they went the legal route, every legal advisor would give different guidance. As there would be so many legal interpretations, that route would not take the Committee forward. He believed that it was a political process. The spirit was about enhancing multiparty democracy. There was a limited kitty and there was the result of an election that could not be ignored. One extreme was 50/50. The other side was 80/20. Every Member said that he or she would negotiate.

What could the Committee agree to without going to court? He wanted Members to be open, frank and honest. There was a recognition that the 90/10 was not on. The quantum of movement was the issue. Mr Mdakane had said that it should be left to the parties, but he did not think that it was a difficult exercise.

The Chairperson noted that the amount in the kitty of R140 million would mean X amount per party. He was trying to see what it meant. ANC/DA/EFF got 88% of the funding and that was wrong. The 88% had to be brought down so that the 12 parties currently sharing 12%, received more money. If the formula was correct, the number of parties would be irrelevant. It was the difference between what the largest and the smallest party currently received that was unacceptable. A task team, or even a single person, could devise an Excel spreadsheet. The Committee could do a spreadsheet to see what the spread looked like. It would be unconstitutional if the amount given to top and bottom was so far apart. They could not have one party receiving 58% of the funding and another receiving 0.6%. The situation would never get to the point where APC would get the same as ANC, but it had to be fair. The Committee could work on a model which contained the permutations of the formula in terms of real amounts. At some point the split would have to be finalised but there was still time to work on it. Parties that wanted to get legal advice could do so. He wanted civil society organisations to know that the Committee would work on it behind the scenes at a task team level.

Mr Mdakane said that Members should ask themselves how they would feel in a situation like that if they were in opposition. Or were in the governing party. That would be the only way to arrive at fairness that would enhance vibrant democracy in the country. The governing party wanted to cover the opposition as it was a multi-party democracy. Even if someone went to court, Parliament could win the case if it could show that parties had agreed upon something that was considered fair by all parties. Dr Mulder, although he was in the opposition, was calm and unemotional because he was a lawyer who approached the situation as such.

Ms Mathys noted the Committee had agreed that it was necessary to come up with a document on the constitutional principles of equitable and proportional. She did not have a formal position from her party at that stage but she suggested that she could put 60/40 on the table as a negotiating point. She was not too sure about working on figures as those would change from time to time, but she understood it would be a pointer. But the Committee needed to have something solid for when the EFF took over in 2019!

Mr Godi said that the APC was surviving on R150 000 public funding so anything additional coming from the national kitty would be Christmas, but Parliament should provide an opportunity to make history and do things that would stand in the future. When he was no longer leader of APC, his successor might have a different position. However, if one looked at the spirit of equitable and proportional, equitability was shared with proportionality. Everything else was overshadowed by proportionality. Even the equitable share received by the Northern Cape was determined according to proportionality. As much as equitable and proportional were stated as equal principles in the Constitution, they needed to recognise that whatever figure was used, there would still be some slant towards proportionality. It was a question of how much. He still hoped that a specific number could be avoided. No party in Scandinavia, such as Denmark, touched the funding formula because it was accepted that the country paid fairly for democracy.

Dr Mulder understood that as much as he interpreted the Constitution to mean an equal division between equitable and proportional, other Members would have different interpretations of that section of the Constitution. However, he did not want to leave the decision to someone else. There was a political reality. He would prefer it to be decided in the Committee. He supported the Chairperson and the proposal to set up a task team that would develop a model that could show exactly how much each party would receive from the central kitty according to different formulae. The Committee had made good progress to date and he was convinced that a solution was possible.

Mr Singh reminded the Committee that it had received legal advice from the parliamentary legal advisor and therefore he did not think that they needed further legal advice. He supported the Chairperson’s proposal for a small team to work on the formula in the following few days, and to see if a proposal was possible.

