Political Party Funding Bill: National Treasury & IEC briefing

Ad Hoc Committee on the Funding of Political Parties NCOP

07 June 2018
Chairperson: Mr D Stock, (Northern Cape)
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Meeting Summary

The Independent Electoral Commission and National Treasury briefed the Committee on the Political Party Funding Bill [B33-2017].

The National Treasury explained that the costing of the envisaged structure is to be financed following the phased-in approach with about R20 million required. The compensation of employees would cost about R5.5 million, goods and services to be around R14.3 million while capital is R215 000. The fund in the long terms should be self-financed.  In relation to process to be followed for establishing one RPPF, the priority is to have the mechanism to combine all funds in the provinces into one RPPF. If there are provincial laws regulating the funds in the provinces then this legislation regulating such funds in the provinces must be repealed by the relevant Provincial Legislatures. The remainder of money in such funds must be dealt with in the repeal legislation. The Bill only provides for the repeal of the Represented Political Parties Act 1997 as well as transitional measures in order to provide guidance how matters need to be dealt with under the new Act. National Treasury noted that there were still policy matters that required clarity and this included interface with the Public Finance Management Act (PFMA), the Bill refers to the FMP and PL, the interface with Promotion of Access to Information Act (PAIA) in terms of disclosure of private funding. There is also a need to deal with harmonizing the legislation for establishing funds in the provinces not addressed and  Correcting reference to Auditing Profession Act (Bill refers to Professions). The Bill does not provide funding for smaller parties only participating in the local elections

The Independent Electoral Commission indicated that private funding is unregulated in South Africa and there is no legislation that compels political parties to disclose the names of persons or organisations that provide donations. There are no limits with respect to the amount a donor can contribute to a political party over time (election or non-election periods). Political parties are allowed to own their own private companies which they use as investment vehicles for the party. Consequently, the public is not informed about where political parties get a large share of their money from and how they spend it. This clearly goes against international praxis, which commonly regulates private income through prohibitions and setting upper limits. The current shows that there is no central repository of information regarding public and private funding of political parties and no transparency, regulation or oversight of private funding of political parties. The current RPPF may appear to reinforce the status quo by favouring incumbent and larger parties. The Commission would need an initial allocation of R11 million to begin implementing new legislation requiring political parties to disclose private funding. The personnel would about R11 million and this is the bare minimum that would be required to kick-start the structure. The salary package for the Chief Executive Officer (CEO) is envisaged to be around R1.828.516. In addition, it is estimated that approximately R34 million would be required for administrative expenses and assets. The reality is that there is an urgent need for party funding regulation. South Africa remains one of only a few countries which currently does not regulate party funding. Transparency and regulation of party funding is an important aspect of free and fair elections and in the combatting of corruption. With the next national and provincial elections scheduled for 2019 it would be a lost opportunity not to have some reporting system in place for party funding ahead of the elections. But there is limited time and limited resources as there are currently no systems, processes or regulations in place and these will have to be developed. The Commission highlighted that National Treasury will need to provide a minimum amount of R20 million in 2018/19 for the establishment of a skeleton party funding unit. Thereafter it is estimated that R38 million and R39 million respectively will be required in subsequent years. The limited resources during the first phase of implementation (2018/19) will require a phase-in application of certain chapters, clauses and provisions of the legislation in line with the development of regulations and capacity of the new unit (e.g. postpone the compliance and enforcement functions.

Members wanted to know why the bill would be phased-in, if political parties at other levels would also be covered, who would be managing the funds, if political parties would be compelled to disclose their funders and whether there would be recourse to those who failed to adhere to this and how this impacted on the PFMA.

Some Members felt that the Bill was overdue as it was really unacceptable to see a situation where parties continued to be funded by private companies with their own agendas.

The Committee decided that both National Treasury and the Commission should provide written responses and these responses should be as detailed as possible. 

Meeting report

Briefing by National Treasury

Ms Gillian Wilson, Chief Director: Admin Services Public Finance, NT, explained the purpose of the bill:

-To establish a Represented Political Party Fund (RPPF)

-To establish a Multi-Party Democracy Fund

-To regulate private funding to political parties

-To provide annual disbursement of public money through the RPPF

There is a proposal in clause 21(1) for the Independent Electoral Commission (IEC) to establish and administer the two funds. There are a number of factors that should be followed before finalising the structure of the unit and these included the following:

  • Process map-governance structure, administration, reporting and communication structure
  • Development of systems, policies and procedures guarding the administration
  • The organisational structure should be aligned to the mapping of the policies, processes and systems
  • The organisational structure should be evaluated by a Human Resource (HR) practitioner in line with the Bill before finalising. 

