New rules needed to regulate money in politics

When Mitt Romney ran for president of the United States, both the US media and Romney’s political opponents lambasted him for refusing to release his and his wife’s tax returns. Eventually he partially caved in under the pressure and released the tax returns for himself and his wife for the 2011 financial year. However, Romney’s refusal to reveal the true nature of his wealth (and questions about how he could have managed to pay a lower percentage of his income in taxes than most ordinary workers who earned a 100^th of his income) probably hurt him at the polls.

Of course, Romney had other problems – and I am not talking about the fact that he once strapped the family dog to the roof of the car and drove all the way to Canada on a family holiday. In the absence of a personality transplant (and another $100 million to finance his campaign) he was probably never going to win the presidential election. But the fact that he appeared to want to avoid scrutiny of his financial affairs strengthened the belief that he was a privileged man out of touch with the concerns of ordinary workers, a blow-dried fake, somebody who believed the rules only applied to others.

In contrast, South African voters seem to have a complicated relationship with the wealth of its leaders. Some voters and members of the media seem to be horrified by the fact that some politicians are rich. They sneer at Tony Yengeni’s Maseratis, Cyril Ramaphosa’s R18 million bid on a buffalo, Jacob Zuma’s R206 million house (not bad for a guy who had to ask Schabir Shaik for pocket money not so long ago), Tokyo Sexwale’s billionaire empire, and now Mamphela’ Ramphela’s revelation that she is worth over R50 million.

Voters who are horrified by the wealth of some politicians have both bad and good reasons for this view.

For some the horror is animated by the racist view that white people are rich because they worked hard for their money and deserve it, but that rich black people could not possibly have earned their wealth. Others express more nuanced concerns about the lack of financial transparency in our political system and ask how some politicians without any other discernible source of income could have amassed the riches they did if not for the corrupting influence of the private sector.

But many voters also look up to leaders who have “made it” in the world – especially if they see the success of the politician as affirming their own worth as human beings or (less admirably) if they believe they might benefit personally from the wealth and influence of a politician.

Could that be why Mamphela Ramphele is getting such a hard time for revealing how much she is worth? She does not look like the kind of person who will share her wealth with us or will allow financial concerns to dictate her course of action. She is far too imperious and hard-headed for that. Or do some people harbour the sexist belief that a wealthy woman could not possibly have worked for her money?

Whatever the reasons for these complicated attitudes of voters towards the wealth of politicians might be, it is uncontroversial to state that corrupt wealth-acquisition by politicians pose a real threat to the integrity of our political system. Put differently, when members in the private sector pay bribes to politicians to buy their favour, they subvert the will of the voters and sell our democracy down the drain.

Where politicians corruptly use their power and influence to advance the interests of business or of foreign leaders or institutions, this erodes democratic accountability, cheapens the vote, and often have catastrophic consequences for poor and even middle class voters who depend on the state to survive or thrive as human beings with inherent human dignity.

The Executive Members Ethics Act of 1998 (and the code of ethics promulgated to give effect to it) was passed in a half-hearted and futile attempt to address these concerns. The Executive Code of Ethics – which applies to members of the national and all provincial cabinets – does not require member of the executive to declare their full wealth – as Mamphele Ramphele did last week. The Code requires Cabinet members (which includes the president) to declare some of their financial interests and that of their spouses, permanent companions or dependent children, “to the extent that the member is aware of those interests”.

The Code requires members of the executive to declare their shares and other financial interests in companies and other corporate entities, sponsorships, gifts, other financial benefits, foreign travel not paid for by the state, details about land or property they own and pensions. It does not require members to declare wealth acquired before the individual became a cabinet member.

It seems to me that given such loopholes, any half-decent lawyer or financial adviser could structure the financial affairs of a cabinet member largely to avoid any declaration of his or her financial interests.

A clever politician will create a trust (as Julius Malema did) to place some distance between him or herself and the benefits received from the private sector or foreign leaders. The politician will then argue that any financial benefits that accrued to the trust need not be declared.

In any case, even if the value of the trust and any benefits that accrue to a trust need to be declared, the trust could be set up as a family trust, which would draw a veil of secrecy over the trust. This is because the Code lists parts of a Cabinet member’s declaration that must be kept secret as follows:

• The value of interests in a corporate entity other than a private or public company;
• the details of foreign travel when the nature of a visit requires those details to be confidential;
• the details, including the address, of any private residence;
• the value of any pension;
• details of the financial interests of a member’s spouse, permanent companion or dependent child;
• the member’s liabilities.

There is no way for the voters to hold the individual cabinet minister accountable regarding this secret part of the declaration. Where a company or a foreign leader channels a large sum of money into the family trust of a cabinet minister, this will remain a secret. Moreover, where the money is channelled to a non-dependent child of a Cabinet member with the understanding that the Cabinet member will provide untrammelled access to the person providing the money in return, this corruption will not be revealed by the declaration.

The Public Protector has access to the secret part of the declaration, but in the absence of other mechanisms to check whether the declarations are complete, cabinet members have no reason to be truthful when they declare any donations made to such a trust.

Unless the books of such a trust are opened up to public scrutiny, we have to rely on the integrity of individual Cabinet members to declare all benefits and will also have to assume that the Public Protector has the resources and the time to check whether any conflict of interest arose because of donations made to such a family trust. In the absence of a complaint, it is unlikely that the Public Protector will investigate any conflict of interest and there cannot be a complaint because the details of the financial interests of the family are kept secret.

In other words, for all we know every single cabinet member – including the president – are lying through their teeth when they make the secret declarations of their interests and that of their family members. The opposite may, of course, also be true. But we are not allowed to know, because it is all a state secret. So, for all we know, President Zuma has meticulously and properly declared the R206 million benefit he received from the state for the upgrade of his Nkandla homestead (built on land held in trust!) as well as any financial benefits he or any of his family members might have received from the Guptas.

But the simple fact is that we will never know. Because the Executive Members Ethics Code was constructed on the assumption that it was regulating the financial interests of cabinet members who are scrupulously honest, it will necessarily fail dismally to unmask the corruption of those members of cabinet who might be dishonest.

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