The question of private funding for political parties is as contentious as it is befitting

Black Business Quarterly put questions across to Judith February, manager of the Political Information and Monitoring Service at the Institute for Democracy in Africa (Idasa).

What would be the best safeguard against dubious donors to political parties – if such a thing is ever possible?

Idasa maintains that the regulation of party funding will strengthen democracy, curb opportunities for corrupt practices and promote several constitutionally enshrined rights. Regulation will never be the panacea for all ills, but it will create a frame of reference and will set certain parameters as regards the private donations to political parties.

At present, we have no regulation of private funding, which creates a laissez-faire situation that only increases the potential for corruption, since political parties simply say they are able to raise as much money in secret as they wish, as there is no regulation.

In terms of strengthening democracy and curbing corruption, regulations will foster stronger representative government and accountable political parties; ensure effective electoral competition; promote citizen participation; and enhance transparency.

In terms of promoting constitutional rights, regulations will enhance the right to political equality in terms of access and influence; the right to freedom of association by informing citizens about political parties’ affiliations, interests, objectives and resources; and the right to freedom of expression by allowing citizens to debate, impart and receive political information in an informed manner.

These rights can be promoted through regulation. This can include bans or limits on private political contributions, controls over political expenditures and rules securing transparency of contributions and expenditures.

Is not the idea of allowing companies to make secret donations a recipe for corrupt practices by crooks hell-bent on deriving political favour from beneficiary parties?

Of course, not every donor who donates does so with a corrupt intent, but it creates an environment that is ripe for corruption, yes.

Political parties need money, and private financing of political life is desirable and necessary (since the public funding given by legislation i.e. 90% proportional and 10% equitable, according to the number of seats in Parliament); it also presents a problem if left unregulated.

Secret donations from private sources such as wealthy individuals or large corporations can exert undue influence on the political system, secretly drowning out the interests of the poor and less powerful.

Private donations exert influence over politics in a number of ways and can have a corrupting effect on the government. Private donations to parties in return for an unauthorised favour; or the promise of a favour if elected to office, or accepting contributions from disreputable sources, are two such examples.

A number of corruption scandals around the world have focused attention on the way to respond to the problem. Most modern democracies now regulate private donations, driven by the recognition that regulation is important and necessary for democracy and that financing political campaigns in many countries has become a form of legalised corruption.

What is the international best practice regarding political party funding?

International standards are emerging in most modern democracies in terms of party funding.

The increasing contempt for and general disillusionment with parties and politicians has led to wide acknowledgement internationally that unregulated money (soft money), in the form of contributions to political parties by private sources, is a contentious area that requires some level of regulation to
ensure disclosure.

Many countries are taking steps to deal with the problem. Recent examples include: the United Kingdom’s comprehensive Political Parties, Elections and Referendums Act of 2000; the Rau Commission in Germany, established in 2000 in response to the Christian Democratic Union party donation scandal to examine existing party funding methods; and the Federation Parliament in Bosnia, which passed a new party funding law in July 2000.

Most countries do permit private funding to political parties. However, a number of those countries regulate and limit such funding, including India, Australia and the United States.

There is no shortage of regulations and subsidies concerning political money. Regulatory steps include bans or limits on private political contributions, state subsidies (state funds) for parties and/or candidates, controls over political expenditure, and rules securing transparency of contributions and expenditures.

International experience shows that the regulation of party funding can be effective if well-designed, backed by effective sanctions, and accompanied by a parallel diffusion of appropriate ethics and norms.

Ultimately, it is committed politicians and citizens who have the ability to assert the principles that should govern party financing and who are in the best position to push for legislation and regulations. These rules would need oversight, enforcement and monitoring.

Therefore, a system regulating private funding of political parties is necessary.

However, there is no single prescription for success, as party financing rules have to operate in an environment of respect for institutions and law, which varies across different contexts: some countries have outlawed donations from certain types of donors. These include both public and private sector companies such as in France since 1995, or foreign donations. Others include trade unions, political foundations, casino and gambling institutions and anonymous donors.

Countries that prohibit foreign funding include Australia, the Czech Republic, the UK, Greece, India (unless prior government permission has been obtained), Italy, Mexico, the Netherlands and Sweden. In Canada, foreign funding is prohibited, although foreign-owned firms with Canadian subsidiaries may contribute. In Germany, donations not exceeding R3 000 are permissible

What funding model is adopted by some of the largest democracies in the world, namely: the US, UK, India, Canada and Australia? Can this work here in South Africa?

