January 18, 2021

Roots of state capture lie in 20 years of failure to enforce party funding transparency

In her new book, Turning and Turning: Exploring the complexities of South Africa’s democracy, political analyst JUDITH FEBRUARY reminds us that the Institute for Democracy in South Africa warned us back in 1997 of the threat to democracy posed by secrecy in party funding. No one knew then that in time it would bring us very close to the brink. This is an extract from the book.

Six weeks before the 2014 national elections, over 60 civil society organisations made an open call to the fourteen biggest political parties, asking them to disclose their sources of private funding. Not one of them did.

In most democracies, the public’s right to know who funds political parties is recognised in some way through legislation. Yet in South Africa, up until 2017, while there were disclosure requirements for public funding, political parties were not required by law to disclose their private donors. Keeping that information secret was one thing that, until very recently, seems to have united all major parties.

Until 2017 there was very little incentive for political parties to be transparent or accountable in relation to the money they raised.

Although we talked about the potential for political donations being used for corrupt purposes and for undermining the democratic process ... we could not have predicted the full impact that corruption would have on the trajectory of South African politics.

In my view, there has been no clearer way in which the interests of political parties conflict with the public’s right to know than around the question of political party funding. The lack of regulation of private funding to political parties creates a secret space between politicians and their donors that has the potential to undermine democracy, allowing corporations, wealthy individuals and even foreign governments to buy influence and favours from the political elite.

Lack of mandatory disclosure represented an early vulnerability in the so-called fight against corruption, a fight which requires constant vigilance from the outset. Such vigilance in relation to party funding, or the apparatus to support regulation, was not forthcoming in South Africa in the early 1990s or when the Constitution or pursuant anti-corruption legislation was drafted. In fact, there is no evidence to suggest that the drafters of our Constitution had the regulation of party funding (or, indeed, the implications of a failure to regulate it) on their minds at all. Perhaps there was too much else to think about at the time.

The seeds of state capture

What started at IDASA [Institute for Democracy in South Africa] in 1997 as a discussion about the toxic impact of unregulated money on the political process became a rather more urgent issue with the passage of time. Over the years, we saw the ANC become mired in allegations of corruption as regards money and politics, but with the advent of pervasive state capture allegations, the problem morphed in dangerous ways.

State capture – the term used to describe the way in which a government is manipulated by private interests – is perhaps the ultimate expression of corruption and far more serious than a political party not declaring a private donation. Yet, the one has its genesis in the other and the issues are in fact inextricably linked.

As I have noted, since coming to power the ANC has battled to deal with a range of corruption allegations. The arms deal, discussed in more detail later, has virtually come to define post-apartheid South Africa, and its impact continues even now with former President Zuma facing charges of racketeering, corruption, money laundering and fraud in connection with the controversial government deal. In many ways the arms deal represents the start of post-1994 grand corruption activities. While it has never been conclusively proven that the deal funnelled money to the ANC as a party, the arms deal came to be publicly recognised as an example of the problems created by opaque and unregulated party funding.

In his book, former ANC MP Andrew Feinstein recounts being warned by an unnamed senior member of the ANC that the truth about the deal would never be revealed, ‘because we received money from some of the winning companies. How do you think we funded the 1999 election?’

Patricia de Lille, leader of the Independent Democrats at the time, claimed in parliament in 2007 that one of the arms deal bidders had made payments to the ANC and other organisations in early 1999. However, even if no political party was a direct beneficiary, the suspected corruption followed a pattern representing all the latent dangers in undisclosed party funding: a juicy government contract; winners chosen outside a formal tender frame- work; payments made by the successful company; and a handsome payoff for a fortunate political insider or political party.

Zuma came into office soon after corruption charges were conveniently withdrawn against him in 2009 by then National Director of Public Prosecutions Mokotedi Mpshe, employing some dubious legal reasoning. (After a protracted legal battle, Judge Aubrey Ledwaba ruled in April 2016 that Mpshe had acted irrationally in that no clear link existed between the supposed tainting of the prosecution and the merits of the charges against Zuma. The NPA and Zuma were denied leave to appeal as the court felt that no prospects for success existed.) In addition to alleged bribes received at the time of the arms deal, the charges were related to Zuma’s relationship with his financial adviser Schabir Shaik.

