CDC to increase investment in Malawi

For a number of years the SMP has been encouraging the CDC Group to increase the number of investments made in Malawi and to make available smaller investments, more proportionate to the scale of the opportunities and economy in Malawi.

The CDC Group, formerly the Commonwealth Development Corporation, was established to invest UK Government funds to support the pro-poor economic development of the Commonwealth. It is a Development Finance Institution wholly owned by DFID. However, over most of the last decade, Malawi has received comparatively little investment from CDC, with ever increasing funds going to very large investments in larger countries offering a ‘safer’ return. This has been widely criticised in the media.

We are greatly encouraged by recent commitments from CDC to increase investment into Malawi. Malawi will be the first high priority country for CDC’s new DFID-funded “Impact Accelerator” programme, this will likely involve tens of £ millions invested into Malawi in the coming years. There is also a slight reduction in the scale of some of these investments; although at $5-$10m each, these are still extremely large in Malawi terms. It is likely these investments will in the first instance be focused on agriculture and financial services.

The SMP had a very productive meeting with CDC to discuss this programme and we hope in the coming months and years to support CDC to tap into the expertise within our network and explore potential Scottish markets for Malawian exports. We discussed the environmental and social standards which CDC will hold itself accountable to and encouraged CDC to continue to lower the scale of individual investments. We also encouraged greater grass-root monitoring of the pro-poor human impact of these investments in Malawi, beyond just the financial return and the number of jobs created. To help encourage human impact monitoring and transparency, we will support CDC’s communications as they seek to illustrate the positive impact of these investments in the coming years.

We welcome the commitment from CDC to Malawi and look forward to working together to ensure the Impact Accelerator has the greatest possible human impact in Malawi.

We do not, however, support the draft CDC Bill before Parliament this week in which DFID seeks to increase the maximum amount of UK aid money that can be put into trade and investment through CDC – from the current cap of £1.5 billion, to £6 billion and then possibly £12 billion. Given the entire UK aid budget is under £12 billion, we have extremely strong reservations about these proposals which could see an eight-fold increase in the amount of aid funds that go to private sector investments.

The Secretary of State for International Development, Rt Hon Priti Patel, has been critical of her own department (DFID), arguing for greater transparency, accountability and effectiveness. We would therefore expect that all ODA funds put through CDC or other government departments are held to equal or higher standards of accountability and transparency, with full disclosure through IATI and close scrutiny of the proven human development impact of such investments.

The UK Government is required by law to ensure all ODA spend is targeted at reducing poverty and the current government has a strong manifesto to ensure aid remains untied and that all aid is compliant with the OECD DAC definition of ODA.