The Commonwealth Development Corporation, CDC, which was set up in 1948 to improve Britain’s financial returns from its colonies, is now owned by DFID. Its website describes its work as a state-funded private equity house providing capital to invest in promising businesses with particular emphasis on sub-Saharan Africa and South Asia. CDC’s brief is to contribute to long-term poverty reduction in developing countries by supporting the private sector. 

In 2004, it sold its fund management operation at a low price, to its current chief executive and other bosses who named it Actis. Actis was given a government-owned portfolio of more than £1 billion to manage and invest; in effect British taxpayers’ money was entrusted to private equity fund managers. 

Taxpayers fund large executive incomes and extravagant expenses 

Between 2003 and 2007, Richard Laing, CDC’s chief executive, saw his income rise from £383,000 to £970,000. In just one year Actis gave £65m in bonuses to its staff. Paul Fletcher, the senior partner, received £1m. Average pay for employees was on a par with those at Goldman Sachs. 

The House of Commons Public Accounts Committee report said that these were “extraordinary levels of pay in a small publicly owned organisation charged with fighting poverty”. 

Expenses claims released to Private Eye included the ‘predictable’ first class travel and expensive hotels as visits were made to businesses they funded. Detailed information was given about the substantial amounts spent on wining and dining in London, remarking that the cost of one of the least expensive feasts – a £55 breakfast – was about a month’s income for the average Indian.   

In addition to high levels of pay and expenses there has been unease about the nature or location of some private companies selected: lucrative investments were made in projects including a skin-whitening cream company, a Nigerian shopping mall and a Chinese egg producer. 

Will improvements be made by the coalition government?

At a meeting of the international development select committee at the end of July, the development minister, Andrew Mitchell, said that ‘very specific changes’ would be made to CDC, after finding some of its transactions “absolutely astonishing”. 

On page eight of a Draft Structural Reform Plan published by DFID on 27th July 2010, a review of CDC which would make it more proactive and pro-poor was listed with instructions:

i. Request CDC to develop new business plan to maximise its development impact

ii. Publish CDC’s business plan

Ideally, this organisation will be turned round, resiling from its colonial mindset and fulfilling its mission, tightening control on expenditure and making a larger proportion of taxpayer funding available to worthwhile projects ‘contributing to long-term poverty reduction in developing countries’.