Constitutional Matters Amendment Bill: deliberations

Meeting report

JUSTICE AND CONSTITUTIONAL DEVELOPMENT PORTFOLIO COMMITTEE; SECURITY AND CONSTITUTIONAL AFFAIRS SELECT COMMITTEE: JOINT MEETING

11 August 2005
CONSTITUTIONAL MATTERS AMENDMENT BILL: DELIBERATIONS

Co-Chairpersons: Ms F Chohan-Kota (ANC) and Kgoshi L Mokoena (ANC) (Limpopo)

Documents handed out:
Constitutional Matters Amendment Bill (Working Draft 3)
Constitutional Matters Amendment Bill [B22-2005]

Public Funding of Represented Political Parties Act No. 103 of 1997
Amendment Regulations (Draft 3)

SUMMARY
The Committees continued with their deliberations on amendments relating to Constitutional Matters Amendments Bill as well as amendments to the related regulations. Some technical amendments were made to the regulations. The Independent Electoral Commission would only cover existing legal financial obligations of a party that had ceased to exist if such obligations were in existence at the time of the crossing of the floor. It would not be expected to pay for things that parties were not legally obliged to pay. Such a party’s obligations would only be covered until the end of the financial year in question.

The Department was asked to consider having a penalty for parties that failed to submit annual financial statements. It was suggested that the IEC should be empowered to withhold allocations until such time that the statements had been submitted.

A party that had ceased to exist and had not submitted its audit report as required by the Act would be required to repay all allocations it had received during the financial year in question.

Afternoon session
The new Section 6A(8)(a) and (b) now provided that an audit requested by the Commission must also express an opinion on the manner in which the monies have been spent and on the unspent balances and financial obligations, and the Committee questioned whether there was precedent for a Commission or public body appointing another auditor to audit an auditor’s work. Section 6A(10) was aimed at preventing the spending of the unspent funds in the current financial year. Section 6A(8)(c) now provided a time-frame within which the audit needed to be completed. The IEC had expressed reservations with the penalties imposed in the new Section 9A, and their concrete proposal were awaited. The new Section 10 now referred expressly to after elections as well as after floor-crossing, and the Preamble had been amended to provide for both the allocation of monies as well as the repayment of unspent balances into a single preamble. The long title was amended to bring it in line with the amended Preamble.

MINUTES

The Committees continued with their deliberations on amendments relating to Constitutional Matters Amendments Bill as well as amendments to the regulations.

Kgoshi Mokoena pointed out that the Committees could vote only on regulations as a joint committee. However, they could not vote as a joint committee on the Bill because the rules required that the National Assembly (NA) had to pass the Bill before the National Council of Provinces (NCOP) could pass it. The NCOP would pass the Bill on 24 August 2005.

Mr M Mzizi (IFP) (Gauteng) said that it was envisaged that the Committee would pass the Bill on 19 August as to enable the President to assent to the Bill so that it could come into effect on 31 August 2005. He asked what would happen if some anomalies were discovered that would require that the Bill be referred back to the NA.

Kgoshi Mokoena replied that such a possibility might create a problem. The reason why the Committees were meeting jointly was to minimise problems. He hoped that the Committees would be able to ensure that such a problem would not occur.

Deliberations on the Regulations
Mr Labuschagne said he had effected the amendments as instructed by the Committee at yesterday’s meeting. He noted that he had deleted amendments to Regulation 2 as a result of certain amendments that had been effected to the Act.

Amendment of Regulation 5 of the Regulations
Mr Labuschagne said that he had replaced the word "distribute" by "re-allocate" in regulation 5(3)(a). He suggested that regulation 5(3)(a) should refer to Section 5 of the Act and not Section 5(1)(A). This was to make it consistent with the proposed Section 6A which simply referred to Section 5. The Committee agreed with the proposal.

Ms S Camerer (DA) said that the first reference to Item 5(3) of Schedule 6A to the Constitution in regulation 5(3)(a) was correct. She wondered if the second reference to Item 5(3) was correct. She thought that the second reference to Item 5(3) should be changed to Item 4(1) and (2) of the Schedule. The first part of regulation 5(3)(a) was trying to show when the Independent Electoral Commission (IEC) would be "activated". It would be activated by the publication of the list by the Speaker in the government gazette. Political parties qualified for allocation after the expiry of the period referred to Item 4(1) and (2).

