#StopAidForProfit - ten shocking corporate projects supported by UK aid
20 July 2020
Boris Johnson's announcement that the Department for International Development (DfID) will be merged with the Foreign Office later this year has left many in the development sector with more questions than answers. But if previous experiences of "tied aid" and spending by CDC Group are anything to go by, the future of aid will see more money being shovelled into corporate pockets.
The merger reverses over twenty years of development policy in which the aid budget has, officially at least, being spent with the intention of reducing global poverty and not on achieving foreign policy objectives. The International Development Act 2002 effectively outlawed "tied aid" - that is aid money spent on the condition that recipient countries purchase exports from the donor. Most infamously, this practice was exposed in the early 1990s with the Pergau Dam Scandal, when aid was given to construct a dam in return for the purchases of UK arms by the Malaysian government. The World Development Movement (as we were known then) took the government to court to, and won! Not long after, the 1997 Labour government set up DfID to ensure greater separation of aid and trade.
The corporate takeover of aid
In the past 5-10 years, however, we have seen an increasing trend towards aid being spent in regions and sectors where UK businesses are well placed to profit. Although DfID has maintained a strong reputation for aid spending which contributes to poverty reduction, an accelerating trend towards disbursing large amounts of funding to major international firms and private sector partners has caused concern. During this time, the government has also deliberately reduced the amount of aid spent by DfID to 70-75%, with more money spent by departments and cross-government funds that are less transparent and less accountable (MPs raised concerns about this just before the merger was announced).
Another trend has been the growing importance of CDC Group. CDC invests and gives loans to private companies and private equity funds operating in the global south. As we have argued previously, CDC's business model represents a "market knows best" approach to development that results in millions of pounds being siphoned off by financial intermediaries and aid spending decisions being made on the basis of private profit rather than in the public interest. In 2017, the government passed a bill to allow it to increase the financial assistance that CDC received from £1.5 billion to £6 billion with an option to increase to £12 billion at a later date. And with GNI and the 0.7% aid budget set to fall due to the Covid-19 pandemic, CDC will grow as a proportion of aid spending in the coming years.
The future of aid
That means that we already have a fairly good idea of what the future of aid will look like under the current government. In our latest briefing, The future of aid after DfID, we have summarised some of the worst examples of corporate, profit-driven aid spending in recent years. Our top ten worst projects are:
- Feronia Inc (DR Congo) - Feronia Inc received $18 million from CDC in 2019, the latest in a series of loans and investments the UK development bank has made (alongside other DFIs) since 2013. Feronia operates several palm oil plantations in DR Congo. A report by Human Right Watch alleges that health and safety standards at the plantations are routinely abused, to such an extent that workers have reported loss of eyesight and impotence. Furthermore, in 2019 a community activist was murdered near the plantation and, although one suspect has since been cleared, the families are still searching for justice and have accused Feronia of complicity in a cover up.
- Bahraini police (Bahrain) - The cross-government, aid funded Conflict, Security and Stability Fund (CSSF) has funded several projects in Bahrain in the past decade. This includes training for the Bahraini police in how to “command and control” demonstrators, including sessions on using “less than lethal options” such as water cannons and dogs, as well as “evidence gathering and tactical advice". Other programmes as part of the £5 million "technical assistance" package included work with the Bahraini prison system. In 2016/17, 63% of the CSSF's budget was spent by the Foreign Office.
- Amandi Energy / Three Points Project (Ghana) - CDC has provided $82.9 million to Amandi Energy to construct a 203 megawatt gas turbine in Western Ghana. Supplied with gas from Ghana’s offshore Sankofa gas field, the $552million project also attracted funding from Power Africa and the US development bank (the Overseas Private Investment Corporation). In April 2020, it was reported that the Ghanaian government is facing a “$250 million bill for unused gas in 2019 due to ‘take or pay’ clause” in the Public-Private Partnership contract established for gas extraction at Sankofa.
- Bridge International Academies (Kenya, Uganda and Liberia) - Both CDC and DfID have supported Bridge International Academies in the past decade. Bridge is a low-cost private school chain with significant operations in Kenya, Nigeria and Uganda. Our research has found numerous issues with Bridge schools including: exclusion of poor and disadvantaged children; violation of health and safety and labour conditions; and a severe lack of transparency and accountability. The situation became so serious that authorities in Kenya and Uganda actually tried to stop the schools operating.
