Anthony Butler is a professor of Political Studies at the University of the Witwatersrand. He is the author of Contemporary South Africa, 2nd edition (Palgrave Macmillan 2009), Cyril Ramaphosa (Jacana Media 2007 and James Currey 2008), Democracy and Apartheid (Macmillan 1998) and Transformative Politics: the Future of Socialism in Western Europe (Macmillan 1995). He has previously been Fellow of Emmanuel College, Cambridge, Director of the Politics and Administration programme at Birkbeck College, University of London, and Professor of Political Studies at the University of Cape Town. He writes a weekly column for Johannesburg’s Business Day newspaper.

Paying for Politics

Party Funding and Political Change in South Africa and the Global South

By Anthony Butler

Jacana Media (Pty) Ltd and Konrad Adenauer Foundation

Copyright © 2010 Anthony Butler and individual authors
All rights reserved.
ISBN: 978-1-77009-784-1

Contents

Title Page,
Copyright Page,
Preface,
Contributors,
ONE – Introduction: Money and politics,
TWO – Party finance and single-party dominance in Mexico and beyond,
THREE – Financing politics in Malaysia,
FOUR – Predominance and private party funding in Botswana,
FIVE – Party funding in the Russian Federation: a tool of bureaucratic control,
SIX – The need for balance in party financing in Brazil,
SEVEN – Analysing party finance regimes: best practice for dominant multi-party systems in ‘new democracies’?,
EIGHT – Government buy the people? Democracy and the private funding of politics in South Africa,
NINE – Party financing in democratic South Africa: harbinger of doom?,
TEN – Money politics in South Africa: from covert party funding to the problem of Black Economic Empowerment,
ELEVEN – Financing the ANC: Chancellor House, Eskom and the dilemmas of party finance reform,
TWELVE – Paying for our democracy,
THIRTEEN – Conclusion: The opportunity and challenge of party finance reform in South Africa,
Notes,

CHAPTER 1

Introduction: Money and politics

Anthony Butler

Money and power are intertwined in the political life of every country. The intersection between money and politics has been a site of contention and controversy in every democratic state.

Money is essential to the operation of any democracy. Candidates in presidential systems must communicate their message and values to a vast number of dispersed electors. In parliamentary democracies, robust political parties must be created and sustained for electors to make genuine choices.

Parties are complex organisations that need resources to maintain their permanent offices, deliberate with citizens, develop alternative policy programmes, and set out their values and objectives during electoral campaigns.

If money is essential, it is also dangerous. Parties with disproportionate access to resources can buy votes, monopolise air time during campaigns, and dispense jobs and patronage to supporters. Competitors who cannot raise equivalent funds risk losing the political race before it has even begun. Within parties, factions can build war chests to win internal elections and to dominate party candidate lists.

Even more troubling are the patterns of dependency, collusion and corruption that can emerge between those who donate money and those who spend it. Parties can raise some revenues from dues – although the international trend is towards declining membership numbers – and public financing is increasingly available in more wealthy states to fund campaigns and other expenditures. Almost all democratic countries, rich and poor, have experienced a trend towards more generous public subsidies over the past half-century.

Even in these countries, however, private donors play a major – and often dominant – role in party and campaign finance. Whether donors are individuals or private companies, there is a danger that they will use their money to influence candidates or party officials. In this way, special interests can receive favourable treatment from political leaders in government. Money given in return for implicit or stated favours not only has a corrupting effect on a political system, but it also undermines the trust and legitimacy upon which a flourishing democracy depends. The poor, who are unable to contribute to party coffers, are left to languish voiceless, in poverty, and increasingly enraged at their exclusion from the political equality that democracy has promised to them.

Party funding has for these reasons been controversial in developed and developing countries alike and in young as well as established democracies. Though the way in which money insinuates itself into politics has been extensively studied, improper influence is exercised mostly underground. The fungibility of money makes its passage through a political system hard to trace. Key actors in the drama of money-politics – party officials, candidates, private companies, and wealthy individuals – shun publicity, and most of what we know about their actions has been uncovered by investigative journalists. Party finance issues emerge periodically through scandals, and a complex mythology has emerged in many societies about hidden payments that are believed to lie behind almost every political action.

The success of private companies is dependent upon appropriate public legal and regulatory regimes, government policy choices, licensing decisions, and access to government contracts. It is no surprise that businesspeople and other special interests want to shape party policy and to build relationships with political leaders. Formal mechanisms for lobbying and influencing governments and parties are both proper and necessary in any flourishing and democratic society. Unfortunately, unequal access to financial and other resources leaves some special interests vastly more powerful than others.