Mr Gumede thanked every Member from the different parties for their positive contributions to the debate. What was the intention of the legislator when he used proportionality and equity side by side? What did it mean? Both terms were in the Constitution. If the legislator had wanted it to be equitable, he would have used only equitable. That was the puzzle. One needed to look at it politically. Members should seek a mandate from their principals. He knew that he could go down from 90/10. All parties needed to accept that South Africa was a democratic country. It was not governed by courts. Members had to convince each other of an agreed upon principle. The formula needed to be decided by mutual agreement. He thought that it could be perhaps 80/20, or perhaps 70/30.

The Chairperson determined that a small task team to crunch the numbers was the way to go. He would try to develop a spreadsheet which would show the meaning of the split in real numbers. It should not be too difficult to plug in figures once the model had been developed. It would require a formula in which the percentage would change. One Member from each party would sit on the task team. Mr Gumede would represent the ANC. 90/10 was undesirable and parties would work towards agreement on a more appropriate formula.

Regulations 3 and 4
Dr Mulder queried Regulations 3 and 4.

The Chairperson noted that that item had been addressed when a decision had been made to remove the alternatives (aaa) and (ccc) from those clauses.

Regulation 5
The Chairperson noted Regulation 5 had referred to the previous Act.

Mr Singh stated that Regulation 5 was fine for the appropriated funds but it more might or might not be appropriate for the Multi-Party Democracy Fund, depending on how they dealt with that fund. The timing was an issue and if it should be quarterly allocation.

Ms Mathys agreed.

The Chairperson said that the Regulation stated that the public funding allocations would be done quarterly and the multi-party allocation was also quarterly. Could they add that it was for both funds?

Dr Mulder noted that the Regulation stated both funds.

Mr Singh pointed out that if it was quarterly, one would not know how much money there would be in order to create an annual budget.

The Chairperson explained that whatever was in the kitty would be split quarterly. The wording therefore covered both funds.

Regulation 6: Disclosure threshold and upper limit
The Chairperson noted that it related to the current regulation and was still relevant.

Mr Selfe pointed out that the threshold and the upper limits were both the subject of several submissions and the submitters would be giving evidence the following week. He, therefore, thought that it would be premature and contentious to discuss it now.

Mr Singh differed from Mr Selfe. He thought that the Committee should have some ideas before they heard the views the following week. If the presentations suggested a R5 000 to R10 000 threshold, that would be a huge administrative burden. He was speaking as Treasurer-General of his party. Councillors and Members of Legislatures contributed to party funding sometimes even more than R100 000 per annum. So, the lower limit should be R100 000. The upper limit should be R20 million. He was talking about the Multi-Party Democracy Fund as well.

Ms Mathys understood the disclosure to be about political party funds, and not necessarily the Multi-Party Democracy Fund. She reminded Members that they had been requested by the Chairperson to get a mandate from their parties on the threshold and the cap so that there would be something on the regulations schedule for the public to comment on. She suggested that there be no upper limit for the Multi-Party Democracy Fund because that would be managed by the IEC. She agreed that without a threshold, it would be an administrative nightmare. The EFF recommended a lower cap of R5 million for the amount that could be donated to a political party.

Mr Mdakane thought that they were talking about two different issues. One was about the funding for political parties and the other was for the Multi-Party Democracy Fund. Money donated to the Multi-Party Democracy Fund was a separate matter and he would have no problem if some rich and benevolent donor gave R100 million to promote democracy in the country. However, when it came to donating to individual parties, that was another matter. There was an important principle. Why should a political party that received government funding get additional donations? But that had been decided upon and so he was withdrawing his comments. The reason for giving money to parties was so that they could run the party and they got that money from the public purse. If they did allow donations to parties, those should be disclosed. The lowest limit should be R10 000 and the highest limit R50 000. He thought that there should be a limit on how much a party could receive. However, he noted that he had not consulted the ANC. The Bill should monitor parties as to what they did with the money as some small parties would hang onto their money and remain small forever because it was more beneficial to them to remain small. He spoke at some length on how funds could be abused by political parties.

