In 2016, CDC invested $65 million in Zambeef, one of the largest meat producers in southern Africa which is listed on the London Stock Exchange and exports in Africa and also to China, India, the UK and Italy. Zambeef is also one of the largest landholders in Zambia, with more than 100,000 hectares. [51]

Those supporting the company have previously been accused of facilitating the concentration of land in the country into just a few hands, while the vast majority of the population are subsistence farmers and have on average just 0.6 hectares per household. [52] The company’s stock reportedly soared by more than 50% as a result of CDC’s investment. [53]

Opaque investments through intermediate fund managers

CDC also continues to channel millions of pounds through intermediary investment funds. [54] It says this “remains a key part of what we do” and “allows us to reach small and medium-sized businesses.” [55]

This is despite extraordinary rates of return being made by some CDC-backed funds. One of CDC’s major funds, Actis, formed in 2004 following the restructuring of the CDC, has revealed that it has made $2.2 billion from the $867 million it has invested in infrastructure and other projects since then. [56]

A 2014 report from the parliamentary Ombudsman meanwhile said that CDC still has limited oversight of investments funds that receive its money and that even after CDC required fund managers to sign up to its new investment code, it has only “limited rights” to their records and accounts. [57]

CDC also continues to invest in funds and businesses domiciled in well-known offshore secrecy jurisdictions. Analysis of CDC data shows that since 2012, it made 38 new investments through funds – at least 28 of which are in Mauritius, the Cayman Islands, Guernsey, and Luxembourg. These investments account for 49% of the total $1.8bn committed to funds over this period. [58]

Most of CDC’s direct investments are in fact domiciled in developing countries. But some of these direct deals involve companies based in offshore jurisdictions and rich countries too – for example its $41m investment in Feronia Inc, which operates in the DRC but is domiciled in Canada, and its $25m investment in Garden City which operates in Kenya but is domiciled in Mauritius. [59]

CDC says: “We never use offshore financial centres to avoid tax. We use them so that we can invest alongside other international investors.” It says: “many developing countries do not yet have stable administration and legal systems necessary.”

Elsewhere it has acknowledged that “certain investments may include structures that reduce the tax burden on investors”, and said that it “will only acquiesce to such structures in order to facilitate a developmental impact.” [61]

But investing through offshore entities doesn’t help developing countries build the stronger administrative and legal systems that CDC says are lacking. It enables secrecy, and if CDC cannot convincingly prove its development impact, it is hard for it to justify investment through offshore jurisdictions based on that impact.

Diverting aid to private business

The UK has enshrined in law its commitment to spend 0.7% of Gross National Income as official development assistance (ODA), the OECD’s term for aid. [62]

Under little-noticed but important changes to how the government reports its aid spending, any new capital increase for CDC could count as ODA and come out of the aid budget – meaning less money for other projects. [63] This is concerning given CDC’s own admission that it is “not designed to solve all development challenges.” [64]

It is also concerning as, in the past, not all of CDC’s activities have themselves met the OECD’s criteria for aid spending. According to a report prepared for the House of Commons, between 2012 and 2015, only 68% of CDC’s new commitments were eligible to be counted as ODA. The remainder did not count usually because loans lacked the required grant element of at least 25%. [65]

This suggests that, in some cases, CDC has been lending at rates more similar to a commercial bank than a development agency.

Inviting scandal

Serious questions remain about CDC’s supposed development impacts. Meanwhile it has not yet published its investment strategy for 2017 to 2021, and it does not have a new CEO in place. CDC itself says it’s too early to tell what impact its reforms have had. “It is relatively early days”, it has said, “as results from new investments…will typically take five to ten years to materialise fully.” [66]

CDC’s direct investments continue to include examples of projects with questionable impacts for poor communities – the intended beneficiaries of UK development spending – and its continued investments through intermediary investment funds, many of which are located in well-known offshore secrecy jurisdictions, continue to pose severe challenges to transparency and accountability.

At the bill’s second reading in Parliament, UK Development Secretary Priti Patel said: “We will shortly be setting out a new investment policy for the CDC, covering the next five years. That will include a new reporting framework to better capture the broader impact of investments on development.” [67] Any consideration of increased taxpayer funding for CDC is, at this stage, clearly premature.

DfID is essentially asking MPs to pre-approve a quadrupling of funding for its controversial investment arm – before presenting a worked through strategy or plan for how this money will be spent, and how taxpayers will be assured that it helps meet the official mission of this spending: ending global poverty.

This raises serious concerns as this bill could clear the path to a massive diversion of public aid money towards private businesses – without sufficient transparency, accountability, or proof of impact.

