Political Party Funding Bill and Regulations: deliberations

Ad Hoc Committee on the Funding of Political Parties

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

Revised working draft of Bill and Regulations as of 23 November (not made public)

The Committee worked through the revised drafts of the Regulations and the Bill to check that requested changes had been made as intended. After the meeting, the drafting team would prepare the Bill and Regulations for the Committee to approve on Tuesday 29 November to send to the National Assembly. As it was a Committee Bill, a first reading was not required in terms of Rule 283. Ordinarily, a Bill could not commence with a Reading before three working days had lapsed from introduction. That rule had been waived because Parliament was going into recess.

In the Regulations, the main concern was whether ‘political party’ should be more clearly defined. The definition in the Act did not necessarily mean represented political party. That meant that parties not represented could have access to the funds. It was agreed to include “represented” in the definition to exclude other parties from the represented political party funding and the Multi-Party Democracy Fund.

The Memorandum on the Objects of the Bill was ready and so was not discussed in detail.

The Bill included a definition of a ‘represented political party’ and a definition of a ‘political party’, which included any entity that received donations to support, or oppose, political parties. Members queried why political party’ was included in the Bill if the party was not represented and not going to get funds. The drafting team explained that, internationally, setting up an entity to collect unfettered donations was a way of circumventing the electoral laws. As soon as restrictions were imposed on political parties, they found ways around the regulations. It was decided that there was a need to regulate those who would be raising money for the purposes, especially, of advertising to support political parties during elections. The IEC would deal only with those few specific entities that were raising funds to support, or oppose, political parties. The Committee agreed that such regulation was necessary.

One Member raised the matter of NGOs in the country, funded by foreign governments to push the agenda of the foreign country funding the NGO. The NGOs might employ South African citizens, but they were funded by foreign governments and pushed other people’s agendas. Their interests were the interests of the other country and not the country in which they resided. The Committee agreed that the matter of preventing foreign donations to political parties had been adequately addressed.

The definition of ‘foreigner’ excluded a permanent resident. The point was hotly debated as it could be a way of circumventing the regulation prohibiting donations by foreigners. Other Members argued that it would be wrong to preclude permanent residents from playing a role in South African politics. Permanent residents had to meet strict criteria to receive permanent residency and had to be people of good standing. The Committee agreed to retain the definition as it stood, including permanent residents in those who could donate to political parties.

Lengthy discussions ensued on the sanctions to be imposed if a political party contravened the Act or Regulations. A suggestion that sanctions be linked to the Represented Political Party Fund was rejected as unrepresented political parties would only pay the rand value in the Schedule attached to the Bill, which could be as little as R500 000, whereas the offence could involve billions. One Member stood firm that the sanctions should be based on the percentage of the political party’s audited income statement from the previous year as 30% of a party’s share of the Represented Political Party Fund would be insignificant in comparison with amounts donated and would not have a deterrent effect. It was necessary to have a real deterrent or there would be no point to the Act. Ultimately it was agreed that the sanction would be a percentage of a political party’s annual income, and that included unrepresented political parties.

Meeting report

Opening remarks
The Chairperson informed the Committee that Members would be working through the revised drafts of the Regulations and the Bill to check that requested changes had been made as intended. Once the Committee was happy with that, it would ask the drafting team to go and prepare the Bill and Regulations so that they would be ready for the Committee to send to the National Assembly.

The Chairperson noted that there seemed to be some confusion. He explained that his understanding was that on Tuesday the following week, the Committee would adopt the Bill, the Regulations, the Memorandum on the Objects and the Committee Report on the Bill. Those four items would go to the National Assembly. At National Assembly level, the Bill would be debate the four documents. The House would ratify, reject or whatever they would be doing. That would be the end of the ad hoc Committee. From there, it would go to NCOP. That would be the process going forward. There was certainly not going to be a third round of public hearings. The Committee was two meetings shy of concluding its business. He asked the Deputy Chief Whip to clarify the situation so that everyone understood clearly.

The Deputy Chief Whip, Ms D Dlakude (ANC), confirmed what the Chairperson had said. She noted an objection from one political party on the consultations about waiving the three-day rule between tabling a Bill and voting on it.

