Is South Africa's democracy properly funded?

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Views expressed in this report do not necessarily represent the views of

the Inclusive Society Institute or its Board or Council members.

Authors:

Daryl Swanepoel

Editor:

Olivia Main

FEBRUARY 2023

Content

Chapter 1: Background and introduction of the study

Chapter 2: The literature review

2.1 The role of political parties in a democratic dispensation

2.1.1 Why are political parties important for democracy?

2.1.2 What is the role and functions of political parties in a democracy?

2.2 The need for party-political funding

2.3 How political parties are funded

2.4 The imperative to ensure transparency through the regulation of private donations

2.5 The rationale for state funding of political parties

2.5.1 Enabling parties to fulfil their democratic responsibilities

2.5.2 State funding of political parties to combat corruption and as mitigation for anti-corruption measures

2.6 The different forms of state funding for political parties

2.7 The relationship between private donations, disclosure regulations, state funding and the viability of political parties

2.8 The post-1994 history of party-political funding in South Africa

2.9 Conclusion

Chapter 3: The legislative review

3.1 The Constitution of the Republic of South Africa, Act 108 of 1996

3.1.1 Section 19(2)

3.1.2 Section 57(2)(c)

3.1.3 Section 59(1)(a)

3.1.4 Section 236

3.2 Political Party Funding Act, Act 6 of 2018

3.2.1 Direct funding of political parties

3.2.1.1 Prohibited donations

3.2.1.2 Donations from juristic persons

3.2.2 Represented Political Party Fund

3.2.3 Multi-Party Democracy Fund

3.3 Appropriation Bill B7-2022 and Parliament’s Annual Performance Plan 2022–2025

3.3.1 Appropriation Bill B7-2022

3.3.2 Parliament’s Annual Performance Plan 2022–2025

3.4 Conclusion

Chapter 4: Research design and methodology

4.1 Research objective

4.2 Research question

4.3 Research design

4.4 Research subjects

4.5 Measurement

4.6 Data collection

4.7 Analysis

4.8 Ethics

4.9 Limitation of the study

Chapter 5: Findings

5.1 The public party-funding regime of Germany

5.1.1 Public funding of German political parties

5.1.1.1 Restrictions of private donations to political parties

5.1.1.2 The various forms of public funding that German parties are entitled to

5.1.1.3 Incentives to encourage individuals/corporates to make donations to political parties

5.1.1.4 Indirect public funding

5.1.1.5 Private versus public funding of political parties ratio

5.1.1.6 Quantifiable public funding to support political parties

5.1.2 Funding to party-aligned political foundations

5.1.3 Germany–South Africa Purchasing Power Parity (PPP)

5.1.3.1 PPP in relation to direct public funding to political parties

5.1.3.2 PPP in relation to funding to politically aligned foundations

5.1.3.3 PPP in relation to the funding of the German party-political dispensation as a whole

5.1.3.4 Public annual-spend per person on political parties and foundations

5.2 The public party-funding regime of Sweden

5.2.1 Public funding of Swedish political parties

5.2.1.1 Restrictions of donations to political parties

5.2.1.2 The various forms of public funding that Swedish political parties are entitled to

5.2.1.3 Incentives to encourage individuals/corporations to make donations to political parties

5.2.1.4 Indirect public funding

5.2.1.5 Private funding versus public funding of political parties ratio

5.2.1.6 Quantifiable funding to support political parties

5.2.2 Funding to party-aligned political foundations

5.2.2.1 Quantifiable funding to support political foundations

5.2.3 Sweden–South Africa Purchasing Power Parity (PPP)

5.2.3.1 PPP in relation to direct public funding to political parties

5.2.3.2 PPP in relation to funding to politically aligned foundations

5.2.3.3 PPP in relation to the funding of the Swedish party-political dispensation as a whole

5.2.3.4 Public annual-spend per person on political parties and foundations

5.3 The public party-funding regime of the Netherlands

5.3.1 Public funding of Swedish political parties

5.3.1.1 Restrictions of donations to political parties

5.3.1.2 The various forms of public funding that the Netherlands political parties are entitled to

5.3.1.3 Incentives to encourage individuals/corporations to make donations to political parties

5.3.1.4 Indirect public funding

5.3.1.5 Private funding versus public funding of political parties ratio

5.3.1.6 Quantifiable funding to support political parties

5.3.2 Public funding to political foundations

5.3.3 The Netherlands–South Africa Purchasing Power Parity (PPP)

5.3.3.1 PPP in relation to direct public funding to political parties

5.3.3.2 Public annual-spend per person on political parties and foundations

5.4 The public party-funding regime of South Africa

5.4.1 Public funding of South African political parties

5.4.2 Indirect public funding

5.4.3 Private funding versus public funding of political parties ratio

5.4.4 Quantifiable funding to support political parties

5.4.5 Public annual-spend per person on political parties

Chapter 6: Discussion of findings

6.1 Comparative analysis: The amount of public funds allocated to the political parties in selected jurisdictions

Chapter 7: Conclusions and recommendations

7.1 Conclusions

7.2 Recommendations

References

Cover photo credit: istockphoto.com – Jacques Kloppers

Chapter 1:

Background and introduction of the study

Prior to 2019, donations to political parties in South Africa were unregulated. But in light of the growing scandals flowing from alleged illicit donations to parties, such as money for tenders, civil society began to agitate for private donations to political parties to be more transparent. It was, for example, alleged that the ruling African National Congress was being bankrolled by the now fugitive Gupta family and that the Democratic Alliance was captured by the so-called “white monopoly capital” (M&G, 2017). Donations to political parties, pre- and post-1994, have always been shrouded in secrecy, and therefore “it has never been possible to tell whether political parties act in the best interests of the public, or whether they act in the best interests of those who fill their pockets” (M&G, 2017).

This led to the Institute for Democratic Alternatives in South Africa (Idasa) lodging a legal challenge in 2004, to ensure the introduction of legislation to limit private funding to parties and compel them to make public their sources of funding (M&G, 2017).

Against this background, the High Court in Cape Town, in 2017, ruled that legislation needed to be introduced to regulate the funding of political parties (De Wet, 2017). This led to the passage of the Political Party Funding Act (PPFA), Act 6 of 2018 (RSA, 2019a). The Act was subsequently assented to by the President of the Republic and came into effect on 1 April 2019 (The Presidency, 2019).

Since the introduction of the legislation, private funding of political parties has, to a large degree, dried up, with many – including the ruling party – finding it difficult to meet their operational obligations. It has, for example, been widely reported in the media that the ruling party is unable to regularly pay its staff their monthly salaries (Moichela, 2022). Parties have directly linked the evaporation of private funding to the disclosure requirements contained in the PPFA. Former ANC Treasurer General, Paul Mashatile, is reported to have said that the Act “is making regular donors reluctant to give” (Letshwiti-Jones, 2022).

It is recognised that, in order for political parties to effectively conduct their democratic obligations, they need adequate funding so that they can carry out their core functions, and to fund their election campaigns (Venice Commission, 2020:56). State funding for parties is essential to guarantee parties’ independence from undue influence of private donors and to ensure that they “have the opportunity to compete in accordance with the principle of equal opportunity”. But private contributions are also a form of political participation. Therefore, a balance needs to be achieved between encouraging moderate contributions and limiting unduly large contributions on the one hand, and state funding on the other (Venice Commission, 2020:56).

It is evident that the South African parties are struggling to keep afloat. Whether this is due to insufficient funding or because the available funds are not being appropriately applied, is an open question. Whether the balance between private funding and state funding within the highly regulated South African dispensation is adequate, needs to be assessed.

This study aims to carry out such an assessment by benchmarking the South African party-political funding regime against a selection of European democracies whose election systems are similarly based on proportional representation. Germany, Sweden and the Netherlands have been chosen, since, as stated, their elections are based on proportional representation. In Germany it is a system of personalised proportional representation, where “each voter has two votes: the first for an individual constituency candidate, and the second for a party-list in a particular state” (Federal Ministry of the Interior and Community, N.d.). In Sweden the number of seats each party receives in the Riksdag is in proportion to the number of votes the party received in the election (Sveriges Riksdag, N.d.), and in the Netherlands citizens vote for a candidate on the candidate list, with parties represented in Parliament in proportion to the total number of votes they received in the election (Tweede Kamer. Der Staten-Generaal, N.d.).

The study will attempt to settle the question as to whether our democracy is sufficiently funded. It will do so through the lens of political parties, the primary building blocks of our country’s parliamentary democracy.