Ms Chohan-Kota wondered if parties did not qualify for the re-allocation at the time of the publication of the new list.

Mr Labuschagne agreed that parties would only qualify for the reallocation once the Speakers had published the new lists of the legislatures.

Dr T Delport (DA) said that Ms Camerer was technically correct. Parties qualified for the reallocation after the expiry of the period referred to in Item 4(1) and (2). However, there might be all sorts of uncertainties. Two forms might be handed over and some people might move from one party to another. There would only be rumours and speculations until the lists have been published. It was safer to work on the basis of published lists.

Ms Chohan-Kota said that brand new parties would follow under regulations that the IEC had as well as Constitutional provisions. The Bill would not have to provide for such parties.

Mr Labuschagne replied that such issues were dealt with under the Electoral Act.

Mr Labuschagne said that Item 3(a) provided that the Commission must, within ten days after the expiry of the period referred to in Item 5(3) of Schedule 6A to the Constitution….". Item 5(3) referred to "within seven days after the expiry of the period referred to in Item 4(1)(a) or (b)". An impression might be created that the intention was that the Commission must, "within ten days after the crossing period" reallocate the funds. It should be made clear that it was referring to ten days after the 22 September.

Ms Chohan-Kota could not understand how one could misinterpret the item. She said that perhaps the item should say that ‘the Commission must, within ten days after the speaker of a legislature had published the notice contemplated in Item 5(3)’.

Mr Labuschagne said that parties or members had to submit their forms to their speakers between the first and fifteenth day of September. Parties must, within seven days after the end of the floor crossing period, submit their candidate list to the speakers. The lists had nothing to do with the publication. He agreed with the suggestion by Ms Chohan-Kota but reminded members that there were ten speakers. The question was date would be used should speakers publish their lists on different dates. It might be preferable to work on the date in which the last list was published because the Commission would not know whether it had to wait for a specific speaker to publish his or her list. In any event the Commission could not reallocate the funds because it had to wait for the national and provincial lists.

Ms Chohan-Kota said that the drafter should just try and use the wording provided in Item 5(3) because Commission could in any event not do anything before the seven days.

Ms Labuschagne asked if it would not be better to say, "the Commission must, before the last day of September…". This would eliminate any confusion.

Ms Chohan-Kota asked would happen if a speaker had not published the list. The Commission could not do anything unless it was certain on the constitution of the legislature. It must be ten days after the publication of all the lists.

Mr Labuschagne said that the second reference to Item 5(3) would also have to be changed because a party could argue that it had qualified for reallocations after the floor crossing period.

Ms Chohan-Kota disagreed.

Amendment of Regulation 8 of the regulations
Mr Landers said that the words "of the Act" must be added at the end of Regulation 8(2)(b).

Mr Mzizi asked why the leader of the party was given two months within which to furnish the information required for the purposes of subregulation (1) to the Commission. The accounting officer of the party was given three months.

Ms Chohan-Kota said that Regulation 8(2)(b) applied to both the leader and the accounting officer of the party. Item 2(a) was already in the Regulations. Currently each party was expected to submit certain information to the IEC every year. Item 2(b) was new and dealt with the crossing of the floor situation. A party that had ceased to qualify for funding should close its books at the end of the September. Such a party should submit its audited financial statements within two months.

Mr Labuschagne said that said that Item 2(a) referred to an "accounting officer referred to in Section 6(1)". Item 2(b) simply referred to an accounting officer. He suggested that, for the sake of consistency and eliminating any confusion, Item 2(b) should also refer to an accounting officer referred to in Section 6(1). Some people might think that the two items were dealing with different accounting officers.

Deliberations on the Bill
Mr Labuschagne said that he had amended the Bill as instructed by the Committee.

Clause 4: Insertion of Section 6A in Act 103 of 1997
Ms Chohan-Kota said that Section 6A(1) should be subject to Section 6A(3).

