FI­NANCE

With Brexit on the hori­zon, a large UK de­vel­op­ment fi­nance in­sti­tu­tion is look­ing to make big deals in Africa and sup­port lo­cal pri­vate sec­tors at the same time

The Africa Report - - CONTENTS -

Nick O’dono­hoe, chief ex­ec­u­tive of­fi­cer, CDC Group

Formed in 1948, the CDC was one of the world's first de­vel­op­ment fi­nance in­sti­tu­tions. To­day, it has a £5bn ($6.5bn) bal­ance sheet and in­vests in sub-sa­ha­ran Africa and South Asia. Wholly owned by the UK gov­ern­ment, it rein­vests its earn­ings back into the fund. With Bri­tain's exit from the Euro­pean Union loom­ing, the in­sti­tu­tion – which an­nounced it will in­vest £3.5bn in Africa over the next four years – is set to play a greater role.

TAR : You got dragge d onto Prime Min­is­ter Theresa May’s late Au­gust tour of Africa. Did you dance? NICK O’DONO­HOE: No, I didn't dance, and we went will­ingly, trust me! While the Prime Min­is­ter was danc­ing, the busi­ness del­e­ga­tion was off talk­ing about busi­ness. The Prime Min­is­ter's trip to Africa was a pretty graphic il­lus­tra­tion that, post-brexit, the UK needs to have a broad range of part­ners. And Africa can be a crit­i­cal part of that. So a lot of what we spent time talk­ing about [on the tripwas the Prime Min­is­ter re­in­forc­ing how im­por­tant eco­nomic de­vel­op­ment was to our over­all de­vel­op­ment pro­gramme in the UK. And, within that con­text, how im­por­tant the CDC and UK ex­port fi­nance are, and also the Pri­vate Inf ra s t r uc t ure Devel o pment Group, of which the UK owns 70%. It’s been quite a busy time for eco­nomic diplo­macy on the con­ti­nent. What does that tell you about what’s hap­pen­ing right now? I think there is a lot of in­ter­est in Africa for a va­ri­ety of dif­fer­ent rea­sons. The im­por­tance of eco­nomic de­vel­op­ment on the con­ti­nent has been high­lighted over the last cou­ple of years by the im­mi­gra­tion is­sues in Europe. [...] We have unique re­la­tion­ships in Africa and unique ad­van­tages there. But I think Brexit has some­thing to do with that, and the need to be seen, the whole ‘global Bri­tain' story. [...] The most sig­nif­i­cant change over the last 15 or 20 years has been the level of Chi­nese in­ter­est in in­vest­ing. I was [re­cently in Sierra Leone, for ex­am­ple, and it's very ob­vi­ous how sig­nif­i­cant a role the Chi­nese are play­ing.

Ma n y We s t e r n c o mpa n i e s strug­gle to match the abil­ity of Chi­nese com­pa­nies to come with ven­dor fi­nanc­ing al­ready bolted onto deals. How do Bri­tish com­pa­nies com­pete? We have world-lead­ing tech­nol­ogy and ex­per­tise in build­ing and ex­e­cut­ing com­plex pro­jects, par­tic­u­larly in ar­eas like in­fra­struc­ture. We have ex­port fi­nance sup­port, al­though we're prob­a­bly not as mo­bile or as well joined up [as China]. And I think this is not just true of us, but of the other Western coun­tries as well. So I think we could be com­pet­i­tive with the Chi­nese, but we do have to make sure that we are all joined up. And that was part of the rea­son for the trip [in Au­gust – [to show] that we're really joined up and pre­sent­ing a co­her­ent, com­pet­i­tive pack­age.

Give us an idea of some of the pro­jects that the CDC is tar­get­ing for this £3.5bn in­vest­ment. Broadly speak­ing, we in­vest in six pri­or­ity sec­tors: in­fra­struc­ture, fi­nan­cial in­sti­tu­tions, agri­cul­ture, man­u­fac­tur­ing, health and ed­u­ca­tion. I can't really talk about spe­cific pro­jects that are in the pipeline and not an­nounced. But if you look at what we have an­nounced in the last three to four months, you'll see a $100m in­vest­ment in In­do­rama: we're build­ing a new fer­tiliser plant in Nige­ria. We an­nounced a fa­cil­ity of $100m along­side Stan­dard Char­tered to in­vest in Zim­babwe, which was the first real com­mit­ment by a pri­vate sec­tor fi­nan­cial firm in Zim­babwe since the change in regime.

“Some­body has to be the first mover […] and take a risk on Zim­babwe”

With the $100m you shared with Stan­dard Char­tered in

Zim­babwe, where are you in­vest­ing? There are sig­nif­i­cant com­pa­nies in Zim­babwe who are op­er­at­ing at 20% ca­pac­ity, prin­ci­pally be­cause they can’t bring in any im­ports. Some­body has to be the first mover and start ad­dress­ing that is­sue and take a risk on Zim­babwe. And we felt – to­gether with Stan­dard Char­tered, who’s had an of­fice there for many, many years – that we wanted to be a first mover. So there’s about 15 com­pa­nies there in the man­u­fac­tur­ing sec­tor, the con­sumer sec­tor. They are ex­ist­ing, medium-sized com­pa­nies. This fa­cil­ity, when it’s up and run­ning, will al­low them to ac­cess prin­ci­pally dol­lars, which will al­low them to im­port, al­low them to man­u­fac­ture and to sell.

The cash in­jec­tion a few months ahead of the July elec­tion helped the Harare regime at a crit­i­cal point. Did the De­part­ment for In­ter­na­tional De­vel­op­ment (DFID) ask you to do it? No. In terms of in­vest­ment pol­icy, we are ab­so­lutely in­de­pen­dent of DFID. They don’t di­rect our in­vest­ment pol­icy in any way and never have. [...] First of all, the CDC sup­ports the pri­vate sec­tor, it doesn’t sup­port gov­ern­ment. We felt that there was an ur­gent need for cap­i­tal, we recog­nised – both Stan­dard Char­tered and our­selves – that we could have sat back and waited un­til the pol­i­tics had set­tled down. [...] I sup­pose some peo­ple tried to make it seem as if it was some sort of vote of con­fi­dence in the gov­ern­ment. It was never pre­sented that way. It was a vote of con­fi­dence in the coun­try, in the peo­ple, in the pri­vate sec­tor com­pa­nies that ex­ist there to­day. In­ter­view by

Nick O’dono­hoe CEO, CDC Group, UK

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