This was the headline thrown up by a BBC File on 4 investigation into CDC, formerly the Commonwealth Development Corporation. This was a government body set up in 1946 as part of Britain’s overseas aid programme.
In 1998 CDC had over 400 different projects in 50 countries. Crucially more than 40% of its funding went into agriculture – helping to feed the world’s poor. But CDC had a problem. New Labour was determined to privatise it. Clare Short brought in a new chief executive, Goldman Sachs banker Alan Gillespie. His target was to get a 25% return to make CDC saleable. At the time it was making 8-10%. That’s because its brief was to feed the poor, not to rob them. One thing about the poor, New Labour should understand, is that they don’t have much money.
In the past projects included irrigating thousands of acres of dry bush land in Mpongwe in Zambia. Simba Moya, a former worker who became a manager there was glowing about its achievements. “When I tell people from other parts of the world that we’ve got something like this in Africa not many people believe it, but when I show them the pictures they say ‘wow I never knew something like this could happen in Africa,'” “It was producing 50% of Zambia’s soya crop, 40% of its wheat and was the largest single source of maize in the country,” Geoff Tyler, CDC’s former representative in Zambia told the BBC.
Now, as Oxfam notes in disgust, “investments are in things like shopping malls…which cater to the wealthy elite or expatriate community. These have a neutral or even negative impact for the poor” Other projects are in banking (now 21% of all investments), power, property and mobile phones. These offer a higher rate of return than growing food. Investment in farming fell to 6% of the total. CDC is offering the poor mobile phones in place of food!
Gillespie’s drive to privatise CDC ran aground of the general collapse in shares prices after the 2001 recession. But there is more than one way to skin a cat. Failing to privatise CDC outright, development minister Hilary Benn agreed to sell off the job of managing the funds in a private equity deal. The fund manager was called Actis. New Labour sold 60% of Actis to former civil servants for just £373,000. The fund handled £1.5bn at the time. There was no competitive tender. The management was awarded a £2.3m bonus for being clever enough to clinch the deal – with themselves! In effect the fund was given away.
Even the Tories can smell a rat here. MP Tim Loughton says, “” I’m concerned about the apparently knock-down price at which Actis was floated….and it’s clearly now worth many millions.
Also, there was a post-transaction bonus paid of £2.3m. So they [the management] didn’t risk any of their own money.
The taxpayer paid bonuses which enabled the managers to pay for the business and pocket a large amount left over. Nice work if you can get it.”
Private equity is a sinister form of capitalist organisation. Its main advantages to capitalists are the ability to dodge tax (thanks to Gordon Brown’s initiatives to encourage ‘enterprise’) and to keep their affairs shrouded in mystery. (See Private equity – a new capitalist mutation) We do know that the fund uses offshore tax havens so as not to pay tax to hard-pressed ‘third world’ governments. We also know that the pay of the Actis directors quadrupled after the ‘sale’ (give-away), and they also take a slice of the profits. And the profits (‘returns,’ they are coyly called in the annual report) are fabulous – £672 million for 2007, up 79% from 2006.
How can Actis generate this sort of money? They go into partnership with local capitalists. Their specific aim is to maximise profits. CDC now describes itself as “a fund of funds”, which is to say it sits on its backside and counts the money made by Actis. But, don’t forget, CDC is still an arm of the Department for International Development and the £2.7bn it plays around with (up from £2bn in 2006) is our money. Ultimately we are the shareholders. Most of us would have no objection to stumping up money to help the poor feed themselves. But CDC doesn’t do that.
This year Actis sold off the last of its investment in Mpongwe, which then went into liquidation. Who cares about feeding the poor? Actis is too busy chasing a fast buck on behalf of CDC. Inevitably this means servicing the wants of the rich. After all, they’re the ones with money. Offices have been shut in Uganda and the Ivory Coast and opened in Egypt, China and Mexico. Do we really need a UK ‘aid agency’ to pump money into China to help it grow? Clearly Actis is in China because that’s where the money is, and they want some. Even ‘The Economist’ admits the offices are staffed “by people who know more about making money than growing pineapples.”
The managers at Actis and CDC are not helping the poor. They are helping themselves, and they are helping capitalism which perpetuates the gulf between rich and poor. War on Want reports, “Across much of Africa – in Kenya, Ivory Coast, Senegal, Zambia – GDP has risen while the numbers out of work have increased. The attitude is that it’s all going to come right in the end so let’s trust the market, when the evidence is screaming in the opposite direction.” Is this the best sort of ‘aid’ Britain can offer the world’s poor?
This article appeared on Socialist Appeal.
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This post was written by Mick Brooks