The theoretical motivation for the public funding for political parties is that it will have a positive impact on the role of money in politics and “ensure that all political forces have access to enough resources to reach the electorate, thereby encouraging pluralism and providing the electorate with a wider choice of politicians and policies” (International IDEA, 2014:22). However, as has been alluded to, the introduction of party-funding regulation in South Africa has led to financial instability within the political party environment. The level of public funding should therefore take into account the impact that high regulation has on party income from private sources.

Should practice prove that such public funding be insufficient, the objective of bolstering democracy could very well be undermined. This study therefore aims to evaluate the South African party-funding dispensation against international best practice.

It intends to make recommendations to the public-policymakers as to what adjustments are needed, if any, to ensure that sufficiently resourced political parties adequately underpin the country’s democratic dispensation.

Chapter 2:

The literature review

The literature review aims to garner an understanding as to the role of political parties in a democratic dispensation, their need for income and how they are funded, and to understand the interaction between private and state funding of parties.

2.1 The role of political parties in a democratic dispensation

Before we delve into the financing aspects of political parties, the review starts by asking two fundamental questions: Why are political parties important for democracy and what is the role of parties in a democratic dispensation?

2.1.1 Why are political parties important for democracy?

The influential International Institute for Democracy and Electoral Assistance (International IDEA) argue that “political parties are crucial for the functioning of representative democracy”, since they produce a variety of policy options for the electorate to consider and choose from. They also provide the mechanism “through which citizens express diversity of interests and aspirations” (International IDEA, N.d.).

Political parties bring people with the same political ideas together, for them to take part in elections collectively, in the hope of getting as many of those of the same ‘thinking’ as possible elected into legislatures, such as Parliament or a municipal council. And similarly, to hold as many posts as possible in the government (Government of the Netherlands, N.d.).

In this vein, many prominent scholars have lamented the importance of political parties for democracy. They have said that parties are indispensable, make democracy workable, and provide a mechanism for the public to be represented in the legislatures through electoral competition (Ezrow, 2011).

Political parties allow for broader societal participation in the drafting of coherent public policy, serve as an intermediary between members of society and the government, connect them and allow for the interpreted communication between government and society (Ezrow, 2011).

Political parties make government accountable for its actions by helping the public identify the executives’ past performances, and by diminishing the power of dominating personalities. The existence of opposition parties also allows for non-performing incumbent governments to be challenged at the poll (Ezrow, 2011).

Individuals attempting to challenge incumbent governments tend to be “fragile, fragmented and incoherent, with limited capacity to mobilise, organise and coordinate collective action”. When individuals group themselves into parties, they become more capable of overcoming coordination problems. And they create longer-term time horizons, since parties normally have long-term goals with a broader spectrum of priorities (Ezrow, 2011).

They also help politicians solve these coordination problems, since they act in a collective manner and are able to present disciplined goals by keeping politicians in line with the goals of their parties, as opposed to individuals that can opportunistically manoeuvre their message as the wind blows (Ezrow, 2011).

“Parties also enable the opposition to stand firm against divide and rules tactics by the incumbent regime”, something that individuals acting on their own accord will find difficult to do. So too, independent politicians may not be able to credibly commit to policies that do not coincide with their own preferences, whereas, by being a member of a party, they are put in a position where they can convincingly commit to policies that they normally would not support in order to win a larger support base (Ezrow, 2011).

Furthermore, governments comprise collective leadership capable of carrying out cogent and coordinated policies. This requires likeminded individuals acting in unison. Parties play a role in creating such cohesive leadership through their internal recruitment, nomination and socialisation processes. Unlike individual politicians, parties, because of their diversified process of recruitment, are also able to create ways for individuals of diverse ethnic and economic backgrounds to rise to political power (Ezrow, 2011).

And parties are more likely to be in a position to provide valuable training in negotiation, compromise and coalition building; and broader socialisation with regard to democratic practices (Ezrow, 2011).

Whilst acknowledging the right of individuals to compete for political office, there seems to be broad consensus that political parties are, given their greater capacity to coordinate and function over a far wider sphere within the democratic machinations, an essential component of a functioning democracy. Ezrow (2011) quotes the authoritative American political scientist, E.E. Schattschneider, who argued that "democracy is unthinkable save in terms of parties”.

2.1.2 What is the role and functions of political parties in a democracy?

Having, in the aforementioned section, established that political parties are indeed important for democracy to succeed, in this section we examine the role of political parties and the functions they carry out.

Although somewhat dated, being written in 1950, it was then argued that political parties consist of individuals that hold common views on important public questions, and who promote their principles in order to gain control of government so that they can put their ideas into operation. These parties generally have three things: organisation, fidelity to certain principles, and they must follow constitutional means to reach their objectives (Singh & Singh, 1950). This remains true today.

Similarly, the authors contended that political parties did not exist in Greek times, as citizens participated in the democratic processes in their own capacity. But in modern times, due to the complexity of government and the vast increase in the population, it is not practical for all to be directly involved in the democratic processes. Political parties now act as “brokers of ideas and carriers of government”.

Indeed, they are the principal go-betweens in the constitutional process. Parties are the ‘people’ – the apex norm of all democratic constitutions – organising themselves. They therefore act as the organisational vehicle for the people, with the value proposition being that they can be better enabled if properly organised and through the sharing of resources (Kangu, 2001).

Kangu affirms the 1950 assertion that political parties are in fact an “association of private citizens formed to promote certain political and economic beliefs … [with the purpose of having] … them adopted as government policy”.

Political parties fulfil a range of important functions in a democracy, such as:

• Drawing together those people who share similar philosophies and ideas. They are vehicles through which those with broadly similar interests can organise and campaign.

• Since governments are composed of people who belong to political parties, political parties are in reality the way in which political power is exercised. Political parties therefore provide the government and the opposition.

• Parties select candidates to contest elections. It is therefore parties that provide the nation’s political leadership.

• Parties provide organisational support for organising and financing election campaigns, for recruitment and training of candidates, and for developing policy, all of which are crucial for the sustainability of the party’s elected members.

• Through the debating of issues and formulation of policies to be presented to the electorate during elections, parties articulate the shared beliefs, values and philosophies of its members. They then utilise these to determine their attitude to legislation, public policy, and the issues of the day.

• Parties are often an avenue for community groups to shape the decision-making process. Many civil society organisations, such as trade unions, organised business, advocacy groups, etcetera, have close ties with political parties. They interact with the parties in order to influence the development or implementation of public policy.

• Parties are one of the main avenues for political debate and discussion in the community.

• Given that statutory authority vests in the hands of government, parties are ultimately responsible for the structure of the machinery of government, in that, in practice, it is they who can make appointments to the public sector from the ranks of their members and supporters.

(AustralianPolitics.com, N.d.)

Parties also fulfil important ancillary roles in society that go beyond their own narrow interests. In many societies, including South Africa, they also fulfil the role of educating society on the role of politics and the political processes. For example, they provide political education for their members and broader society. This includes, amongst others, voter education – that is, the activities and processes designed to deliver a free, fair, efficient and cost-effective election, the value of democracy and human rights (Sirivunnabood, N.d.).

And they contribute to the legitimisation of the political system, in that their activities help connect citizens and social groupings to the political system. In this, they anchor the political order in the consciousness of the citizens and in social forces (Hofmeister & Grabow, 2011).

2.2 The need for party-political funding

Whilst much has been written on the shady influence of money in politics, the fact is that political parties need resources to effectively carry out their constitutional and democratic mandates. Money in politics is not a problem per se; it is whether that money has been ethically secured, legally applied, and fairly distributed amongst the political role-players.

Should the nation aspire to a well-functioning and effective representative democracy, it must accept that political parties – lest the country is to slide towards authoritarianism – need to be well-resourced and that money is necessary for inclusive democracy and effective governance, for allowing candidates and parties to reach out to voters and for them to build long-term political organisations (Lee-Jones, 2019).

Political parties need appropriate funding in order for them to carry out their core functions, activities and programmes, all of which involve expenses “which should be seen as the necessary and unavoidable costs of democracy”. Parties need to maintain their party organisations, employ staff, campaign in elections, and communicate with the electorate at large (Van Biezen, 2003).

Political parties have at least eight spending needs (IEC, N.d.):

• Developing the political will of people. For this, programmes and actions need to be put in place to inform, empower and mobilise citizens.

• Shaping public opinion. This would, for example, include the costs attached to carrying out media and advertising campaigns, hosting public outreach programmes such as town hall meetings, etcetera.

• Inspiring and furthering political education, which will include activities such as voter education, informing the electorate with regard to their constitutional rights and the value of democracy and human rights.

• Promoting active participation of individuals in political life, for example, the identification and recruitment of young leaders, their training and equipping them for future political leadership roles. But also ‘foot soldiers’ training’ to ensure that the party has sufficient manpower to carry out campaigns, act as party agents during elections, etcetera.

