Political Party Funding Bill: Parliamentary Legal Advisor, National Treasury & IEC responses

Meeting report

The Chairperson opened the meeting and welcomed everyone, including the various officials from Parliament’s Constitutional and Legal Services Office (CLSO), the National Treasury and those from the Independent Electoral Commission (IEC), to brief the Committee on the Political Party Funding Bill. This Bill was passed by the National Assembly on 27 March 2018 and forwarded to the National Council of Provinces for consideration. It repeals the current Public Funding of Represented Political Parties Act 103 of 1997, which was enacted in line with section 236 of the Constitution.

The Chairperson read out the agenda for this meeting, noting that the first item had already been dealt with. The second item on the agenda was apologies. Only one apology had been received, from Ms Tasneem Motara (ANC), who was off sick. He notified the members that he had received a complaint from the Democratic Alliance (DA) party, alleging that the Committee is merely rubberstamping decisions from the National Assembly, and is not applying its mind to the matters before it. One of the issues the DA claimed was that the Committee did not consider the contents of the Bill itself. They also had an issue with the timeframe of six weeks that the Committee had set for itself to finalise the Bill. According to the DA, the Committee “will not be able to do justice to the Bill in terms of the public hearings, so they were of the view that we must extend our programme by two weeks…” These were the complaints raised by the DA.

The Chairperson then instructed that a clause-by-clause discussion of the Bill be done in this meeting. This is to remedy the allegation that the Committee does not take time to discuss the Bill in detail. Also, he directed that the Committee goes through the written responses of the IEC.

Ms L Dlamini (ANC; Mpumalanga) commented on the complaints that were raised by the DA. It was inappropriate for the DA to raise these issues. It had attended the previous meeting and should have raised these issues during that meeting. “They participated fully in the meeting and did not raise those concerns. Then after the meeting, they raise the concerns. I do not think that is fair for us as a Committee…we are doing as they requested and they are not here. They will come back again and complain about it…in the future, let us not allow concerns outside the meeting. If they have concerns, they must raise them in the meeting, so that all of us can make inputs in the formal meeting.”

The Chairperson agreed with her sentiments and instructed that if anyone has concerns about the Committee and how it handles issues, they must raise these issues during the meeting. He then invited the CLSO to begin its presentation on the Political Party Funding Bill. He requested the Office not to do a clause-by-clause review of the Bill, considering the fact that this would be the second presentation made on the Bill. He therefore asked for a synopsis/ summary of the Bill.

Input from Constitutional and Legal Services Office (CLSO)

Mr Michael Prince, Parliamentary Legal Adviser, CLSO, began with an overview of the Bill. Section 236 of the Constitution stipulates that in order to enhance multi-party democracy, national legislation must provide for the funding of political parties participating in national and provincial legislatures on an equitable and proportional basis. This funding must be distributed on an equitable and proportional basis. There is legislation in place giving effect to section 236 i.e. Public Funding of Represented Political Parties Act. This Act contains a Represented Political Parties Fund, which is retained under the Bill. This Fund is administered by the IEC and the allocation to political parties is on a 90% proportional and 10% equitable basis. Funding is from public money. The Bill has established a second Fund, called the Multi-party Democracy Fund, to be funded from private sources. Both funds pursuant to the Bill, will be administered by the IEC.

The Bill further seeks to regulate direct private donations to political parties. It contains several prohibitions, such as the prohibition on donations from foreign governments and agencies and foreign persons. However, there is an exception if these donations are for the purposes of training, skills or policy development. It prohibits donations from state-owned enterprises or from proceeds of corruption. It places a cap on how much money any person/ entity can donate to a political party in a year and it prohibits donations made to a member of a political party, except if that donation is for political party purposes and is accepted on behalf of the party.  It requires disclosure of all donations above a prescribed threshold to the IEC by political parties and the donors. The IEC must then publish the donations disclosed to it on a quarterly basis. These disclosure requirements do not limit anyone’s rights to access to information in terms of the Promotion of Access to Information Act (PAIA).

In addition to the above, the Bill highlights the duties of political parties. It imposes reporting and accounting obligations on them, it prescribes what must happen in the case of unspent money from the Funds in each financial year, it empowers the IEC to monitor and suspect payments of money as well as to recover money that has either been received or spent by political parties. It also gives the Electoral court the power to review the decisions of the IEC and impose administrative fines.

