1. Presentation to Ad Hoc Committee on Party Funding Financial Implications of Political Party Funding Bill Electoral Commission 14 March 2018

2. Contents Current Environment Core principles
Envisaged functional areas and costing
Collaboration with National Treasury
Revised approach
Implications
Challenges
Conclusion
Questions

3. 1. Current environment Need for party funding regulation
South Africa remains one of only a few countries which currently does not regulate party funding.
Transparency and regulation of party funding is an important aspect of free and fair elections and in the combatting of corruption.
Limited public resources
The public sector is facing severe financial constraints.
The Electoral Commission understands the importance and urgency of implementing a regulatory regime for party funding ahead of the 2019 National and Provincial Elections and acknowledges that there is a need to reduce public spending by sharing of resources.

4. 2. Core principles Insulated new mandate
There are compelling political, operational and financial reasons for (i) the regulation of party funding and (ii) the management of elections to be distinctly separated from electoral operations.
Among these are:
1.1 To insulate the election process from the politics of party funding;
1.2 To ensure that the political party funding regulatory mandate does
not impair the electoral operations mandate and visa versa and
1.3 To ensure that “cannibalisation” of either budget does not occur
and to uphold the financial and operational integrity of each
process.
In operational terms this means the creation of a separate entity with shared governance structures of the Electoral Commission to undertake the political party funding mandate.
This has been accommodated in Chapter 6 of the Bill.

5. 2. Core principles Separately funded mandate
Taking the above mentioned factors into account there is now a need to determine the source of funding for the party funding start-up costs.
The Electoral Commission will not be able to use a portion of its baseline allocations for this purpose due to the following reasons:
2.1 The present budget appropriations to the Electoral Commission are
based on its current legal mandate and are intended to prepare and
conduct the national and provincial elections in 2019;
2.2 The “Mhlophe decision” of the constitutional court has resulted
in a significant financial burden on the Electoral Commission.
2.3 The harvesting of addresses remains a national strategic priority which is consuming the resources of the Commission;
2.4 The baseline allocations for the current financial year have been reduced by National Treasury.
The Electoral Commission has reiterated the above in all its interactions with the ad-hoc committee on party funding during the development of the Bill.

6. 2. Core principles New skills
The present bill expands the scope of the party funding mandate beyond the present skills and expertise of the Electoral Commission.
New skills and competencies will need to be recruited in order to perform the functions contemplated in the bill.
These include:
2.1 Investment management and planning;
2.2 Investigations and enforcement;
2.3 Party funding research and policy development and
2.4 Fund raising

7. 3. Envisaged: Functional Areas
Functional structure
The envisaged organisational matrix to identify the key functional areas
required:

8. 3. Envisaged: Costing Costing
1. The proposed costing for the start-up comprises of R11 million in personnel expenditure as follows:
Position Type
No. of positions
Salary Package
Total
CEO (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

9. 3. Envisaged: Costing
In addition it is estimated that approximately R34 million would be required for administrative expenses and assets as follows:

10. 4. Collaboration with NT
To seek a way forward regarding the funding requirements proposed above, a meeting was held between the Electoral Commission and National Treasury officials on 9 March 2018.
During this engagement the following areas of agreement and consensus emerged:
2.1 The proposed budget of R45 million was unaffordable within the
current fiscal constraints and National Treasury was of the view
that R20 million might be a more feasible amount.
2.2 The funds can only be allocated after the due parliamentary
process and enactment of the legislation by the President.
2.3 Based on the current timing, enactment was likely to only transpire
a few months into the 2018/19 financial year which would reduce
the required costs for that financial year.
2.4 The allocation would either be through the adjustment budget or
MTEC process, however no provision for these funds have been
made as yet.
2.5 It was proposed that the implementation be done in a phased-in
approach with certain aspects of the legislation prioritised. This
would also further reduce the costs.