• Exercising an influence on political trends, which could entail, for example, empirical research; policy and message development; and the carrying out of polls and surveys.

• Ensuring linkages between the people and organs of state, for example, through the maintenance of constituency offices to service the electorate, and to deal with their complaints. It may be necessary to arrange contact meetings with government and political leadership to engage the electorate on various issues as the need arises.

• Operational expenses such as staff, travel, administration, office rental, the hosting of meetings, running of programmes and publications.

• Election campaigns, for example, the hosting of rallies, media advertisement, posters and billboards, pamphlets, town hall meetings, etcetera.

Access to sufficient funding for political parties is crucial to the overall vibrancy of an electoral and democratic system. Without funding, political parties would not be able to reach out to the electorate to explain their goals and policies, nor would they be able to maintain mechanisms for them to receive input from the electorate about their views. Similarly, they would not be able to run dynamic election campaigns capable of engaging citizens in the electoral process. Neither would they be able to maintain the democratic dialogue between elections (Ohman, 2014:1).

What is therefore being inferred is that parties that lack organisational coherence and institutionalisation, and/or programmatic substance, will fail to perform. Neither will they be able to get much traction amongst the electorate (Cotón, 2008). Needless to say, poor performing political parties are counterproductive to the building of dynamic, responsive and inclusive democratic dispensations.

2.3 How political parties are funded

This literature review has revealed that political parties are funded via a range of sources. Apart from passive income in the form of interest or dividends that parties may receive from investments lodged at registered financial institutions, at least six streams of funding have been identified.

• Direct state funding

In many democracies, political parties receive funding via the national fiscus. Direct funding from the state may take on different forms, differing from jurisdiction to jurisdiction. Similarly, there may be different streams of direct state funding within the same jurisdiction.

In Germany, for example, there is no distinction drawn between campaign funds and political party funds, since campaigning is considered part of the normal duties of a party. Campaign expenditure therefore forms part of the normal operation of a political party and is included in the party's total budget (DW, 2021).

Germany’s state funding of political parties is votes-based, with further contribution-based funding dependent on the extent to which they are established in society.

Whilst there are preconditions for entitlement and absolute limits set, the basic tenet of the funding is that parties receive an amount for each vote received. Section 18 (3) of the Act on Political Parties states that they are entitled to state funding in the amount of €0.85 per valid vote won at the most recent European, Bundestag and Land parliament elections up to a total of four million votes, and €0.70 for every additional vote thereafter. In other words, the financial rewards given by the state vary depending on electoral success (Deutscher Bundestag, 2012). These amounts may have been adjusted since 2012, the discovery of which will be made during the interviews envisaged by the research.

For contributions given by natural persons, the parties receive €0.38 per euro donated per person per year up to a total of €3,300 (Deutscher Bundestag, 2012). Similarly, these amounts may have been adjusted since 2012.

In other countries a distinction is drawn between regular annual funding of parties and reimbursement for election campaign expenditure.

For example, after each federal election or by-election in Australia, the Australian Election Commission distributes money to eligible political parties, candidates and Senate groups to reimburse them for election campaign expenditure (AEC, N.d.).

The current election funding rate is AU$ 3.016 for every first preference vote received. An automatic payment in the amount of AU$ 11,029 is made. Further funding of expenditure greater than the automatic payment can be claimed. The amount payable will be calculated as the lesser of the calculated election funding entitlement; or the amount of demonstrated electoral expenditure. The payment will be reduced by the amount that has been paid as an automatic payment (AEC, N.d.).

• Indirect state funding for parties

In addition to the direct state funding to political parties, elected representatives and political groups receive varying degrees of support for their work as parliamentarians. For example, the House of Commons in the United Kingdom reimburse MPs for the costs of running an office, employing staff, and travelling between Parliament and their constituency (UK Parliament, N.d.)

In South Africa, Parliament also provides allowances for the setting up of constituency offices. These payments are, however, made directly to the parliamentary party. Further administrative allowances are also made to parties to employ parliamentary support staff and to enable them to effectively perform their parliamentary function. The administrative allowances are distributed in proportion to the seats each party occupies in Parliament (Parliament of the RSA, N.d.).

In addition, a feature of European democracies is the state-funded politically aligned foundations. Germany currently has, for example, six political foundations that receive funding from the government. Each foundation is associated to a party that is represented in the federal Parliament (Unmüssig, 2017).

These foundations are tasked to, amongst others, promote civic participation, and support young academic talent with scholarships and support the development of democracies abroad. They offer socio-political and democratic education and provide information and policy analysis at home and abroad. Their purpose is to build on the principles of liberal democracy and to solidify the basic principles of societal solidarity, subsidiarity and tolerance (Unmüssig, 2017).

Whilst the foundations act autonomously and are legally and financially independent, each foundation is “politically associated and close to a political party”. Their work therefore stimulates and indirectly underpins the work of political parties (Unmüssig, 2017).

• Membership fees, trade union and other voluntary contributions; and public representative levies

Party membership subscriptions are normally not high, but can collectively can make up a material portion of a party’s income. In 2014, for example, membership income for parties in the United Kingdom was 23% for the Green Party, 15% for the Labour Party, 9% for the Liberal Democrat Party, but just 2% for the Conservative Party. In 2015 the Labour Party also introduced a registered supporters’ scheme by which people can pay £3 per annum, which gives them the right to vote in the leadership elections (Brit Politics, N.d.). In South Africa, the ruling African National Congress has uninitiated the Progressive Citizens’ Forum, a debit-order campaign aimed at soliciting regular contributions from its members and supporters (PCF, N.d.).

So too, trade unions in the United Kingdom have been linked to the Labour Party since its foundation in 1900. Most charge their members a political levy, which can be used for campaigns, publicity on issues they are concerned with and so on. Some can affiliate to the Labour Party and pay the Labour Party for the number of members that they have. In 2014 this provided twenty-seven percent of Labour’s income (Brit Politics, N.d.).

And in some countries, parties levy their public representatives a monthly contribution based on their earnings from their position as a public representative. In South Africa, for example, the ruling African National Congress collects levies from their public representatives. In 2009 they took in about R250,000 from their parliamentarians and cabinet ministers each month. MPs were then levied around R500, while cabinet members paid between R1,500 to R2,000 a month. Councillors are also levied (politicsweb, 2009).

The DA public representatives pay around 2% of their salary, while the ID levies 10% per month. The IFP charged MPs R3,300 a month (politicsweb, 2009).

• Donations

Direct donations and sponsorships from corporates and wealthy individuals also remain a feature of modern-day politics, albeit that jurisdictions are insisting on greater regulation to various degrees of late. This will be further explored later in this study.

Standard Bank, for example, donated R5 million to political parties in 2009, split amongst political parties based on the IEC’s funding formula, “in terms of which funding is distributed to political parties in proportion to their representation in the National Assembly" (politicsweb, 2009).

• Commercial investments

It is not uncommon for political parties to own companies as investments to augment their income. The SPD of Germany, for example, has a one hundred percent shareholding in German Printing and Publishing mbH (dd.vg, N.d.). Until as recently as 1997 the SDP of Sweden owned the advertising company, Folkreklam and Förenade ARE-Bolagen (Lakomaa, 2019). And in South Africa, the African National Congress set up Chancellor House as an investment vehicle to make the party self-sufficient over time (Jolobe, 2010).

• Fundraising events

Parties also raise funds through hosting dinners, holding raffles, and so on (Brit Politics, N.d.). These events are sometimes organised on a national scale, providing a substantial stream of income. In South Africa, for example, the ruling party, under the auspices of its Progressive Business Forum, regularly hosts presidential gala dinners, business breakfasts and corporate exhibitions on the sidelines of its national conferences (Ticketpro, N.d.). In a similar vein, the UK Labour Party hosts exhibitions at their national conferences (UK Labour Party, N.d.).

2.4 The imperative to ensure transparency through the regulation of private donations

It has been established that effective and functioning political parties are crucial for democracy. For them to be so, they need to be adequately resourced. This funding can be either via the fiscus or from private sources. Funding from the fiscus is open and transparent. From private sources, less so but needs to be. Why?

Because a lack of information on how much money circulates in and around elections, where resources are coming from and how they are spent, makes it harder for the electorate to make informed decisions (International IDEA, 2019).

Donations to political parties, be it direct or indirect, can materially impact, influence and distort both the electoral process and passage of legislation. And it has also proved to be a major motive for grand corruption (GSDRC, 2001; Bodede, 2022).