On 6 May 2017, the National Assembly resolved to establish an ad hoc committee to inquire into inter alia how to make recommendations on the funding of political parties in national and provincial legislatures. There was an extensive public participation process in the National Assembly dealing with many of the current organisations that have made submission in that process. On 27 March 2018, the Political Party Funding Bill was passed by the National Assembly and passed to the NCOP.

Mr Prince summarised the provisions of the Bill.  

Chapter 1 is the definitions clause for the terms used in the Bill.  This chapter regulates how the Bill should be interpreted.

Chapter 2 establishes the Funds discussed above. It deals with how that money will be invested as well as the management and administration of these funds. It further deals with the allocation of payments of money to represented political parties, pursuant to section 236 of the Constitution stipulated above. The 90%/10% split of the allocation of funds has been changed to a two thirds proportional and one thirds equitable split. The purpose for which the money should be used is the same as is encapsulated in the current Act.

Chapter 3 deals with direct funding of political parties. It sets out the prohibitions. Two definitions are imperative to note. “Donations” includes a donation in kind and does not include member’s fees, funding of political parties and funding rendered by a volunteer i.e. these are not classified as donations. It does however include things like money lent to political parties other than on commercial terms, sponsorship to political parties, among others. A “political party” includes any entity that accepts donations principally to support any political party or its candidates in an election, as defined in section 1 of the Bill.

Chapter 4 contains disclosure requirements to the IEC by political parties and donors. It also provides that they must account for their income, establish bank accounts, submit financial statements, how they must deal with unspent money at the end of a financial year etc.

Chapter 5 contains the enforcement provisions of the Act, for example it allows the IEC to monitor and inspect, suspend payments of political parties, the power to issue directions and the power to recover money irregularly accepted or spent, it sets out administrative fines, offences and penalties and review or appeal procedures.

Chapter 6 contains the general provisions e.g. deals with the reporting by the IEC to Parliament. It sets out the legislative sources of funding for political parties etc. Clause 24 sets out the regulations to be made by the president in terms of the Bill and others to be issued by the IEC. This provision also regulates the repeal of this legislation.

There are two schedules in this Bill; Schedule 1 contains the maximum permissible fines that may be imposed for contravening the terms of this legislation and Schedule 2 stipulates the regulations on political party funding.

Mr Prince addressed the concerns that had been raised by the IEC. The first was the need to separate the territorial functions from the functions under the Bill. Clause 21 (1) of the Bill permits the IEC to establish another unit to exercise certain powers conferred or perform other functions imposed on the IEC under the Bill. The second concern raised related to the need to apply a phased in approach in bringing the Bill. Such an approach is catered for in the short title of the Bill

Mr Prince addressed the concerns raised by National Treasury. The first concern was the interface with the Public Finance Management Act (PFMA). The PMFA applies to the IEC; it therefore applies to the administration and management of funds through the unit created by the IEC.  The second concern relates to the interface with the Promotion of Access to Information Act (PAIA). As was expressed above, nothing in this Bill limits anyone’s rights to access to information in terms of the PAIA. So one still has the right to access to information in respect of PAIA. The Bill deals specifically with funding of political parties, whilst PAIA deals with access to information. The other concern was that the Bill does not cater for small political parties. Section 236 of the Constitution extends funding to political parties at a local level.

Input from the Independent Electoral Commission (IEC)

Mr Glen Mashinini, Chairperson, IEC, apologised on behalf of the CEO who could not attend this meeting, since he was attending a public conference overseas. He introduced his team from the IEC i.e. Mr Terry Tselane (Vice Chairperson, IEC), Ms Ester De Wet (Acting Chief Financial Officer, IEC) and Mr Marco Granelli (Senior Manager of Communications, IEC). He began by clarifying that the unit to be created by the IEC is going to fall under the accounting officer of the IEC. It is a business entity, not a legal entity in the strict sense of the word (a legal entity would imply that it would have a separate legal personality as a separate body from the IEC).

Mr Mashinini said that the Commission will require additional financial resources to establish this separate unit to perform its functions under the Bill. Lastly, he explained that the Commission will bring the Bill into effect in a phased approach.

Mr Tselane responded to some concerns that were raised. One issue was why the legislation was sought to be implemented in a phased approach. This issue had been covered in the presentation by Mr Prince relating to the financial constraints in implementing the legislation. The second issue on whether it undermines the core objectives of the legislation if it is not implemented from the start. It is not going to compromise the process and infrastructure must first be created for the implementation of the whole legislation. The IEC had earlier indicated that it requires R20 million in this financial year to properly implement the legislation. This is merely an estimate for the first phase of the implementation. There had also been concerns that the start-up costs seem high and salary of the head of the team is excessive. To this inquiry, he responded that the salary system within the organisation is not excessive. Another question was why fundraising was needed so much. It is important for the IEC to go on a campaign to highlight the areas of compliance for political parties. A number of Committee members expressed lack of clarity regarding the nature of the publicly funded business unit and whether it was part of the IEC. As stated previously, this will be a business unit within the IEC reporting to it and complying with its regulations. The main reason for this separation from the IEC is to ring-fence it to prevent interference.

