Paper 2 • October 2016 In Africa people have experienced the toxic impact that money can have on their political systems and citizens’ ability to have their voices heard. It is increasingly recognised that corruption related to financing political parties poses a grave threat to responsive democratic governance, worldwide and in Africa. Covert party funding streams, influence peddling and leveraging state resources for party purposes all compromise the single greatest asset of democracy: the faith and support of ordinary citizens in the political process. In Africa, a lack of regulation hinders accountability and watchdog institutions for detection and enforcement are weak. This paper explores how enhancing disclosure of funding to political parties and strengthening their internal democracy can mitigate the corrupting impact of political party funding in Africa. This paper was produced as part of the project Exploring New Approaches and Strategic Entry Points for Anti-Corruption Efforts, ELECTIONS FOR SALE? financed by the Swedish International Development Cooperation Agency (Sida) Political-party funding – a necessary evil? Judith February Elections for sale: Political-party funding – a necessary evil? Judith February This paper was produced as part of the project Exploring New Approaches and Strategic Entry Points for Anti-Corruption Efforts, financed by the Swedish International Development Cooperation Agency (Sida) Judith February – Paper 2 – October 2016 Introduction by those with deep pockets can take on sinister dimensions and undermine the voices of citizens, ‘It is money, money, money! Not ideas, not in particular when it comes to policy. principles, but money that reigns supreme in Daniel Kaufmann and Joel Hellman, writing for the American elections,’ Robert Byrd, a respected US International Monetary Fund, highlight state capture senator, once said. Rahul Gandhi made a similar as follows: pronouncement about the Indian elections when he said, ‘If you do not have money, a family, friends, you In transition economies, corruption has taken cannot enter politics. I want to change this.’ on a new image – that of so-called oligarchs manipulating policy formation and even shaping Both Byrd and Gandhi were talking about the influence the emerging rules of the game to their own, very that money seems to have on political systems and substantial advantage. democratic outcomes all over the world, whether one is Though this form of grand corruption is in the developed world and fighting an election – for increasingly being recognised as the most instance, in the US – or in the developing world, such pernicious and intractable problem … we define as Asia or Africa. Increasingly, we have seen the toxic state capture as the efforts of firms to shape the impact that money can have on the political process laws, policies, and regulations of the state to their and citizens’ ability to have their voices heard. The own advantage by providing illicit private gains to problem is a Medusa-like head with several public officials. manifestations, depending on the context. The authors continue: Recently, in South Africa, there have been dramatic allegations concerning the influence that wealthy Indian Because such firms use their influence to block family, the Guptas, resident in South Africa, have over any policy reforms that might eliminate these South Africa’s president, Jacob Zuma. It has been advantages, state capture has become not alleged that they may go as far as influencing cabinet merely a symptom but also a fundamental cause appointments. The Guptas have close links with the of poor governance. In this view, the capture president and are known to have made donations to the economy is trapped in a vicious circle in which governing ANC, as well as to opposition parties in the policy and institutional reforms necessary to South Africa. improve governance are undermined by collusion between powerful firms and state officials who Meanwhile, in Brazil, President Dilma Rousseff has been reap substantial private gains from the under fire for her role in several party-funding scandals. continuation of weak governance.2 Reuters reported that executives from a large Brazilian engineering company, Andrade Gutierrez, testified that Anne Lugon-Moulin says that ‘state capture can be the firm paid suppliers off the books for Rousseff’s 2010 further refined by distinguishing between types of electoral campaign. It was also reported that the institutions subject to capture (Legislative, Executive, company contributed more than five million reais Judiciary, regulatory agencies, public works ministries) (US$1.27 million) under the table to pay campaign debts and the types of actors actively seeking to capture (large run up by Rousseff’s Workers’ Party. The money was private firms, political leaders, high ranking officials, allegedly transferred through a Brazilian-based media interest groups).’3 firm called Pepper Communications, which worked on Rousseff’s campaign, using a false invoice, according to It is against this backdrop that a discussion on money and the report. The executives also revealed bribes paid to politics, the link between corruption and development, win contracts in public-works projects, including the and possible reform measures must take place. Angra 3 nuclear power station, the Belo Monte hydroelectric dam and three stadiums built for the State capture through political 1 Soccer World Cup, held in Brazil in 2014. donations: The link between So, if in places such as South Africa and Brazil corruption and development untrammelled party funding in corrupt contexts is causing the state to be captured, some reforms might Corruption ... leads to inefficient economic, be called for – though it remains an uphill battle to slay social, and political outcomes. It reduces this complex dragon. In some political contexts, capture economic growth, retards long-term foreign and 1 Elections for sale: Political-party funding – a necessary evil? domestic investments, enhances inflation, distribution and poverty in varying degrees, both directly depreciates national currency, reduces and indirectly. Consequently, the effects of corruption on expenditures for education and health, increases an economy can be thought of in terms of distorting the military expenditures, misallocates talent to allocation of resources and the extent to which ongoing rent-seeking activities, pushes firms economic activity is redirected and rendered less underground, distorts markets and the allocation efficient. There are numerous studies showing this of resources, increases income inequality and relationship, and all point to both economic inefficiency poverty, reduces tax revenue, increases child and and distributional consequences. infant mortality rates, distorts the fundamental The World Bank has identified corruption as the single role of the government (on enforcement of greatest obstacle to economic and social development, contracts and protection of property rights), and and asserts that it undermines development ‘by undermines the legitimacy of government and of distorting the rule of law and weakening the institutional the market economy.4 foundation on which economic growth depends.’10 ‘Corruption related to financing political parties poses a (IDASA, 2005). grave threat to democratic development worldwide. Covert party funding streams, influence peddling and The neopatrimonialist practices of the party in office leveraging state resources for party purposes all since 2005 have relegated Burundi to the lowest compromise the single greatest asset of democracy: governance rankings, reduced its appeal to foreign the faith and support of ordinary citizens in the political investors, damaged relations with donors and process.’5 ‘Corruption erodes some of the core values contributed to social discontent. Tensions with of a democracy, including the fundamental principle that development partners have increased with corruption cases. The first case to provoke a governments are accountable to their citizens. Political reaction from donors was the sale of the presidential corruption may even erode the very legitimacy of the aircraft in 2006, which led the World Bank to request state. When political leaders are perceived to be an audit. In 2007 the Interpetrol scandal broke, in pursuing their personal interests excessively, citizens which the Public Treasury was deprived of more than become disenchanted, questioning their legitimacy and US$10 million. These two cases had an effect on that of the state.’6 There is a strong negative correlation budgetary aid, which was postponed during the between genuine wealth per capita – a direct measure of 2007 financial year. Although other cases of sustainable development – and corruption. Corruption corruption and allegations of economic malpractice and inefficient regulation are two sides of the same coin.7 implicating government officials in the ruling party did ‘There has been increasing contempt for and general not have as big an impact, the murder of the public disillusionment with parties and politicians, which, vice-president of Burundian civil-society group in turn, has an impact on attitudes to democracy as a Olucome in April 2009 raised new questions in the donor community.11 whole. One main reason for this has, without a doubt, been what is perceived as an excessive intrusion of ‘Lack of regulation ensures that conditions are ripe for money into politics.’8 political corruption in developing and transition