Therefore, society needs to know who are funding the parties so that:

• The electoral process is fair and equitable. Parties need to be able to compete on an equal footing. Elections can be distorted should some parties be flooded with funds that are illicitly obtained, since it could create unfair advantage for them. In a multi-party election, there is often a spending rat race between the parties, where governing parties are often in a stronger position to solicit donations, thereby placing the opposition in a disadvantaged position (GSDRC, 2001).

• The passage of legislation can be unduly influenced should donors exercise financial coercion to manoeuvre certain policy and legislative outcomes, which may not be in the interest of the broader public. It may even sway elected representatives to either actively, or through inertia, go against their undertakings to the electorate (GSDRC, 2001). This is because when politicians become overly dependent on donations from a limited group of donors, the danger is that their policy programmes can be co-opted (International IDEA, 2019).

• It also facilitates corruption and erodes citizen trust in political institutions (International IDEA, 2019). And, as has been demonstrated in the South African context, shady donations to parties, for example cash for tenders, as has been highlighted in the Zondo Commission of Enquiry into Corruption. This led to corruption on a grand scale (Bodede, 2022).

According to Webb and Drury (2020), “big political donations are intended to have political influence”. They say that there is a “sliding scale of influence” that is facilitated by such donations:

• Access: It can ensure the donor gets access to a public representative that ordinary citizens would not normally get.

• Clientelism: This is the kind of corruption where officeholders are influenced through large donations to decide issues not on the merits of the argument, or the interests and desires of their constituents, but according to the biddings of the donor upon which the officeholder may have become dependent.

• Quid pro quo: Where politicians make promises in exchange for donations.

• Pressure: The running of political parties and election campaigns has become very costly. Parties and politicians are accordingly being placed under enormous pressure to keep donors happy, lest they walk away with their support. Big money effectively builds inequality between the haves and the have-nots into the political system.

There are at least four arguments in favour of transparency in party finance:

• The United Nations Convention against Corruption (UNCAC) considers it paramount for parties to make their funds transparent in order to prevent corruption. The objective of regulations aimed at making party funding more transparent is to, in the first instance, rebuild public trust amongst those that have disengaged from politics due to the marginalisation of the voter through the dominance of money in the political environment. And secondly, to prevent affluent and illicit donors from dominating modern politics.

• Transparency creates a mechanism through which the adherence to party finance regulation can be monitored.

• Where parties receive state funding, transparency ensures that parties can be effectively monitored in order to prevent the misuse of public money.

• It ensures that the electorate can be better informed as to who is supporting which political parties, thereby creating for them a tool to observe whether parties’ special interests may be motivated by external influences.

(Tonhäuser & Stavenes, 2020)

Thus, it is safe to conclude that the only way that the electorate can hold their public representatives accountable for their actions and make an informed vote in the knowledge that their representatives have not been unduly influenced by donor monies, is for them to know how the parties (and individual public office-bearers) have been financed and by who (Essop, N.d.).

In conclusion: Clearly, money is needed to stimulate, maintain and enhance political competition, an essential component of any effective democracy. But if the quantum and source of that money is not transparent, it could pose a serious challenge to the democratic dispensation – should donors, for example, channel their resources to the political elite, essentially negating the ordinary citizens’ ability to influence policies and policymakers through their vote (International IDEA, 2019).

2.5 The rationale for state funding of political parties

There are two overarching reasons that motivate for the state to fund political parties. The first being a mechanism to strengthen democracy by ensuring that political parties are empowered to fulfil their constitutional and democratic roles, and that they are able to do so within a system that is fair and equitable. The second is to combat corruption. A consequence of high transparency regulation as to who funds political parties, is a loss of private funding to political parties, as private funders shy away from being publicly exposed. This creates a funding gap, which public funding needs to address.

2.5.1 Enabling parties to fulfil their democratic responsibilities

There are three central arguments in favour of the state providing political parties with financial resources for purposes of ensuring that they can effectively carry out their constitutional and democratic mandates.

• First, as has been repeatedly argued, political parties are critical to democracy. It is implausible to suggest that a functional democracy is possible without effective parties and party organisation. For them to be effective, they must be able to mobilise the electorate, socialise the citizenry, recruit and train future leaders and party workers, research and formulate policy, and fund their operational costs, such as rent, salaries, etcetera. Their mere existence offers support to the democratic process. And the character of the modern state depends directly on the abilities of the parties serving as integrative links between state and society. State funding can contribute to this.

• Secondly, parties are the vehicles through which the electorate express their political views, and they are the mechanisms through which citizens can become involved in the governing of society. However, there may be vast differences between interest groups and spheres of society – financial and otherwise – that could translate into the powerful having a disproportionate ability to mobilise the electorate behind their narrow cause. The provision of state funding helps safeguard political equality. It also mitigates against the problem of private and corporate funding potentially being channelled to only some parties, since this undermines the principle of equality in the parties’ ability to be responsive apropos their linkages and interactions with the citizenry.

• Thirdly, the costs of running a political party in a modern democracy is costly and they are competing against far better resourced external think-tanks and interest groups, who exert significant influence. Parties need to compete with them for the public mind. For this they need to develop and present to the public coherent policy proposals on a wide range of issues, which requires highly qualified staff and institutionalised expertise. State funding can help sustain the central role of political parties in the political system by providing funding support to enable them to develop and communicate their messages to the voters.

(Pierre, Svåsand & Widfeldt, 2000:1-24)

A further strong argument in favour of funding political parties, is that it is necessary to develop strong opposing political parties so that there is capable and healthy competition within the political system. And funding by the state guards mitigates against an incumbent party misusing the programmes and resources of the state to further its own interests (Marfo, Musah & Owiredu-Amankwah, 2021).

2.5.2 State funding of political parties to combat corruption and as mitigation for anti-corruption measures

Once again, to fulfil their core functions, political parties need appropriate funding.

When there is inadequate funding, political parties are ‘forced’ to adapt various strategies to fund their activities and programmes, which has to pay back in cash or kind. This often leads to “corruption and kickbacks and appointment of incompetent people to hold public positions” (Marfo, Musah & Owiredu-Amankwah, 2021).

To minimise the danger of corruption, in particular state capture and influence peddling, best practice suggests that the funding of political parties ought to be regulated. In this regard, article 7(3) of the United Nations Convention against Corruption (UNCAC) requires states to improve transparency in the funding of political parties and public office candidates (UNODC, N.d.).

A growing number of countries subsidise political parties through the fiscus, or direct provision of goods and services. This is primarily meant to help the parties perform their functions, but it is generally also considered to decrease the opportunities for corruption, since, having some form of sustainable funding, parties are de-incentivised from succumbing to the interests of private donors in return for donations (UNODC, N.d.).

However, a consequence of high disclosure transparency regulations appears to be that corporates and wealthy individuals become more reluctant to give to political parties where there are high disclosure requirements. In South Africa, with the introduction of the PPFA Act in 2019, parties have been crying foul of its unintended consequences, with them receiving fewer private donations. Donors have become apprehensive knowing that their donations would be open for public scrutiny, as it may lead to either reprisal or an impact on their reputation (Pasensie & Clarke, 2021).

The fear of reprisal and/or reputational loss is two-directional. On the one hand, as deliberated before, private donations to governing parties could be viewed as influence peddling, whilst donors may also be fearful of disclosing donations to opposition parties, for fear of the government blocking them from tenders (Pasensie & Clarke, 2021). And as discussed in the introduction of this study, it has, in South Africa, had a devastating impact on the parties’ ability to properly fund their operations.

It should, therefore, be recognised that the probability is high that elevated transparency rules aimed at combatting corruption, will negatively impact the political parties’ ability to solicit donations from private funders.

It is with this in mind that regulators promote state funding as a means to mitigate against the losses parties may incur as a result of high disclosure regimes. But, as illustrated, should the state funding not be set at an appropriate level, it could have the opposite effect of weakening the parties’ operational performance.

In determining the appropriate level, governments will have to accept that democracy, and for that matter the fight against corruption, comes at a price and that, accordingly, the fiscus will have to provide the necessary resources. What that appropriate level is, is an open question, and will be for each country to make its own determination.

But a 2021 study into money and politics did give some indication. It was found that in countries where high levels of spending had become an equilibrium outcome due to corruption and the influence of special interests, the setting of a spending limit may increase political competition and allow for new entrants into politics. In countries where political elites come disproportionately from more affluent and well-resourced echelons of society, it may also reduce the concentration of political power in the hands of the better off. These effects might have direct and indirect consequences for a country’s policy outcomes and, might I add, the depth of democracy in the medium to long term (Avis, Ferraz, Finan & Varjão, 2021).