Proposals to expand CDC also ignore the controversial experiences of other development finance institutions, including the World Bank’s International Finance Corporation whose investments have been linked to land rights violations and violence against peasants in Honduras, and numerous cases of evictions and forced displacement worldwide. [68]

In CDC’s own 2015 Annual Review, it suggested it struggles to find businesses that can meet both of its official objectives, “having a development impact as well as providing a financial return.” It said the “pool of potential investments” is small. [69]

Poverty alleviation or corporate enrichment?

The obvious question is: what would CDC do with billions of pounds in extra taxpayers’ money and how will it ensure this funding helps the intended beneficiaries of UK aid? Assumptions of trickledown development – that the accumulation of wealth by the richest will also benefit the poorest through consumption, investment and employment – are not good enough.

Public money must be used to help the poorest and most marginalised, and to tackle inequality – not finance private businesses for the sake of it. Increasing CDC’s size and influence is not a recipe for sure-fire development impact: instead, it is an invitation for scandal.

We call on MPs not to pass the Commonwealth Development Corporation Bill. We further believe that DfID’s relationship with CDC be opened to a fundamental review as we do not believe that CDC is currently performing a justifiable role in the eradication of global poverty.

This article is based on a briefing by Global Justice Now with news updates by The Ecologist.

References

1. Commonwealth Development Corporation Bill 2016- 2017, Parliament UK, http://services.parliament.uk/ bills/2016-17/commonwealthdevelopmentcorporation. html

2. See section: CDC’s reform promises. The requirement that UK development assistance be focussed on reduction of poverty is enshrined in the 2002 International Development Act: http://www. legislation.gov.uk/ukpga/2002/1/section/1

3. “It is relatively early days, as results from new investments…will typically take five to ten years to materialise fully.” “New CDC Bill: our briefing”, CDC Group, 22 November 2016, http://www.cdcgroup. com/Media/News/News-New-CDC-Bill-ourbriefing/#sthash.ott7WOQM.dpuf

4. “Diana Noble to Step Down as CEO of CDC Next Year”, CDC Group, 13 September 2016, http://www. cdcgroup.com/Media/News/Press-release-DianaNoble-to-step-down-as-CEO-of-CDC-next-year/

5. Commonwealth Development Corporation Bill – Explanatory Notes, http://www.publications. parliament.uk/pa/bills/cbill/2016-2017/0093/ en/17093en03.htm

6. CDC was previously known as the Commonwealth Development Corporation and before that: the Colonial Development Corporation. It is the world’s oldest DFI, established by the 1948 Overseas Resources Development Act which first set it up as a statutory company to invest in British colonies.

7. “Department for International Development: investing through CDC”, National Audit Office, 28 November 2016, https://www.nao.org.uk/wp-content/ uploads/2016/11/Department-for-InternationalDevelopment-through-CDC.pdf, p.23

8. The Development Secretary does, however, in circumstances of consistent or extreme underperformance, have the power to make changes to CDC’s structure and management and to review the Board’s composition. “Department for International Development: investing through CDC”, National Audit Office, 28 November 2016, https://www. nao.org.uk/wp-content/uploads/2016/11/Departmentfor-International-Development-through-CDC.pdf, p.13

9. CDC’s Board, CDC Group, http://www.cdcgroup. com/Who-we-are/Our-People/Board-and-CEO/ 10 Commonwealth Development Corporation Act 1999, http://www.legislation.gov.uk/ukpga/1999/20/ introduction 11 In 2015-16, DfID invested the first of two tranches (£450m) and will invest the balance (£285m) in 2016- 17. “Department for International Development: investing through CDC”, National Audit Office, 28 November 2016, https://www.nao.org.uk/wp-content/ uploads/2016/11/Department-for-InternationalDevelopment-through-CDC.pdf, p.13

12. Commonwealth Development Corporation Bill, introduced in Parliament on 16 November 2016, http://www.publications.parliament.uk/pa/bills/ cbill/2016-2017/0093/17093.pdf

13. CDC for example has explained: before additional funds are provided “a robust business case will be prepared and agreed by CDC’s Board and DFID.” New CDC Bill: our briefing, CDC Group, 22 November 2016, http://www.cdcgroup.com/Media/News/NewsNew-CDC-Bill-our-briefing/#sthash.ott7WOQM.dpuf

14. Commonwealth Development Corporation Bill, Delegated Powers Memorandum, 16 November 2016, Parliament UK, http://www.parliament.uk/documents/ commons-public-bill-office/2016-17/delegatedpowers-memoranda/Dept-for-InternationalDevelopment-16-November-2016.pdf, p.3

