Whether the Political Donations Act in South Africa will be amended in response to the findings and recommendations of the Zondo Commission, companies can expect greater scrutiny of the political donations they make in the country in the future.
The Zondo Commission investigation
Political contributions can strengthen multipartyism and advance accountability and professionalism in politics, and it can be entirely legitimate for companies to donate funds to parties that advance the policies they support and that support the democratic process. . However, there is a risk that the payments could be used as a means to improperly influence public policy and corrupt those with political power.
These tensions inherent in political donations are not unique to South Africa, but the issue rose to prominence in the country after the Zondo Commission’s investigation into allegations of state capture specifically made reference to the misuse and misuse of political donations.
The Zondo Commission, headed by Judge Raymond Zondo, issued its first report on January 4, 2022, with Zondo noting its “extreme concern” about evidence that public tenders had been awarded to companies that had made political donations. . Zondo said the examples detailed in the report should be prioritized by the National Prosecuting Authority (NPA) for investigation and possible prosecution. However, he feels that this in itself will not solve the root of the problem.
Shortly after the publication of the first installment of the Zondo Commission report, the Independent Electoral Commission (IEC) published its third quarterly report on the financing of political parties. The IEC is required to publish these reports under the Political Party Financing Act 2018 (PPFA). In its February 22, 2022 report, the IEC reported that political parties had disclosed private donations totaling 43.9 million rand ($2.84 million) in the last quarter. These donations include contributions from listed companies, international political foundations and individuals.
While the increased transparency in the financing of political parties – as evidenced by the CEI report – is to be welcomed, as part of the inquiry into state capture, Zondo argued that more needs to be done more to “prevent, expose and criminalize” donations related to public tenders.
For example, Zondo said: “The making of such donations by a prospective bidder or by a successful bidder within an extended period of time should be considered a criminal offence, as should the receipt of such payment, whether such payment is conducted directly at political party coffers or through indirect means To be effective, it will be necessary for legislation to require external inspections of both bidders and political parties by a designated authority with appropriate search and seizure powers Significant pecuniary penalties must also be imposed on both the bidder and the political party in the event of violation of these provisions.
However, there is an apparent discrepancy between what Zondo said and the recommendation contained elsewhere in the report that the PPFA “be amended to criminalize the making of donations to political parties pending or in view of the granting calls for tenders or contracts”. in reward or in recognition of the granting of such grants”.
While Zondo suggested that there was a need to create a window period before and after a tender was awarded and that if a company made a political donation during that window period, it should be held criminally responsible, this was not pursued in the recommendation, which instead focuses on securing criminal responsibility for “quid pro quo” situations.
Avoid unfair interventions
Putting in windows during which political donations are prohibited would certainly create a strong legal prohibition to address the apparent problem. However, a blanket approach does not take current circumstances into account and may be too drastic and unfair.
For example, a company that provides vehicles to local government authorities might have a policy of providing the five major political parties with donations of equal amounts, or amounts pro-rated based on representation, during the period leading up to the local administration. elections, with the aim of generally supporting the democratic process in South Africa. During this period, the same company could win a contract with a major metro council during this period.
It would be difficult to attribute corrupt intent to the company if it had a specific policy and a history of equal or prorated political donations to a range of political parties. It would also seem unfair to exclude the political party that controls the Metro from its share of political donations simply because it has majority representation in the Metro where the contract is awarded. This in itself could be considered undemocratic, as all political parties should be able to solicit donations, regardless of size or ruling/opposition party status.
We cite this example to emphasize that more attention needs to be given to how the proposed window periods would apply to real-world situations in order to balance good corporate governance with fairness.
In any event, donations made in the hope of receiving an advantage are already a criminal offense under, inter alia, section 13 of the Prevention and Combating of Corruption Act 2004 (PRECCA) . PRECCA prohibits the direct or indirect offer and receipt of “gratification” to induce someone to award a tender to a particular person. Adding a similar offense to the PPFA would not make the law any stronger than it already is and could create inefficiency in prosecuting cases as similar but different items would have to be proven out of hand. any reasonable doubt.
Inspections and enforcement
Zondo’s views on external inspections and enforcement were also not directly translated into the specific recommendations made regarding the modification of the PPFA. However, Zondo made numerous recommendations regarding the creation of an independent public procurement anti-corruption agency (PPACA).
In these recommendations, he indicates that the PPACA should include an Inspection. Zondo did not specifically recommend that the Inspectorate be responsible for conducting inspections of bidders and political parties based on the PPFA framework, but one of the recommended functions of the Inspectorate is to “monitor and inspect the activities public procurement to detect and expose corruption”.
This primary function would presumably include carrying out the type of inspections envisaged by Zondo in connection with public tenders. It is up to South African lawmakers to clarify this if they decide to implement the recommendation. They should also address a potential overlap based on Article 14 of the PPFA, which already gives the Electoral Commission the power to conduct inspections to monitor compliance with the PPFA.
The intent behind Zondo’s findings and recommendations regarding political party funding is laudable given that such donations could be used by outside parties to improperly influence government decisions. These recommendations add to the greater transparency created by the PPFA, with the public now having access to data regarding political contributions. This allows for deeper scrutiny and opens the door to better monitoring and inspection.
However, Zondo’s suggestions for amending the PPFA may be superfluous and could represent an over-correction following the state capture allegations. For example, corrupt donations are probably already criminalized under existing legislation. Further, while instituting donation periods has merit in principle, it could unfairly limit political contributions made by companies that have strong internal compliance standards and no corrupt intent behind such donations.
More monitoring and inspection is needed and it seems logical that the PPACA will see this through, if Zondo’s recommendations are followed and the PPACA is formed.
Companies operating in South Africa should monitor changes to political donation regulations and how compliance is enforced. The prospect of reform should prompt companies to carefully manage their risks to ensure that if and when they make political or other donations, they do so without breaking the law.
Co-authored by Edward James, partner and white-collar crime expert at Pinsent Masons, and Thorne Godinho, Compliance Consultant at Pinsent Masons Vario.