2.6 The different forms of state funding for political parties

A complementary approach to regulating donations is to give political parties access to public funding.

The purpose of providing political parties with public funding is to:

1. Promote pluralism and to stimulate the battle of ideas – that is, providing the electorate with a wider choice of policies – by ensuring that all the “relevant political forces” are sufficiently resourced.

2. By giving all parties access to funds for campaigning, it also serves to equal the playing field by limiting the advantage that contenders with access to significant resources have. The levelling of the playing field will, however, only be achieved if the gap between the rich and the poor is addressed by complementing public funding with spending caps.

3. Providing the extent of state funding is significant enough, it serves to incentivise obeyance to the election rules. This is because political parties will fear losing access to public funding should they not obey the rules.

(International IDEA, 2014)

The International Democracy and Electoral Assistance Institute (International IDEA, 2014), in their handbook on political finance, identify two types of state funding for political parties:

• Direct funding, that is, providing money

Whilst it may seem fair that all registered political parties should receive state funding, such an approach opens up the danger of the system being abused, where parties with little or no support are formed just to collect the funding. Therefore, in most countries, a threshold is applied for parties to gain access to the state funding. This could, in a proportional representation system, be a minimum share of the vote obtained, or in a constituency system, a minimum number of seats.

Different countries also follow different allocation criteria.

Here too, whilst it may seem that the most democratic way is to give all parties the same amount – national election campaigns after all could cost as much for a smaller party as for a larger party – such an approach, it could be argued, goes against the will of the people. It could also be argued that it is a waste of taxpayers’ money, in that a lot of money will be distributed to many parties who may not materially alter the shape of party politics in the country.

The more common option preferred by most countries is to allocate the state funds in proportion to the votes obtained by the various parties. In some jurisdictions this is done purely proportionally, in others, a percentage is divided equally amongst qualifying parties, with the balance allocated proportionally.

Then again, a different form is to match the funding that parties manage to raise out of their own initiatives from donors, with an equal amount from the fiscus. This is, for example, the position in the United States and Germany. But this too is open for criticism, with detractors arguing that it favours parties with strong business links.

Thus, whilst the overarching objective remains the same for whichever system is adopted, it is for each country to decide which of the systems is most palatable for their particular circumstances and environment.

• Indirect funding, that is, providing goods and services

Most countries also provide indirect funding to political parties. This too can take on various forms, the most common being the provision of free or subsidised access to the public media for campaign purposes. But there are other examples as well, such as tax relief for parties/candidates and their donors, access to public buildings for campaign events and subsidised postage (International IDEA, 2014).

Table 2.1. below captures the rationale and considerations regarding direct public funding as developed by International IDEA.

Table 2.1.: The rationale and considerations regarding financial reporting requirements

(Source: International IDEA, 2014)

In addition to direct and indirect funding, in its broader interpretation, alternative state assistance that can help parties develop and improve their standing in society and within the array of parties, can also include measures other than funding. It can, for example, take the form of:

• Legislation placing spending caps on election campaigns

In many jurisdictions, there are limits as to how much parties and/or candidates are allowed to spend on their election campaigns. The purpose is not to regulate the influence of money, but to reduce the advantages that political parties and candidates with access to large amounts of money have over those that are less resourced.

Whilst this does not equate to income for the party and/or candidate, it does help level the playing field so that the different parties/candidates have a more equitable chance of selling their message. It also brings less pressure to bear on party treasurers, since it reduces the overall spending on election campaigns. In the South African context, as has already been highlighted in this study, where parties are finding it difficult to stay afloat, this can play an important role in stabilising the financial fortunes of parties and contribute to their sustainability and longevity (International IDEA, 2014).

• Funding of politically aligned foundations

In many European countries there are political foundations that receive funding from the state. Whilst each foundation is close to, and ideologically aligned with a particular party, they are autonomous and legally independent. In Germany, for example, the Friedrich Ebert Foundation is associated with the Social Democrats (SPD), and Konrad Adenauer Foundation with the Christian Democrats (CDU). In fact, foundations can be formed and funded by the state for each political party that has been elected to the Bundestag for at least a second term (Unmüssig, 2017).

They receive their funding from a number of ministries, such as the Federal Foreign Office, and the Federal Ministries of Education and Research and of Economic Cooperation and Development, who set and adopt the level of funding as part of the federal budget negotiations process (Unmüssig, 2017).

There are similar arrangements in other European countries such as Austria, the Netherlands, Hungary, Finland, Greece and Spain, amongst others, as well as at the European level (Bértoa & Teruel, N.d.).

As previously stated, they do work, amongst others, in the field of civic, democratic and socio-political education, as well as policy analysis and empirical research (Unmüssig, 2017).

Whilst they are legally independent, determine their own programmes and are in no way accountable to political parties, they do do their work through the ideological lens of their associated parties. In so doing, individual political parties benefit immensely, since foundations underpin and complement the objectives of the party they are associated with (European Parliament, N.d.). As such, they should be viewed as part and parcel of the political party funding regime, in that their output motivates policy in favour of the particular party they are associated with, and they provide empirical evidence on which parties can develop policy and base their arguments on. In the absence of such foundations, such research and other activities would fall wholly to the political parties themselves.

From the aforementioned, it is evident that a determination as to whether the democratic dispensation is adequately funded rests on more than just the financial income of parties, but so too the broader architecture of the particular dispensation.

2.7 The relationship between private donations, disclosure regulations, state funding and the viability of political parties

Evidence suggests that many businesses and other clandestine interests support the bigger political parties with a view to influence public policy, and therefore the legitimate calls for greater transparency within the party funding regime. The public have a right to know who is funding the various parties, so that they can assess whether the donations play a role in influencing policy positions. Regulation is needed to prevent policy capture (Terracino & Hamada, 2014). However, as has already been pointed out in this review, an undeniable consequence of greater transparency is that donors become reluctant to donate to political parties. This is due to a fear of being victimised or penalised if their contributions were to be disclosed (Maphunye & Motubatse, 2017).

And what the review has simultaneously revealed, is that well-functioning political parties are crucial for representative democracy. Thus, since “public funding is generally tied to stronger rules and controls”, it is argued that where disclosure regulation has been introduced, it needs to be complemented by state funding, lest the lack of sufficient funding becomes counterproductive by rendering the political parties ineffective due to them not being able to financially sustain themselves. In the process of reducing reliance on private funding to support themselves, public funding to political parties becomes necessary to sustain the institutionalisation of political parties in democracies (Terracino & Hamada, 2014).

The literature implies, therefore, that there is a direct correlation between the flow of private money to political parties and disclosure regulation. The higher the regulation, the less private money will flow to political parties. The lower the regulation, the higher the prospect of parties receiving private donations.

Consequently, a fair deduction would be that where the disclosure regulations of private donations to political parties are low, the necessity for public funding is reduced, whereas when the disclosure requirements are high, the need for public funding is increased.

To illustrate: In a 2013 study by the International Institute for Democracy and Electoral Assistance (International IDEA) and the Netherlands Institute for Multiparty Democracy (NIMD), it was found that political parties in Ghana successfully managed to develop and assert themselves without any public funding. In fact, the study suggests that “Ghana is one of the most competitive and relatively stable democracies with a vibrant party system in sub-Saharan Africa”. Parties are free, without limitation, to raise funds through donations. There are also no requirements for parties to disclose the identities of their donors (Magolowondo, Falguera & Matsimbe, 2013).

On the other hand, political parties in Mozambique are required to annually declare their donors and the extent of each donation. In this instance they receive regular contributions from the state for both their overall functioning and for election campaigning. But the study says that the Mozambique case shows that when funds are not disbursed timeously, it has a negative impact on the competitiveness of political parties (Magolowondo, Falguera & Matsimbe, 2013).

To further illustrate: Prior to the passing of the Political Parties Funding Act in South Africa, similar to Ghana, there were no funding restrictions on parties, nor any disclosure requirements. But since the inception of the Act, donors have become reluctant to donate (Letshwiti-Jones, 2022) and parties are finding it difficult to keep afloat (Moichela, 2022). Parties are now crying foul. The ruling African National Congress’ Treasurer General has, for example, bemoaned the disclosure requirements, saying that it is causing donors to steer away from contributing to the party. He has called for a greater degree of public funding to fill the gap (Friedman, 2020).

The South African experience underscores the argument that the higher the disclosure requirements, the greater the need for public funding, lest the parties are neutered from effectively fulfilling their constitutional and democratic roles.

