Feedback on Political Party Funding Bill 2017 Electoral Commission 10 November 2017

Contents Comments on the Political Party Funding Bill Establishment of a Political Party Funding Unit: Strategy Structure Budget Questions and Answers

High Level Overview The Electoral Commission would like to flag the following key issues: 1. The appointment of the Chief Electoral Officer as accounting officer and chief executive officer of the Funds: The Commission prefers the separation of election management and party funding management functions with a separate accounting officer for each area reporting to the Commission 2. Funding of political parties at municipal level (including independent candidates): The Electoral Commission notes that political parties represented only on municipal level and independent candidates are excluded from the envisaged Act insofar funding is concerned.

High Level Overview 3. The current draft bill provides for the same formula and recipients for both the RPPF and MPDF: The Electoral Commission recommends allowing for potential differences in both recipients and formula used for distribution of funds from the RPPF and MPDF. 4. Clarity over which entities are covered by the envisaged Act and which are not: The current draft Bill is somewhat unclear regarding the scope and application of the envisaged legislation and regulations to political parties/entities. It is critical that the legislation and regulations very clearly identify which entities and individuals are required to comply.

High Level Overview 5. The lack of criminal offences for non-compliance: The lack of criminal offences weakens the ability of the Electoral Commission to enforce compliance – most especially from individuals, organisations and entities which are not represented in legislatures. The Electoral Commission recommends that criminal offences be included in the Act to reinforce compliance.

High Level Overview 6. The lack of incentive for donations to the MPDF: While this is not a direct issue for this envisaged Act, the Electoral Commission notes that the MPDF is designed to rely on private donations to fund it. The lack of adequate and compelling incentives to donate to the fund will significantly impair efforts to raise funds and will threaten the viability of the MPDF. 7. Dual disclosure: Based on enforcement and investigate practice, the Electoral Commission believes it would greatly enhance disclosure and enforcement if donors were also required to disclose donations to the Electoral Commission above the prescribed thresholds. This would significantly reduce the opportunity for recipients to fail to disclose donations and would provide corroborating information to enable efficient verification of information provided by political parties.

High Level Overview 8. Implications of the bill on audit firms and the Auditor General: The Commission notes the impact of the bill on the workload of audit firms auditing the books of political parties and the Auditor General; the increased fees may have a significant impact particularly on the finances of smaller parties.

Political Party Funding Unit: Strategy Background: Funding to political parties from the public purse in terms of Section 236 of the Constitution is governed in terms of the Represented Political Parties Fund Act But South Africa has hitherto not had a regulatory framework for the private funding of political parties. Earlier in 2017 Parliament established an Ad Hoc Committee to review and propose legislation to govern both public and private funding of political parties A Political Party Funding Bill has now been published for public comment following a number of interactions with stakeholders. Further public hearings on the bill are contemplated before the finalisation of the Bill. The Electoral Commission has been earmarked as the administrator of the contemplated statute on political party funding.

Political Party Funding Unit: The Electoral Commission has indicated the following minimum conditions to undertake this mandate: 1. New Mandate to be Fully Funded The present budget appropriations to the Electoral Commission are based on the legal mandate as it stands. The budgets are intended to prepare and conduct the National and Provincial Elections in 2019. On the one hand the Mhlophe decision of the Constitutional Court has resulted in a significant financial burden on the Electoral Commission. The procurement of addresses remains a national strategic priority which is consuming the resources of the institution. Therefore there is no scope for additional mandate in circumstances where additional resources are not possible.

Political Party Funding Unit: 2. New Mandate to be Insulated In order to ensure that the political party funding regulatory mandate does not impair the electoral operations mandate, it is exceedingly important that the two aspects are separated. In operational terms this mean the creation of a business entity within the Electoral Commission to undertake the political party funding mandate. This separation will benefit the electoral democratic system in the Republic in that electoral operations will be geared for the preparation and delivery of elections without consideration of the implications of political party funding mechanics. Secondly, both mandates will receive undivided attention.

Establishment of a Political Party Funding Unit: Strategy 3. Building New Competencies The present bill expands the scope of the party funding mandate beyond the present skills. In order to perform the functions contemplated in the bill certain competencies will have to be created. An example in the regard is the investigation of non-compliance with the reporting requirements in the bill.

