UK aid spending on CDC Group comes under scrutiny

U.K. aid shelter kits being distributed in remote parts of Nepal. Photo by: Russell Watkins / DFID / CC BY

CDC Group, the United Kingdom’s development finance institution, is set to receive a recapitalization of around £780 million ($1.1 billion) of aid for 2021, according to campaigners.

The budget, which is reduced from 2019 levels but similar to the Department for International Development’s 2018 investment in CDC group, comes as many aid programs face severe cuts, including those providing humanitarian assistance in conflict zones such as Yemen and Syria.

While the precise amount CDC Group will receive has not been disclosed, campaigners examined government aid transparency data on the d-portal and Development Tracker platforms, which indicated CDC Group would receive between £779 million and £781 million in aid funding in 2021. Funding to CDC was deferred in 2020 as the government implemented £2.9 billion in aid cuts due to the economic fallout of the COVID-19 pandemic.

“Sending piles of cash to CDC Group while cutting aid to Syria and Yemen is indefensible.”

— Daniel Willis, development campaigner, Global Justice Now

A spokesperson for CDC Group did not deny the figure but refused to comment, instead directing questions to the Foreign, Commonwealth & Development Office, which did not immediately return requests for comment. Asking about the amount of funding CDC Group received in 2020 — which was reduced amid the cuts — Devex was directed to a parliamentary question indicating that the 2020 CDC Group investment was lowered by 42%.

CDC Group is owned and funded by FCDO, with a mandate to invest in underdeveloped economies for poverty reduction. But it has received backlash for some of its investments, which critics say are an inappropriate use of aid. FCDO has an “arms-length relationship” with the group and is not involved in its investments, according to government documents.

"Sending piles of cash to CDC Group while cutting aid to Syria and Yemen is indefensible,” said Daniel Willis, development campaigner at Global Justice Now. “While the government makes huge cuts to vital aid programs without consulting Parliament, it's absurd to offer almost £1 billion to an institution that redirects aid towards the rich.”

CDC Group’s more controversial financing has been linked to the Nu Cosmetic Clinic in Bengaluru, India; a palm oil plantation in the Democratic Republic of Congo accused of mistreating workers; and a string of luxury hotels in Africa. The organization also received criticism from the Independent Commission for Aid Impact, a U.K. public watchdog, in July for making “inadequate” progress against its recommendations for investing in low-income and fragile states.

While Global Justice Now has consistently opposed CDC Group being funded by aid, some development economists support the institution’s work and aid funding, saying the organization helps deliver important long-term support that’s essential for economic development in lower-income countries.

"In recent years, CDC has invested in rip-off private hospitals, for-profit schools, luxury hotels, and cosmetic surgery clinics,” Willis said. “It's a completely inappropriate use of aid spending at any time, let alone during a pandemic."

UK aid to be cut by £2.9B this year

The almost 20% ODA cut comes as the U.K. grapples with the economic fallout of the coronavirus pandemic.

The CDC spokesperson said the institution’s investments “must meet stringent impact criteria before any funds are committed.” They dismissed controversial investments, such as those in private schools and hotels, as “historic investments within the portfolio that do not reflect current CDC investment policy.”

“In the context of the current cuts in the U.K. aid budget, now is not the time to channel any more U.K. taxpayers’ money through CDC,” said Graham Gordon, head of policy at Catholic Agency for Overseas Development.

“Its track record of significant fossil fuel investments, and the continued reality of many of its investments going through financial intermediaries where there is even less control over what it is used for, means that there is no guarantee that this money would be used to benefit the poorest communities or tackle climate change,” he said.

CDC Group has disputed that it continues to invest in oil and coal, saying its fossil fuel investment policy was in “complete alignment” with the U.K. government and 30% of its capital will be invested in climate finance and renewable energy in 2021.

About the author

  • William Worley

    William Worley is the U.K. Correspondent for Devex, covering DFID and British aid. Previously, he reported on international affairs, policy, and development. He also worked as a reporter for the U.K. national press, including the Times, Guardian, Independent, and i Paper. His reportage has included work on the Rohingya refugee crisis in Bangladesh, drought in Madagascar, the "migrant caravan" in Mexico, and Colombia’s peace process. He can be reached at william.worley@devex.com.