Since the existence of the ANC’s investment company, Chancellor House, was revealed by the media in 2006, along with allegations that it tendered for government contracts, the line between party and state became increasingly blurred and there is sufficient evidence to suggest that companies and wealthy individuals have sought to buy influence from the ruling party through donations. Having said that, the Chancellor House matter, although worrying, seems like child’s play when compared with the scale and depth of the current phenomenon of state capture.

The fraught relationship between money and politics in South Africa has its roots in the pre-democracy era. Under the 1980s Nationalist government, these trends had started to become evident in the institutionalised politics of the era (what we might describe as the politics of the ‘white’ parliament), and it was not uncommon for opposition politicians to bemoan the considerable advantages that the National Party of the day held over them.

The transition to democracy in the early 1990s meant a fundamental re-configuring of the political landscape. Apartheid rule was ‘tightly structured by a network of Afrikaner-exclusivist cultural, social and political organisations’. In the years running up to 1994, as the regime gradually unravelled, corruption grew.

With the Afrikaner establishment unable to discipline its followers, a scramble for personal enrichment began. This was reflected at the highest levels. The orientation of the National Party leadership almost visibly shifted from an ethos of service to the ‘volk’ to an interest in the establishment of Swiss bank accounts. A glimpse into this world was provided by the ‘Muldergate’ scandal of the late 1970s which unseated Connie Mulder, at one time the heir apparent to BJ Vorster. In this episode it emerged that clandestine funds had not only been used to manipulate internal and external media presentations of South Africa, but that much of this money had been siphoned off or diverted by officials or government supporters. For example, the entrepreneur Louis Luyt not only used such funds to establish a pro-government news- paper, but along the way also used some of the money to prop up his failing fertilizer company. As the economy stagnated the country seems to have shifted dramatically from a low-corruption high-growth to a high-corruption low-growth scenario.

This suggests the culture was toxic and that those who were wanting to exploit rent-seeking opportunities from their business relationships permanently undermined accountability. There was no regulation of private funding to political parties prior to 1994. The National Party, for instance, simply drew its resources from its links with other parts of the establishment, primarily from corporate South Africa, as Open Secrets, an independent non- profit with a mission to promote private sector accountability for economic crime and related human rights violations in southern Africa, has detailed. The transition in 1994 introduced a sort of mass politics and open campaigning that had never existed or even been possible in the past. All over the world, electoral politics was becoming increasingly professionalised and expensive. Political parties needed ever-deeper pockets to reach ever-larger electorates. Producing branded products and printed material, accessing television and radio, paying for staff and engaging high-priced consultants are now standard practice for political parties in the world’s democracies. Research – high-priced research – can pinpoint issues affecting particular communities and interest groups and fashion their offerings accordingly.

All of this demands money. The scale of resources that all parties needed in 1994 exceeded anything they had commanded in the past. This situation, and how the ANC handled it, turned out to be decisively important for South Africa’s future direction. In exile, the ANC had mostly been underwritten by sympathetic governments, multinational bodies and non-governmental organisations (NGOs). It was a Spartan existence, both for those drawing their subsistence from the ANC, and for the ANC as an organisation. Already barely adequate for the demands of supporting an organisation in exile, it was woefully inadequate for the demands of managing one geared for mass political participation. The ANC was now suddenly having to transform itself into a modern political party with new rules applying to the way it operated. It was, after all, contesting state power.

Domestically, a number of South African businesspeople, expecting the ANC to be in the country’s driving seat, were willing to make funds and resources available to the struggling party ahead of the 1994 elections. Some of this was fairly standard fundraising: Nelson Mandela recounted approaching twenty of the country’s leading businesspeople, and requesting R1 million from each for the 1994 election campaign. By his account, nineteen complied. Other instances were mired in controversy, as were donations made to the ANC by the casino magnate Sol Kerzner, possibly in expectation of support for his ventures and to assist with legal troubles. Other cases saw personal support extended to particular ANC notables – the use of a house, for example, or the payment of school fees.