Ms Chohan-Kota asked if any member had a problem with the words "existing legal financial obligations" in Section 6A(4)(c). The intention was to make it clear that the obligations should have existed at the time of the crossing. The IEC could not be expected to pay for things that parties were not legally obliged to pay.

Ms Camerer asked why the words "the financial year in question" in subsection (4)(c) were in italics.

Mr Labuschagne replied that the question was whether the IEC should cover a party’s obligations until the end of the financial year in question or for specific months.

Ms Chohan-Kota said that it had emerged during the Committees’ discussions that political parties normally entered into long-term leases and also had employment contracts with their staff. It would be unfair to say that all such contracts should be wound up at the end of September. The Committee had considered the possibility of having December as the cut off point but it was then suggested that such obligations should be covered until the end of the financial year.

Ms Camerer said that a six months’ termination notice in relation to leases was realistic. Three months could be given for employment contracts.

Ms Chohan-Kota said that political parties would be expected to motivate their obligations by submitting supporting documents. This could be done by submitting lease agreements and employment contracts. Such contracts would normally indicate what parties thereto could do. For instance, it might be possible to terminate a contract after a month’s notice. She said that the words "the financial year in question" should be taken out of brackets and not italicized.

Ms Chohan-Kota asked how the auditor’s report and financial statement submitted to the Commission in terms of subsection (6) would be verified. She wondered if the intention was to empower the Commission to say that it had read the report and make an opinion on whether there was cogency between the statement and the audit report. This would not entail an in-depth audit.

Ms Camerer asked if it was normal practice for public accountants and auditors to verify reports of other auditors. She asked if the Commission had the power to appoint auditors should the party fail to do so.

Ms Chohan-Kota replied that such powers were contained in subsection (8)(a)(ii).

Mr Mzizi asked if one was dealing with a party that had been in existence before the floor crossing period. Such a period had been submitting financial statements annually. There was no reason why such a party would not continue to do so before it ceases to exist.

Mr L Landers (ANC) said that a party would do so to save money.

Ms Chohan-Kota said that failure to comply with the Act was a crime.

Mr Landers said that a person might have skipped the country and would therefore not be imprisoned for failure to comply with the Act. It was important to empower the Commission to conduct the audit. The clause only related to unspent balances and was very narrow. He wondered who would pay for the audits. If one was going to empower the Commission to conduct audits, there should be some money for this. Someone should be help responsible for compliance with the Act. A civil suit might be preferable in cases where such a person had skipped the country.

Ms Chohan-Kota asked what would be the point of pursuing such a person or party if they did not have the money to audit the books. It was just a case of throwing good money for bad money.

Mr Landers said that Ms Chohan-Kota was assuming that the person or party did not have money. The question was what if they had money.

Ms Chohan-Kota said that chances were that such a person would have taken the money with him or her if they had skipped the country.

Dr Delport agreed with Ms Chohan-Kota’s views. He said that a party that had failed to comply with the provision of the Act would be required to repay all the money it had received during the financial year in question. The Commission would have to decide if it was worthwhile to pursue the money.

Ms Camerer agreed with Dr Delport. The Commission should be empowered to audit the books.

Ms Chohan-Kota said that Dr Delport’s suggestion could be used as an alternative to the present penalty clause.

Dr Delport said that it was important to move away from creating criminal offences all the time.

Mr Labuschagne asked if the accounting officer or the leader of the party who would be liable for the allocations received in the financial rear in question.

Ms Chohan-Kota replied that it would be the party itself. Its furniture could be attached and sold to recover the money. The Department should, in relation to parties that had not ceased to exist, investigate if there should not be a penalty for failure to submit annual financial statements. Such parties were a bigger problem to the Commission that parties that had ceased to exist because the Commission would be expected to continue to make payments to them.

Mr Landers said that failure to submit annual financial statements should disqualify a party from receiving further funding. The Commission should be empowered to hold the money back until such a statement had been submitted and possibly audited.

Ms Chohan-Kota said that this would be a better incentive to submit financial statements.

Afternoon session:
During the break, the Department of Justice Legal Drafter effected those amendments to the regulations that had been proposed by the Committee in the morning session so that he could present the changed drafting for approval by the Committee.

