As South Africa gears up for the highly-anticipated national elections on 29 May, the nation stands at a crossroads, where decisions made will shape the country's trajectory for the next 5 years. Yet, amidst the fervour of campaigning and political litigation, a crucial aspect of the electoral process often remains veiled: political party funding.
The flow of financial support to political parties can significantly influence the direction of policy-making and governance. From a risk and compliance perspective, political party funding also raises concerns regarding transparency, accountability and compromised relationships. In 2021, a landmark piece of legislation, the Political Party Funding Act 6 of 2018, aimed at promoting transparency and accountability in political financing, was enacted. The act represents a significant step towards enhancing the integrity of the electoral process and safeguarding the principles of democracy. The Electoral Matters Amendment Bill which was passed in the National Assembly in April 2024, and was assented by the President of the Republic of South Africa on 7 May 2024, has now subsequently amended the Political Party Funding Act.
With a primary focus on third-party donors, we discuss the obligations and requirements imposed by the Political Party Funding Act in this article, with consideration made to the recent Electoral Matters Amendment Bill.
Funding to political parties in South Africa is regulated by the Political Party Funding Act and its Regulations and can take a variety of forms. The Act recognises two types of 'donations', namely an actual physical (or electronic) 'donation' or a 'donation in kind'.
A 'donation in kind' in terms of Section 1 of the Act includes:
- money lent to the political party other than on commercial terms;
- any money paid on behalf of the political party for any expenses incurred directly or indirectly by that political party (including legal fees, fines or penalties);
- the provision of assets, services or facilities for the use or benefit of a political party other than on commercial terms; or
- a sponsorship provided to the political party.
Donations in kind do not include the services rendered personally by a volunteer.
The Political Party Funding Act places disclosure obligations on a juristic person or an entity that has donated directly to political parties, independent candidates or independent representatives. Section 9(2) of the Act provides that a juristic person or entity must disclose to the Electoral Commission a donation made to a political party, independent candidates or independent representatives, if the donation made is above the prescribed threshold ("Disclosure Threshold"), in the prescribed form and manner as envisaged by section 9(1)(a). Prior to the assentation of the Electoral Matters Amendment Bill, the disclosure threshold was in the amount of R100 000.00 within a financial year.
The Electoral Matters Amendment Bill has now amended the Disclosure Threshold to provide that the President may from time to time, determine the Disclosure Threshold referred to in section 9(1)(a) of the Act, after a Parliamentary resolution and by notice in the Gazette. Therefore, the Disclosure Threshold amount is yet to be finalised.
Subsequently, the question that arises is whether a donor or political party can circumvent disclosure if the donor makes multiple contributions each falling below the prescribed Disclosure Threshold. However, Regulation 8(1) of the Act specifically provides that a juristic person or entity that makes a Donation to a political party or aggregated donations which together exceed the Disclosure Threshold must still disclose terms of Section 9(2). Such disclosure is to be made within one calendar month after the end of the quarter within which the donation that exceeds the disclosure threshold or the aggregate of donations exceeding the threshold was made.
Companies and individuals must be made aware of these obligations as contravention of the Act may lead to the Electoral Commission instituting proceedings, and the imposition of an administrative fine. In terms of Section 18 of the Act, the Electoral Court may impose an administrative fine in accordance with the Schedule of the Political Party Funding Act in the event of a contravention or a repeated contravention of the Act.
Schedule 1 of the Regulations read with Section 18 provides that a person may be sentenced to a fine or imprisonment for a period not exceeding 5 years or both if that person commits an offence which contravenes Sections 8, 9(1), 9(2) or 10 of the Act.
In addition to the disclosure requirements contained in the Political Party Funding Act, the Act also places restrictions on the manner and form that donations can take. Specifically, the Act provides that no donations may be delivered to a member of a political party for reasons other than "political purposes". Furthermore, prior to assentation of the Electoral Matters Amendment Bill, political parties could not receive donations from a person or entity in excess of R15 000 000.00 within a financial year. However, due to the recent development of the Electoral Matters Amendment Bill, the President now has the authority, from time to time after a Parliamentary resolution and by notice in the Gazette, to determine the upper limit of donations, which is yet to be determined.
In terms of Section 8(1), Donations sourced from foreign governments or foreign government agencies, foreign persons or entities, organs of state or state-owned enterprises may not be accepted by political parties, independent representatives and independent candidates. Donations from foreign entities may only be accepted if the purpose of the Donations is for training skills development or policy development as provided for in Section 8(4) of the Act. The Act, however, does not define 'policy development'.
The Electoral Matters Amendment Bill seeks to amend and align legislation such as the Political Party Funding Act, with the Electoral Amendment Act of 2023, enabling independent candidates to contest in the national and provincial elections and increase the Presidential powers to determine the upper limits and Disclosure Threshold for donations, and a change to the funding formula, subsequently causing a reallocation of proportional public funding to political parties. As the President has assented to the Electoral Matters Amendment Bill, we await imminent guidance from the President and the National Assembly regarding the specific Disclosure Thresholds and upper limit of donations.
As the general elections approach, the political arena is fraught with widespread campaigning efforts. Amidst this fervour, the matter of campaign funding emerges as a key focus. It is imperative for donors to observe due diligence in accordance with the provisions outlined in the Political Party Funding Act and its accompanying regulations. Compliance with these legal frameworks not only ensures transparency but also safeguards against potential legal repercussions.
Political party funding demands careful consideration from companies operating within the country. The flow of financial support to political parties carries significant implications and risks, not just for the electoral process but also for broader governance and industry dynamics.
Companies must recognise the importance of implementing appropriate policies regarding donations to political parties. Beyond ethical considerations, adherence to these policies is essential from a compliance perspective. Companies must not only engage in responsible political funding practices but also advocate for transparency and accountability within the broader business community. By doing so, they contribute to the integrity of the electoral process and uphold the principles of democracy, ultimately fostering a more equitable and prosperous society.
Reviewed by Steven Powell, Head of ENS' Forensics Practice.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.