It is important to remember that exiles had been deprived of the ‘normal’ opportunities they might have enjoyed (even a life ‘normal’ by the skewed definition of the pre-democratic order). They had needs that demanded attention, often as basic as accommodation, clothing or medical care. Accepting the hand of friendship from a well-heeled businessman was, for some, not a difficult decision to make. Notoriously, it was through such a relationship that Jackie Selebi – later to be the commissioner of the South African Police Service – came to befriend alleged underworld player Glenn Agliotti.

In recognition of the extensive demands that campaigning imposed on parties, a modest amount of public money was made available to participating parties ahead of the 1994 election – some R69 million. However, this barely scratched the surface of what the campaigns actually cost. The ANC, for example, was estimated to have spent anything between R160 million and R400 million. Fundamentally, it was donors, large and small, that made the election possible.

Apart from limited funding provided by the state, the major source had to be obtained from the private sector and party supporters. Which party got what and from whom was never fully revealed, but from what little is known it is clear that the ANC was the principal beneficiary of private largesse, receiving at least double the combined total of what was received by all the other parties. Having set itself a target of R168 million, the ANC raised R150 million. It allegedly secured ‘massive’ financial support from foreign governments, including Libya, Indonesia, Malaysia and Taiwan (it withdrew recognition of Taiwan not long after the election). Local companies supported the ANC generously, no doubt out of a combination of institutional self-protection and a wish to ingratiate themselves with the future government.

If anything, these problems were amplified in the immediate post- election period. The ANC had found the regular financial support it had received waning, and after the 1994 election it effectively ceased. Ad hoc fundraising undertaken throughout the 1990s compensated somewhat. Nelson Mandela – since his release, an iconic figure worldwide with rock- star appeal – proved adept at securing donations.

Given the times, party funding was essentially a non-issue for most of the 1990s. The possible influence of donations on South Africa’s foreign policy received some attention from the media and political commentators in 1995. A notable instance was the role that funds from Republic of China (Taiwan) to the ANC and assistance to South Africa may have played in South Africa’s delayed switch of recognition to the People’s Republic of China. But at this point, the issue was not given sustained prominence.

Party funding gained some visibility as a result of legislation passed swiftly in 1997 in the form of the Public Funding of Represented Political Parties Act, No. 3 of 1997. The background to the passage of that Act was roughly as follows: Section 236 of the Constitution stated that: ‘To enhance multi-party democracy, national legislation must provide for the funding of political parties participating in national and provincial legislatures on an equitable and proportional basis.’

The Public Funding Act was thus enacted. It established a Represented Political Parties’ Fund to be administered by the Independent Electoral Commission (IEC). Public funds were allocated to the fund and could be used ‘for any purposes compatible with the functioning of a political party in a modern democracy’. The Act provides a series of broad and generic indications of the purposes for which these funds can be put to use, among them political education, promoting citizen participation, advancing the political perspectives of parties to shape public opinion, and ‘development of the political will of the people’. Of the total amount in the fund, 90% is allocated to parties in proportion to their representation in the national and provincial legislatures, and 10% is allocated equally among these various parties. Parties that receive public funding are required to submit an annual report that the IEC makes available to the public.

Sensing that party funding could have profound implications for the integrity of our political processes – although in retrospect perhaps not realising quite how profound – IDASA took a special interest in the issue as far back as 1997 when the Public Funding Act was passed. At the time, IDASA advocated for private funding to be regulated alongside public funding.

Then Minister of Justice Valli Moosa and the South African parliament could not be convinced, however. It was a case of ‘We can legislate for that later’. It was simply not a priority. And it must be said that even though IDASA talked about the potential for political donations being used for corrupt purposes and for undermining the democratic process by exercising undue influence on policy and appointments, we could not have predicted the full impact that corruption would have on the future body politic and the trajectory of South African politics.

This extract from the book is published with the kind permission of Judith February.

Last modified on Wednesday, 29 August 2018 09:50

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Notes from the House is an independent online publication that tracks and monitors Parliament’s role in fulfilling its constitutional responsibilities to improve the lives of South African citizens. Published by Moira Levy with the support of the Claude Leon Foundation.

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