Mr N Singh (IFP) informed the Committee that he had been at the Programming Meeting that morning. The report of the Committee had been put on the program. He wanted to confirm that the tabled report included all four documents because normally a Committee tabled a report first and then there was a second reading of the actual Bill itself. However, it could be that the Bill was not a normal one as it was a Committee Bill. He thought it would be a good idea to check on this and make sure that they were not making an error. If it was going to be a debate of the report and the Bill, that should be made clear on the program.

The Chairperson clarified that the Bill before them was a Committee Bill. In terms of Rule 283(5) a Bill introduced by a Committee in the National Assembly did not have a first reading but, on introduction, had to be placed directly on the Order Paper for a Second Reading. If it was necessary to clarify the heading on the Announcements, Tablings and Committee Reports (ATC) papers, to state that it was the report plus the Bill, the Secretariat would handle that matter.

Ms L Mathys (EFF) was confused about waiving the three days. She agreed that it had to be made clear that it was about the Bill as well as the report.

The Chairperson explained that according to Rule 292, the second reading debate on a Bill from a Committee that had not been referred to a Joint Committee in terms of Rule 283, could not commence before three working days had lapsed since it had been introduced. That was the rule that said there had to be a three-day period between introducing a Bill and reading it. As it was being introduced on 28 November and it would be read on 30 November, the request had been made for the three-day rule to be waived. The Committee had requested the waiver because of the exceptional circumstances that Parliament was going into recess.

Regulations
Revised copies of the draft Regulations and the draft Bill had been emailed to Committee Members.

The Chairperson noted that the drafters had been requested to introduce the two-thirds/one-third in Clause 2(a). He then suggested that perhaps it would be better to go clause by clause.

Clause 1: Mr J Selfe (DA) asked if political parties should be more clearly defined. The definition in the Act did not necessarily mean represented political parties. Unless that was clearly indicated, one could find people who were not represented wanting to have access to the funds. In the principal Act, the definition referred to an entity, registered political parties, representative political parties, unregistered political parties. That needed to be clarified so that unrepresented parties did not claim funding. The way to resolve that would possibly be to insert in 2(2) a reference to represented political parties.

The Chairperson agreed that there had to be clarity on represented political parties.

Mr A Lees (DA) said that the concept of represented political parties was defined. It was the Schedule that needed to be changed to refer to represented political parties.

Mr Selfe noted that the same addition of “represented” had to be made in Clause 2.

The Chairperson instructed the drafters to ensure that all references to political parties included the term “represented”.

Mr Singh asked if the figures in Clause 7 should be written in figures or words, as in R15 million cap, as well as the R5 million training and development cap. It was agreed to use words.

Ms Mathys was confused and asked about the caps. It was not clear.

The Chairperson explained that there was a cap for donations from entities of R15 million. There was a cap of R5 million for donations in-kind, which included training, from foreign agencies.

The Rand value of R100 had been added in Clause 9.

No other changes were required in the Regulations.

Memorandum on the Objects of the Bill
The Chairperson did not believe that it was necessary to go through the Memorandum on the Objects in detail as it was an easy version of the Bill. It simply stated what was in each clause of the Bill.

Mr Lees clarified that the Memorandum on the Objects had no legal standing.

The Chairperson read through the Memorandum on the Objects and the Committee was satisfied with it.

Bill on Political Party Funding
Preamble
Mr D Gumede (ANC) wanted to shift the newly included paragraph on sovereignty to the beginning of the Preamble to give emphasis.

Dr P Mulder (FF+) suggested starting with the first paragraph as it stood because the Preamble began with a reference to the Constitution and the founding principles of transparency, openness and multi-party democracy. The sovereignty paragraph could be incorporated as a second paragraph.

It was agreed.

Chapter 1 Interpretation
Mr Selfe referred to the definition of ‘political party’ which included any entity that received donations.

The Chairperson thought that the Bill was only about represented political parties. Why were political parties in the Bill if the party was not represented and not going to get funds? He understood that the debate had been about the Bill not having the mandate to deny donations to entities.

Ms Mathys noted that specific entities could raise funds intentionally to support political parties. A registered party had to show a record of funds that they had received and the management of such funding, as the Bill applied to them in that respect.

The Chairperson thought that the decision had been to refer only to represented parties in the Bill. If there was no reference to unrepresented political parties in the Bill, there should not be a definition for unrepresented political parties.

