SOUTH AFRICA CAMPAIGN FUNDING

C O N F I D E N T I A L SECTION 01 OF 03 PRETORIA 000797

SIPDIS

E.O. 12958: DECL: 04/20/2019
TAGS: ECON PGOV SF
SUBJECT: SOUTH AFRICA CAMPAIGN FUNDING

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Classified By: Economic Counselor Perry E. Ball. Reasons 1.4 (b) and (
d).


1. (C) Summary: The Helen Suzman Foundation hosted a seminar
on April 15 to discuss the country's laws on political party
funding, an issue which the media and electorate have largely
ignored in the run-up to South Africa's election on 22 April.
Panelists agreed that both the source and amounts of private
funding are largely unknown. They also argued that the lack
of campaign funding laws in South Africa is damaging the
integrity of South Africa's democracy, opening parties up to
corrupt practices and diminishing the power of the electorate
to influence policy. End Summary.


2. (C) On the eve of South Africa's fourth democratic
election, the Helen Suzman Foundation hosted a seminar on
campaign finance issues on April 15. Panelists included
Institute for Democracy in South Africa (IDASA) political
analysts Steven Friedman and Shameela Seedat, Institute for
Security Studies (ISS) Head of Corruption and Governance
Program Hennie van Vuuren, and Business Leadership South
Africa CEO Michael Spicer. In the absence of clear
regulations, the panelists argued that political party
funding is the biggest threat to the country's democracy and
international reputation.

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THE GREATEST THREAT TO DEMOCRACY
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3. (C) Approximately 220 million rand ($24 million) is being
spent on South Africa's election this year, according to
IDASA estimates. Around 80 million rand of this is from
public funding based on political parties' percentage of
representation in the National Assembly. Seedat noted that a
total of 19 parties received public funding, with the ANC
receiving the lion's share of 33 million rand, the Democratic
Alliance receiving 9.6 million rand, and the Inkatha Freedom
Party receiving 4.8 million rand. In addition to the public
funding, political parties also use front companies to raise
funds. The ANC's Chancellor House is one of the best-known,
and has been accused of getting preferential treatment with
regards to government tenders. (Note: Critics allege that
Chancellor House is more and less than a normal investment
house, being made up of senior ANC operatives who benefit
from preferential access to public contracts and purchase of
privatized public assets. It is further alleged that the ANC
is a regular recipient of money transferred from Chancellor's
House's profits. End Note)


4. (C) Seedat stated that no one has any idea who or what
businesses, countries, or foreign political parties make up
the difference between the public and private funding, nor
does anyone know how the money is being spent. This year
marks the first year that political parties are using
television ads as a campaign tool, she said, but noted that
there have been very few -- only from ANC and DA thus far --
and that such ads cost approximately 3 million rand
($320,000) each. Friedman also rhetorically asked why
smaller parties' complain so much that they need more money,
saying it begs the question of why they need more since
"campaign posters can only cost so much."

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DOOR TO CORRUPTION WIDE-OPEN
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5. (C) All panelists agreed that the lack of transparency
leaves the door open to corruption, with van Vuuren quipping
Qleaves the door open to corruption, with van Vuuren quipping
that unregulated political contributions are criminalizing
politics and drowning out the electorate. He also argued
that more broadly, the conflict of private and public
interests should be addressed, noting the 2006 Auditor
General's report that pointed out that over 50,000 civil
servants also have private business interests. Friedman
reminded the audience that the definition of corruption
should be broad, and include not just who gets what tender
but also who gets what appointments with whom.


6. (C) The level of corruption seems to flow both ways as
well, with domestic corporations at the provincial and local
levels being pressured by "unnamed" parties to give with the
implicit threat that they will not be rewarded if they do
not, according to van Vuuren.


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FOREIGN FUNDING BUILDS EXPECTATIONS
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7. (C) Van Vuuren, Spicer, and Friedman also spoke at length
about the historical relationship between foreign parties or
states and South African political parties. Both Friedman and
van Vuuren mentioned South Africa's refusal to issue the
Dalai Lama a visa last month as just another example of
foreign influence over South Africa's foreign policy,
implying South Africa's actions were in response to Chinese
pressure. Friedman added that it was no accident that ANC
Treasurer Mathews Phosa was such a key part of a recent South
Africa-China Investment Forum, even though he is not a
government official. (Note: The South African Government
denied the Dalai Lama a visa on 23 March to attend a peace
conference linked to the 2010 World Cup, saying his presence
would distract from their preparations to host the event.
Local media claim that China, supposedly an ANC funder,
pressured South Africa not to grant the visa. End Note.)


8. (C) Friedman also argued that historically apartheid bred
a culture of dependency on foreign funding, with apartheid
officials giving foreign governments funding in exchange for
their support, while the ANC received foreign funding to help
it fight apartheid. ANC members in exile, especially, came
back to South Africa without personal or organization assets,
but with such an enormous sense of entitlement -- to housing,
cars, private educations for their children -- that a host of
actors were happy to oblige in exchange for political
influence, whether it was soft or hard influence.

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LEGISLATION LONG WAY AWAY
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9. (C) The same day as the conference, Phosa publicly said
that there will be no law forcing any party to disclose
donors until there are sufficient levels of political
funding. He also implied that this is not possible in South
Africa, saying, "If taxpayers pay peanuts, they get monkeys."
Spicer believes that South Africa's laissez-faire
environment about donations is hypocritical since South
Africa is a signatory to the AU Convention Against Corruption
and since legislation regulating political contributions has
become "an international norm." Not surprisingly, all
panelists agreed that it is unlikely the ANC-led National
Assembly will enact any kind of campaign finance legislation,
citing a lack of support from the ANC and political will from
all parties. Shameela and Spicer both admitted that many
parties are afraid that donations would dry up if donors had
to disclose their contributions. Regulations could also
convince companies to simply complain the process is too
onerous and stop contributing completely, which is what
Spicer called a "cop-out." Alternatively, Spicer noted that
many companies have come up with formulas -- for example,
giving according to proportional representation or 50 percent
to ANC and 50 percent to the opposition -- implying that this
could also dissuade political parties from asking for more.

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RECOMMENDATIONS
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10. (C) Panelists recommended various reforms, many of which
are already applied in the US:

-- Enact legislation forcing parties to disclose all funding
or that above a certain amount;

-- Set thresholds for reporting contributions, both cash and
Q-- Set thresholds for reporting contributions, both cash and
in-kind;

-- Have a truly independent oversight mechanism;

-- Take the issue to court again (Note: IDASA took 5
political parties to court in 2003 to demand that they
disclose their contributors under the Freedom of Information
Act but lost the case. End Note.)

-- Encourage businesses to adopt codes regarding funding
that are widely communicated, published in annual reports,
consistently applied, and cover all contributions including
perks like trips abroad for both politicians and their
children, and is fully documented "with a long paper trail

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right to the party's bank account;"

-- Create a central democracy fund where all political
donations flow through one account that is monitored by the
Independent Electoral Commission and distributed equally; and

-- Either increase public funding of political parties or
fund publicly based on matching funds parties raise
themselves.

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COMMENT
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11. (C) Regulation of political party funding could limit the
scope of corruption and enhance the rights of all voters,
making the one man-one vote principal more than just
theoretical. However, despite the perennial debates in think
tank circles on the subject, there is next to no chance of
legislation regulating party finances in the foreseeable
future. The lack of public concern about the situation is
reflected in the lack of interest within the ruling party,
suggesting both a lack of information or apathy among the
public and a degree of complacency within the ruling ANC
party. Moreover, the laws would be meaningless in the
absence of enforcement mechanisms.
LA LIME