- Spencon / Emerging Capital Partners (Kenya) - In April 2020, a documentary by the BBC’s award-winning Africa Eye team reported on concerns of alleged fraud, bribery and other highly questionable business practices by two British managers appointed by a UK aid-backed private equity fund to run its investee Kenyan firm Spencon. Emerging Capital Partners Africa was backed by CDC who invested $47.5 million in the fund. The Africa Eye documentary reports that the two managers allegedly made highly questionable cash payments for official documents, refusd to pay Kenya staff in the final months before the company went bankrupt, and used company funds and equipment to build a golf practice area for their use at a time when the company was facing insolvency.
- ONOMO Hotels (Eight countries across Africa) - Perhaps unexpectedly, as reported in the Times, CDC has also given plenty of financial support to corporate hotel chains in the past. Perhaps most notably, CDC invested $53.55 million in Onomo Hotels in November 2017, a “Casablanca-headquartered hotel group targeting African business travellers” with hotels in South Africa, Togo, Mali, Guinea, Côte d’Ivoire, Senegal, Gabon and Rwanda. ONOMO will use CDC's investment to double its portfolio from ten hotels to twenty by 2022. Whilst this expansion will create jobs, it is unclear how well paid this work well be in the often precarious hospitality sector. But that's not all; in 2019, CDC invested $32.1 million in Inaugure Hospitality Group (a hotel chain operating across Africa) and made an undisclosed investment in Thalappakatti Hotels, described as a “restaurant food chain in India”. In total, CDC has supported six corporate hotel chains around the world since 2012.
- Nairobi Women's Hospital (Kenya) - Although not listed on its website, responses to parliamentary questions also reveal that CDC is invested in Nairobi Women’s Hospital. Oxfam research has previously revealed that the hospital’s care is highly unaffordable to many Kenyans. Furthermore, in February 2020 journalists reported on a cache of leaked WhatsApp conversations from staff at Nairobi Women’s Hospital that showed a deliberate practice of overcharging patients. The reports state that the Whatsapp group “resembled a trading floor” with senior doctors “pushing employees to work harder to increase admissions”. Whistleblowers also described a “corporate culture of being pushed to meet admission targets” and “a financial reward paid to clinical officers for each admission.
- Prosperity Fund scoping study on gas infrastructure (China) - Another cross-government fund supported by the aid budget is the Prosperity Fund. The Prosperity Fund is specifically designed to have commercial benefits and to increase UK exports as a secondary benefit. In 2018, it was revealed that nearly £2 million had been given to projects exploring the expansion of gas and oil sectors in middle income countries such as Brazil, India, Myanmar and China. This scoping study on China's gas infrastructure examined whether UK expertise could help to develop China's large shale gas reserves. In other words, aid funding was used to try and encourage fracking for the benefit of UK exporters, despite the damaging social and environmental consequences such a project would bring.
- Nu Cosmetic Clinic (India) - One of CDC's more bizarre healthcare investments is the Nu Cosmetic Clinic in India. The clinic, which uses the strapline “The World Awaits A Nu You”, is part of the Beam Hospital company, but is also linked to Nu Cosmetic Clinic of the UK which has 20 cosmetic surgery clinics across the UK. Its website highlights a wide range of cosmetic surgery procedures provided by the company at a substantial price including “Vaser Liposuction” for between Rs. 85,000 and Rs. 350,000 (£950 to £3,800) and nose surgery Rs. 75,000 to Rs. 100,000 (£800 to £1,100). It is unclear from CDC's website how this investment is contributing to poverty reduction.
- Nairobi Java House Limited (Kenya) - A similarly odd investment is in Nairobi Java House Limited. Java House is the owner of several "casual dining retail brands" in Kenya. This includes Java House itself, a coffee house chain, a frozen yoghurt shop called Planet Yoghurt, and the 360 Degrees Artisan Pizza restaurant. Again, beyond vague claims of supporting the local economy and creating jobs, it is unclear how CDC's support for Nairobi Java House Limited contributes to poverty reduction.
Unless we act now, this corporate takeover of aid will continue unabeted. Although the DfID merger now looks almost certain to go ahead this September, we continue to call for strong aid scrutiny, reforms to how CDC invests, and a new, progressive vision of development for the 21st century.
Sign our petition: Tell Boris Johnson to stop hijacking the aid budget
Photo: ONOMO Hotel in Dakar, Senegal. Credit: ONOMO Hotels / Wikimedia Commons.