A government development corporation that invests billions of pounds in Asia and Africa stands accused of squandering public money and failing to make a difference to poverty levels – charges it strongly rejects.

CDC, formerly known as the Commonwealth Development Corporation, which was set up by Clement Attlee in 1948 and is wholly owned by the Department for International Development (DfID), has provided “little to no evidence that … it is making an impact in terms of tackling poverty, providing genuinely additional resources or making effective use of government resources,” according to a new report.

In the past, the corporation, which has invested in luxury hotels, shopping centres, gated communities and private hospitals, has been accused of favouring high financial returns on its investments over tackling poverty. It uses tax havens, and critics say its executive salaries are too high and its accounts are opaque.

In 2011, the then secretary of state for international development, Andrew Mitchell, set out a new vision for CDC, pledging to make it more “socially and environmentally responsible”, with fewer investments in “harmful tax regimes” and greater transparency. He was concerned that too much money was going to private equity intermediaries, with the result that not enough was going to development projects.

But in 2019, the Independent Commission for Aid Impact gave the CDC an “amber/red” rating, finding that it had produced an “unsatisfactory achievement in most areas”.

And, according to Doing More Harm Than Good – a new report from Global Justice Now, a social justice organisation – CDC, which in 2016 saw its potential investment budget increase from £1.5bn to £6bn, remains a cause for concern.

Of the investments in which CDC owns more than 20%, two-thirds are based in tax havens

The report says that, despite Mitchell’s reforms, which were designed to reduce the amount of money being siphoned off by intermediaries, CDC today invests an annual £2bn via private equity funds compared with £1.9bn in 2011.

Of the investments in which CDC owns more than 20%, two-thirds are based in tax havens – something that the institution insists is necessary to stop it being taxed twice, but which campaigners say is a cause for concern.

“CDC has demonstrated a near-total resistance to reform by continuing to make more profit than it should and by channelling its investments through tax havens,” said Daniel Willis, an aid and climate campaigner at Global Justice Now and co-author of the report. “This ‘market knows best’ approach to development uses aid money to facilitate the extraction of wealth from the global south to the global north – the exact opposite to what any institution with a development mandate should be doing.”

Global Justice Now highlighted several CDC investments which it said were a concern. These include the Abraaj Growth Markets Health Fund, which invests in private healthcare institutions around the world, and Bridge International Academies, a low-cost private school chain with significant operations in Kenya, Nigeria and Uganda.

The report states: “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.”

A spokesperson for Bridge said the research referred to in the report dated from 2016 and claimed that it had refuted the allegations, adding: “We have educated a million children living in extreme poverty; consistently outperform national averages in government exams and have been independently shown to deliver equity of learning.”

CDC has also invested in a company which operates coal-burning cement factories in east Africa, one that owns a petroleum pipeline in Cameroon, and another that owns an oil-burning power plant in Benin.

The report states: “The evidence presented here undermines the claims made by government ministers … that CDC is ensuring that its investments will ‘soon in real terms’ be compliant with the Paris agreement on climate change.”

Willis said: “This is not development as we know it. CDC has continually failed to show how its investments are genuinely tackling poverty around the world. What’s more, the aid money being channelled through CDC is actually exacerbating inequalities, damaging the environment and undermining human rights.”

A spokeswoman for CDC said: “The report contains numerous factual errors. It also demonstrates a broad philosophical opposition to the involvement of the private sector in fighting climate change and alleviating poverty. We disagree with that view. No country has escaped poverty without a strong private sector creating jobs, providing services and generating much-needed tax receipts. All 193 member states of the United Nations, including all 54 African countries, endorse this approach, Global Justice Now does not.”

A DfID spokesperson said: “No country can defeat poverty without economic growth. UK aid helps lift millions of people out of poverty by creating jobs.

“We continue to work closely with CDC to ensure it delivers investments, which benefit the world’s poorest countries.”