There is no single prescription for success, as party financing rules have to operate in an environment of institutions and degrees of respect for rules that varies across countries, thus they have to select differing mechanisms to suit their needs.

Britain

In terms of British regulations, the law limits campaign spending by individual candidates.

Expenditure by national parties during a parliamentary campaign, however, is not limited. Candidates have free access to some television. Public disclosure of contributions is required only of corporations and unions.

The UK’s comprehensive Political Parties, Elections and Referendums Act of 2000 incorporates a number of these recommendations.

The Act states that parties are not allowed to accept donations that are not from permissible donors, or donations that are anonymous, where the donor cannot be identified.

Section 54(1) of the Act states: “A donation received by a registered party must not be accepted by the party if:

(a) the person by whom the donation would be made is not, at the time of its receipt by the party, a permissible donor; or

(b) the party is (whether because the donation is given anonymously or by reason of any deception or concealment or otherwise) unable to ascertain the identity of that person.”

Permissible donors include citizens who are registered to vote, a company that is registered in Britain, a political party and a trade union; and donations are not allowed to exceed £200 (section 54).

Parties are required to submit quarterly reports that detail donor information such as their name and address and the nature of
the donation.

The Act further stipulates that donors who contribute more than an aggregate amount of £5 000 must make a report to the Commission (section 68).

The Court may, on an application made by the Commission, order political parties to forfeit impermissible donations (section 58).

Canada

Canada can be viewed as the country with the most comprehensive, balanced and apparently successful system of regulation and public funding. Canadian law provides some public funding of campaigns for election to Parliament.

Television networks must provide candidates two minutes of free television time as well as a limited amount of airtime at the lowest advertising rate.

Voters receive a tax credit of up to $500 for campaign contributions. If you give a political donation for an amount up to $100, the state will add three times to what the citizen has contributed. By providing tax credits for donations, the system encourages small donations as opposed to a few large donations.

Strong pressure recently to curb the influence of corporate financing more severely culminated in a new law that passed through Federal Parliament on 19 June 2003. It prohibits corporations, trade unions and lobby groups from making donations to political parties, allowing them to contribute amounts of up to only $1 000 per year to individual candidates or local party associations. To compensate, direct public funding for parties is to be introduced at the rate of $1.75 per vote received in the previous election, which adds to the already generous reimbursement of candidates’ electoral expenses.

The amount of money that candidates and parties can spend in a campaign is limited by a formula based on the number of registered voters. Canada has an elections commission that effectively enforces penalties for violations of campaign finance laws.

India

Of interest is a recent case in India where independent institutions and a vibrant civil society were able to assert the need for political accountability, in a context where socio-economic disparities are high and democracy is still consolidating.

The key issue of public concern that gave rise to organised advocacy by some leading civil society groups, is that politicians are controlled by private ‘money bags’ or criminal elements who find their way into politics.

After a long and intense debate between politicians and civil society, parliament and the president on the disclosure obligations of politicians, the Supreme Court on 13 March 2003 struck down a major portion of the new Electoral Reforms Act. The Court stated the Act should not undermine an earlier court judgment in 2002, which had given a direction that the voters had the right to know the criminal antecedents, and liabilities and assets of the candidates, so as to equip them to vote wisely on election day.

United States

The www.opensecrets.org website provides the American public with a range of party financing information. This includes information about campaign contributions from a range of corporate industries to candidates or members of Congress committees.

It further allows citizens to scrutinise contributions to local members or candidates in their state. As examples, citizens are able to inform themselves about which candidates the computer industry is giving to and the patterns in tobacco company contributions in the last 10 years.

In addition, citizens can view a list of organisations that have given the most from a particular industry, and a list of candidates who have received the most from an industry.

South Africa’s challenge is to find a regulatory framework that is appropriate to its contextual particularities, and that suits all political parties and role-players, but which, above all, would promote constitutional rights, the public interest and entrench ethics inpublic life.

The case for establishing a framework of principles to which South Africa can be encouraged to subscribe to, has been discussed in the previous sections that highlighted general conceptual guidelines, that have proved useful in other jurisdictions such as disclosure regulations, state funding and subsidies, expenditure limitations, exclusion of certain donors, and oversight.

South Africa’s preferred option is the middle-way option, which attempts to take into account forces at play regarding money and politics. It can be seen as a middle ground between the highly regulated system and the laissez-faire system.