                                                                                        

Ms Wilson mentioned that the phased-in approach is to allow the establishment of the funds and to develop policies, procedures and systems. The focus is on the establishment and limited fund raising for the MPDF according to regulations, appointment of the manager heading the funds and two managers responsible for the two funds respectively. There is also a focus on development of reporting regulations and systems, reporting and disclosure by political parties contesting 2019 elections and training and awareness-raising of affected stakeholders of the new legislation and implementation timelines. The funds should be incubated in the IEC following a shared services model. The costing of the structure is to be financed following the phased-in approach with about R20 million required. The compensation of employees would cost about R5.5 million, goods and services to be around R14.3 million while capital is R215 000. The fund in the long terms should be self-financed.  In relation to process to be followed for establishing one RPPF, the priority is to have the mechanism to combine all funds in the provinces into one RPPF. If there are provincial laws regulating the funds in the provinces then this legislation regulating such funds in the provinces must be repealed by the relevant Provincial Legislatures. The remainder of money in such funds must be dealt with in the repeal legislation. The Bill only provides for the repeal of the Represented Political Parties Act 1997 as well as transitional measures in order to provide guidance how matters need to be dealt with under the new Act.

 

Mr Goolam Manack, Chief Director: Public Entities Governance Unit, NT, stated that there were still policy matters that required clarity and these included the following:

 

  • The interface with the Public Finance Management Act (PFMA), the Bill refers to the FMP&PL
  • The interface with PAIA in terms of disclosure of private funding

                                                                                                                   

  • Harmonizing the legislation for establishing funds in the provinces not addressed
  • Bill does not provide funding for smaller parties only participating in the local elections
  • Establishing of the fund as a separate entity to separate election activities from the administration of these funds.
  • Correcting reference to Auditing Profession Act (Bill refers to Professions)

 

Briefing by the Independent Electorate Commission (IEC)

Mr Sy Mamabolo, Chief Electoral Officer, IEC, stated that the Commission would need an initial allocation of R11 million to begin implementing new legislation requiring political parties to disclose private funding. The personnel would cost about R11 million and this is the bare minimum that would be required to kick-start the structure. Furthermore, there are other additional expenses and structures that would be needed to open offices, advertising, laptops, printers and other office equipment.

Mr Terry Tselane, Vice Chairperson, IEC, said that accepting that political parties require funds for all their activities (including campaigning, canvassing, governance and administration and even contesting elections via deposits) the South African Constitution specifically provided for party funding. In accordance with the Public Funding of Represented Political Parties Act (PFRPPA) Act, allocations to political parties are done accordance with a formula, 10 percent equitable, 90 percent proportional.  In 2016/17 the total allocation was R133 719 172. In the National Assembly, 15 parties received a total of R120 347 254 while 12 parties received a total of R13 371 917 in the Provincial Legislatures. Constituency allowances was adopted in 1995 and passed as part of the National Assembly’s rules, the constituency allowance is meant to give support to parliamentarians that would enable them to integrate their work inside Parliament with their work outside. Even though South Africa has a proportional system, this provision makes allowance for parliamentarians to maintain constituency offices through this allocation.

Mr Tselane mentioned that currently private funding is unregulated in South Africa and there is no legislation that compels political parties to disclose the names of persons or organisations that provide donations. There are no limits with respect to the amount a donor can contribute to a political party over time (election or non-election periods). Political parties are allowed to own their own private companies which they use as investment vehicles for the party. Consequently, the public is not informed about where political parties get a large share of their money from and how they spend it. This clearly goes against international praxis, which commonly regulates private income through prohibitions and setting upper limits. There is no central repository of information regarding public and private funding of political parties and no transparency, regulation or oversight of private funding of political parties. The current RPPF may appear to reinforce the status quo by favouring incumbent and larger parties.

In relation to the international best practices, Mr Tselane said that global acknowledgement that unfettered and unregulated private funding of political parties has inherent risks. South Africa is a signatory to the United Nations Convention against Corruption (UNCAC) which, amongst others, promotes enhanced transparency in the financing of election campaigns and political parties. South Africa is also a signatory member of the African Union and is in accordance with Article 10 of the AU Convention on Preventing and Combatting Corruption is obliged to adopt legislative measures to ‘incorporate the principle of transparency into funding of political parties’.

Mr Tselane highlighted that the proposed costing for the start-up of the envisaged structure comprises of R11 million in personnel expenditure. The salary package for the Chief Executive Officer (CEO) is envisaged to be around R1.8 million. In addition it is estimated that approximately R34 million would be required for administrative expenses and assets. The reality is that there is an urgent need for party funding regulation. South Africa remains one of only a few countries which currently does not regulate party funding. Transparency and regulation of party funding is an important aspect of free and fair elections and in the combatting of corruption. With the next national and provincial elections scheduled for 2019 it would be a lost opportunity not to have some reporting system in place for party funding ahead of the elections. But there is limited time and limited resources as there are currently no systems, processes or regulations in place and these will have to be developed. The skills necessary for this work do not currently exist within the Electoral Commission and its current budget is already constrained. The economic conditions are constrained resulting in limited funding within the public sector and for political parties.