Dr Mulder stated that Mr Selfe was correct in that the submissions in the public hearings would address the issue but he thought it a good idea for the Committee to have some idea as to what Members considered an appropriate threshold and cap. It would be good for Members to apply their minds before they heard the submissions. He reminded the Committee that it was talking about donations to political parties not individuals. If the threshold was too low, it would cause huge administration problems because the paperwork would be endless. The question was how much would capture a party. Would R10 000 capture a party if it were not declared? He could not see R10 000 capturing the ANC. He suggested R50 000 as the threshold. There should be no upper limit for the Multi-Party Democracy Fund but for political parties, an upper limit was necessary. Some rogue could make a huge donation and technically capture the political party and make it dance to his tune. He had not yet applied his mind to an upper limit.

Mr Selfe stated that two principles were at stake. One clearly did not want a corporate or an individual to buy or capture a political party. Equally, one did not want the state to capture a political party. It would be very unhealthy for a political party to depend entirely on the state for funding because a democracy, by its very nature, was supposed to take views that were opposed to those of the state. So, he disagreed that if the state gave money, there should be no private funding. It was also a fact that the determination of upper and lower limits related to the principles of freedom of choice and right to privacy as well as other rights. It went to the heart of determining whether an individual was free to make a political choice by supporting a political party of his or her choice. The question was to what extent that should be limited. He also had a lot to do with his party’s accounts. If he had to put systems in place to acknowledge and disclose donations of R5000, it would tie up an army of people. His view was a lower limit of R100 000. An upper limit would be perhaps R1 million. He had no mandate but it was his view.

Mr Gumede said that he had carefully listened to the other parties and it was all about undue influence and about parties not having the national interest at heart. He would take the words of wisdom to his principals and come back at the next meeting with suggestions of what could and could not have an undue influence on the party. A lower limit, if too low, was too difficult. However, too high a lower limit was undemocratic and would defeat the ends of the legislation.

Mr Godi brought no experience to the question as he operated on an empty tank and those who shared his ideological stand did not have that kind of money. He could only theorise on the matter. The country was operating in an environment where anything and everything was accepted. Putting in measures would not open the floodgates but would put in a framework. He accepted the matter in principle but he wondered how much work was needed to administer funds, to run an election effectively and how much carried the potential of someone impacting on a organisation. R100 000 was maybe okay and maybe R10 million as an upper limit.

Ms D Dlakude (ANC) suggested that no decision be taken that day to allow for better consultations as some Members were saying that they had not consulted.

Mr Mdakane suggested that those who were in Parliament should make proposals and take the proposals to the parties for their consideration so that the parties’ discussions were not too vague. Parties usually engaged well when people brought proposals. It could take years to get to a decision if there was no proposal on the table. It had to be remembered that they were proposals and not decisions. The Members of the Committee had engaged extensively with the matters and therefore should be in a position to give some direction to discussions within the parties.

The Chairperson noted that Ms Mathys had reminded the Committee of the agreement to go to principals and to get proposals on the threshold and the cap. He reminded Members that it was about disclosure, not purely about administration. The IEC would have information about the R1 and R2’s that been donated, but the clause that the Committee was addressing was about proactive disclosure. South Africans wanted to know who was donating and how much. If one looked at a person who donated R1 000 a month, that would total R12 000 a year. A monthly figure of R5 000 would mean R60 000 per annum. R5 000 could not do any damage. He suggested a lower threshold of R5 000 per month, i.e. R60 000 per annum and requested that members consult their principals on the amount. An upper limit was about not influencing political parties and subverting the views of ordinary South Africans. Parliament had to decide on an upper limit and a final decision had to be made by 14 November 2017. His view was that the threshold should be not too low or too high: too low and it would create too much administration; too high and it would be about disclosure.

Regulation 7
The Regulation had existed in the previous Regulations and was accepted.

