Working to ensure the CDC Group delivers in tackling poverty
7 December 2016
The government recently announced – via a Bill tabled in parliament – its intention to increase the amount of aid money it is able to invest in the CDC Group, the Development Finance Institution (DFI) owned by DFID.
Bond and our members have been seeking to understand the intentions behind the Bill and ensure that future investments of taxpayers’ money in the CDC lead to maximum impacts on poverty and support for sustainable, inclusive development.
The CDC Bill, which came as a surprise to many when it was announced in November, seeks to increase the cap on the amount of money that DFID can provide to the CDC Group, setting a new limit of £6 billion and with options to further increase it up to £12 billion. This seems likely to lead to a significant rise in investment from the government; last year’s announcement from DFID of a £735 million contribution to the CDC was the first in twenty years. The plans form part of DFID’s drive to support economic development and job creation, set out most recently in its Bilateral Development Review.
The CDC Group’s mission is to support the building of businesses throughout Africa and South Asia, to create jobs and "make a lasting difference to people’s lives in some of the world’s poorest places". However, over the years the CDC has been the subject of much controversy, particularly in the 2000s with accusations of high salaries, the use of tax havens and failure to ensure its investments have meaningful impact for poor people.
The Group has not faced an equivalent level of scrutiny to many development actors and its investments and outcomes have been far from transparent. Historical reports by the National Audit Office (NAO) and parliament’s International Development Committee (IDC) were critical of the CDC Group, for example in 2011 an IDC inquiry into CDC found that “[CDC’s] development impact has been insufficient for a government-owned company whose net investments count as Official Development Assistance.”
Partly in response to such criticisms, in 2010 the CDC Group went through a major reform process, initiated by Andrew Mitchell the then Secretary of State for International Development. It published a new investment strategy, with more focus on building smaller businesses in less developed countries, and changed its pay structure to rationalise staff salaries. It is also attempting to better illustrate its outcomes and impact on poverty reduction. There is no doubt that these reforms have led to improvements, which were recognised in the most recent NAO report, but have they gone far enough?
Bond’s members want to be assured that the CDC Group is continuing to improve and reform to ensure that its investments bring real benefits to the world’s poorest people. This includes ensuring that there is a clear link between CDC investment decisions and associated business cases, and the Sustainable Development Goals and the "leave no one behind" agenda. It is also vital that the CDC Group is expected to meet similarly high standards on transparency, effectiveness and demonstrating impact as other development actors. We look forward to CDC’s Investment Strategy for 2017–2021 for more detail on the organisation’s plans going forward.
Insufficient focus on the impacts of aid on poor people don’t only fail to alleviate poverty but can actively cause harm to vulnerable groups; and they also risk reducing further the public’s trust in aid. The government has a duty to ensure that UK aid money is going to the people and projects where it has most impact in tackling poverty.
The Bill will pass; we look forward to continuing to work with DFID and the CDC Group to help ensure its investments are as impactful as possible in tackling poverty.