15. Andrew Mitchell MP, ‘A Safer and More Prosperous World’, 2013, the Legatum Institute http://www.li.com/ about/press-releases/private-sector-holds-the-key-tothe-future-of-british-aid-says-andrew-mitchell-mp

16. Commonwealth Development Corporation Bill, Delegated Powers Memorandum, 16 November 2016, Parliament UK, http://www.parliament.uk/documents/ commons-public-bill-office/2016-17/delegatedpowers-memoranda/Dept-for-InternationalDevelopment-16-November-2016.pdf, p.3

17. Commonwealth Development Corporation Bill, 29 November 2016, Volume 617, Parliament UK, House of Commons Hansard, https:// hansard.parliament.uk/commons/2016-11-29/ debates/4CA6B2D4-A665-4444-A4C1-DEF42368EDCD/ CommonwealthDevelopmentCorporationBill

18. Commonwealth Development Corporation Bill 2016-17, Parliament UK, http://services.parliament.uk/ bills/2016-17/commonwealthdevelopmentcorporation. html

19. For example: In 2008 the National Audit Office raised concerns about excessive remuneration packages and the Department’s ability to demonstrate how CDC investments contributed to poverty reduction. “Department for International Development: investing through CDC”, National Audit Office, 28 November 2016, https://www.nao.org.uk/wp-content/ uploads/2016/11/Department-for-InternationalDevelopment-through-CDC.pdf, p.5. In 2010, then Development Secretary Andrew Mitchell said CDC “became less directly engaged in serving the needs of development”, Speech at the London School of Economics, 12 October 2010, http://www.lse. ac.uk/publicEvents/pdf/20101012_AndrewMitchell.pdf

20. “DfID and CDC announce new business plan for CDC”, CDC Group, 31 May 2011, http://www. cdcgroup.com/Media/News/DFID-and-CDCannounce-new-business-plan-for-CDC/

21. “Department for International Development: investing through CDC”, National Audit Office, 28 November 2016, https://www.nao.org.uk/wp-content/ uploads/2016/11/Department-for-InternationalDevelopment-through-CDC.pdf, p.47

22. CDC Group plc 2015 annual accounts, CDC Group, http://www.cdcgroup.com/Documents/2015%20 Annual%20Accounts.pdf, p.4

23. CDC Group plc 2015 annual accounts, CDC Group, http://www.cdcgroup.com/Documents/2015%20 Annual%20Accounts.pdf, p.3

24. “Department for International Development: investing through CDC”, National Audit Office, 28 November 2016, https://www.nao.org.uk/wp-content/ uploads/2016/11/Department-for-InternationalDevelopment-through-CDC.pdf, p.42

25. 35 employees make more than £150,000. “Remuneration data, year ending 31 December 2015”, CDC Group, http://www.cdcgroup.com/ Documents/2015%20remuneration%20data.pdf

26. CDC Group plc 2015 annual accounts, CDC Group, http://www.cdcgroup.com/Documents/Annual%20 Reviews/CDC%20Annual%20Accounts%202015.pdf, p.13

27. “Department for International Development: investing through CDC”, National Audit Office, 28 November 2016, https://www.nao.org.uk/pressrelease/department-for-international-developmentinvesting-through-cdc/, p.9

28. See for example: Key Facts, CDC Group, http://www. cdcgroup.com/Who-we-are/Key-Facts/

29. 1,005,000 of the new jobs “created” were indirect jobs. “Department for International Development: investing through CDC”, National Audit Office, 28 November 2016, https://www.nao.org.uk/wp-content/ uploads/2016/11/Department-for-InternationalDevelopment-through-CDC.pdf, p4

30. 2015 Annual Review, CDC Group, http://www. cdcgroup.com/Documents/2015%20Annual%20 Review.pdf, p.14

31. “Department for International Development: investing through CDC”, National Audit Office, 28 November 2016, https://www.nao.org.uk/wp-content/ uploads/2016/11/Department-for-InternationalDevelopment-through-CDC.pdf, p.7

32. Data disclaimer, CDC Group, http://www.cdcgroup. com/Corporate-information/Data-disclaimer/#sthash. qEsETnM8.dpuf

33. In 2015, fewer than 80% of companies reported employment data to CDC: 46% said jobs had been created, 28% said there’d been no change, and 25% reported job losses. “Department for International Development: investing through CDC”, National Audit Office, 28 November 2016, https://www.nao. org.uk/wp-content/uploads/2016/11/Department-forInternational-Development-through-CDC.pdf, p.28