Ms Mathys added that the financial accounting system should be updated. GAAP had to be updated to GARP.

Regulation 8
Ms Mathys reminded the Committee that it had intended to ensure the use of funds for legal expenditure but it had not been captured.

The Chairperson stated that the Act did not prohibit the use of funds for legal expenses.

Mr Prince had found legal fees referenced in the main Act. Regulation 8 was about what one had to account against, not the purpose for which funds could be used.

The Chairperson asked Ms Mathys and Mr Prince, the Legal Advisor, to check and report back.

Regulation 9
Dr Mulder pointed out that Regulation 9 had been framed exactly as the previous Regulations. In the current system, parties knew how much they were going to get at the beginning of the year as a fixed amount was appropriated for the purpose. Regulation 9 spoke of spending of 50% of the funds within the year. One was able to budget according to the amount one would have for the year as parties had only received appropriated funding. However, with the Multi-Democracy Party Funding, one could not budget in advance as it was only awarded quarterly and donations would be made at random. If a huge amount was donated in the last quarter, parties would have to go on a spending spree. That point, therefore, could not apply to both funds. The percentage of spending could be changed or the two funds should be regulated separately,

Mr Singh agreed that it would lead to fiscal dumping. Parties could not afford to waste money. The Committee needed to consider a provision for a roll-over and then the question would be who would approve the roll-over. Parties needed to budget for large expenditure items such as elections.

Mr Mdakane stated that the Regulation should not encourage fiscal dumping. Parties had to be responsible in spending the money. It had to be amended so that it did not force fiscal dumping. The Committee needed to regulate for a roll-over. The legal team could work it out.

Mr Gumede noted that in Home Affairs there had been an item called modernization, which was a multi-year project, but National Treasury was taking the funds back as they had not been spent. He suggested that the wording should suggest a multi-year plan.

The Chairperson noted that the Committee agreed in principle that parties should not be forced to spend funding in a particular year. The 50% was unrealistic.

Mr Godi would find it strange if a party did not spend at least 50% of the money. The 50% that related to the parliamentary fund was reasonable and should be spent. The Multi-Party Democracy Funding was different and the IEC could put a level of flexibility in their regulations in the case of a late, and large, donation.

Mr Selfe said that parties worked in cycles according to elections. The effect of the legislation would be that they would not be able to raise as much funding as previously but parties needed to save funds for election years and so flexibility was needed. The point needed to be looked at closely as it referred to a previous dispensation. There needed to be flexibility.

Mr Gumede said that another scenario would be where a small party planned to expand with new offices in the following year and so needed to build up their funds. That had to be accommodated in the law.

The Chairperson suggested that it may be sufficient for parties to explain why money had not been spent. Everything was being regulated so did they need to regulate how much had to be spent.

Dr Mulder agreed as there would then be no need for regulations.

Mr Mdakane said that the parties should account for the money that they had received but how they had spent it was the party’s business. The intention was not to punish parties. Parties had to be able to work, as long as they accounted for their funds.

Mr Prince noted that the problem was not Regulation 9, but rather Clause 14(2) in the Bill which stated that parties had to spend 50% of their money. That clause informed Regulation 9.

The Chairperson stated that the Legal Advisor would have to go back to the Bill and work on removing that clause which was outdated, but it had to be removed completely from the Regulations.

Regulation 10
It was agreed that it would remain as it stood.

General
The Chairperson indicated that he would prepare an Excel spreadsheet which would allow Members to model the formulae and to work out actual figures. It would be ready the following Tuesday and the task team of one Member per party could try to reach consensus on a proposal for a formula. He requested that Members discuss the threshold and upper limit with their parties so that the figures could be made public in order for the Committee to get feedback.

Oral submissions would take place in the Old Assembly Chamber starting on Tuesday 7 November at 9:00. Members would hold a Committee meeting before lunch.

The minutes of 14 September and 24 October 2017  were adopted.

Meeting adjourned.

 

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