When philanthropy and politics mix

What happens if you have given a donation to a public benefit organisation and then find it is using its resources to support a political party? Gift of the Givers, an aid organisation that operates in South Africa and internationally, has been criticised for providing goods such as blankets and food parcels worth more than R1 million for distribution by the ANC President, Jacob Zuma, during his election campaign in Mpumalanga. Mr Imtiaz Sooliman, founder and chairperson of the organisation, said there was nothing wrong and that they had done it before. Though most newspapers focused on the electoral code which points out that “no person may induce or reward any person … to vote or not to vote in any particular way”, journalists have not picked up on legislation relating to non-profit organisations, and whether they are permitted to support political parties.

If a non-profit organisation (NPO) is an approved public benefit organisation (PBO), it is required in terms of section 30 (3) (h) of the Income Tax Act to commit that it “has not and will not use its resources directly or indirectly to support, advance or oppose any political party”. The reason for this, as reflected by the SA Revenue Service (in its Tax Exemption Guide for Public Benefit Organisations in South Africa) is that: “The promotion of political objects is not considered to be for the public benefit and a PBO may, therefore, not use its resources directly or indirectly to support, advance or oppose any political party. A separate income tax exemption for registered political parties is provided for in section 10(1) (cE) of the Act.”

The NPO Act is silent on affiliations with political parties. However, the question arises whether NPOs (even those that are not public benefit organisations) should support political parties when those registered in terms of the NPO Act operate for a public purpose in contrast to political objectives.

For those individuals who have given donations to organisations for the public benefit, an alliance with a particular political party might clash with their own personal political views. However, it is incumbent on Sars to give clarity on this issue and to indicate if it plans to take any action against public benefit organisations that are involved with political parties. It would be interesting to know what action they will take, if any. It is possible that the thinking behind the Income Tax Act was that public benefit organisations (as civil society) might oppose the governing party rather than support it. However, the law should be applied both ways and it will be interesting to see if it is applied at all.

As a follow-up to the above, Idasa has published an interesting booklet titled Thinking it Through: Corporate Guide to Political Donations written by Lawson Naidoo and edited by Richard Calland and Judith February. Though this does not focus on individual philanthropists who support political organisations, there are some key issues that are raised, particularly those relating to corruption and the expectation that the “donor” will receive special attention after the party has won at the polls.

In South Africa, donations to political parties are somewhat unregulated and this can lead to scandal, corruption, conflict of interest and unethical behaviour. Examples include the Schabir Shaik case, Oilgate, the arms deal and Brett Kebble’s relationship with the ANC Youth League.

Political parties receive funds from the state based on their proportionality in Parliament. Pity the newcomer on the block, such as Cope, which starts the elections on the back foot compared to others that receive state funds (the ANC received the bulk) and often corporate funds. However, all rely on donations from their supporters, but as they are political, rather than public benefit, they have the power, if they become the governing party to assist their own supporters or harm the supporters of their opponents. Hence the request by many donors to opposition parties to remain anonymous.

For those who strongly believe in supporting their party of choice, here are some tips from the booklet:

Only fund parties registered with the Independent Electoral Commission.

Be clear that the party’s policies are aligned with your own views.

Avoid intermediaries.

Donations should be transferred to a designated account in the name of the political party (and not put in black bags).

It is important that South Africans support their political parties to ensure a thriving democracy and it is our duty to ensure that our party of choice is well-resourced. However, care needs to be taken to ensure that our giving does not degenerate into expectations of favours and corruption and that some form of regulation should be encouraged.