DFID’s CDC, genuine source of development finance or opening for illicit financial outflows from Ethiopia? 18 MAY By Keffyalew Gebremedhin
On 12 May 2012, The Reporter carried a news article that flashed an announcement by CDC, a UK-based ‘development finance institution’, regarding its investment of $15 million through the Schulz Global Ethiopia Growth and Transformation Fund I.
I was more taken by the verb “sink” in the article’s title than the rest of its content. I could not figure out why or how a new investment could ‘sink’ even before it has become operational. I tried to look closer more particularly about CDC, the effort of which has led me to a bizarre and worrying behavior in its recent past, and the cover-up by its owner, the DFID.
Interestingly, both DFID and CDC are still reeling from the fall out of that ‘problem’ or ‘wrong action.’
CDC stands for the Commonwealth Development Corporation. It is sort of a private sector arm for the UK’s Department for International Development (DFID).
In the course of the World Economic Forum session for Africa, which took place in Addis Abeba from May 9-11, 2012, it appears that the fund has reached agreement with Ethiopian officials that it could make equity investments in the country, mainly in agro-processing, industrials and manufacturing.
While $15 million is not such a significant amount of money for an investment in a poor country with massive needs, this is the kind of investment that could make handsome returns for its foreign owners. It is one reason, why of this investment in its press release CDC on its webpage indicates that the fund has three aims:
to achieve commercial risk-adjusted returns for investors
to drive improvements in social, environmental and governance standards
to make a contribution to the long-term sustainable economic development that creates jobs and opportunities for people in Ethiopia.
In the case of this investment in Ethiopia, DFID’s Secretary Andrew Mitchell was quoted as saying:
“This announcement marks a watershed in the kind of investments CDC can make and shows that the management are fully embracing the new strategy that we agreed with them.
“For the first time, CDC is directing its much-needed capital to help promising entrepreneurs and businesses in Ethiopia to transform agriculture and food production.
“I am delighted that following the Government’s overhaul of CDC Britain will be able to unlock the potential of hundreds of businesses in a country where investment and growth will ultimately be the route out of poverty.”
For those of us not as much familiar with CDC or its operational relations with the DFID, the concern is that there are some allegations of corruption against both institutions, regarding which parliamentary investigations are being demanded in the House of Commons in the United Kingdom itself, according to news reports.
In Nigeria, according to the BBC, CDC was accused by the Nigerian government “of allowing tens of millions of pounds in UK aid to be invested in Nigerian money laundering fronts.” To the knowledge of this writer, the final outcome of the Nigerian investigation has not been reported to date.
Perhaps not so surprisingly, attention in Nigeria was diverted to James Ibori, the corrupt Nigerian politician and former governor of Nigeria’s Delta State, who was sentenced to 13 years imprisonment. Consequently, in a message dated 17 April 2012 all that the DFID could do was to state on its webpage how busy it was “leading the process to return the millions of pounds James Ibori stole back to the country’s poorest people.”
Some resolution my come to the affected individuals as a result of the criminal case being completed. Unfortunately, what the DFID has stated, above, does not inspire sufficient confidence for those countries far off from that Nigerian incident, but may likely be in line for the next scam.
Honorable Dotun Oloko
In Ibori’s case, the whistleblower was Dotun Oloko, a British-born Nigerian. The BBC reported that Mr Oloko warned the DFID “about potential problems with CDC investments.” Surprise! Surprise! In Hail Mary effort, it seems, the DFID passed Mr Oloko’s name to the private equity firm he had accused of investing in potential corruption.
This scandal was made public by BBC Newsnight. The investigative program reports that Mr. Oloko instead was targeted by private investigators, allegedly sent by CDC.
In its defense and in response to the Niewsnight’s report, at the time the DFID issued the following statement:
“These specific allegations date back to 2009 under the last Labour government and were investigated by CDC at the time and subsequently passed on to the Met Police and the Serious Fraud Office.
“CDC always carries out full and thorough checks before investing in a fund manager and the subsequent investigation gives no indication that British funding has been misused in this case.”
It seems that this is a standard DFID response for all crises situations it experiences. Appropriate as it was, Mr. Oloko’s reaction was: “That’s the incredible paradox. The same people who’ve funded the prosecution are the people who’ve funded the activities which are now being investigated.”
When the evidence was made public that the DFID had passed the name of the whistleblower to those accused of the corruption, the department was left with no other recourse save Mr. Andrew Mitchel offering his “unconditional apology, wherein he stated “there would now be full review of procedures.”
A week ago, the Morning Star reported that the parliamentarian from the hometown of Mr Oloko had submitted complaints to the Parliamentary Ombudsman to look into why independent investigations into investments by a corrupt Nigerian governor were not carried out. She also asked DFID and CDC to be investigated for exposing the whistleblower to the funds and, according to the paper, in the process placing him and his family in jeopardy.
