Private Eye is a British satirical magazine published once a fortnight. It mixes world class investigative journalism with some very silly and often ridiculously funny political satire. It does not however publish its articles on the internet, and for this reason I wanted to summarise an extremely important 7-page exposé regarding the British Colonial Development Corporation by Richard Brooks in its latest edition (3rd September).
The Colonial Development Fund (CDC) was launched shortly after the second world war for “projects for developing foodstuffs and raw materials, or for agricultural, industrial and trade development.” Although its early years were run in a decidedly amateurish manner, by the 1950s it had managed to become profitable, having built up a network of offices running large projects in forestry, irrigation, fisheries, tea plantations, cotton spinning, abattoirs and many other ventures to promote employment. By the 1970s it had changed its name to the Commonwealth Development Corporation, and by the 1980s it had 300 investments worth £1billion.
However, when the New Labour government came to power in 1997, Gordon Brown soon decided to privatise the CDC. In order to ready it for privatisation, it became CDC Group plc, with a new chief executive, Alan Gillespie brought in from Goldman Sachs. I will summarise some excellent and detailed reporting by Private Eye by saying that the privatisation never did happen due to a changing international financial climate. What did happen was that the company was broken up into different funds, which were then purchased instead by a new management partnership.
The new management partnership was headed up by Paul Fletcher, who had been brought in by Alan Gillespie. Amazingly 26 partners purchased the fund for £373,000 between them. Taxpayers funded a £5m office. Paul Fletcher’s salaray went from £200,000 in 2001 to £1,200,000 in 2006. He was not the only one getting rich. 192 employees shared $32.4million in 2005.
It was able to achieve these huge profits by dropping many projects that were designed to help the poor throughout the world, and by investing in many new projects in new technologies in India and China. It also avoided tax using many dubious tax avoidance schemes, with 38 subsidiaries in tax havens compared to 40 subsidiaries which were not.
This transformation, from worthy development finance institution to a private equity money making machine was left unscrutinised by the Commons International Development Committee. CDC Group uses many accounting tricks to make it appear to be supporting employment, such as retaining a trivial stake in MTM Nigeria, Nigeria’s mobile phone network, and claiming all 2000 employees as beneficiaries of its investments. (Added to this MTM Nigeria had plenty of investors lined up and did not require seeding from CDC Group).
As Private Eye’s report continues, it becomes harder and harder to carry on reading. Private Eye has been battling for 2 years to ensure full disclosure of CDC Group’s operations under the UK Freedom of Information Act, and to understand if there have been any failed investments, but so far CDC Group has managed to ensure that these internal reports are not released. If they were to become public, it would certainly be likely to damage CDC Group’s business.
In seeking maximum profits, rather than looking to invest in worthy projects, CDC Group appears to invest with some very dubious players, for example with Nigerian businessman Michael Orugbo, currently a suspect in a money laundering case. Another CDC Group owned company, Ugandan Umeme “argued publicly in favour of executing locals.” Private Eye quotes an unnamed German finance minister as “dismissing the practitioners as locusts.”
It may come as a surprise to some of my fellow students to learn that it was Clare Short, New labour’s first international development secretary who created CDC Group in 1999. Short recently came to Schumacher College to teach for a week on our masters degree course, on the module “After Copenhagen.” Certainly her actions have created some very wealthy businessmen who have become millionaires from poverty relief.
Britain now has a new international development minister Andrew Mitchell who has called some of CDC Group’s arrangements “astonishing.” As the article concludes, “the wealthy and powerful vested interests that have captured Britain’s development programme will have to be confronted.”
But Britain to me seems to be a country with lame politicians who are only out to make fortunes from themselves, not just from the world’s poor but from British taxpayers, the British public, who like turkeys voting for Christmas, seem to come back election after election to vote these people back in to power. Yes, we have maybe a handful of honest and decent politicians, but the vast majority are part of the problem, and I see no immediate resolution to this terrible abuse of what was a once great organisation. But Private Eye has to be applauded again for such sterling journalism.