The devastation that the Covid-19 pandemic has caused for businesses has had a knock-on effect on the revenues of the ANC and the DA.
ANC treasurer-general Paul Mashatile and DA treasurer Dion George have both highlighted the damage the pandemic has done to cash flow as the parties prepare for costly local government elections.
The prolonged pandemic caused many businesses to close or to suffer severe losses, which required them to retrench staff. This was certainly worsened by the widespread looting and destruction in KwaZulu-Natal and Gauteng last month.
The Political Party Funding Act, which came into effect on April 1 and requires political parties to disclose all donations above R100,000, has also had repercussions, the parties’ treasurers said, because donors sometimes do not wish to reveal their identities. In addition, the act changed the formula for allocating government funding for political parties.
“The ANC ... has been affected negatively by the Covid-19 pandemic,” Mashatile told Business Day. “Covid-19 has disrupted many facets of life in an unimaginable way. One ... is the disruption of private business, which is key in funding all political parties in the country since there has not been an adjustment in party funding by the government.
“Since the inception of the democratic dispensation, parties have relied on private sources for funding as opposed to government funding.
“However, there has been a noticeable, impactful reduction of donations from private business,” Mashatile said.
Over the past few months the ANC has been struggling to pay staff salaries and was planning to halve staff numbers at its Luthuli House head office. It had an outstanding debt of tens of millions of rand to the SA Revenue Service for the nonpayment of PAYE and at one point the party was in arrears of about R140m in deductions from staff salaries for its provident fund.
George said in an interview that the Political Party Funding Act as well as the coronavirus pandemic have restricted the DA’s cash flow. “But we have not had a problem in terms of paying all of our bills and preparing for the elections but of course our envelope is smaller.”
George said the DA had “right-sized” the party to streamline the organisation and had retrenched a small number of staff in the months leading up to May in anticipation of lower income from the government allocation to political parties because of a change to the formula. Staff vacancies were also not filled.
“It [the effect] has been significant but was not as severe as we had anticipated,” he said.
The DA’s election budget is thus smaller than in the previous election but not to the extent that it has affected its ability to run an election campaign. “We have always been very prudent with our money but I would say we are being even more prudent now because of the tight financial envelope that we are in,” George said.
Funding formula
Freedom Front Plus (FF+) leader Pieter Groenewald said the pandemic had had some effect on donations but not a huge one. Due to Covid-19 “people just don’t have money to donate”, Groenewald said.
There had been no need to retrench FF+ staff and trim down the party’s organisation. Staff have been paid their full salaries throughout the pandemic. The budget for the election has not been reduced.
The change of the formula for allocating government funding for political parties has worked in favour of the FF+.
Before the change, 90% of the pool of funds was divided between all political parties represented in parliament and provincial legislatures proportional to their share of the votes and there was a 10% equitable allocation. This was changed to 75% proportional and 25% equitable. Groenewald said this had hit the ANC and the DA, while all the smaller parties had gained from it.
The formula is also applied to donations made to the common political party funding pool.
The EFF was not available for a full comment, but its treasurer did say that the pandemic had affected its finances.
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