Mr Selfe agreed with the Chairperson. He did not believe that the IEC would have the capacity to manage all the groups that were contained in the definition of a political party. He believed an incremental approach, starting with represented political parties, was the way to go.

The Chairperson asked the drafters if it was possible to remove the definition for ‘political party’ and simply to include a definition of ‘represented political party’. Would that cause a problem?

Dr Mulder explained that the issue was not really about a political party, but an entity that supported a political party. The definition was trying to prevent an entity from circumventing the Bill and spending billions of rand in support of a political party. The definition stated that “political party” included any entity that accepted donations to support or oppose any registered party or its candidates in an election”. He thought that the Committee should consider how such entities be prevented from undermining the Bill and being able to circumvent all the regulations when supporting a political party.

Prof Halton Cheadle, legal drafter, confirmed that Dr Mulder had explained exactly the purpose of that clause. If it was excluded, it would allow any entity to receive donations from any donor and use the money to advertise and otherwise support political parties during the election period. He noted that the careful wording was so that it was clear that it referred to all those who received funds to support a political party. It was not entities such as SANCO and environmental organisations. It did not prescribe to NGOs, except if they accepted donations with the specific intention of supporting a political party during an election. The decision in the last meeting had been to keep a tight definition, but not to separate the definitions. The definition had stemmed from input during the public hearing process. At the previous meeting, the drafters had been told to move the definition from Section 8 to Section 1 and they had simply done as instructed. They would be able to be more specific if required. He pointed out that the definition of political party in the Electoral Act included the fronts or entities. “Third party” was the terminology used in the electoral laws.

Another way of writing the definition would be to say: a political party means a represented political party in the national or provincial legislature, a political party that has representation at municipal level, and third party entities. The words “third party” could be dispensed with but they would all be regulated. Another clause would require anyone who was going to raise funds for a party during an election to register with the IEC. The Electoral Act included the entities but there was no obligation for them to register. There was the choice of having all political parties, with the administrative difficulties, but which would definitely cover all fronts or, alternatively, there needed to be a tighter definition, together with an obligation for those who raising money to support political parties during elections. In such a case the IEC would only be dealing with those few specific entities that were raising funds to support, or oppose, political parties.

Prof Cheadle added that that was a way of preventing circumvention of the electoral laws. On Tuesday Dr Mulder had noted that as soon as restrictions were imposed on political parties, they found ways around the regulations.

The Chairperson noted that the explanation confirmed that bodies like SANCO, would not be affected. He requested input from Committee Members.

Mr Selfe suggested a change to the words in “during an election period as defined in the Electoral Act, and stated that the entity “accepted donations solely or principally to support a political party”.

Ms Mathys did not believe that the restrictions should apply only to election periods. She was not too sure about calling an entity a political party. Members had required an explanation to understand the point but the Bill had to be understandable to members of the public. There was no definition for a registered political party. What about unrepresented parties? She liked the idea that people or entities that worked directly to support political parties should be registered with the IEC.

Mr Gumede asked for an explanation of the difference between a registered political party and a registered party in the context of the definitions.

The Parliamentary Legal Advisor, Mr Michael Prince, replied that it was meant to be a registered political party.

The Chairperson explained that the Committee had to ensure that the Bill closed loopholes for fronts. They would have to find appropriate wording to say precisely that. It was about a definition.

Dr Mulder asked the drafters to remember Mr Selfe’s point about the IEC not having the capacity to manage all of the groups.

The Chairperson asked about the definition of a ‘foreigner’ which stated that it excluded a permanent resident. He asked if a permanent resident had to have a South African document. He was concerned about citizens of other countries who were living in South Africa on a permanent resident permit who donated to a political party. Was that not a way of circumventing the regulation prohibiting donations by foreigners? Was it a loophole or not? What was a permanent resident, and could he vote? What was the difference between a permanent resident and a citizen?

Mr Selfe believed that the Committee had had a long discussion about it and had decided on the definition as it stood in the Bill. He explained that a permanent resident had to satisfy certain requirements to get a permanent residence permit in order to remain in the Republic for a specified period and ordinarily paid tax etc and therefore was a legitimate person. He believed that it was right to allow such person to take an interest in the politics of the country.