11. 5. Revised approach
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:
1.1 A phased-in approach be followed in implementing the
requirements of the bill and only a skeleton staff complement
be appointed;
1.2 The CEO of the political party funding entity be amongst the
first appointments on the structure;
1.3 Two senior managers, one for 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;
1.4 The current RPPF unit be moved to the new entity and
1.5 It is proposed to prioritise on the following aspects of the draft legislation
ahead of NPE 2019:
1.5.1 Implementation of Represented Political Party Fund;
Establishment of the Multiparty Democracy Fund;
Annual reporting and disclosure by political parties of all resources
and amounts of direct funding to the Electoral Commission; and
1.5.4 Research and policy development.

12. 5.Revised approach
This would mean the Electoral Commission could prioritise the areas of Party Funding Management and Policy & Regulatory Affairs within the period ahead of NPE 2019:

13. 5. Revised Approach: Costing
Expenditure Category
Description
Amount R
2018/19
2019/20
2020/21
Personnel expenditure
All inclusive remuneration packages
5,500,000
11,000,000
11,550,000
Administrative expenditure
Office rental
Telecommunications
Subsistence and travel (incl international)
Advertising
Conferences and workshops
Printing and stationery
Repairs and maintenance
Audit costs
Storage
Professional and other services
Subscriptions and membership fees
Domestic requirements and meals on premises -
3,000,000
5,000,000
2,000,000
1,000,000
500,000
1,515,000
250,000
20,000
25,000
3,150,000
10,000,000
90,000
1,050,000
26,250
3,307,500
5,250,000
2,100,000
525,000
150,000
10,500,000
262,500
94,500
Assets
Computers/ Laptops
Printers
Heavy duty copier
Shredder
Office desks
Chairs
Boardroom furniture
Storage cabinets
Credenzas
60,000
75,000
15,000
70,000
240,000
110,000
45,000
Total start-up budget requirement
20,000,000
37,785,000
39,015,750

14. 6. Implications
National Treasury will have to provide a minimum amount of R20 million in 2018/19 for the management of the fund and thereafter it is estimated that R38 million and R39 million respectively will be required in subsequent years.
The limited resources during the first phase of implementation (2018/19) may require a phase-in application of certain chapters, clauses and provisions of the legislation in line with the development of regulations and capacity of the new unit (e.g. postpone the compliance and enforcement functions.)
The proposal to prioritise certain aspects of the proposed new legislation will have to be agreed to politically.

15. 7. Challenges The following challenges remain of concern:
Process and timing of allocation of funds for the implementation:
1.1 The National Treasury has only two options to allocate funds –
the MTEC budget process and the 2018 Adjusted Estimated
National Expenditure (AENE);
1.2 Both of these cannot be done before late 2018 or beyond which
does not accommodate proposal to implement from mid-2018
ahead of NPE 2019 and
1.3 The Electoral Commission is of the view that an allocation
would qualify for the AENE as it is an unavoidable cost that was
not foreseen during the previous MTEC process.
Treasury has proposed the start-up costs be funded from the Electoral Commission baseline initially – to be refunded during the AENE or the next MTEC processes:
2.1 This may compromise preparations for NPE 2019 and on-going
operations of the Electoral Commission;
2.2 There is no guarantee the additional allocation will be approved
2.3 It undermines the independence of the Electoral Commission.

16. 8. Conclusion
The Electoral Commission remains committed to implementing the new party funding legislation when approved and enacted.
The urgent provision of R20 million initial funding (immediately after the enactment of the legislation) is necessary to start the phased-in implementation of the legislation.
Such allocation will enable allow the Electoral Commission to prioritise the following aspects in time for NPE 2019:
3.1 Establishment and limited fund-raising for the Multiparty
Democracy Fund;
3.2 Development of provisional reporting regulations and
systems;
3.3 Limited reporting and disclosure by political parties contesting the national elections in 2019;
3.4 Limited training and awareness of affected stakeholders of the new legislation and implementation timelines (including political parties and corporate entities);
The Electoral Commission will support the start-up through the provision of shared services in the fields of HR, ICT, finance and other organisational requirements.

17. Questions???

18. Thank you