Mr Tselane highlighted that National Treasury will need to provide a minimum amount of R20 million in 2018/19 for the establishment of a skeleton party funding unit. Thereafter it is estimated that R38 million and R39 million respectively will be required in subsequent years. The limited resources during the first phase of implementation (2018/19) will require a phase-in application of certain chapters, clauses and provisions of the legislation in line with the development of regulations and capacity of the new unit (e.g. postpone the compliance and enforcement functions. The proposal to prioritise certain aspects of the proposed new legislation will have to be agreed to politically and the phased implementation must be made clear in the legislation and promulgation process. The Electoral Commission remains committed to implementing the new party funding legislation when approved and enacted. However, there is a high likelihood that the final legislation will only be approved and enacted towards the latter part of 2018. While the legislation provides an over-arching framework, considerable work must still be done to develop regulations to empower the implementation of the legislation

 

Discussion

Ms C Labuschagne (DA, Western Cape) wanted to know if there was any reason for the postponement of compliance by the IEC and how long would this postponement be effective. What would be the implication for this proposed postponement of compliance and enforcement functions by the IEC? There was a mention of first phase of the application of the Act and the important question is why are we implementing the Act in phases. Was it not better for the Bill to be implemented in full in other to save money? It looked like we are going to spend R20 million on the structure that is not going to fulfill the aims of the legislation.

Mr M Monakedi (ANC, Limpopo) said that the postponement of compliance and enforcement functions by the IEC was particularly concerning as this was supposed to be implemented immediately. The Bill should be implemented to the fullest instead of phases as suggested in the presentation by IEC in order to save funds. It was unclear as to whether the R20 million was only for the first phase and not the whole funding required.  Was there an anticipation of additional amount that would be required? Are there any issues that the two organisations are canvassing with the National Assembly to be taken into consideration in relation to the Bill? What about the political parties that are contesting elections for the first time? Are they also going to be funded? What about the parties at provincial level? Are they also covered? It would be important to know if there was any possibility of the Bill being extended to cover the provincial parties. What is the opinion of IEC on this?

Ms L Dlamini (ANC, Mpumalanga) wanted to know if there would be an establishment of the new entity to manage funds for political parties. What section would this new entity fall under? Who is going to be managing the funds? Do we need all these activities to be undertaken? At what level are political parties given the funds? Who would be doing the fundraising? What we are trying to discourage is political parties going out to fundraise to other organisations with their own agendas. Are we not likely to experience the repeat of state capture because of this issue of fundraising? There is an opportunity to accommodate local and provincial parties since this is a new Bill. What are the matters are you canvassing from Members?

Ms T Mokwele (EFF, North West) appreciated both of the presentations that had been made as they were insightful. It would be important to know how the Bill would ensure that the funding of political parties would be consistent with the constitution on proportional representation. Should we come up with ways on how to fund those smaller parties especially those contesting elections at local level? It was unclear if the Bill was only focused on national political parties.

Mr L Gaehler (UDM, Eastern Cape) said that the Bill was overdue as it was really unacceptable to see a situation where we continued to be funded by private companies with their own agendas. This democracy needed to be strengthened and become fully-fledged like in other countries. There indeed was a need to have clarity as to whether there would be an entity to be established by the IEC. Was it this entity that would be doing the fundraising? Was the R20 million likely to kick-start the process? The provincial political should also be included in the Bill as we cannot have a situation where political parties do as they pleased.

Mr M Chabangu (EFF, Free State) questioned if political parties would be compelled to disclose their funders and whether there would be recourse to those who failed to adhere to this. The presentation by the Commission showed provincial allocations of funds throughout all provinces in the country except KwaZulu-Natal (KZN). Why was this the case?

Mr T Motlashuping (ANC, North West) indicated that a lot was expected from the presentation by National Treasury especially on the issue of adherence to the PFMA and funding for local government. It was unclear if we are going to choose a suitable model to accommodate smaller parties. What would be the process undertaken for those political parties that are likely to be established next year before the elections? The presentation by National Treasury provided addendum of the cost breakdown and the implication on the Bill and it looked the salary scale for the Chief Executive Officer is extremely high. How would the CEO of the new entity be accounting?

Ms T Motara (ANC, Gauteng) also felt that the issue of the PFMA should have featured in the presentation by the National Treasury. The new proposed structure should be explained further even in terms of reporting. Was the new proposed structure likely to be responsible for reporting?  It looked like there would be two processes in terms of credit balance with credit balance for the political party and credit balance within the fund.  Why would there be two processes? The proposed structure looked like it was bloated or expanded and this was a major concern.

The Chairperson said that due to the limited time available NT and the IEC would be forced to provide responses in writing and these responses should be detailed as there had been complaints from Members that written responses are usually short.

The meeting was adjourned.

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