This isn’t what aid should look like - A fresh wave of controversy for the CDC Group
09 December 2016
This comment piece was published in the Times today as part of front page story, and double page spread expose of the CDC group, the controversial private equity arm of DfID. There's a bill underway in parliament right now to quadruple the amount of money that DfID could channel through the CDC group - from £1.5 billion to £6 billion. Email your MP to oppose this bill.
No aid group can claim that all of its work is one hundred percent effective. It isn’t an exact science, any more than running a public service or a business. Mistakes will be made, the important thing is to learn from them.
But when it comes to the CDC Group, the private company wholly owned by the Department for International Development (DfID), it’s the business model itself which is flawed. That’s why, despite reviews and reforms, the way in which CDC uses aid money is not up to the job it’s been set; namely to combat poverty in Africa and Asia.
At the crux of the matter is that CDC Group bases its operations on ‘trickle down’ economics – the discredited concept that the poorest will eventually benefit from growing wealth at the top of society. How else could you believe that investing aid in the construction of an upmarket mega-mall in Kenya, to provide “shopping therapy at its best”, along with luxury apartments in a so-called Garden City, is the best way to fight poverty in that country?
CDC argues that the project creates 650 jobs during construction and 800 more afterwards. But the cost of these jobs works out at one direct job created for every $17,000 spent, with almost half of these jobs being temporary.
Garden City isn’t a one-off. CDC invests in private hospitals in India. The need to improve healthcare in India is clear, but it’s less obvious that investing in for-profit care for the middle class is the best way to help poorer communities.
Then there’s private schools in Africa. Again, no one doubts the crying need for better access to education. But one of the companies CDC invests in - Bridge International– has recently had its schools closed in Uganda because these ‘low’ fee schools were accused of using unqualified teachers, and poor standards of education and sanitation.
CDC doesn’t always invest directly, but uses private equity funds to invest on its behalf. While these funds understand how to generate financial returns - CDC’s average since 2012 is 10.3% – they aren’t set up to eradicate poverty. To prove the point, CDC has made 38 new investments in funds since 2012, at least 28 of which are domiciled in well-known offshore tax centres, draining developing countries of the very money they need to build better social protection.
CDC also sits arm’s length from the Secretary of State for International Development. Perhaps that’s part of the attraction. Former Secretary of State Andrew Mitchell predicted back in 2013 that “in 50 years’ time the CDC will be seen as the principal British development structure – rather than DfID.” But this doesn’t sit well with repeated calls for more accountability in aid spending.
People up and down Britain spent years arguing that meeting our aid target is something to be proud of. Those same people will be horrified with the government’s plans to quadruple the amount of that budget going to CDC to build more luxury developments. Aid should support the real needs of the poorest - like robust public health and education services. CDC is unable to deliver on this agenda, and MPs should vote down the government’s proposal.
Image: An illustration of the Garden City mall in Kenya.