Mr Tselane highlighted that the key strategic areas that the unit will be focusing on are identified and outlined in slide no 6. This emphasizes the need to focus only on key strategic areas. Another query was whether it is necessary to staff it with so many senior personnel. Since it has been established that the unit will only focus on key strategic areas, it is appropriate to involve people at senior level who can come up with strategic input. On the question of whether the legislation extends to local governments or only to those parties contesting national and provincial elections; it is dealing with national, provincial and local representation. Another question was should provincial funds be incorporated into this legislation; the Commission feels that the Bill will cover all public funds provided to political parties, except constituency allowance.

Input from National Treasury

Ms Gillian Wilson, Chief Director: Public Finance, National Treasury, introduced her colleague, Mr Goolam Manack (Head: Public Entities Governance Unit of the Budget Office, Treasury). 

She summarised Treasury’s responses and stated that it agreed with the responses given by the IEC. The startup funds constitute an indicative amount that will depend on when the Bill comes into operation, after which, the amount will be firmed up. The startup amount was agreed, pursuant to a meeting between the Treasury and the IEC. With regards to the salary scale and organisational structure, NT had a discussion with the IEC and it was agreed that these will be determined by the latter because the unit will operate within it. In respect to the two Funds, NT is satisfied with the administration and regulatory process of the IEC.

Mr Manack indicated that some of the issues have already been addressed by Mr Prince in his presentation. Also the issues of the interface with the PFMA have been addressed above. The Funds and their administration will have to comply with the PMFA i.e. issues of procurement and financial management. On the question of smaller parties not being able to access funding because they do not have representatives at the national and provincial levels; they should get some kind of funding through limited thresholds that can be set. This issue can be debated further. However, the deposits that must be paid by political parties to the IEC in order to contest elections must be applied. He also emphasised that the unit is not a separate entity, but a unit within the IEC. It is not a separate entity because it does not have its own legislation, but is established in terms of this Bill.

Discussion

The Chairperson insisted that the purpose of the Bill is to enhance multiparty democracy, as stated in section 1 of the Constitution. The second rationale of the Bill is to provide funding for political parties in terms of section 236 of the Constitution. The third objective of the Bill is to regulate external donor funding for political parties. Confusion was caused by the terminology used by the IEC, which suggested that the unit to be established to monitor the funding of political parties was intended to be a separate entity from the IEC so as to avoid conflict of interest with the IEC. He asked the members of the Committee to make responses and ask questions on the various presentations and contributions that have been made so far in the meeting.

Ms Dlamini stated that political parties should get more money from the government, instead of receiving funds from private donors because private actors tend to attach conditions when granting money to these parties, which may not be in line with the goals of the parties. She asked for clarification because the Bill seeks to introduce private funding for political parties, thus creating the risk that they seek to avoid. Secondly, she asked “how is the current funding being managed? Who is managing this funding in the IEC?… why don’t we increase capacity in that unit instead of starting a separate one? ”. She suggested that instead of instituting a new unit within the IEC, the focus ought to be on building the capacity of the IEC to handle the duties that it intends to delegate to the newly formed unit. She drew from her time as a volunteer to justify her claims that the functions that are to be passed on to the new unit, could be done by the IEC, as currently constituted. Additionally, she wanted to know what criteria was used to come up with the budget for the new unit, for example she highlighted that the budget provides for funds for rental, yet it has been stated in the previous presentations that the unit will be within the IEC. 

Mr M Monakedi (ANC; Limpopo) addressed a number of issues. Firstly, he asked for clarification on what is meant by the terms “equitable” and “proportional” in terms of the allocation of funding by the two Funds created by the Bill. Secondly, he asked for clarification of the role of the Auditor-General in terms of the Finance Bill. He also asked for clarification on the structure and salary pertaining to the new unit to be established by the IEC. Additionally, he requested assurances from the relevant bodies that they will comply with the ruling of the Constitutional court that certain provincial legislation in terms of which funding is provided to political parties will be repealed i.e. if there are provincial laws regulating the funds in the provinces then the legislation regulating such funds in the provinces must be repealed by the relevant Provincial Legislatures. He raised concern with the use of the term “smaller parties” and argued that the proper term to be used should be “unrepresentative political parties.” Lastly, he asked what the criteria for the funding of these “smaller parties” is, bearing in mind that the Treasury is advocating for a national threshold be set for the funding of “smaller parties.”

