South Africa

Op-Ed

Implementing the Political Party Funding Act is fraught with difficulties for the IEC

Implementing the Political Party Funding Act is fraught with difficulties for the IEC
The Political Party Funding Act prohibits donations to parties by foreign governments or agencies, foreign persons or entities, organs of state or state-owned enterprises. (Photo: Adobestock)

South Africa’s Political Party Funding Act is an ambitious and bold undertaking, regulating party and campaign finance, but there are several tricky issues still to be resolved.

The introduction of the Political Party Funding Act (PPFA) in January 2019 was welcomed by South Africans at large, with many believing that it would assist in the fight against negative influences of private money in elections. As the Independent Electoral Commission (IEC) of South Africa awaits the president’s approval and determination of implementation date for the act and its accompanying regulations, some challenges in what the IEC has proposed remain.

The PPFA seeks to enhance multi-party democracy by providing for and regulating both public and private funding of political parties, and addresses a long-standing gap in South Africa’s electoral legislation framework, which was silent on private funding of political parties. In a nutshell, the PPFA establishes the Represented Political Parties Fund (RPPF) and the Multi-Party Democracy Fund (MPDF).

The RPPF disburses public funds coming from Treasury to political parties represented in the National Assembly, and the MPDF disburses funds received from private sources to those parties. The PPFA is an important step forward in regulating the playing field for political parties, while fostering public trust in the electoral system.

Specifically, the MPDF comes with a set of new responsibilities for electoral stakeholders. It minimises the risk for businesses operating within the republic that donate money to political parties, by managing perceptions of bias in terms of the parties they choose to fund. To the IEC, implementation of the MPDF requires the IEC to go beyond ensuring that the private funds received by political parties are disclosed, to actively regulating and disbursing private funds on a proportional basis.

To date, the IEC has engaged political parties, civil society, the business community and financial regulatory institutions such as Fica and SARS to clarify the contents of the act and to raise awareness on what its implementation would mean for the stakeholders concerned. 

The IEC also embarked on a study tour to the United Kingdom to better understand how the UK electoral commission regulates and manages the disclosure of private funding to political parties. What has emerged from the IEC’s consultations is a common consensus that implementing the PPFA is a mammoth task that contains considerable risks for the IECs stature as an independent Chapter Nine institution. Nonetheless, the IEC thinks that it is better to start with the implementation of the PPFA and improve its efficiency in the process of rolling it out.

The PPFA places considerable burden on the IEC to manage the PPFA in not only tracking private donations parties receive, but also receiving money on behalf of political parties which comes from private donors. These private donations are meant to be aggregated and distributed using formulae that ensure disbursement is based on both proportional and equitable considerations. Unusually, this mandates the IEC to fundraise on behalf of political parties so that private funds are available. 

There are many countries that regulate private funding – however, the PPFA is unique in that it does not only maintain oversight of private funds that parties receive, but also appropriates funds received for the benefit of all political parties. This minimises the extent to which businesses can freely donate to only those parties that they want to sponsor. This is one of the most unusual proposals under the PPFA, and places a significant risk to public perceptions of the IEC moving forward.

Implementation delays

The act will repeal the Public Funding of Represented Political Parties Act (Act no 103 of 1997). It was adopted by Parliament in 2018 and signed into effect by the president in January 2019. At the time, it was anticipated that the act would be an important feature of the 8 May 2019 elections, as contesting political parties and candidates rolled out their campaign activities.

However, this was not the case, after the IEC reneged on its original plan to implement the first phase of the act ahead of the elections, in favour of more public consultations after it had received over 5,000 submissions on the draft regulations published for comment on 1 March 2019. The postponement meant that the 2019 elections did not serve as the litmus test for the capacity of the PPPFA and its regulations to hold political parties accountable to the electorate when it comes to private sources of funding. 

Despite the missed opportunity, the objective of ensuring that the electorate and citizens in general have access to information in terms of who funds political parties is important. This objective remains constant as countries grapple with foreign influence in elections and State Capture, which has been more pronounced in South Africa.

The PPFA is meant to inspire a culture of transparency and accountability to improve the health of South Africa’s democracy. Operationally, it is meant to minimise the risk for businesses operating within the country that donate money to political parties by clarifying how these businesses can legally support political parties financially.