CDC in the glare of $15 million worth publicity in Addis Abeba
At about exactly the same time, when CDC was enjoying the publicity glare for its investment in Ethiopia of $15 million, MP Caroline Lucas MP spoke loud and clearly about its horrifying actions in Nigeria and the UK. She said:
“The failure of DfID and CDC to properly investigate the allegations made by Dotun Oloko, who bravely raised the alarm about CDC-backed investments in Nigeria despite the threat to his personal safety, casts serious doubt on the checks in place to prevent UK aid money from lining the pockets of corrupt individuals.
“Furthermore, it is completely unacceptable that DfID was unable to protect the identity of this anti-corruption campaigner, resulting in his family being placed under covert surveillance right here on UK soil. It is fundamental to our Government’s efforts to crack down on fraud that whistleblowers are able to come forward with impunity.”
These charges are serious on two grounds, even for those that have not been affected in the situations above. Firstly, the allegations refer to a failing in a developed country institutions and officials, knowingly or unknowingly, promoting corruption. Secondly, this hits hard those in poor developing countries aspiring for better standards they thought the UK had and wanted to emulate.
I hope in earnest that these would not give false comfort to those in developing countries looting their poor countries saying corruption is common phenomena in both developed and undeveloped, democratic and undemocratic countries. Equally disturbing is the cruelty Mr.Oloko has been subjected to in a democratic country, where the rule of law has been well established.
On 27 February 2012, Mr. Mitchell posted on DFID’s webpage his pledge on behalf of the UK saying:
“Corruption is a cancer in developing countries and the Coalition Government has a zero tolerance approach to it. We are committed to rooting out corruption where ever it is undermining development, and will help bring its perpetrators like Ibori to justice and return stolen funds to help the world’s poorest.”
This article is prompted by my fears for my country. What guarantees do Ethiopians have that CDC would not, knowingly or unknowingly, facilitate another money-laundering enterprise in that poor country?
Already most educated Ethiopians at home and abroad find it incredible that the DFID should all these years keep on trying to pull all sorts of strings to protect and bankroll the Meles regime, despite its horrendous records on human rights, repression in the country and several allegations of corruption of the ruling party the Tigrai People’s Liberation Front (TPLF/EPRDF).
In fact, the DFID through the Africa Power and Politics Programme has deemed it necessary to recommend in a study entitled Rethinking Business and Politics in Ethiopia: The Role of EFFORT, the Endowment for the Rehabilitation of Tigray, the ruling party’s business and financial arm as the vital mechanism that Ethiopia and Africa need for growth and development.
At least, in the case of the above, I had the opportunity to express my dismay in ETHIOPIA: helpless victim of twin evils—double-digit inflation and illicit financial outflows. That is partly not only because of its poor scholarship. But also one of the authors Mesfin Gebremichael is known to have ascended high within the ranks of the TPLF because of his closeness to the leadership, otherwise lacks proper qualification to do this kind of job.
The other author Sarah Vaughan, who claims to have done the writing singlehandedly also leaves the door open that the TPLF is possibly using outlets in trading posts in major cities and trading centers of Europe or Asia or even Africa under false names and identities, as they did in the case of Tower Trading Company in London. Although this company as of 2010 has been been transformed into Mulugeta Guade Mengiste and Addis International Trading, Sara Vaughn concedes, “The prospect that it [EFFORT] might do so [revert to recover it] in future, meanwhile, is explicitly not ruled out.”
Nevertheless, APPP’s high priests have lauded EFFORT as an endowment fund and recommended it as Africa’s future path. In reality, it is not lost on these people that TPLF/EPRDF and EFFORT are tools for the ethnic domination, supporting to the hilt Africa’s worst political and economic dictatorships and violation of fundamental human rights. Where endowment funds have been aligned to political power as in Ethiopia and Rwanda, APPP’s best examples of good politic and good economics, machineries of state repression have been well-greased in no less degree than the Soviet Union.
In particular I have in mind studies such as Developmental patrimonialism?: Rethinking business and politics in Africa and Developmental patrimonialism? The case of Rwanda.
I hope the preceding would remind Mr. Andrew Mitchell a few things about the TPLF/EPRDF. More importantly, he is already well aware that Ethiopia has been bleeding white for a long time now from crimes associated with illicit financial outflows. This has been confirmed by the recent UNDP report on Illicit Financial Flows from the Least Developed Countries: 1990-2008 and Illicit Financial Outflows From Developing Countries Over the Decade Ending 2009.
UK aid funded firms ‘linked to Nigeria faudster Ibori
The UK Government apologizes to whistle blower Dotun Oloko
DFID taken to task over links with fraudsters
*Reissued for technical reasons and also to enrich the article with additional materials.