The features of this system include:

Public funding

• Funding restricted to parties taking into account the public relations electoral system;

• Funding extended to factions if defections occur;

• Funding for electoral and/or operational costs, depending on resource availability and priorities;

• Creative and extensive use of indirect public funding opportunities;

• Allocations must be open and transparent to avoid charges of favouritism or corruption through a system of extensive public disclosure, including expenditure;

• A proper distribution formula in place for allocations (e.g. time scales, initial amount and balance on receipt of proper audit
of expenses);

• Principles of proportionality and equity taken into account with allocations (e.g. taking into account last election count, membership fees and private donations);

• A weighing formula to advantage smaller parties;

• Maintaining the ratio between public and private support, and reducing parties’ reliance on private sources to a tolerable
level; and

• Taking into account the cost burden on the state.

Private funding

• Both foreign and local funding allowed;

• However, there should be limitations on the sources and type of funding (possibilities include in-kind contributions and shares as a means to source funds);

• Foreign funding limited to governments or parliamentary groups, registered expatriate voters and endowment funds;

• Foreign funding should be to the benefit of all parties and the principle of proportionality and equity should be achieved;

• Funders should be identified at all times, as well as the type or amount of funding;

• Funding of operational costs of parties by local private donors should be outlawed; and

• Certain donors should be excluded e.g. anonymous (above certain fairly low levels) and those that infringe the Constitution.

Advantages

This option recognises the importance of private funding as well as the dangers related to it.

On the basis of this, it puts in place mechanisms to regulate private funding to ensure heightened accountability and ethical mechanisms are in place to regulate private funding.

These mechanisms include disclosure of donors, exclusion of anonymous donors as well as outlawing local private funding for operational costs.

Where these mechanisms are effectively implemented, the credibility of the government is in little danger.

While we expect the government to practise openness and transparency at all times (vehement opposition to Information Bill is a case in point), we condone the practice of political parties being funded by faceless benefactors. Please reconcile the two.

Well, it is not civil society condoning the lack of regulation. Idasa, for example, has been campaigning for openness as regards political donations since 1997. Idasa, along with other civil society organisations, are equally opposed to the Info Bill. The two are, in fact, intrinsically linked: we need an open society to prevent corruption.

It is important to realise that the secrecy surrounding political donations creates a situation where those who are wealthy (companies or individuals) are able to buy influence over policy decisions as well as the tender processes; this has the effect of drowning out the voices of poor people and creates even greater inequality. In a country such as ours, this is obviously not a good thing.

So, most ordinary citizens see the links between a lack of transparency and corruption, and how that diverts resources from the poor – but there seems to be very little political will to deal with the issue of party-funding.

Since Idasa’s court case against the five largest political parties in 2005, nothing much has happened. The ANC at Polokwane resolved to regulate, yet it has made little progress given the vested interests that are at stake. For the opposition, they are keen to retain levels of secrecy, as they benefit from the lack of regulation, too.

If parties are serious about transparency in the name of socio-economic and political rights, then it is time they were proactive about regulation. Democracies require strong, independent political parties operating in an open and truly competitive political system to function properly. Such systems encourage transparency and accountability, and thereby encourage the reduction of corruption in the public sector and politics generally.

What is the power of money in our body politic?

There is no doubt that money has been playing an increasing role in political life.

We have seen it through very crude ways such as Chancellor House, where access to state tenders or projects has been used to gain money. Also, where political parties use the benefits of incumbency to gain access to funding i.e. through vote-buying, for instance, where the resources of state are used to influence voters. In addition, we have seen tenders being awarded to those who are politically connected.

So, there are many different ways in which money has influenced our political processes.

In any democracy, money plays an important role in the political process. A representative democracy cannot function without parties, and parties rely on political finance to sustain themselves in terms of election campaigns, routine functions and advertising.

The point at which politics and money meet, and the number of channels through which private money can enter politics and parties is numerous and complex to manage.

It entails direct contacts with members of the executive and legislature, election campaigns and a party’s ability to attract private sources of funding. It further relates to the level of state funding for the party system and the relationship between private sources of funding and government decisions. Any of these situations provide opportunity for corruption and conflicts of interest to arise and demand specific remedies.

While money is a fundamental part of the functioning of modern democracies, the flow of cash need not necessarily become an unethical, corrosive tool with which politicians promote their own interests. There ought to be a healthy relationship between money and politics by advocating a system that is characterised by transparency and openness by promoting access to information, and a system that allows for clean and fair private
funding practices.

Regulation should not be seen as a threat to the right to donate, but as a way to minimise the undue influence of money on politics while, simultaneously, recognising that money is an important feature of the modern political landscape.

Were you disappointed that the official opposition, champions of clean governance, was part of the four big parties that Idasa took to court, for refusal to disclose sources of private funding? Double standards, perhaps?

