Political Party Funding – A Comparative Perspective

6 September 2017

Debate over South African political financing has, over the years, occupied the public discourse. The 2005 IDASA v ANC High Court ruling, that the Promotion of Access to Information Act (PAIA) did not necessarily require political parties to disclose funding sources, began the debate, and the so-called “Gupta Leaks” have given it a new sense of urgency. Recent concerns over state capture allegations and a national election looming has seen political party funding feature prominently in both political and civil society discourse.

The debate has forced legislators to reconcile the apparent clash between the section 14 and 18 constitutional rights to privacy and freedom of association, with the section 32 right to access to information and the section 1(d) right to an accountable, responsive, and open democratic system. Proponents of transparency cite the dangers of influence peddling, while opponents worry about economic bullying of political dissidents.

Prior to 1997, no legal regulatory framework for political party funding existed. Bodies including non-profit Open Secrets and the Truth and Reconciliation Commission (TRC) have claimed that there is a strong historical precedent of large political donations by big business. The Gupta Leaks indicate that the practice is ongoing.

The Public Funding of Represented Political Parties Act (PFRPPA) of 1997 legislated public political financing and set up the Represented Political Parties’ Fund, administered by the Independent Electoral Commission (IEC) of South Africa. The PFRPPA holds each party receiving an allocation from the Fund responsible for keeping a separate bank account located within the Republic for Fund monies, appointing a party official to act as an accounting officer and ensure compliance with the Act, and supplying an income and expenditure statement to be audited annually and sent to the IEC.

However, no legislation exists for non-state (private) political party funding. According to the IEC, party funding includes both direct funding - financial contributions given to parties - and indirect funding - non-monetary contributions. Currently, parties need not disclose donation details from local and foreign business, or civil society groups.

In 2015, non-profit My Vote Counts (MVC) argued in front of the Constitutional Court that Parliament did not provide sufficient access to information by failing to require private political financing disclosure. MVC argued that passing PAIA - which allows citizens to petition public and private bodies for information - only partially met the section 32 constitutional obligation. The Constitutional Court chose not to order Parliament to pass legislation, at which point MVC brought its case to the High Court in Cape Town, where it is currently being heard.

In Parliament, from 15 to 23 August 2017, the Ad Hoc Committee on the Funding of Political Parties debated proposed changes to political financing regulation. Committee members agreed on the need to disclose, to the IEC, foreign donations and private donations above a certain threshold. However, Committee members from the Democratic Alliance argued against disclosure, asserting that there was no evidence linking non-disclosure and corruption, but businesses did experience prejudice for connections with opposition parties. Business groups were notably absent from the discussion.

South Africa may do well to look to international examples of political financing regulation. Moderate regulation of private funding is in line with international best practice. However, many countries regulate further than what the Committee proposed.

India and Canada both require disclosure to their respective electoral bodies for donations above a certain threshold. However, both India and Canada’s thresholds are lower than the R10 000 threshold proposed by the Committee, at 20 000 rupees (approximately R4 000) and 200 Canadian dollars (approximately R2 100), respectively. India and Canada also limit cash contributions, to Rs2 000 and $200, respectively. In 2015, Canada limited contributions to

$1 500 in total in any calendar year, to be increased by $25 per year. Kenya requires full disclosure of all donations to its electoral body. Of the three countries, Kenya’s constitution most resembles South Africa’s in terms of rights to association and privacy, yet Kenya requires the most transparency.

India has recently undergone political financing reform in which it eliminated cash donations from corporations altogether, and introduced an “electoral bond” system, in which corporations can purchase time-limited bearer bonds from scheduled banks and transfer them to registered party accounts. Use of these bonds does not require donor disclosure.  Additionally, most Indian political financing legislation is enforced through tax incentives, rather than punitive measures. A similar system could be instituted in South Africa as a compromise between rights to privacy and transparency - donor identity is protected while making it difficult for party funds to be corrupted.

A hybrid system may work best for South Africa, at least until it is known how increased transparency will change the landscape of party funding. The issue is far from resolved, as Parliament must still consider donation limits and enforcement before drafting legislation, and the High Court decision on the MVC case is likely to influence decision-making. Still, the focus on political financing regulation is an important step toward enforcing the foundational values of openness and transparency, as demanded by the Constitution.

Antonia Drummond, Intern, Centre for Constitutional Rights