Overview of the Political Party Funding Act Electoral Commission July 2019

Background South Africa is one of the few countries in the world which has not regulated the private funding of political parties Two-thirds of the world’s countries ban foreign political donations to political parties. In addition, 50% of countries restrict donations to political parties stemming from entities such as charities, religious, political or social organisations South Africa is a signatory member of the African Union and is in accordance with Article 10 of the AU Convention on Preventing and Combatting Corruption is obliged to adopt legislative measures to ‘incorporate the principle of transparency into funding of political parties’. A number of civil society organisations (notably My Vote Counts (MVC) and The Right to Know (R2K)) have been campaigning for a number of years for regulations to control party funding On 28 July 2016 MVC launched application in WC High Court requesting PAIA to be declared unconstitutional and ineffective in accessing private political funding information

Background On 27 September 2017 WC High Court rules in favour of MVC, declares PAIA unconstitutional and gives parliament 18 months to rectify defects On 21 June 2018 the Constitutional Court rules in favour of My Vote Counts regarding the invalidity of the Promotion of Access to Information Act (PAIA) with regards to the access of private donor information of political parties The judgment acknowledges Parliament’s efforts to address the issue of party funding through the Political Party Funding Bill (which had started in June 2017) The judgment obliges political parties and independent candidates to disclose information regarding their sources of funding and make it readily accessible to the public This includes all information on donations, amounts and identities of donors

Legislative process In response to these legal challenges and mounting public pressure over the need for parties to disclose sources of party funding, in June 2017 2017 the National Assembly resolved to establish the Ad Hoc Committee on the Funding of Political Parties Mandate was to enquire into and make recommendations on the funding of political parties represented in national and provincial legislatures with a view to introducing, if necessary, amending legislation. As a point of departure the Committee invited public comment on the funding of political parties including the adequacy or not of the existing legislation. The Electoral Commission was also invited to brief the Committee on party funding including international best practice. On 22 August 2017 the Committee, having deliberated on the public input received, agreed to repeal the existing Public Funding of Represented Political Parties Act, No 103 of 1997, and instructed the Parliamentary Legal Services Unit to draft new legislation.

The Political Party Funding Act The Political Party Funding Bill was drafted and approved by the National Assembly in March 2018 It was approved without amendment by the National Council of Provinces in July 2018. The Political Party Funding Act (Act 6 of 2018) was assented to by the President on 22 January 2019 It is anticipated that the provisions of the Act will be gradually phased-in over a two to three year period to allow for the development of capacity within the Electoral Commission to oversee the implementation of and compliance with the legislation (see later slides)

Key aspects of the Act The Act provides legislation for three key areas: The annual disbursement of public money to political parties represented in national and provincial legislatures through the Represented Political Parties Fund (RPPF). The establishment of a new Multiparty Democracy Fund (MPDF) which will accept private donations and disburse these to political parties represented in national and provincial legislatures. The regulation of private funding (donations) to political parties including requiring disclosure of all donations above an annual threshold by political parties and donors and imposing certain restrictions on the source and use of such donations.

Oversight of party funding During the Parliamentary process to investigate and draft the Bill, the Electoral Commission was provided with a number of opportunities to engage with the Ad Hoc Committee on a number of aspects of the Bill These included recommendations for which institution would be best mandated to oversee the implementation and management of the Act International approaches range from separate entities to existing entities including the Auditor-General, Information Regulator, or electoral management body Parliament preferred to mandate the Electoral Commission to assume the responsibilities for this expanded mandate Throughout its engagement with Parliament and National Treasury, the Electoral Commission insisted that the new mandate must be separately funded so as not to cannabalise resources set aside for elections

Overview of the Funds The Represented Political Parties Fund (RPPF) and the Multiparty Democracy Fund (MPDF) will be administered by the Electoral Commission The Electoral Commission must raise funds for the MPDF The Electoral Commission is entitled to charge the MPDF an administration fee which may not exceed 5 percent of the money credited to the fund in the previous financial year Funds from both the RPPF and MPDF are only available to represented political parties Funds from both are distributed according to the formula: 1/3 equal (33.3%) 2/3 proportional (66.6%)

