Bilateral Trade: United Kingdom and Africa

Earl of Sandwich Excerpts

Wednesday 11th November 2015 Lords Chamber

[The Earl of Sandwich (CB)]

My Lords, the noble Lord, Lord Sheikh, has raised a fascinating subject, on which I congratulate him. I also congratulate the noble Lord, Lord Oates, on his excellent maiden speech and welcome the Minister to the House and the Front Bench.

As someone with an NGO background, I am interested in the relationship between trade and aid. With the Government’s renewed emphasis on trade support through DfID, and with the increased aid budget, there will be more pressure to find private sector projects. I personally favour using aid for trade, but it must not be tied aid. DfID must develop its own trade expertise, poverty reduction must remain the focus and partnerships with organisations such as SMEs and NGOs must not be exploited, as the noble Lord, Lord Chidgey, and the right reverend Prelate pointed out.

The Minister will know that DfID’s ventures into trade have not been entirely successful. ICAI, the aid watchdog which reports to the Commons International Development Committee, has been keeping a close eye on DfID’s business ventures. In 2013, it showed that TradeMark Southern Africa, promoting a free trade area between Durban and Dar es Salaam, had failed to meet its targets. TMSA was then closed down by DfID, and the Permanent Secretary even had to apologise to the Select Committee.

ICAI also said DfID needed to improve its financial oversight of programmes, and the NAO echoed these findings. DfID has promised to do better, but does the Minister know whether there has been progress, especially in relation to TMSA’s sister programmes, the MRGP—the Mozambique Regional Gateway Programme, which links the north-south corridor to ports in Mozambique—and the older TMEA programme in east Africa? The Commonwealth Development Corporation is being given additional funds to boost private sector investment in such projects as hotels and shopping centres. Does the Minister consider that the revamped CDC is a suitable channel for DfID funds, which are legally required to reduce poverty? DfID will need to develop its expertise in these larger regional programmes because aid money has been, and is being, wasted. I remember some successful large Africa projects in the past, notably customs and excise reform through the Crown Agents in Mozambique.

Of course, the UK must operate through development banks and multilateral agencies, but there is a problem of mounting debt to the IFIs. The investments of the wealthy do not necessarily, as we all know, trickle down to the poor and may accentuate the poverty gap. Why not invest in the poor themselves? NGOs have long put their money into income generation and microcredit in the poorest communities. Trade at the village level was originally pioneered by the Grameen Bank in Bangladesh, and multiplied many times in Africa. Savings and credit schemes can be the most efficient method of starting up small local businesses and stimulating the informal economy. Loan repayment rates among the very poor are the fastest and most efficient you can find.

Finally, another government initiative is the UKTI and FCO’s overseas business risk programme, which with Morocco now covers 16 African countries. Naturally, many of these are conflict states and it is to UKTI’s credit, and thanks to some of DfID’s efforts, that the UK has been successful in attracting investment even to the remoter and more dangerous regions of those countries. Taking Kenya as an example, the presence of terrorism on two of its borders has not been a sufficient deterrent to business, with the Nairobi Securities Exchange up with the leaders in the world and with investment at record levels. As other noble Lords have said, African business has been, for once, a good news story and we all hope it will remain so.