Parties have historically been private associations that function in the public sphere. In established democracies there have been sustained efforts over the past six decades to apply tighter systems of public regulation to them, often accompanied by the introduction of increasingly generous public funding. As we shall see, however, state regulation and public funding can bring fresh pathologies and dangers of their own.

In countries that have recently escaped authoritarian rule, political finance can also influence the broader character of an emerging democracy. Financial weakness is not an absolute barrier to electoral success. The funding of parties and candidates is just one factor among many: politics is also shaped by the party system, the political culture, and access to less tangible public resources. However, private money can undermine new democracies because the formal rules of the political game have not yet been deeply entrenched.

The institutions through which corruption and improper influence can be countered are also weak in such transitional states. Democracy is often established by means of elite pacts between state bureaucrats, political families and the military; party funding is low down their list of priorities, and safeguards against abuse are rarely systematically incorporated during the drafting of foundational constitutions. There is an imperative to build party systems quickly, and the rush to secure funds can set a new democracy on a dangerous course. The role that money can play in shaping a party system is not yet fully understood. Some scholars, however, believe that resources, including financial resources, can help to entrench a dominant party system: a powerful party’s access to public and private funds can make it impossible for opposition parties to compete.

The importance of money in political life is recognised by political leaders everywhere. There has been an extraordinary variety of interventions by states in the financing of politics. These measures have taken two broad forms: regulations and subsidies. Regulations include bans on vote buying, disclosure rules, caps on campaign expenditure, and contribution limits, among many others. Subsidies include public payments to parties or candidates, tax relief to donors, and subsidised access to resources such as state television and radio. Different countries have adopted various patterns of regulation and subsidy, and these distinct political finance regimes have brought varied and often unanticipated consequences.

Political finance regimes are ostensibly designed to increase transparency, reduce corruption, and build healthy parties. However, they can entrench undesirable as well as desirable patterns of politics, advantaging party bureaucracies over candidates and activists, creating state dependency and interference, sparking factionalism within parties, or entrenching ‘cartels’ of big and established parties. State funding and regulation, moreover, can serve as opportunities for states to penetrate parties and bring them under undemocratic control.

Political finance and party funding regimes

Despite the importance of the subject matter, the empirical study of party and campaign finance is relatively undeveloped. There has been little systematic empirical research on political finance, particularly in developing countries, and we still lack a basic academic consensus around definitions, classifications and typologies. In parliamentary systems, the focus of study has been on the funding of political parties. In presidential systems, most attention has understandably focused on campaign finance and on the relationships between donors and candidates. Many problems and pathologies are shared between systems because modern political parties engage in ‘permanent campaigning’ and political leaders play an important role even in parliamentary systems.

There are two basic categories of political funding: private and public. Within each category, scholars have variously distinguished legitimate or formal funds from informal, illegitimate or illegal ones; covert funding from overt; and concentrated sources that create dependency from dispersed ones that build relations between society and party. Some researchers have focused on the quantity of expenditures and corresponding donations. Others have seen an alleged ‘arms race’ between political parties at campaign time as central to the phenomenon of money politics: the more money party leaders need to compete, the more willing they will be to compromise principles and legality to secure such funding. Scholars have also explored the character of resources, viewing the key reform challenges as arising not from too little or too much money but from the ‘wrong kind’ of money.

Private donations from civil society to political parties are widely (but not universally) considered to have prima facie legitimacy, given the fundamental democratic right of individuals and companies to form and fund ‘private’ political associations and to express and promote political and policy preferences. Donations by party members, particularly small donations or party fees, are generally viewed as benign because they strengthen bonds between party and society. Donations can also legitimately buttress or advance ideological positions – such as limited state intervention in the economy or fiscal policy orthodoxy – and they can be used to defend particular rights, preferences or freedoms.

Business donations, of course, are likely to promote the values, sentiments and policy preferences of commercial society as a whole or of particular businesses or economic sectors. They can be partially counteracted by trade union or social movement funding for alternative parties or candidates. In the case of donations from foreign companies, a majority of countries have criminalised the acceptance of such donations even if they originate with apparently legitimate donors. Multinational corporations have been viewed as especially controversial funders in many post-colonial societies and also, for example, in the United States.

Donations made by wealthy individuals seeking public honours or positions have been one common source of controversy. Another has been company donors who seek privileged access to political leaders and officials. Most problematic of all has been companies’ covert pursuit of direct business advantages: access to government contracts and licences, detailed manipulation of laws and regulations to a company’s advantage, or influence over the actions of regulators and tax authorities.