Ms D Ngwenya (EFF; Gauteng) raised issue with clause 10 (1) and explained that it is the reason why the EFF are opposing this Bill. The clause states “no person or entity may deliver a donation to a member of a political party other than for party political purposes.” This provision limits the Constitutional right of Freedom of Association and it may prevent people, especially the poor, from joining political parties because of the fear that they are giving up the right to receive donations. She suggests that the provision should be rephrased to read, “No person or entity will deliver a donation made to a political party, to a member of that political party, other than for party political purposes.” This would ensure that it does not infringe on the Constitutional right of members of political parties.

Ms Z Ncitha (ANC; Eastern Cape) asked for clarity on the accountability of political parties, specifically whether they are accountable to the Treasury.

The Chairperson invited the various presenters to respond to these clarity-seeking questions by the members of the Committee.

On the issue of funding raised by Ms Dlamini, Mr Mashinini responded that the Bill in discussion is not the Electoral Commissions Bill. He emphasised that the Bill now extends funding from private parties, with increased monitoring mechanisms. The IEC cannot accept a mandate that is unfunded i.e. without the commensurate funding for it. Also on the question of whether the IEC has the capacity needed, he said that it only has the capacity for the current mandate that is spelled out in the Constitution and amplified in the Bill. Secondly, on the question raised by Ms Ngwenya, he said that the IEC is aware of the concerns and it is for the members and the legislatures to decide. The IEC would then abide with whatever decision is reached by the lawmakers.

Mr Tselane, in relation to Ms Dlamini’s queries, replied that those were indeed the reasons that motivated the IEC to determine that the unit must be a separate entity from the IEC. This is because there would be a risk that the IEC would be expected to take the limited resources it has to fund a new mandate. This would also overburden the members of the IEC because they would have to deal with even more responsibility as a result of the new mandate. “We do not want this new mandate to eat up the little resources that we have…” On the issue of proportionality and equity asked by Mr Monakedi, he said that it is a practice that already exists in terms of the current Fund. In the current structure, 90% of the Funds was proportional, thus implying that it was dependent on how many seats a political party gets. The remaining 10% would then be equitable, meaning that each political party is given an equal amount. The same principle applies under the regime of the new Bill, but the proportions are altered i.e. two thirds and one third respectively.

Mr Mashinini insisted that the IEC is not the party to determine whether there should be private funding for political parties or not. Also, it cannot prescribe the amounts to be allocated, and whether these should be increased or decreased. Their decisions derive from engagements with the legislature; therefore it is up to the legislature to make such decisions, in consultation with the IEC and other stakeholders.

Ms De Wet, on the question of why the budget of the unit reflects that it needs funds for rentals,  answered that the IEC is currently in a lease agreement that is due to expire in 2020, therefore it is unclear whether it will be staying in its current building or moving to another, and because it is also not certain how exactly the funds will be used and what number of bodies will be in the fund, it thought it is prudent to cater for these matters through the budget, so as to avoid burdening the IEC. The rest of the funds in the budget are merely estimates, and in the event that some of the money will not be used in a certain financial year, it will rollover to the next financial year. On the issue of proportionality, she reiterated what Mr Tselane’s point that the principle would be the same as is with the current law. Also, the budget for salaries is based on the salary levels currently within the IEC, and is also an estimate of what the Treasury feels will be fair and reasonable. Lastly, on the issue of the role of the Auditor-General, she stated that the Auditor-General audits the Funds and will continue to do so under the new Bill.

On the reporting by political parties, Mr Manack responded that the PMFA does not apply to political parties; therefore they do not have to report in that context. However, the reporting envisaged in the Bill is the generally expected reporting of accounting practices. He also stated that there is significant funding flowing from provinces to political parties.