The Chair noted that the Committee's proposed amendments to the draft Regulations would first be forwarded to the Independent Electoral Commission (IEC) for consideration. The Committee would vote on them once the IEC had considered the proposed amendments hopefully by the following day. The voting by the NA Committee on the Bill would be probably be on the 18 August, and the NCOP Committee would vote once its Members had returned from the provinces.

Deliberations on the Regulations
Mr Labuschagne presented the changes he had made in response to the instructions from the Committee that morning.

Amendment of Regulation 5
Mr Labuschagne stated that the amendments proposed by the Committee during the morning session of this meeting were now reflected in the new 3(a). He stated that he felt much more comfortable with this formulation.

The Chair agreed.

Mr Labuschagne noted that he had also removed the proposed 3(a) and (b)

Amendment of Regulation 8
Mr Labuschagne explained that he had effected consequential amendments to this Regulation to bring it into line with the existing Regulation 8(2)(a).

The Chair agreed. She added that these Regulations would be considered again the follwing day after the IEC had had a look at them. She requested Mr Labuschagne to forward the proposed amendments to the Bill as well, for their consideration.

Mr Labuschagne stated that he would fax the documents to the IEC.

Deliberations on the Bill
Mr Labuschagne then continued with pointing out the changes effected to the Bill.

Clause 4: Insertion of Section 6A in Act 103 of 1997
Section 6A(8b)
Mr Labuschagne explained that the new Section 6A(8b) stipulated that an audit requested by the Commission must also express an opinion on the manner in which the monies have been spent, as well as the information on the unspent balances and financial obligations. This formulation thus included a reference to 4(b) and (c).

The Chair agreed.

Ms S Camerer (DA) [NA] asked whether there was a precedent for a Commission or public body appointing another auditor to audit an auditor’s work. The proposed amendment did seem somewhat unusual because an auditor was required to uphold a certain standard and comply with certain rules and regulations.

Mr L Landers (ANC) [NA] reminded Ms Camerer that, over and above the auditors referred to in the provision, the Office of the Auditor-General could still re-audit the financial statements.

The Chair pointed out that it was not unheard of for auditors to cook the books, particularly if they were the auditors appointed. The principle was to allow the IEC to make the final determination on the exact amount of the unspent balances. Consequently the IEC must satisfy itself absolutely that whatever was presented to it by the political party represented the actual state of its financial affairs. It could be, particularly because it related to political parties, that controversies could arise as to what was or was not disclosed by the political party to the IEC, and it was under these circumstances that the IEC should have these powers. It was for this reason that the Committee had decided that the IEC "may" have such powers to question the information provided.

Mr E Trent (DA) [NA] contended that if that formulation was approved then it would not be necessary for the political party to have an audit conducted, as it was only really in the case of a developed dispute that political party A would appoint an auditor to verify the facts presented by political party B. It was unusual for one auditor to audit another.

The Chair replied that she did not want to disagree with what was being said by Mr Trent in principle, but it must be remembered that the provision referred to an unusual circumstance as it referred to a political party that had ceased to qualify. The political party would have been under an obligation at the end of the financial year in March to submit audited financial statements. The provision thus merely brought that date forward, and no principles had been changed.

Section 6A(8)(c)
Mr Labuschagne explained that this new provision stipulated that when the Commission appointed an auditor, that auditor must submit his report and audited financial statements to the Commission within one month of his appointment. The previous formulation did not specify a time-frame within which this needed to be completed.

The Chair questioned whether this provision was specifically included because the amount of unspent funds must be declared within a certain period of time.

Mr Labuschagne suggested that that amended Regulation 2(1) stipulated that total amount of funding available for allocations from the Fund during a particular financial year must be announced within two weeks of the beginning of the financial year, which referred to the two weeks after the financial year had begun.

The Chair disagreed and contended that it referred to the two weeks in March, before the commencement of the following financial year on 1 April.

Mr Labuschagne apologised for his misinterpretation and stated that it would be corrected in Section 6A(7)(b).

Section 6A(9)(b)
Mr Labuschagne stated that the word "percentage" had been replaced with "amount".