The Chairperson stated that it was about sovereignty. If the Preamble stated that sovereignty was a primary concern, then everything in the Bill should support the principle of sovereignty. Could one be a permanent resident without being a South African citizen? Why should foreigners influence the South African political environment?

Mr Lees said that one should look at permanent residents as different from citizens because foreigners could deal with citizens in exactly the same way as they could deal with permanent residents. That was therefore not an argument for excluding permanent residents. He asked if the legal advisor could inform the Committee whether permanent residents were able to form a political party in South Africa. He doubted it. A permanent resident would probably be in South Africa until he died, and it would be wrong to preclude them from playing a role in South African politics.

Mr Gumede understood that a foreign person in that context included a juristic person, which could be a company. A company could provide funds to support a particular concern, such as rezoning in a specified area. Would a company be permitted to do that?

The Chairperson informed him that as far as businesses are concerned, a company that did not have a base in South Africa was designated a foreign company. If a company had a footprint in South Africa, such as Coca Cola South Africa, it could donate. He asked Mr Lees why a person would not take out citizenship if he stayed in the country for so long. His concern was that they did not open loopholes by allowing permanent residents the same rights as citizens.

Ms Dlakude raised the issue of NGOs in the country funded by foreign governments to push the agenda of the foreign country funding the NGO. The NGOs might be South African citizens, but they were funded by foreign governments. Were they included, or should they be excluded from the process? NGOs pushed other people’s agendas. Their interests were the interests of the other country and not the country where they resided.

Mr Selfe stated that the issue of NGOs was dealt with elsewhere in the Bill. Regarding long term permanent residents, there were many reasons why such a person would not take out South African citizenship. For example, if a British permanent resident took out South African citizenship, he would lose his pension from the United Kingdom.

Dr Mulder read from the website of the Department of Home Affairs which described a permanent resident and the requirements to become a permanent resident. A permanent resident was therefore a person in good standing.

The Chairperson agreed to retain the definition as it stood, including permanent residents.

The Committee discussed the use of the term “participate” in Clause 2.1. It was left unchanged as “participate” was the term used in the Constitution.

The point about using funds to defray legal costs had been added as Clause 7(2)(d).

The prescribed amount was included in 8(5) and dual disclosure which had been added in 9(2).

Mr Selfe noted some subtle changes to Clause 10 that dealt with giving party members the authorisation to collect donations. In the DA, people went door to door registering new members and taking their membership donations. To Clause 10, he would have to authorise all party members. He wanted to know why it was necessary to have “authorised by the party” in that clause.

Mr Gumede did not understand what Mr Selfe was saying. What if funds were collected by unauthorised people? How could that be managed? There needed to be a regulated collection of money that was enforceable.

The Chairperson agreed that it was difficult to enforce collection by authorised people, but the essence was that people should not collect funds that did not go into the political party purse. He did not see any harm in putting it in there.

Ms Mathys said that anyone receiving more than R100 000 would be authorised and would need to declare it. Political parties could put something in their constitution which would deal with who collected money and how it was handled.

Ms Dlakude asked how they prevented criminal elements collecting on behalf of the party illegally, even if it was under R100 000.

Mr Singh thought that the clause protected the party. The Treasurer General could provide a letter of authorisation for someone who was going out to specifically collect large donations.

Mr Selfe agreed that it could remain in the Bill.

Dr Mulder noted that there was no reference to the threshold in Clause 10.

Mr Selfe stated that the words “must be approved if collecting above the threshold”.

The Chairperson agreed.

Clause 13(5) addressed concerns about the Auditor General auditing political party books generally.

Ms Mathys asked where it was captured that parties were not restricted to using outdated accounting systems.

Mr Prince, Legal Advisor, explained that it was in the Regulations.

Mr Lees noted that Auditor General could come to the offices at any time at all. He proposed an amendment stating that the Auditor General could come to the offices at any “reasonable” time.

The amendment was agreed to.

Mr Selfe did not recollect the Committee agreeing to include penalties and offences. He was concerned about criminalisation in Clause 19.

The Chairperson explained that the sanctions criminalising offences merely gave permission for the IEC to lay criminal charges.

Mr Selfe acknowledged that the IEC had talked about offences, but he was not aware of the Committee deciding to include those points.

