Commonwealth Development Corporation Bill

Lord St John of Bletso Excerpts

2nd reading (Hansard): House of Lords & 3rd reading (Hansard): House of Lords & Committee: 1st sitting (Hansard): House of Lords & Report stage (Hansard): House of Lords
Thursday 9th February 2017 Lords Chamber

[Lord St John of Bletso (CB)]

My Lords, I, too, warmly welcome this Bill. When the new world order appears to be more disorder and one of the key themes of the World Economic Forum in Davos is rising inequality and the threat this poses to economic and political stability, the Bill comes at an opportune time.

Clearly, addressing poverty is critical to addressing global inequality. We have moved from the millennium development goals to the sustainable development goals and the role of the private sector has been recognised as a central part of achieving this agenda. Many of the major development initiatives in Africa have come from foreign aid agencies, local and international NGOs and publicly funded multilateral financial institutions. So I wish to focus my few remarks in support of this Bill on the key role that the CDC has played and continues to play in some of the most challenging countries in Africa.

During the last 15 years, the growing Africa-focused private equity community has had a unique opportunity to play its role in what is becoming a development relationship. Private equity has been good for African economic development. It has helped to promote a healthy business sector, as well as creating jobs and alleviating political instability, while taking pressure off Governments to be universal problem solvers. Here, certainly, the CDC has played its role in the development of the private equity industry, particularly in the last two decades. It was an early investor in the 1990s, while the DFIs still focused on debt. Since then, the number of private equity funds has grown from around a dozen Africa-focused funds managing some $1 billion, to well over 200 firms managing over $30 billion. The CDC has played an incredibly important role in poverty reduction, working with these private sector companies and investors to create sustainable growth in its target countries.

As the Minister mentioned in his introductory comments, the CDC is now a transformed institution. From 2012, when the CDC invested some £200 million a year in a broad geography from Latin America to south Asia to Africa, with a staff complement of 50, it has now well over 250 staff. It is investing and will continue to invest more than £1.2 billion a year, focused on Africa and south Asia.

I do not agree with the noble Lord, Lord Judd, that the CDC has become just another investment bank. There have been some notable success stories. While the humanitarian response to tackling the Ebola crisis in Sierra Leone, Liberia and Guinea was very successful and essential, the CDC made a valuable contribution in rebuilding many affected businesses by providing much-needed SME loans. As the Brookings Institution rightly mentioned in its recent Foresight Africa report, with many millions of young Africans entering the labour market every year, job creation remains a top agenda item. Here I agree entirely with the noble Baroness, Lady Northover, that human resource development must be a core focus.

The potential threat of climate change has put many parts of Africa at risk of disasters such as floods and droughts. Many Governments continue to face corruption and violence, and global political uncertainty has complicated peacekeeping efforts, aid disbursement and overall investment. Among the many challenges facing sub-Saharan Africa are not just unemployment but lack of infrastructure, food insecurity, inadequate access to education and healthcare and, of course, to clean water, in all of which the CDC is playing a key role. Often the public sector is ill equipped to tackle these challenges, and this is where the private sector can play a critical role. The CDC, with its well-respected 70-year track record, has made a very important contribution in identifying and nurturing management teams and companies that have provided and continue to provide solutions to many of these problems.

Sub-Saharan Africa suffered one of its worst years in terms of foreign direct investment last year. This was due partly to the fall in commodity prices, particularly the oil price, as well to other concerns, including those of international investors about collapsing local currencies, and was exacerbated by high levels of corruption and lack of accountability. Although technology has continued to transform the continent with the introduction of broadband and many other innovative, transformational technologies, the many challenges that Africa faces are unlikely to be solved in the short to medium term. This will obviously impact negatively on the lives of millions of the poorest people. That is why it is important that the CDC continue to provide much-needed capital and mobilise other international private capital to co-invest in well-run businesses with high levels of integrity and high social and environmental standards. I stress the importance of long-term capital in this regard. These projects can range from building schools to the establishment of hospitals, agribusinesses, renewable energy, ports and logistical infrastructure. While these are all needed in most countries in sub-Saharan Africa, the CDC has not shied away from going to some of the most challenging areas. Here I mention some of the agribusinesses in which the CDC has invested in northern Nigeria, which have had a transformational impact on many of the people there.

A good example of the CDC’s work is the development in Virunga in Eastern Congo. The CDC has helped to construct a hydropower plant that has already transformed the lives of many of those in the area who were living in desperate conditions, through providing jobs and training to former child soldiers who became socially excluded adults. This will in all likelihood have an added benefit of reducing the erosion of natural resources in the parks, which includes the rampant problem of wildlife poaching.

I warmly support the Bill, which provides much-needed long-term additional funding to the CDC, but as it is a money Bill that will not be deliberated on further in your Lordships’ House, it is important that a firm business plan is in place outlining the medium and long-term road map for the CDC, with appropriate checks and balances. In this regard I was reassured by the Minister’s comments in introducing the Bill.

Finally, I acknowledge the leadership, commitment, dedication and vision of the CDC’s chief executive, Diana Noble, who will sadly retire in June this year, and pay tribute to the able chairmanship of Graham Wrigley.