Section 6A(10)
Mr Labuschagne explained that this provision was aimed at preventing the spending of the unspent funds in the current financial year, as the unspent balances could be paid as early as December of that year. This was a policy decision that had been taken by this Committee some time ago.

The Chair questioned whether the provision should stipulate "to the Fund" or "in the Fund".

Mr Labuschagne replied that these two words were used inter-changeably in the statute books.

The Chair proposed that the provision stipulate "to the Fund".

Mr S Swart (ACDP) [NA] agreed with the Chair as this mirrored the wording used in Clause 9(2) of the Bill.

Section 6A(11)
The Chair noted that this was the catch-all provision which would accommodate any eventuality that the Committee had not foreseen at the time of drafting the Bill.

Clause 6: Insertion of section 9A in Act 103 of 1997
The Chair stated that Mr Labuschagne had informed her that the IEC expressed some reservations about the penalty clauses provided. She stated that the provisions in Clause 6 happened "outside of the crossing of the floor", in other words it happened every year. The IEC proposed that the new Section 9A impose a penalty outside the normal flow of information regarding financial statements, because they contended that each year individual political parties were late in submitting their financial statements. The IEC’s preliminary proposal, in the absence of any concrete formulation, was that such penalties not take the shape of fines or imprisonment, as that would in no way assist the timeous provision of the information sought.

Mr Labuschagne proposed that such amendments only be effected once the IEC had submitted a formal amendment.

The Chair agreed.

Amendment of Section 10 of Act 103 of 1997
Mr Labuschagne stated that this amendment gave effect to Dr Delport’s submission that the provision refer expressly to after elections as well as after floor-crossing.

The Chair stated that the second "or the election of Parliament or any provincial legislature" be deleted.

Dr T Delport (DA) [NA] proposed that it stipulate "after any election of Parliament or a provincial legislature", which would cover the occurrence of an election by Parliament and only one provincial legislature or if they all decide to do it together.

The Chair noted that the Committee agreed.

Preamble
Mr Labuschagne stated that the amended Preamble gave effect to Dr Delport’s proposal that it provide for both the allocation of monies as well as the repayment of unspent balances into a single preamble.

The Chair noted that the Committee agreed.

Long title
The Chair asked Mr Labuschagne to confirm whether the only amendment effected was with regards to the re-allocation.

Mr Labuschagne replied that it was. He drew the Committee’s attention to the amendments which was aimed at bringing the long title in line with the amended Preamble, by including a reference both to the allocation of monies as well as the repayment of unspent balances.

The Chair noted that the Committee agreed.

Mr Labuschagne proposed that the Long Title of the Funding Act be amended because it was silent on the repayment of unspent balances. It would have to be replaced with the amended Long Title of this Bill, by means of a separate clause in the Bill.

The Chair requested Mr Labuschagne to effect these amendments, and to prepare a consolidated document. She asked whether the long title of the Determination of Delegates (National Council of Provinces) Act 69 of 1998 would also change.

Mr Labuschagne stated that that long title would then also have to include references to provide for crossing of the floor and after an election, as the current long title of that Act was very raw.

Mr M Mzizi (IFP) (Gauteng) cautioned against "scratching where it was not itching".

Mr Labuschagne proposed that the Act remain as it currently stood.

The Chair noted that the Committee agreed. She noted further that the Committee had now concluded its deliberations on the Bill.

Concluding remarks
Mr Mzizi expressed his party’s objection to the concept of floor crossing and the new parties that would emerge after the floor-crossing period. This was because the party would obtain a Member with a parliamentary seat when that party’s credibility had not yet been tested. Thus that party’s locus standi could not be legitimised, especially in the case of competing surpluses or ties. The Inkatha Freedom Party would not challenge that new party’s funding allocation, merely its legitimacy.

The Chair commented that this appeared to be the dominant view on the subject in any case. The problem was that the Committee must be sure that, in applying the formula, serious constitutional blunders were not being committed by ousting a political party from having a delegate in the NCOP. This matter would however be discussed in greater detail at the next meeting.

Kgoshi L Mokoena (ANC) [Limpopo] urged Members to finalise all controversial issues at the next meeting, as the Committees were under pressure to pass the legislation by the 1 September 2005 deadline.

The meeting was adjourned.