2.8 The post-1994 history of party-political funding in South Africa

When ushering in the new democratic dispensation in 1994, no laws, rules and regulations were in place, nor introduced, to regulate private donations to political parties. Parties were free to solicit donations from any source and of any amount, be it local or international, and in most any form. Of course, whilst laws did not prohibit private donations, the receipt of such donations would still be subject to the normal laws of the country. It did not mean that criminal activity would be condoned.

Following a number of funding scandals – which involved parties from across the political spectrum – public and civil society opinion started to form in favour of some form of regulation to be introduced.

It came in the wake of allegations of corruption levied against the French arms company Thales, and various ruling party heavyweights, dominating the media headlines. It was alleged that the then Deputy President and later President, Jacob Zuma, received large sums of money as a bribe in exchange for him protecting Thales from investigations into a multi-billion rand deal for supplying weapons to South Africa (Reuters, 2021).

In the early 2000’s allegations of corruption started to emerge against leaders of other political parties as well. In 2004, for example, charges were laid against New National Party leaders, who then governed the Western Cape province, for planning permission irregularities in exchange for bribes (M&G, 2004). The official opposition, the Democratic Alliance, also did not escape scrutiny. In 2002 they were accused of corruption after a German businessman, Jürgen Harksen, told an official commission that he paid more than one million rand to the then Democratic Alliance mayor of Cape Town for both his party's and his own benefit (McGreal, 2002).

In 2004 the first shots were fired, when the Institute for Democratic Alternatives in South Africa (Idasa) filed papers in the Western Cape High Court, seeking an order that legislation should be introduced that would compel political parties to disclose the details of all funding they received (M&G, 2017). They failed, but in subsequent court challenges, the Western Cape High Court ruled in favour of a motion brought by “My Vote Counts”, who challenged the constitutionality of the Promotion of Access to Information Act (PAIA) “insofar as it did not allow for the disclosure of information on private funding to political parties”. Parliament was given eighteen months to “remedy the defect in the PAIA to allow for disclosure of private funding for political parties” (Parliament, 2017).

The Political Party Funding Act was introduced into Parliament in 2018. It was subsequently passed by Parliament and assented to by the President on 23 January 2019 (RSA, 2019a).

Since the implementation of the Act, it has been a struggle for South African parties to survive financially. Bloomberg, in 2021, already reported that they are “in dire straits”. Most were unable to raise enough money to cover their operational costs (Cele, 2021).

In a report released by the Independent Electoral Commission, it was reported that the ruling party, whose monthly wage bill amounted to R18 million, managed to only raise R10,7 million in the three months through to July 2012 (Cele, 2021).

They were not alone. Of the country’s other 503 registered parties, it was only the ruling African National Congress, the Official Opposition Democratic Alliance, and ActionSA that received donations exceeding R100,000 (Cele, 2021). While the measure is aimed at curbing corruption, politicians have been complaining that corporates have been deterred from donating (Cele, 2021).

The problem is that prior to the enactment of the PPFA, like other political parties, the ANC generated its revenue primarily from private donations. It has been reported that “between 2013 and 2017, the ANC collected R2.6-billion in donations” (Mahlaka, 2021). And as alluded to in the preceding paragraphs, these private donations have all but dried up.

The drying up of private donations to the parties is in itself not a bad thing, for all the reasons elaborated on in the previous sections of this review. It is the fact that the public funding to political parties has not been materially adjusted pre- versus post-PPFA. Private funding has been cut off without the compensatory upward adjustment of the allocation to the Represented Political Parties’ Fund (RPPF), that is, the fund managed by the Independent Electoral Commission, out of which the public funding is paid over to the political parties.

In Treasury’s Estimates of National Expenditure for the 2019/20 financial year (pre-PPFA), an amount of R157,8 million was allocated to the RPPF (Treasury, 2019:74). This rose marginally to R171,1 million for the 2022/23 financial year (post-PPFA) (Treasury, 2019:xiii), a mere R13,3 million per annum more three years on, amounting to no more than an inflationary adjustment. It seems, however, that some relief has been given in the 2022/23 Estimates of National Expenditure, which indicates an increase of around thirty percent on the previous year, to R342 million.

In addition, the defunding has been exacerbated by the fact that funding to political parties by provincial legislatures needed to be cancelled as a consequence of the introduction of the PPFA. Some provinces, such as Gauteng Provincial Legislature, had such arrangements, but the legislation had to be repealed once the PPFA came into operation (Gauteng Provincial Legislature, 2021).

2.9 Conclusion

This literature review gives rise to the question: Is South Africa’s democracy properly funded? It seems that whilst great strides have been made in improving the transparency regime, it has not gone hand-in-hand with the necessary concomitant increase in public funding. The improvement on the one hand, and not on the other, amounts to a defunding of the party-political environment, which may very well have damaged the democratic dispensation more than the transparency advancements might suggest. This requires serious and urgent contemplation, to which this study hopes to contribute.

Chapter 3:

The legislative review

It is evident from the literature covered in the preceding Chapter that scholars, democrats, political analysts and experts consistently argue that the provision of public funds to political parties is a necessary part of a free and fair democratic dispensation. This matter has also been settled in South African law, which makes it clear that the provision of public funds to political parties for purposes of executing their constitutional and democratic responsibilities is not open for consideration and/or interpretation. Neither should it be considered a benevolent act of the Executive and/or Treasury. It is compulsory.

In this legislative review, the two principal pieces of legislation reviewed are the Constitution of the Republic of South Africa and the Political Party Funding Act. The review will also examine the public funding afforded to the parties via the Appropriation Bill and the Parliament’s Annual Performance Plan 2022 – 2025.

3.1 The Constitution of the Republic of South Africa, Act 108 of 1996

3.1.1 Section 19(2)

Section 19(2) of the Constitution asserts: “Every citizen has the right to free, fair and regular elections for any legislative body established in terms of the Constitution” (RSA, 1996).

In this regard the emphasis is placed on the right of every citizen to a fair election. Law Insider defines fair elections to mean:

“electoral processes that are conducted in conformity with established rules and regulations, managed by an impartial, non-partisan professional and competent Electoral Management Body (EMB); in an atmosphere characterised by respect for the Rule of Law; guaranteed rights of protection for citizens through the electoral law and constitution and reasonable opportunities for voters to transmit and receive voter information; defined by equitable access to financial and material resources for all political parties and independent candidates in accordance with the national laws; and where there is no violence, intimidation or discrimination based on race, gender, ethnicity, religious or other considerations” (Law Insider, N.d.).

In terms of this definition, the delivery of a fair election is therefore considerably more than just the technical delivery of the election. It also envisages an environment in which ideas, policies and programmes are effectively communicated to the electorate, and that sufficient opportunities are created for them and parties to connect and communicate with each other.

It also pre-supposes that sufficient finances and resources will be in place for parties to carry out their functions. And that the parties have an equitable access to such financial and material resources. It cannot be, therefore, that some parties, merely as a consequence of their incumbency or policies favoured by the business community and/or the wealthy, are advantaged. Such advantage can come in the form of using the parties’ incumbency to reach out and communicate with the electorate or relying on the favour of private funders. Thus, public funding: To level the playing field and to ensure that all participants in the election have a fair chance at putting their case forward.

3.1.2 Section 57(2)(c)

Section 57(2)(c) of the Constitution says: “The rules and orders of the National Assembly must provide for … financial and administrative assistance to each party represented in the Assembly in proportion to its representation, to enable the party and its leader to perform their functions in the Assembly effectively” (RSA, 1996).

In this regard, the emphasis is placed on the enabling of parties represented in Parliament to perform their functions.

Parliament of South Africa’s Policy on Political Parties Allowances is meant to give effect to section 57(2) of the Constitution. The policy’s objective is to, amongst others, assist parties represented in Parliament to perform their parliamentary duties, and to enable the parties to establish and maintain infrastructure that enables them to serve the interests of their constituents, as well as to service them (Parliament, 2005).

The allowances are meant to cover the parties’ expenditure in relation to their parliamentary functioning, and include:

• Party leader allowances

• Political party administration allowances, which are based on a determination of staff and other entitlements made by the Secretary to Parliament on an annual basis.

• Party constituency allowances, which are paid to the parties and not the individual members of Parliament. The Presiding Officers annually determine an amount per member. Parties receive a constituency allowance equal to the annually determined amount multiplied by the number of their representatives in Parliament.

3.1.3 Section 59(1)(a)

Section 57(1)(a) of the Constitution states: “The National Assembly must facilitate public involvement in the legislative and other processes or the Assembly and its committees” (RSA, 1996). To this end, parliamentary and Provincial Legislature portfolios and select committees provide opportunities for public participation in debating the proposed policy or law (ETU, N.d.).