34. “Department for International Development: investing through CDC”, National Audit Office, 28 November 2016, https://www.nao.org.uk/wp-content/ uploads/2016/11/Department-for-InternationalDevelopment-through-CDC.pdf, p.30

35. “Department for International Development: investing through CDC”, National Audit Office, 28 November 2016, https://www.nao.org.uk/wp-content/ uploads/2016/11/Department-for-InternationalDevelopment-through-CDC.pdf, p.29

36. CDC Group plc Annual Report and Accounts 2015: http://www.cdcgroup.com/Documents/Annual%20 Reviews/CDC%20Annual%20Accounts%202015.pdf ;

37. “Department for International Development: investing through CDC”, National Audit Office, 28 November 2016, https://www.nao.org.uk/wp-content/ uploads/2016/11/Department-for-International- Development-through-CDC.pdf, p.20

38. “CDC and the Abraaj Group to invest in Rainbow Hospitals”, CDC Group, 13 August 2013, http:// www.cdcgroup.com/media/news/cdc-and-theabraaj-group-to-invest-in-rainbow-hospitals-aleading-women-and-childrens-healthcare-chain-inindia/#sthash.qG8OzN3F.dpuf

39. See for example: Yarlini Balarajan, S Selvaraj, and SV Subramanian, “Health care and equity in India”, Lancet, February 2011: https://www.ncbi.nlm.nih.gov/ pmc/articles/PMC3093249/

40. Reghu Balakrishnan, “Why are PE funds interested in Indian labour rooms?” LiveMint, 28 July 2016, http:// www.livemint.com/Companies/864qpK55gWLpJiUQt VTIWN/Why-are-PE-funds-interested-in-Indian-labourrooms.html

41. “Maternity and Child Care MCC Hospitals Market in India 2015-2020”, PR Newswire, 30 May 2016, http://www.prnewswire.com/news-releases/ maternity-and-child-care-mcc-hospitals-market-inindia-2015–2020-300276642.html

42. “CDC Supports Expansion of Bridge International Academies with $6 million Investment”, CDC Group, 21 January 2014, http://www.cdcgroup. com/Media/News/CDC-supports-expansion-ofBridge-International-Academies-with-US6-millioninvestment/#sthash.lKzuIr0y.dpuf

43. “Judge orders closure of low-cost Bridge International schools in Uganda”, The Guardian, 4 November 2016, https://www.theguardian.com/ global-development/2016/nov/04/judge-ordersclosure-low-cost-bridge-international-academiesuganda

44. See: CDC Direct Investment Information, as of September 2016: http://www.cdcgroup.com/ Documents/Direct%20investment%20information%20 as%20at%2030.09.16.pdf, and GEMS Cambridge International School, GEMS Education website, http:// www.gemseducation.com/choosing-a-school/find-aschool/gems-cambridge-international-school-cin/

45. See: CDC Direct Investment Information, as of September 2016: http://www.cdcgroup.com/Global/ CDC%20Direct%20Investment%20Information%20 as%20at%2030.09.15.pdf

46. “Land Conflicts and Shady Finances Plague DR Congo Palm Oil Company Backed by Development Funds”, GRAIN and others, 2 November 2016, https:// www.grain.org/es/article/entries/5564-land-conflictsand-shady-finances-plague-dr-congo-palm-oilcompany-backed-by-development-funds, p.3

47. “CDC and Feronia”, CDC Group, http://www. cdcgroup.com/Global/Statement%20and%20QA%20 on%20Feronia%20for%20CDC.pdf, p.2

48. “Land Conflicts and Shady Finances Plague DR Congo Palm Oil Company Backed by Development Funds”, GRAIN and others, 2 November 2016, https:// www.grain.org/es/article/entries/5564-land-conflictsand-shady-finances-plague-dr-congo-palm-oilcompany-backed-by-development-funds, p.2

49. “CDC and IFC Invest in Garden City to Create Jobs and New Business Opportunities in Nairobi”, CDC Group, 15 January 2014, http://www.cdcgroup.com/ Media/News/CDC-and-IFC-Invest-in-Garden-Cityto-Create-Jobs-and-New-Business-Opportunities-inNairobi-/#sthash.s5x9DYfZ.dpuf

50. Garden City Mall Nairobi, Twitter, https://twitter.com/ GardenCityNbi

51. “Fast track agribusiness expansion, land grabs and the role of European private and public financing in Zambia”, Hands off the Land, December 2013, http:// www.fian.org/fileadmin/media/publications/13_12_ FIAN_Zambia_EN.PDF, p.14