To the IEC, implementation of the PPFA requires it to go beyond ensuring that private funds received by political parties are disclosed, to actively regulating and disbursing private funds on a proportional basis. To political parties, the implementation of the PPFA means that political parties now need to disclose to the IEC all donations exceeding R100,000 from private sources, and support their disclosure with audited financial statements.

In return, parties will now enjoy a more equitable formula for disbursement of both public and private funding where 66,6% is distributed proportionally, and 33,3% is distributed equitably for political parties represented in the national assembly and/or provincial councils. To private donors, the PPFA also requires disclosure of funds exceeding R100,000 to the IEC. As a benefit, private donors can now donate to the MPDF, which distributes money proportionally and equitably to avoid perceptions of bias.

It is important to note, however, that the PPFA is highly ambitious and makes several key assumptions. It expects that private individuals and corporations can be neutral to the extent that they can accept that the money they have donated to their preferred parties should now be shared among all political parties for the sake of democracy.

It further expects that the bigger political parties that are used to getting the bigger slice of the cake from private donors, should now share those benefits with smaller parties who stand to be in a better position. As the previous formula allocated only 10% to be shared equally, the proposed formula will allocate 33,3% equitably and decrease the stake shared based on proportional representation from 90% to 66,6%. There are also various gaps that have been highlighted through the IECs stakeholder consultations.

Key gaps in the PPFA

The PPFA only covers party and campaign finance regulations for national and provincial elections. It is silent on municipal and intra-party elections. The IEC has explained that this is because the act is guided by section 236 of the Constitution, which only speaks of funding for political parties participating at national and provincial level.

The PPFA enforces disclosure requirements for political parties only, and does not envision a possibility of independent candidates contesting the national and provincial elections. This can be a deficiency, considering that the New Nation Movement case that challenges the constitutionality of independent candidates being prohibited to run in national and provincial elections is currently awaiting judgment in the Constitutional Court.  

The PPFA is more focused on regulating income received and, as opposed to expenditure, it does not place spending limits for political parties. It is best practice for party and campaign finance regulations to also be cognisant of providing guidelines/limits for spending to ensure that the playing field remains level.

The PPFA does not provide regulations for online income and expenditure by political parties. Information communication technologies are becoming an important tool in electoral processes, and a recent international conference on social media hosted by the IEC and the UN Development Programme shows that African governments are only just beginning to think about legislation and regulations aimed at controlling the negative aspects of such technologies. Therefore, as the country grapples with understanding the 4IR, it is important that new laws that are introduced are not left behind.

The act is not clear on what constitutes a permissible source of funding and, at the same time, the onus is on political parties not to accept “suspicious donations”. Ideally, there should be clear criteria for determining the permissibility of incoming private funds in order to avoid political squabbles, as both the IEC and the political parties would not have such capacity.

Chapter 3, Section 8(2) of the act prohibits political parties from accepting donations from private sources that are above the threshold, while Section 9(2) gives the impression that private sources can donate amounts above the threshold directly to political parties, as long as they disclose the donation to the IEC. Contradictory sections in the act can provide leeway for political parties to take advantage.

The formula for allocating funds of the MPDF is 66.6% proportional representation and 33.3% in equity – at the same time the IEC can charge a maximum of 5% for its administration fee from the MPDF. Although the administration charge is understandable, in difficult years where money is scarce, the amount can be a source of contention between the IEC and political parties, since the IECs administrative charge is not built into the formula for disbursing funds.

The act does not explain who is authorised to call for funds that are left over to be invested into the Public Investment Corporation (PIC) and for how long the funds would be invested.

To manage possible contention, it is important to ensure that gaps that can directly impact the operationalisation of the PPFA are resolved to improve the successful prospects of the PPFA. The PPFA is an ambitious and bold undertaking in the realm of party and campaign finance, considering that some of the most advanced democracies in the world have not ventured into regulating the disbursement of private funds in a proportional and equitable manner.

The question remains as to whether the IEC should perhaps open the window of consultation once again, to allow for the gaps which are already visible to be addressed, especially because the PPFA does not have much bearing for the upcoming 2021 municipal elections.

Otherwise, should the IEC proceed with implementation of the PPFA as it currently stands, it is safe to say that it should be prepared to deal with possible challenges that may also jeopardise its stature as an independent institution which should at all times steer clear of the game of politics. DM

Noxolo Gwala is Assistant Programme Officer in the Elections and Political Processes Department at the Electoral Institute for Sustainable Democracy in Africa (EISA).

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