The Commonwealth Development Corporation inquiry
Closed
What the inquiry looked at
“The Department for International Development has improved its oversight of the Commonwealth Development Corporation and has directed it to address many of the weaknesses previously identified by Parliament. However, it remains a significant challenge for the Commonwealth Development Corporation to demonstrate its ultimate objective of creating and making a lasting difference to people’s lives in some of the world’s poorest places. The National Audit Office (NAO) has found that given the Department for International Development's (DFID) plans to invest further in the private company CDC, a clearer picture of actual development impact would help to demonstrate the value for money of the Department's investment. The Department's principal mechanism for encouraging private sector investment in developing countries is CDC Group plc (CDC), a private company owned by the Secretary of State for International Development. CDC's mission is to "support the building of businesses throughout Africa and South Asia, to create jobs and make a lasting difference to people's lives in some of the world’s poorest places". In 2015–16, the Secretary of State for International Development approved a £735 million recapitalisation of CDC, to enable it to expand the breadth and depth of its business. National Audit Office report The NAO report finds that CDC's operating costs are increasing as a result of the change of focus in CDC's business towards direct investments and the expansion of its operations. The number of new investment commitments made per annum has increased from 12 to 27 between 2012 and 2015 and the number of staff has increased from 65 to 161 over the same period. CDC has addressed Parliament's previous concerns about pay. Recruitment and retention challenges, however, remain a significant risk to CDC’s operations. CDC has reduced average pay from £123,000 to £90,000 by severing the link with commercial sector salaries. Both the Department and CDC classify the latter's recruitment and retention of staff as a high or severe risk. The nature of CDC’s business and the countries in which it invests can increase the risk of fraud and corruption. As a result of the NAO's inquiries CDC has recently improved its procedures for recording allegations of fraud and corruption. While CDC has whistleblowing arrangements, it has only recently established systems to consolidate records of all the allegations it receives.”
The committee's words, from the inquiry page on parliament.uk ↗.
What it found
The Department and CDC have addressed a number of the significant concerns raised by the previous Committee, such as the issue of excessive remuneration within CDC, and by implementing a new strategy with greater focus on investing in the poorest countries which is better aligned with the Department’s priorities. CDC has also met its objectives for the financial return and the expected development performance of its investments agreed with the Department. However, issues remain: for example, neither the Department nor CDC can set out a coherent picture of CDC’s development impact, the Department has been slow to evaluate CDC’s performance, and the relationship between the Department and CDC lacks clarity.
CDC is on the cusp of significant changes to how and where it invests in developing countries. It is embarking on a taxpayer-funded expansion of its business and needs to appoint a new chief executive. Not only is it moving more to direct investment but government has the power to increase funding to a total of £12 billion. This raises concerns about portfolio management, the measurement of success, and the relationship between the Department and investment decisions. It also faces the challenge of identifying a suitable pipeline of projects in which to invest and building capacity to make investments. At the same time it needs to make sure it controls costs.
What the government said
No government response is linked to this report.
How the inquiry ran
Each dot is a dated item listed on this page, from the inquiry's opening on 16 January 2017 to its close on 4 January 2018.
- Oral evidence 8 Feb 2017
- Report 25 Apr 2017
- Correspondence 13 Sep 2017
What it recommended
The committee's recommendations are not listed here yet. Read them in 54th Report - Department for International Development: investing through CDC ↗ on parliament.uk.
Evidence
Oral evidence sessions 1
- 8 Feb 2017No witnesses recordedparliament.uk ↗