Apart from political parties participating in the legislatures through their public representatives, they are principally civil society organisations that encapsulate the interests, views and ideas of a certain group (or groups) within society. They articulate and represent these groups by participating in democratic elections, but they also, as a civil society contestant, sometimes independently and sometimes in collaboration with other civil society organisations, present these interests to formal political representatives and institutions (Mexhuani & Rrahmani, 2017).

This is necessary to ensure the timely exchange of information between the legislators, the government and the public about problems and their solutions. And for civil society to take part in the country’s public affairs, to contribute to the development of the government policy- and law-creating procedures and to exert influence on the decision-making that will affect them and broader society (Aitken, 2013:19).

Given the constitutional weight afforded to public participation in the legislative and other processes of Parliament, it is fair to deduce that meaningful (as opposed to superficial) contributions are expected from the public (and civil society). The development of their contributions requires from them well-developed, consulted, and empirically researched proposals to present to the Legislatures (and might I add, Executive, who themselves follow similar consultative processes when developing policy and legislation).

Well-researched legislation and policy requires accuracy (Aitken, 2013:5), certainty, predictability (Aitken, 2013:7) and detailed analysis as to the likely impact of the legislation/policy, and its ability to achieve the desired regulatory results (Aitken, 2013:6), which requires considerable participatory and transparent policy processes and (Aitken, 2013:7), might I add, research by well-qualified experts.

Proper participatory processes comprise the holding of discussions, open dialogue participation, consultations, workshops and seminars, with input from government officials and agencies, parliamentarians, civil society, international advisers, independent experts, the private sector, academics and the public (Aitken, 2013:19).

All of which require political parties to have adequate funding or networked collaboration, which collaborators, in turn, will require funding.

3.1.4 Section 236

Section 236 of the Constitution says: “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” (RSA, 1996).

The legislation envisaged by this section of the Constitution is the Political Party Funding Act, Act 6 of 2018, the details of which is deliberated on in paragraph 3.2 hereunder.

3.2 Political Party Funding Act, Act 6 of 2018

The Political Party Funding Act, Act 6 of 2018 (PPFA), was assented to by the President of the Republic of South Africa on 21 January 2021 (RSA, 2021). With its introduction, the political party funding environment was completely changed. It introduced a new era of transparency in terms of who is funding the political parties. It will also help guard against corruption and the misuse of state resources. All of which needs to be applauded in an open and free democratic society.

What was not envisaged was the spectacular collapse of private funding to political parties. This has all but dried up to the extent, as has been discussed, that the official opposition has, for example, had to retrench a significant portion of its staff, and the ruling party has run up huge debts and is not able to regularly pay its staff; indeed, its operations have been hamstrung.

The celebration with regard to the ushering in of transparency, now needs to be balanced against the danger to the country of a weakening democratic dispensation due to neutering of the parties’ ability to effectively carry out the work, due to a lack of financial and other resources.

What does the Act say? For purposes of this review the focus is on the three areas in the Act that impact party funding, namely, the direct funding to parties and the imposition of prohibitions, the establishment of the Represented Political Party Fund, and the establishment of the Multi-Party Democracy Fund.

3.2.1 Direct funding of political parties

3.2.1.1 Prohibited donations

Political parties may no longer receive donations from foreign sources, be they foreign governments and/or agencies, foreign persons or entities. There is one exception, namely that they may accept grants for the purposes of training and skills development, and/or policy development. But this is subject to an annual cap that an entity may contribute, which currently stands at R5 million (RSA, 2021).

The parties may also not receive funding from any organ of state or state-owned enterprise, albeit that this was the case prior to the introduction of this legislation as well (RSA, 2021).

They may also not receive any donations that they know, ought to have known, or suspect, originated from sources of crime (RSA, 2021).

3.2.1.2 Donations from juristic persons

A political party must disclose any donation it receives from a natural or juristic person that exceeds the threshold. The current threshold is R100,000 received from any single entity within a financial year (RSA, 2021).

Furthermore, no entity may donate more than R15 million to a political party within a financial year (RSA, 2021).

3.2.2 Represented Political Party Fund

Section 2 of the PPFA provides for the establishment of a Represented Political Party Fund (RPPF). Its purpose is to promote multi-party democracy through the provision of public funding to those parties that are represented in Parliament (RSA, 2021).

Money is appropriated annually by an Act of Parliament and is distributed to the parties by means of a prescribed formula that, in part, provides for a weighted equitable distribution to parties represented in the national parliament and provincial legislatures. The second part provides for a distribution to the parties represented in the National Assembly and provincial legislatures based on their proportional strength in terms of the numbers of members represented in both the National Assembly and provincial legislatures.

Currently, one-third is distributed equitably to all parties that hold seats in the National Assembly or any provincial legislature; and two-thirds is distributed in proportion to seats held by a political party in the National Assembly or provincial legislatures (IEC, N.d.).

Section 7 of the PPFA spells out what parties may and may not use the monies received form the RPPF for (RSA, 2021).

They may use it for:

• Activities aimed at developing the political will of the people

• Shaping public opinion

• Political education

• Promoting the active participation of citizens in political life

• Influencing political trends

• Ensuring connectivity between the citizenry and organs of state

• Expenditure aimed at ensuring compliance with the PPFA

They may not use it for:

• Remunerating any person that represents the party in any legislature or municipal council, or who receives remuneration for any appointment or service rendered to the state

• The financing of or contributing to anything that is in contravention of any code of ethics aimed at binding members of Parliament or members of a provincial legislature

• Establishing a business of any kind, or to acquire or maintain a financial interest therein, except where it is for the purposes of acquiring property to be used solely by the party and for party political purposes

• Defraying legal costs that relate to internal political party disputes

3.2.3 Multi-Party Democracy Fund

Section 3 of the PPFA provides for the establishment of a Multi-Party Democracy Fund, the proceeds of which are to be distributed to represented political parties for purposes of promoting democracy (RSA, 2021).

The fund may receive contributions in any amount from any private source within or outside of the country. It may, however, not receive any money from an organ of state, state-owned enterprise, foreign government or foreign government agency. In addition, interest earned by the fund and irregular donations made to political parties which are recovered, are also distributable to the represented parties (RSA, 2021).

Donors making contributions to the Multi-Party Democracy Fund may request the regulator not to disclose their identity (RSA, 2021).

The funds are allocated to the parties using the same formula as that of the RPPF. Similarly, the rules in terms of what the monies can and cannot be spent on are the same as those of the RPPF (RSA, 2021).

3.3 Appropriation Bill B7-2022 and Parliament’s Annual Performance Plan 2022–2025

The purpose of this section is to ascertain the degree of public funding given to the political parties in a financial year. It examines the Appropriation Bill B7-2022 and Parliament’s Annual Performance Plan 2022–2025, with specific reference to the amounts allocated to political parties. Direct public funding is channelled to parties through these two avenues only.

3.3.1 Appropriation Bill B7-2022

In the Appropriation Bill B7-2022 (RSA, 2022), there are two allocations that bear reference to the question posed in this study. Firstly, the Bill provides an allocation to Parliament, and secondly, it provides an allocation to the Independent Electoral Commission. It is these two institutions that transfer monies to the political parties.

The following allocations were made in the Appropriation Bill:

• For the purposes of providing support services required by Parliament to fulfil its constitutional functions, and to assist the political parties represented in Parliament with facilities and administrative support, and to service their constituents, Parliament was allocated an amount of R2,212,234,000 (two billion two hundred and twelve million two hundred and thirty-four thousand rand).

• For purposes of providing institutional support and transfer funds to the Electoral Commission, the Represented Political Parties' Fund and the Border Management Authority, an amount of R2,762,584,000 (two billion seven hundred and sixty-two million five hundred and eighty-four thousand rand) was allocated. Of this, R342,077,000 (three hundred and forty-two million and seventy-seven thousand rand) was allocated to the Representative Political Parties’ Fund.

3.3.2 Parliament’s Annual Performance Plan 2022–2025

Programme 3 of Parliament’s Annual Performance Plan 2022/23 to 2024/25 provides for the transfer in the amount of R518,572,000 (five hundred and eighteen million five hundred and seventy-two thousand rand) during the 2022/23 financial year, the application of which has been spelt out in paragraph 3.1.2. of this review. The actual net amount transferred to parties in the 2022/23 financial year amounted to R511,869,648 (five hundred and eleven million eight hundred and sixty-nine thousand six hundred and forty eight rand) (Parliament, 2022).