Mr Prince dealt with two issues. Firstly, on the matter raised by Ms Ngwenya on the constitutionality of clause 10 (1), he said that the provision was agreed to by the National Assembly when the Bill was considered. This provision was approved amid controversy around the issue of state capture in the public service, which also influenced the inclusion of clause 9 of the Bill regarding disclosure of donations to political parties. Clause 10 says that a donor cannot donate to a member of a political party.  Clause 9 helps to safeguard against state capture and prevent donations that could influence political parties to change their political stance. On the issue regarding provincial legislation, there is a court decision on this matter that all, but one province responded to the application. The court recognised that there is a lacuna in provincial legislations regarding funding of political parties and it ordered that they be repealed and certain mechanisms had to be put in place to deal with that. Parliament is currently drafting the Regulations of Financial Management of Parliament and Provincial Legislatures Act dealing with constitutional funding of parties. In terms of these Regulations, it provides funding for individual members of the legislatures (section 34 of the Act). He did not know why the Acts have not been repealed provincially, since the court declared them unconstitutional in as far as they purport to regulate financial management of provincial legislatures, because he is not a member of the legislatures. Lastly, clause 23 of the new Bill prohibits other sources of funding other than those provided for in this section.

The Chairperson proposed that the Committee defer considering item no 6 on the agenda to the next meeting.

The members agreed.

The Chairperson then directed that the Committee consider item no. 5 on the consideration of written submissions from the public and the way forward. He asked for an update from the Committee on how many of the submissions it received, which ones are deemed to be relevant, which are conducive for oral presentation and debate by the Committee etc. He then dismissed the officials from the National Treasury from the meeting and again thanked them for attending the meeting.

Summary of Submission Received

The IEC indicated that it has received eleven submissions from the members of the public as well as various organizations. The Commission was wary of making detailed responses on behalf of the public and instead indicated that it would briefly summarise the submissions.

The first was from Mr Jean Paul, who raised the issue in relation to clause 3(5) and clause 4 of the Bill (objects of the Bill). He argued that the establishment of the Multiparty Democracy Fund should be deleted due to a lack of transparency.

The second submission questioned the purpose of allocating the Fund to political parties instead of to the people living with disabilities.

The third submission by Mr Fredrick Bonga, who said political parties should raise funds on their own and not be allocated funds.

These three submitters did not express any interest in coming to make presentation to the Committee orally.

The next one raised concerns with the unintended consequences of the Bill, and did not elaborate further, but expressed interest to come and present orally to the Committee.

The Council for Advancement of the South African Constitution (CASA) also made submissions, agreeing with the Bill as it is, but it raised a few concerns and expressed interest to appear before the Committee to present orally.

The Auditor- General also made submissions, saying that clause 12(5) of the Bill might not be consistent with section 128 of the Constitution. The AG confirmed that it is available to make oral presentations to the Committee.

Furthermore, COSATU also made submissions, raising concerns with clauses 9 and 12 as well as Schedule 2 of the Bill. It also expressed interest to present orally.

My Vote Counts was another entity that made submissions. It raised concerns with the voluntary disclosure requirement in clauses 1, 9, 10, 8, among others. It also showed interest in presenting orally to the Committee.

Right2know raised an issue with clause 9(3) and showed interest to present orally.

Another organisation also raised concern with public disclosure of the Constitution to the Multiparty Democracy Fund (clauses 3(5), 10(3)) and showed interest in presenting orally.

The EFF has also made submissions and said it has an interest in presenting orally.

The Committee will have to decide whether to allow the EFF to present before it because it is a political party. However during the National Assembly Round, the ANC and Azapo were allowed to present.

Corruption Watch is another institution that has raised concerns with clauses 9, 22, 6 and Schedule 2. It also showed interest to present orally. These were all the submissions received, eight showing interest in coming to present orally to the Committee.

Discussion

The Chairperson asked that the Committee ought to decide whether to consider all the submissions, even those that did not indicate that they will come forward to make oral presentations to the Committee. This is so as to promote fairness and transparency.

Mr Prince stated that, according to the invitation by the Committee for public submissions, the submissions may be made either orally or in writing, depending on their subject matter. Therefore there is no element of unfairness or bias if some of the organisations appear before the Committee, whilst others do not.

Ms Ncitha argued that all members, except if they are members of a political party, should be allowed to make presentations, regardless of whether they indicated interest to present orally or not.

Mr Monakedi agreed with these sentiments.

The Chairperson directed that all interested parties, including the EFF be allowed to make presentations to the Committee. However, the members of the EFF must still decide who will represent the party.

It was agreed that they select one of their leaders, who is not in Parliament, to make the oral presentation on the party’s behalf. He also stated that the public hearings will be held the following week on 20 June 2018, as per the Committee’s programme. He urged all members to be prepared for this process.

He concluded by thanking everyone present for attending the meeting.

The meeting was adjourned.