The Chairperson reminded the Committee that the IEC had said that in order to ensure implementation of the Bill and Regulations, they would need to deal severely with people that did not adhere. Ultimately offences and criminalisation would lie with the Electoral Court and not with the IEC. He could not see the harm. If the IEC could suggest to the court but not implement such sanctions, there could be no harm.

The Committee agreed to leave the clause unchanged.

Mr Selfe expressed concern about the right to review in Clause 20. The legal advisor was requested to address the concern.

Clause 21 dealt with administration by the IEC. Clause 21(1) stated that the IEC could open up a second unit, if there was work to be done.

Mr Selfe indicated that it had been agreed at the 21 November meeting that Clause 8(5) had to be moved to Page 19.

The Chairperson asked the Committee to address Schedule 1 which dealt with maximum permissible fines for contravention of the Act.

Mr Selfe understood that the fine would be taken from the Represented Political Party (RPP) Fund.

Prof Cheadle explained that the Bill stated that the fines would come from total income, and not the RPP Fund because entities and unrepresented political parties would not receive money from the RPP Fund.

The Chairperson asked how one would know if entities or unrepresented political parties contravened the Act?

The Legal Advisor stated that illicit income was usually found out as a result of a whistleblower or FICA processes. If an entity or an unrepresented political party was found to have accepted funds from a prohibited donor, the fine would be a percentage of the previous year’s audited income or income. The Electoral Court would do it. The Committee had talked about the Multi-Party Democracy Fund, but unrepresented political parties did not receive those funds either. The point was not to allow parties or entities to fall through the cracks.

Ms Mathys stated that her understanding was that the sanctions would be based on a percentage of the political party’s audited income statement from the previous year. 30% of the party’s share of the RPP Fund would be insignificant and would not have a deterrent effect. The EFF stood by the use of percentages and percentage of the annual income because it was necessary to have a real deterrent.

Mr Lees said that unrepresented political parties did not fall through the cracks as they were caught by the fixed rand amount in the Schedule.

The Chairperson had thought that a predetermined amount was important to be able to understand the magnitude of the sanction. By using the IEC Fund, there was certainty as to how much there was.

The Legal Advisor stated that the audited statement of the political party would show a specific amount. Should the Committee link the sanction to the RPP Fund, unrepresented parties and entities would not suffer a percentage loss but simply the indicated amounts. It could be done if the Committee wished to have it its way, although drafting was very tricky. If the sanction was linked to the RPP Fund or a specified amount, the unregistered parties would only pay R500 000, etc.

Ms Mathys stated that her party felt very strongly that a percentage of the RPP Fund would be insignificant to political party and would not act as a deterrent. The Represented Political Party Fund was a small percentage of the amount that political parties received and the percentage of that would be insignificant, thus it had to be the audited statement. If there was not an effective deterrent, the entire exercise had been a waste of time.

The Chairperson was convinced by Ms Mathys’ argument so the clause would remain unchanged.

The Chairperson informed Ms Mathys that the reference to accounting systems had been completed.

Mr Selfe noted that his question on Section 22 of the Electoral Act had not been answered.

Prof Cheadle replied that the Electoral Court could hear an appeal only insofar as it related to interpretation of the Electoral Act or any other Act. In the Funding of Represented Political Parties Act, the Electoral Court would not be making a review, but it would be making a determination of guilt and sanctions. The authorising power to give to the Electoral Court power to impose sanctions lay in the Bill at hand. The Electoral Court was a High Court.

Ms Mathys asked for confirmation that there was no conflict between the Bill that the Committee was working on and the Electoral Act.

The Chairperson confirmed that. He said that there were a few changes to be effected. The legal advisor and drafting team would email the Bill, the Regulations, the Memorandum on the Objects and the Committee Report to the Committee on the following Monday 27 November. The report that would go to the House indicated what the Committee had done and that the solution to the situation was the attached Bill.

Mr Singh stated that the Committee had adhered to its mandate, completing the work by 30 November 2017 and had done the job very well. He thanked the Chairperson and the legal people. He suggested that the Deputy Chief Whip be asked to hold discussions with the NCOP to ensure that the Bill did not get held up in the NCOP, but was expedited.

The Chairperson announced that the final meeting would be on Tuesday 28 November 2017 and from there the administrative processes would kick in. He thanked his colleagues and members of civil society that had walked the journey with the Committee.

Meeting adjourned.

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