Party funding has been closely linked to corruption (broadly defined as the abuse of public office for private gain), including the acceptance of campaign contributions from organised criminal groups. One author’s breathless ‘sampling’ of campaign finance scandals from around the world includes the following tasty morsels: alleged kickbacks from companies doing business with government in Brazil; private contractors in Croatia paying political parties in order to secure outstanding payments from government departments; illegal political donations in Germany tied to waste management contracts; substantial monetary transfers from foreign companies to the Indian ruling party in exchange for arms sales; party donations to secure state contracts in Japan; payments in return for logging licences in Papua New Guinea; and donor generosity allegedly linked to proposed changes in anti-tobacco legislation in the United Kingdom.

Countries such as Malaysia, Israel and South Africa have experienced further controversies around party-owned companies. Such companies allegedly use their relationships with political power brokers to secure commercial advantages and thus super -profits – some of which are then ploughed back into party coffers. Payments to parties have also been linked to the abuse of tender processes to generate returns that can then be funnelled into party war chests.

Other sources of contentious political funding include donations by foreign governments, political parties or international political foundations, particularly where these have originated in one-party or dominant party states – or where they are linked to reciprocal favours to the donor party or government. During democratic transitions, the need for donations from international agencies and political foundations has often been inescapable, and these have been grudgingly accepted as the ‘least bad’ donors available.

Formal public-sector funding of political parties has usually arisen as the result of attempts to minimise corruption and the abuse of private donations. The state’s growing regulatory role, most notably in Western and now post-communist Eastern and Central Europe, has been the ‘stick’ used to regularise political finance. The ‘carrot’ has been the provision of public funds for electioneering and party administration. Formal public funding of parties can create problems of dependency and it can entrench the power of existing parties at the expense of emerging ones. It may also empower bureaucrats and parties’ headquarters at the expense of candidates and peripheral branches. The idea of providing ‘matching funds’ has grown in popularity in recent years because it obliges parties to retain relationships with private donors.

In some Western European countries, public funding has more or less totally replaced private donations. Both public funding and state regulation have been far less prevalent and extensive in anglophone countries and in the developing world. Poorer countries, particularly in Africa, have found it hard to fund their public financing aspirations.

In most cases, reformers have aimed to create ‘balanced’ party finance regimes that combine the regulation of private donations with an injection of regular public funds. As we shall see in our concluding chapter, there are no reliable templates or best practice guidelines available for reformers, and there are no simple legislative remedies for the funding-related ailments that afflict every political system. Simplistic international codes of conduct peddled by non-governmental organisations have almost always proved ineffectual or counterproductive.

In the middle-income developing countries explored in this volume, informal and often illegal public-sector funding of parties and candidates is at least as important as legislated public funding mechanisms. Informal funding mechanisms include the diversion of revenues from state-owned enterprises, the transfer of public funds to party-owned companies through tender rigging, patronage relationships through which party activists are given jobs or contracts, ‘pay to play’ conventions where only donors have access to government work, the abuse of state resources for election campaigning, and the gross manipulation of public funding regulations for partisan purposes. Such pathologies occur in one or other configuration in every country under investigation in this collection.

Less obviously, the political development of young democracies is affected by the intrusion of money into the internal politics of political parties. In presidential systems, candidates’ fundraising efforts can have devastating repercussions for the coherent internal organisation of parties. In parliamentary systems, it is too often assumed that political finance is purely a matter of transfers of funds to bank accounts controlled by ‘the party’. Most parties have complex internal systems and money is held in a variety of sites. Political entrepreneurs claiming to represent or have influence in a party can build personal or factional war chests whose existence is unknown to party officials. Informal transfers from businesses and state-owned enterprises can fuel internal party divisions, fund vote buying in internal elections, and accelerate factionalism and the personalisation of party patronage systems. Once such patterns of politics become entrenched, it may become impossible for activists to rise within a party without a factional or personal war chest; and it may become impossible for such aspiring leaders to accumulate adequate resources to compete without resorting to illegality and corruption.

Lessons from the global South

It is widely accepted that party and campaign funding, and its regulation, can be important factors in the development of a political system. Party finance regimes influence the degree of autonomy political parties enjoy from the state and from powerful interests. Such regimes affect the level and character of corruption. They help determine how independent parties and candidates remain from donors. And they influence the degree of open political competition and equality of political opportunity that citizens enjoy. Equally importantly, party finance influences the internal organisation of parties, the character of their internal party democracy, their overall organisational structure, and the growth and character of internal factions. It is therefore a major factor – albeit one among many – that influences the overall political development of a democracy.

(Continues…)Excerpted from Paying for Politics by Anthony Butler. Copyright © 2010 Anthony Butler and individual authors. Excerpted by permission of Jacana Media (Pty) Ltd and Konrad Adenauer Foundation.
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