52. “NGOs blame Berlin for feeding big business land grabs”, Euractiv, 17 June 2014, https://www.euractiv. com/section/development-policy/news/ngos-blameberlin-for-feeding-big-business-land-grabs/

53. Mike Verdin, “Zambeef shares soar more than 50% on $65m CDC investment”, Agrimoney.com, 4 August 2016, http://www.agrimoney.com/news/zambeefshares-soar-more-than-50percent-on-$65m-cdcinvestment-9811.html

54. According to the National Audit Office, CDC’s plan is that by 2021 the composition of its portfolio will be as follows: 54% equity; 24% debt; and 22% funds. “Department for International Development: investing through CDC”, National Audit Office, 28 November 2016, https://www.nao.org.uk/wp-content/ uploads/2016/11/Department-for-InternationalDevelopment-through-CDC.pdf, p.21

55. “Our Partners”, CDC Group, http://www.cdcgroup. com/Who-we-are/Our-Partners/

56. See for example: Actis on MatchDeck: https://www. matchdeck.com/company-profile/1068-actis#/inde

57. “Handling allegations of corruption: A report by the Parliamentary Ombudsman on an investigation into a complaint about the Department for International Development”, Parliamentary and Health Service Ombudsman, 25 February 2014, http://www.ombudsman.org.uk/__data/assets/ pdf_file/0009/24300/FINAL_Handling-allegations-ofcorruption.pdf, p.16

58. Global Justice Now calculations based on: CDC Fund Investment Information, as of September 2016, looking only at funds for which “vintage” = 2012 or later http://www.cdcgroup.com/Documents/Fund%20 investment%20information%20as%20at%2030.09.16. pdf

59. CDC Direct Investment Information, as of September 2016: http://www.cdcgroup.com/Documents/ Direct%20investment%20information%20as%20at%20 30.09.16.pdf

60. “New CDC Bill: our briefing”, CDC Group, 22 November 2016, http://www.cdcgroup.com/Media/ News/News-New-CDC-Bill-our-briefing/

61. “Policy on the Payment of Taxes and Use of Offshore Financial Centres”, CDC Group, March 2014, http://www.cdcgroup.com/Documents/ESG%20 Publications/cdctaxpolicy.pdf, p.2

62. “UK commitment to 0.7% aid budget enshrined in law”, 9 March 2015, Bond UK, https://www.bond.org. uk/news/2015/03/uk-commitment-to-07-aid-budgetenshrined-in-law Take action To find out how you can help tackle corporate power and become part of a movement for real change visit globaljustice.org.uk or call 020 7820 4900. Global Justice Now campaigns for a world where resources are controlled by the many, not the few. With thousands of members around the UK, we work in solidarity with global social movements to fight inequality and injustice. Global Justice Now, 66 Offley Road, London SW9 0LS t: 020 7820 4900 e: offleyroad@globaljustice.org.uk w: globaljustice.org.uk

63. Until 2015, new CDC investments counted as positive ODA, and returns to CDC as negative ODA. Now, what counts is the capital flow from the government to CDC. Thus, last year the UK reported its £450m capital increase as aid. See: Steven Ayres and Rob Page, Commonwealth Development Corporation Bill 2016-17, House of Commons Briefing Paper Number 7809, 25 November 2016, http://researchbriefings. parliament.uk/ResearchBriefing/Summary/CBP-7809, p.8

64. FAQs, CDC Group, http://www.cdcgroup.com/ Corporate-information/FAQs/

65. Steven Ayres and Rob Page, Commonwealth Development Corporation Bill 2016-17, House of Commons Briefing Paper Number 7809, 25 November 2016, http://researchbriefings.parliament.uk/ ResearchBriefing/Summary/CBP-7809, p.8

66. “New CDC Bill: our briefing”, CDC Group, 22 November 2016, http://www.cdcgroup.com/Media/ News/News-New-CDC-Bill-our-briefing/

67. Commonwealth Development Corporation Bill, 29 November 2016, Volume 617, Parliament UK, House of Commons Hansard, https:// hansard.parliament.uk/commons/2016-11-29/ debates/4CA6B2D4-A665-4444-A4C1-DEF42368EDCD/ CommonwealthDevelopmentCorporationBill

68. See: “Evicted and Abandoned: The World Bank’s Broken Promise to the Poor”, The International Consortium of Investigative Journalists, https://www. icij.org/project/world-bank

69. 2015 Annual Review, CDC Group, http://www. cdcgroup.com/Documents/2015%20Annual%20 Review.pdf, p.11