3.4 Conclusion

Direct public funding in South Africa is allocated to political parties via three avenues: the RPPF, Multi-Party Democracy Fund (of which there has been no distribution to date) and Parliament, the quantum of which is indicated in Table 3.1. below. The number of eligible and soon-to-be eligible voters – that is, citizens over the age of 15 – number around 43,587,000 according to Statista (2022a), whereas the number of registered voters number 26,046,612 (IEC, N.d.). This means than an amount of R19,59 per annum per citizen over 15, or R32,78 per annum per registered voter, is set aside from public funds to support political parties.

Table 3.1.: Transfer of public funds to political parties per citizen over 15 and registered voter

*Note: These figures are in relation to the national sphere of government. See study limitation in Chapter 4.

Chapter 4:

Research design and methodology

As already stated, the introduction of the new party-political funding regime seems to have negatively impacted the political parties’ ability to raise funding from private sources. This has made them far more dependent on state funding, which, according to reports, seems not to be adequate, in that parties are not being able to meet their financial obligations. Consequently, they are not empowered to carry out their democratic and constitutionally imposed responsibilities and obligations properly and effectively. The introduction of regulations with regard to the private funding of political parties may have improved transparency, but at the same time it may also very well prove to disable parties from carrying out their functions effectively.

In order for parties to effectively represent the constituents in Parliament, they need to have the organisational infrastructure to regularly interact with the electorate, and the capacity to do research, policy development and the marketing of their policy positions. All of which requires money.

This is deployed to, for example:

• Develop the political will of the people

• Bring the party's influence to bear on the shaping of public opinion

• Inspire and further political education

• Promote active participation by individual citizens in political life

• Exercise an influence on political trends

• Ensure continuous and vital links between the people and organs of state

(IEC, N.d.)

4.1 Research objective

The objective of this research is to examine the South African party-funding environment in comparison to a selected group of parties from the European Union. The purpose is to ascertain how the South African political party funding regime compares to these international jurisdictions.

The purpose is to provide public policymakers with benchmark information to enable them to consider the appropriateness of the current funding regime and to motivate for adjustments thereto, should it be found that the current model is wanting.

4.2 Research question

Primary research question

What comprises South Africa’s party-political funding regime and how does it compare with the party-funding regimes of Germany, Sweden and the Netherlands?

Secondary research question

Compared with the public funding regimes of the other countries of this study, are the South African political parties sufficiently funded to effectively carry out their democratic and constitutional obligations?

4.3 Research design

The research takes a pragmatic approach in which both qualitative and quantitative methods were deployed during the course of the research.

Qualitative research – “that is, non-numerical examination and interpretation of observations” (Babbie & Mouton, 2017:646) – was, for example, deployed to discover and understand the elements and extent of state funding of the political parties in both the European dispensations chosen for the benchmarking, as well as that of South Africa.

Quantitative research – that is, the numerical representation and manipulation (Babbie & Mouton, 2017:646) – was, for example, used to measure the financial variances between the different state funding models and to convert the various financial quanta to equivalent purchasing power parity (PPP) in order to equalise the purchasing power of different currencies, by eliminating the differences in price levels between the foreign countries and South Africa.

It was also needed to determine the per capita cost of state funding in each of the jurisdictions.

4.4 Research subjects

The research subjects were the political parties of the countries that formed part of this study. The objective was to obtain data as to all the funding streams for funding the activities of the parties, and the extent thereof.

The countries were selected using matching selection – that is, by comparing the similarities between the subjects to be selected (Babbie & Mouton, 2017:213). In this study the similarities were the electoral system – proportional representation.

Whilst it is also important to consider the bearing of the different socio-economic conditions between that of South Africa and the developed world, the overriding consideration was that the quality of democracy should not be undermined based purely on affordability, since such considerations could potentially undermine the democratic ethos in the country. Costs were, however, as mentioned, converted to equalise the buying power differences between the countries.

4.5 Measurement

The study required three measurements.

The first was to measure the extent of party funding in each of the jurisdictions. This was to ascertain all the types of funding and the financial extent of that funding in each of the jurisdictions. This called for qualitative data, given the descriptive nature of the data (OSU, N.d.). It was obtained directly from the political parties, foundations and electoral commissions interviewed.

The second measurement was to determine what the differences were between the jurisdictions in terms of the various sources of funding. This too was qualitative in nature.

The third measurement was to determine the comparative cost per citizen (15+) to fund the parties. This was quantitative in nature, since it required measurable numeric information (OSU, N.d.). There were two dimensions to this measurement: (i) the conversion of the quantum in each jurisdiction in terms of purchasing power parity (PPP) in order to ensure that an apples-for-apples comparison between the jurisdictions would be achieved, and (ii) to determine the per capita percentage differentiation between the various jurisdictions. This enabled an interpretation as to the adequacy of the South African funding regime compared with the practices in the benchmarked countries.

4.6 Data collection

In-person expert interviews were undertaken in each of the benchmarking countries with the treasurers (or their delegated representatives) of a major political party in the particular country, and/or the electoral commission in the country. The purpose was to get a holistic understanding of the funding regimes in each country. It also served to identify all the elements of funding for parties in the particular country and the quantum thereof.

To this end, both the qualitative and quantitative data were secured through open-ended questions, in order to allow for a holistic and comprehensive look at the issues being studied, since open-ended questions allowed for the respondents to provide all options and opinions related to the topic, thereby ensuring more diversity and elaboration than would be possible with a closed-question or forced-choice survey format (Allen, 2017).

The questionnaire used in this regard is shown hereunder:

1) Questions to be posed to interviewees

a) Are there restrictions of private donations to political parties, and if so:

b) What are the laws governing those restrictions?

2) What do the restrictions entail?

a) What are the various forms of public funding that parties are entitled to?

b) Directly to the party

c) Directly to elected representatives

d) To the groups within Parliament

e) Reimbursement for election expenses

f) Any other

3) What is the monetary value of each of the aforementioned funding contributions?

4) How is the funding divided and distributed to the parties and/or elected representatives?

5) Are there any election campaign spending caps, and if so, what?

6) Are there any incentives in place to encourage individuals/corporates to make donations to political parties, such as, for example, tax incentives?

7) Is there any indirect funding in place, such as, for example, free media slots, and if so:

a) What are the rules?

b) What is the value?

c) How is it divided and distributed to the parties?

8) Are there any public funds made available to institutions, foundations, etcetera, which stand independent from the political parties, but which are ideologically aligned with parties, such as the political foundations in Germany and other European countries who stimulate the public policy dialogue, democracy and human rights through the lens of the ideological orientation, and if so:

a) What is the rationale behind those contributions?

b) How does it work?

c) From which government departments and/or institutions are the funds dispersed?

d) How are the contributions divided/distributed to the various institutions, foundations, etcetera?

e) What is the monetary value of the contributions from each department and/or institution?

9) In terms of private versus public funding of political parties, what is, in your estimation, the ratio between the two?

Indicate by marking the correct statement:

Note: Private finding includes membership fees and contributions by trade unions.

(10) Are there any other factors that you believe should be taken into account?

4.7 Analysis

Various multivariate tables were constructed, which comprised a number of independent variables (the different jurisdictions) and a range of dependent variables (the funding streams available in each jurisdiction) (Babbie & Mouton:435). This enabled the researcher to do a comparative analysis on the similarities and differences between the various systems.

In some instances, the tables were simultaneously multiple in nature, since they, in addition to the qualitative data mentioned above, also provided for quantitative data – that is, the quantum of the various funding streams available in each jurisdiction.

In the final instance, the researcher interpreted the table in terms of:

• the elements of state funding that are available in each of the benchmarking countries, including those elements that are not available in South Africa, together with an analysis of the amounts provided by the state to fund each of the elements

• the per capita cost of party funding by the state, based on PPP, for each of the countries

whereafter:

• in that the researcher had been exposed to the implicit and explicit facts related to the various funding regimes (Babbie & Mouton, 2017:641), the researcher was able to make a determination through deduction reasoning as to the adequacy of the South African funding dispensation in comparison to the benchmarked countries

• the researcher developed recommendations for public policymakers to ponder.

4.8 Ethics

Whereas the data, such as the types and quantum of state funding, are available in the public domain, formal ethics clearance was not required. However, since some financial information, especially that which relates to private funding or commercial activities, was confidential, the financial analysis was restricted to public funding only.

4.9 Limitation of the study

This study has only examined the public funding of political parties at the national level. It has not ventured into public fund transfers to political parties at the provincial and/or municipal level of government. The assessment therefore relates to public funds transfers to the parties at the national and the national parliamentary levels only.

That said, in the comparative analysis, all jurisdictions were treated in similar fashion, resulting in a like-for-like comparison.

The author is therefore confident that the conclusions reached will be valid for the purposes of the study, that is, to draw conclusions as to how South Africa’s public funding of political parties compares with those of the other international jurisdictions against which it was assessed.

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