Structural Characteristics Accounting Officer and Head of Party Funding The Accounting Officer and Head of Party Funding reports to the Commission and is responsible for all aspects of party funding. Section 12 of the Electoral Commission Act , the Commission shall appoint a suitably qualified person as chief electoral officer and such chief electoral officer shall be head of administration and accounting officer. A provision to ameliorate a conflict with this section of law will be necessary in order to give effect to this proposition. Functional Elements of the Party Funding Business Entity Based on the current bill it is proposed that the business entity at least has capacity in: Corporate Functions; Party Funding Management; Policy, Regulatory Affairs and Enforcement; and Communications/Education & Awareness

Structural Characteristics A. Corporate Functions of the Business Entity Information Communication Technology (ICT) Enterprise architecture Database administration IT Operations IT Security Human Resources Attracting, developing and retaining high quality staff Personnel administration and record keeping Compensation and employee benefits Performance Management Labour relations Procurement and Assets Procure-to-pay activities Asset management General Office Administration Space and records management Building security and maintenance Printing and reproduction services Fleet management

Structural Characteristics B. Political Party Funding Management Investment Management and Planning Device fund-raising strategies (for MPDF) Project income receivable over the medium term Project expenditure over the medium term Disclosure management – disclosure of donations register and reporting of breaches Project cash flow requirements Make allocations to political parties Adhere to reporting requirements Financial Compliance and Reporting Ensure compliance with rules and law Ensure compliance with administrative processes Review Annual Financial Statements of Political Parties Compile the annual financial statements of the Fund Compile the Annual Report of the Fund

Structural Characteristics B. Political Party Funding Management cont. Financial training to political parties Preparation of training materials and content Conduct training Skills assessment Audits Internal audits External audits (Auditor General) Forensic audits

Structural Characteristics C. Research, Policy, Regulatory Affairs and Enforcement Research and Policy Development Research - Continuous evaluation of international best practice. Develop and draft and / or consider policy across all units Regulatory Affairs and Enforcement Draft amendments to party funding Act Draft amendments to party funding Regulations Propose amendments to Electoral Act, Electoral Commissioners Act and Municipal Structures Act Receive queries and act on them Receive complaints and process same Resolve minor complaints Refer serious complaints for investigation Receive internal and external reports on possible violations of the law.

Structural Characteristics C. Research, Policy, Regulatory Affairs and Enforcement cont. Regulatory Affairs and Enforcement cont. Investigate alleged violations of the law. Make recommendations to Commission on appropriate action to take in respect of violations. Recommend conciliation agreements, which may include penalties and administrative remedies, with respondents or their counsel to resolve the matter. Recommend referrals to the Electoral Court. Consider the appropriateness of the sanctions in cases of serious offences proposed by investigators and comment thereon. Represents the Commission in cases referred to the Electoral Court and Courts of Appeal.

Structural Characteristics C. Communications Education Promotion of understanding and awareness of the requirements by all stakeholders Development and publication of education material related to all aspects of party funding Communications Publication and awareness of reports Media relations Stakeholder relations Stakeholder engagement Promotion of MPDF among potential donors

Proposed Functional Matrix

Proposed organogram In view of the many unknown factors in the first year of implementation of the provisions of the envisaged new Act, the following is proposed: That a phased in approach be followed and only a skeleton staff complement be appointed; That Accounting Officer as the Head of the political party funding Entity be amongst the first appointments on the structure; That two senior managers, one for political party funding Management and one for Policy & Regulatory Affairs and Enforcement also be amongst the first appointments as these are basic functional elements of the proposed business entity; That the current RPPF unit be moved to the entity; and That additional initial staff capacity as outlined below be created.

Proposed organogram Position Type No. of positions Salary Package Total DCEO (PERSAL level 15) 1 R1,828,516 Senior Manager (level 14) 3 R1,524,899 R4,574,697 DM (level 12) R1,060,537 AM (level 10) R737,582 SAO (level 8) R512,974 AO (level 7) 2 R427,793 R855,586 SUBTOTAL   R9,569,892 ADD 10% non-salary personnel expenses R956,989 TOTAL R10,526,881 ROUNDED OFF R11,000,000

Summary of proposed start-up budget

Notes on proposed budget Personnel expenditure amounts to approximately 25% of total projected budget of the Political Party Funding Unit, i.e. R11 million. The operating budget equals approximately 73%, being R33 million. Asset requirements amounts to about 2% of the budget, i.e. R1 million. Total budget (i.e. 100%) equals R45 million. Goods and services are likely to be required / acquired using internal SLAs, term contracts (panels), and direct purchases / procurement.

Thank you Questions