Restrictions of money for Funds The Electoral Commission may not accept money for the Multiparty Democracy Fund (MPDF) from: Any organ of state Any state owned enterprise Any foreign government or foreign government agency Any donor to the MPDF may request to remain anonymous Purposes for which money from RPPF and MPDF may not be used: To pay remuneration to any person representing the party in the national, provincial or municipal legislatures To pay remuneration to any person in the service of the state and who receives remuneration for that service To finance or support any cause in contravention of any code of ethics binding on members of parliament or provincial legislatures To establish any business or acquiring or maintaining immovable property (except where that property is to be used solely by the party for party political purposes To defray legal expenses relating to internal party disputes Any other purpose which may be prescribed

Private funding: Limits and thresholds Political parties and donors must disclose donations above R100 000 in a financial year Maximum donation amount for private donors (individuals or entities) of R15 million per year, per party Parties cannot receive donations from: Foreign governments or agencies Foreign persons or entities (*see below) Any organ of state State owned enterprises Parties may not accept donations where it knows or ought to have known or suspected they are the proceeds of crime and must report this to the Commission * Parties may accept donations from foreign persons or entities for the purpose of: Training or skills development of a member of the political party or Policy development by the party This is limited to R5 million per financial year in total

Obligations of political parties Political parties must disclose all donations received above the threshold to the Electoral Commission in prescribed form and manner (every three months) Political parties must deposit all donations received into a separate bank account Appoint an accounting officer who must: Account for all income received by the party Ensure any money from the Funds is not used for a prohibited purpose Ensure compliance with the Act Prepare financial statements showing all money received by the party Appoint an auditor to audit its financial statements annually and express an opinion on whether the party has complied with all aspects of the Act The Accounting Officer must submit the auditor’s opinion and financial statements to the Electoral Commission once a year

Obligations of Electoral Commission Must establish a separate unit within the Electoral Commission to oversee party funding Appoint a suitably qualified and experienced person as the Chief Executive Officer Report annually to Parliament on: The amounts received by the Funds The allocations made by the Funds The amounts spend by each party in connection with the purpose under each category The balance in each Fund and any amounts owing Make public every three months the donations reported by political parties Report annually to Parliament on all donations made to political parties during the year

Powers of the Electoral Commission DISCLOSURE OF INFORMATION The Electoral Commission must monitor compliance by political parties with this Act In order to do so it may request any person: To disclosure any relevant information Produce any relevant records, reports or other documentation Permission to enter any premises during working hours to inspect any relevant documentation Copy or store any relevant information Answer a question about any relevant information If a person refuses or fails to comply with such a request, the Commission may apply to the Electoral Court for an order to compel compliance The Electoral Commission must investigate any complaint received if there is prima facie substance to the complaint

Powers of the Electoral Commission SUSPENSION OF FUNDS The Electoral Commission may suspend the payment of money from the Funds: If it is satisfied on reasonable grounds that a party has failed to comply with the Act It may only suspend funds if it has issued a direction (see later slide) RECOVERY OF MONEY The Commission must recover any money that was accepted in contravention of the Act by: Instituting a civil claim Setting off the liability against money allocated from the Funds Any funds recovered must be paid to the MPDF

Powers of the Electoral Commission ADMINISTRATIVE FINES The Electoral Court may impose an administrative fine in respect of a contravention or repeated contraventions of the Act These fines are specified in Schedule 1 and range from: R40 000 to R150 000 for failing to account for money R500 000 to R1 million for failing to disclose money received to the Commission or for accepting prohibited funds The fines range depending on the number of contraventions OFFENCES AND PENALTIES Any person commits an offence if they contravene the provisions of the Act and, if convicted, may be sentenced to a fine or imprisonment for a period not exceeding five years

Powers of the Electoral Commission ISSUING DIRECTIONS The Electoral Commission may issue a direction to a political party in order to avoid imposing a sanction: After affording that party an opportunities to make representations and If it is of the opinion that the party has contravened the Act The direction must indicate which of the following sanctions the Commission may impose if the party fails to comply with the direction: Suspension of payment from Funds The recovery of money The imposition of an administrative fine Note: The Commission may only suspend funds after issuing a direction