It seems the one thing on which South Africa’s major political parties agree, is not wanting to say who secretly funds their myriad activities. At least, not at this juncture in our democratic life. Possibly, it takes transparency an uncomfortable step too far.

It is disappointing conduct from all the parties.

If political parties need private funding, should they not be run like businesses?

Well, yes, they ought to become more professionally run or operated. Some of them, such as the Democratic Alliance are already quite professionalised, with regard to fund-raising, research, etc.

The key is always transparency.

How best can political parties avoid the ANC/Hitachi kind of scenario when they pursue commercial interests through their investment wings – Chancellor House, in the case of the ANC?

A strong democracy requires healthy political parties. In turn, political parties require resources to sustain and operate a basic party structure sufficient to represent people, develop the capacity to contest elections and contribute creatively to policy debate. Parties, therefore, need to raise funds.

Idasa recognises the need for private sources of finance to support a newly formed multiparty system. It is important for parties to survive between elections as well as competing at elections.

As regards Chancellor House, the ANC, through this investment arm, should never be allowed to tender for such contracts. The perception of a conflict of interest and undue advantage is simply too great.

Political parties should not tender for state contracts. The relationships between those who are making the decisions and the ruling party are too close and simply invite conflicts of interest and corruption.

Should the number of political parties not be capped, given the inability by the state to fund political parties fully? Surely, if we had four strong parties, these could be funded fully from the national fiscus?

The founding provisions of the South African Constitution include a reference to “a multiparty system of democratic government”[s,1 (d)].

South Africa strives to construct a democratic political system, based on a plurality of political parties that espouse differing policies and programmes, and contest elections.

Parties need resources in order to discharge their functions, and this need is compounded in South Africa due to its geographic size, social complexity and preponderance of languages.

The State does provide some financial support to political parties, but this needs to be complemented by private funds to enable parties to function effectively. It would be unrealistic, given the competing demands for state resources, for parties to be fully funded from the fiscus in a developing country such as ours. One cannot ‘cap’ political parties – that would be a breach of the right to freedom of expression.

South Africa is a multiparty democracy with a Bill of Rights that guarantees citizen rights, including political rights. Section 18 of the Bill of Rights states that everyone has the right to freedom of association.

And section 19 further states that “every citizen is free to make political choices, which includes the right to form a political party; to participate in the activities of, or recruit members for, a political party; and to campaign for a political party or cause. Every adult citizen also has the right to vote in elections for any legislative body established in terms of the Constitution, and to do so in secret; and to stand for public office and, if elected, to
hold office.

South Africa’s Constitution imposes the imperatives of having an electoral system that results in proportional representation and the participation by minority parties in the decision-making process.

Section 236 of the Constitution of the Republic of South Africa, Act 108 of 1996, states: “To enhance multiparty democracy, national legislation must provide for the funding of political parties participating in national and provincial legislatures on an equitable and proportional basis.”

How do you remove the prospect of victimisation, were companies to donate to opposition parties in a transparent manner?

Disclosure in some emerging or unstable democracies may have negative spin-offs.

Opposition parties and respective donors may experience difficulties. Contextualising transparency and disclosure is important to understand domestic complexities such as the party system and the media, but should not be a disincentive to adopting such measures.

In 2004, Idasa encouraged companies to declare the donations they were making publicly. Quite a few companies did so and many opposition parties, in fact, benefited where they might not otherwise have i.e. companies gave to more opposition parties. So it is a case of swings and roundabouts.

Are politics and business incompatible bedfellows?

South Africa’s civil society is a vibrant one.

Trade unions, church organisations, human rights pressure groups and smaller, community organisations all contest the policy ground with vigour and dedication. Generally, they do so armed solely with the power of persuasion and argument. Meanwhile, big business exerts pressure, armed with the power of its donations. It is an uneven playing field.

Of course, any vibrant democracy needs business to be part of that and so it is not an ‘all or nothing’ situation. Business, the government and civil society need to work together to find ways to deepen democracy.

Companies should, therefore, be encouraged to make regular and transparent donations to political parties. An issue that many companies grapple with is which party or parties to donate to and how to apportion funds between those parties.

Donations from companies to parties should not be premised on the expectation of privilege and patronage if a particular party were to attain power. However, there is nothing necessarily improper or untoward in a company supporting a party on the basis of that party’s political programme or philosophy, so long as this basis for donating is clearly articulated to all stakeholders.

The constitutional principles of transparency, openness and accountability should inform and permeate the donations process, with the aim of informing the public of donations received by political parties.