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?
