REVIEW OF THE PUBLIC FUNDING OF REPRESENTED POLITICAL PARTIES ACT NO REVIEW OF THE PUBLIC FUNDING OF REPRESENTED POLITICAL PARTIES ACT NO.103 OF 1997 Presenter : Timothy Murwa | 01 September 2017

Overview of the presentation Introduction Current status Sources of political funding National Treasury (NT) observations of the public hearings Financial implications of the proposals Capacity constraints in IEC to administer both funds Management fees to be regulated Financial implications of the review of the PFRPP Act 103 1997

Introduction The Constitution of the Republic of South Africa Act, Act no. 108 of 1996 Section 236 stipulates the funding for political parties to enhance multi-party democracy and that National legislation must provide for the funding of political parties participating in national and provincial legislatures on an equitable and proportional basis. To give effect to Section 236 of the Constitution - the Public Funding of Represented Political Parties, Act 103 of 1997.The Act provides a broad framework for the public funding of represented political parties at national and provincial legislatures. The Represented Political Parties Fund (RPPF) was established for the purpose of funding political parties represented at national and provincial legislatures. RPPF intended to receive funds as follows: Allocation by Parliament, Contributions and donations to the fund originating from any sources, whether within or outside the Republic, Interest earned on moneys deposited in a separate banking account opened by the Commission and standing to the credit of the fund as well as moneys invested that are not immediately required for making allocations to political parties, and Moneys accruing to the fund from any other source.

Current status Funds are appropriated for represented political parties at national and provincial legislatures as follows: Funds are appropriated through a Parliament Vote. Funds are appropriated through IEC (RPPF). IEC is administering the RPPF as per the PFRPPA, Act 103 of 1997 Provinces also make allocation for represented political parties at provincial legislatures. Ad-Hoc Committee has been established to review the Public Funding of Represented Political Parties Act 103 of 1997.

Sources of political funding (RPPF) This funding to political parties is provided by the Represented Political Parties’ Fund (RPPF) and is regulated by an Act of Parliament. Annual average growth rate of the RPPF is around 5 %.

Sources of political funding cont. This funding to political parties is provided by provinces and is currently not regulated.

Sources of political funding cont. This funding to the political parties is provided by Parliament, regulated by Section by Section 34 of the Financial Management of Parliament and Provincial legislatures Act of 2009.

Analysis of allocations over the years RPPF has increased at an annual average growth rate of 5% Parliament has increased at an annual average growth rate of 12% Allocations for 2017/18 is over R500 million on these two sources only Inclusive of provinces, allocations amounts to over R1 billion for 2017/18

NT observations of public hearings There is a general view to increase political funding, this will be possible based on availability of funds. There is a general view for the review of the allocation formula between proportional and equitable, currently the funds are distributed 90% proportionally and 10 % equitable. There is a general support for the overall governance of funding to be transformed including putting disclosure system in line with South Africa’s duties in the Constitution & International law. Transparency to be enacted through legislation. In some instance allow discretionary disclosure. There is also a general view for some of the public funding to be earmarked for specific programmes. Proposal for threshold and curbing of donation, private or foreign donation, with foreign donation there should be no condition (worried about influence of such donors)

NT observations of public hearings cont. Challenge with foreign funding of political parties was raised highlighting challenge of undue influence….with proposal or mixed feelings whether foreign funding should be allowed or not…but if allowed should be transparent and parties should disclose any foreign and or private funding and parties that did not disclose… the funding should be deposited into the political parties fund pot. There is a general view that there should not be any burning of political parties to lose seats as that process is decided through a democratic process. There is a view raised that there should not be any donation to individuals, but donation should be made to political parties or to the fund. There is a view for the inclusion of regulation of provincial funding of political parties.

NT observations of public hearings cont. There is also a view that AFS and annual report of political parties should be made public for scrutiny There is a view raised for the regulation of private political funding. There is a proposal for multi-party fund…currently there is political fund administered by IEC to fund all represented political parties at national assembly and provincial legislatures There is proposal for IEC to continue administering Represented Political Parties Fund. Proposal for capacitation of the IEC to enable provide necessary oversight of the political parties fund and enforcement of compliance.

Financial Implications of the proposals R1 billion has been allocated in 2017/18 (RPPF = R141m, Parliament = R414m and Provinces = R535m). For the past 3 years (2014/15 to 2017/18) public political funding has increased at an annual average growth rate of 4 % (from R971 million to R1.09 billion). From the proposals, the information at this stage cannot be costed. If the outcome of the process suggest additional public funding for political parties, it would mean the following: -Borrowing; -Revenue; and -Cut from potential government services (existing baseline)

Capacity constraints in the IEC to manage both funds Currently IEC provides two employees for the administration of the fund. There is no direct allocation made for IEC to administer RPPF. The current institutional arrangement does not make it possible for IEC to enforce compliance or provide necessary oversight. Additional capacity would be required for the establishment of the proposed Multi-Political Democracy Fund. Sole mandate of the IEC…independency of the Electoral Commission – question of conflict of interest when comes to administration of elections

Management fees for administering both funds (RPPF /MPDF) Currently there is a memorandum of understanding to charge the RPPF employee costs (management fees) for the management of the fund. Management fee to be regulated by an Act. Appropriate formula to be determined for the management fees. Proposal is that allocation can be made to the administering body of the fund (1) directly (a transfer) or (2) as a percentage of the total appropriated political funds.

Financial implications of the review of PFRPPA Operational funding requirement for administering both Multi-Party Democracy Fund and Represented Political Party Fund: IF IEC – Operational cost likely to be less but it will have additional cost to the establishment. IF a separate Entity established under IEC and or an elected department– It will have huge financial implications additional to capacitating IEC in the form of office accommodation, support function such as IT, HR as well additional cost associated with having Head of the Entity etc. Ultimately, more burden on the tight fiscal envelope.

Conclusion The review should take into account lessons learned thus far, address any deficiencies in administering public funding of political parties. The review process should enforce compliance in legislation to any represented political parties receiving funding. The review process expected to deliberate on the public funding of political parties split between national and provinces to incorporate already existing public funding of political parties scope. PFMA requires that any entity within or outside government to implement effective, efficient and transparent financial management system and internal control system. PFMA requires departments or constitutional institution intending to establish an entity to consult and or seek prior written consent of the National Treasury, in case the proposal is to establish separate entity to administer the fund.

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