10/02/2017 Select Committees


10/02/2017

Recorded coverage of the Public Accounts Committee's session on overseas investment, from Wednesday 8 February.


Similar Content

Browse content similar to 10/02/2017. Check below for episodes and series from the same categories and more!

Transcript


LineFromTo

Thank you very much. Ladies and gentlemen, welcome to the

:00:30.:00:36.

Public Accounts Committee this Wednesday 8th February, 2017. We are

:00:37.:00:43.

here today to look at the CDC, the Commonwealth development corporation

:00:44.:00:51.

which is a body set up originally in 1948 to channel money into

:00:52.:00:55.

investment in developing countries to help promote economic growth and

:00:56.:00:59.

job creation and it is going through an interesting change right now,

:01:00.:01:02.

going through the House is a bill that's going to change the structure

:01:03.:01:10.

but particularly focus on increasing investment in line with an economic

:01:11.:01:13.

strategy so there is an investment limit going up from 1. 5 billion

:01:14.:01:17.

currently to 6 billion and potentially enables the House

:01:18.:01:20.

through secondary legislation to increase that to ?12 billion. So it

:01:21.:01:24.

is an interesting time of change. The report goes through some of that

:01:25.:01:27.

with interesting graphs about the expansion of staff teams and the

:01:28.:01:32.

cost of staff going up as a result, partly as a result of that. This is

:01:33.:01:38.

a quadruple willing of taxpayers' money to be invested for overseas

:01:39.:01:43.

development aid but a vehicle that's a sort of hybrid vehicle because it

:01:44.:01:47.

gets direct taxpayers' money but operates in private sector terms

:01:48.:01:50.

which is a sort of brief summary of how it works. I want to welcome our

:01:51.:01:57.

witnesses and I wanted to ask some questions about St Helena airport

:01:58.:02:00.

before the main session. This is from my left to right. Rachel

:02:01.:02:06.

Turner, interim director general for economic development. Welcome I

:02:07.:02:08.

think it's your first time in the committee. Yes. Welcome. We are a

:02:09.:02:13.

friendly bunch, most of the time. If you answer our questions! Sir mark,

:02:14.:02:18.

permanent Secretary at the Department for International

:02:19.:02:22.

Development. Diane Nobel, the chief executive, but not for much longer s

:02:23.:02:27.

that right? A few more months. Do you know who your successor is? We

:02:28.:02:33.

will talk about that later. OK. And Graham Ridley the chair of the CDC.

:02:34.:02:39.

Our hashtag for anyone following on social media is hashtag CDC. Before

:02:40.:02:44.

we start on that, Sir Mark, I wanted to ask about St Helena, I understand

:02:45.:02:49.

there was a key date yesterday for tenders coming in to provide

:02:50.:02:54.

aircraft to the airport. What can you do, can you update us on

:02:55.:02:58.

progress on whether flights will be able to land at the airport? Yes,

:02:59.:03:03.

chair. There was a closing date submission of tenders. I can tell

:03:04.:03:07.

you we have had a substantial number of responses. My commercial advisers

:03:08.:03:11.

tell me I shouldn't tell you the precise number because it is a

:03:12.:03:15.

commercial process ongoing. It remains the Government's plan to

:03:16.:03:18.

move through the tender process and to start an air service to St Helena

:03:19.:03:22.

in the way we discussed last time I was here later in the year. OK. Any

:03:23.:03:29.

of these aircraft large or all smaller aircraft that were managing

:03:30.:03:33.

to land successfully? There are some aircraft that are in the category

:03:34.:03:41.

that I ran through when I was here with Richard Montgomerie last time.

:03:42.:03:45.

We won't revisit that in this session. Thank you for the update. A

:03:46.:03:50.

couple of questions. I met some people from St Helena yesterday,

:03:51.:03:53.

they may have met you, as well, I don't know. But I am concerned

:03:54.:03:57.

because we have seen all of this money go in and haven't yet got the

:03:58.:04:00.

right solution in terms of the airport, I hope that will happen.

:04:01.:04:04.

But these are really questions for CDC and I don't expect to you sign

:04:05.:04:08.

your name in blood to anything right now but your mission is to secure

:04:09.:04:12.

future sustainability and prosperity for some of the poorest countries in

:04:13.:04:19.

sub Sahara Africa and Asia. St Helena is underdeveloped and is in a

:04:20.:04:25.

sort of aspect where it can't really change without the airport and

:04:26.:04:29.

without the investment. It hardly has any hotel beds, the bank is

:04:30.:04:34.

capitalised at ?5 million. It is precisely the sort of thing one

:04:35.:04:40.

might think where a multilateral financial institution like the EBRD

:04:41.:04:45.

or CDC might come in over a long period of time perhaps with partners

:04:46.:04:49.

to develop a corporation, particularly if the air solution

:04:50.:04:54.

comes up, that would create the right conditions for a much more

:04:55.:05:00.

sustainable long-term tourist industry with perhaps 1520,000

:05:01.:05:04.

visitors, there is obviously a huge interest and a niche market for

:05:05.:05:11.

that. Is this the sort of thing that CDC would seriously look at? You

:05:12.:05:18.

described precisely what CDC does but the geographies that we invest

:05:19.:05:22.

in are decided by our shareholder and we invest at the moment only in

:05:23.:05:28.

Africa and south Asia wris where 80% of the world's poor live. So a

:05:29.:05:32.

question of the shareholder changing its mind. You Getty point. I get

:05:33.:05:39.

your point and indeed you will be aware that the Caribbean development

:05:40.:05:45.

bank, for example, with help is interesting in overseas territories

:05:46.:05:49.

now I need to check which of the development banks have a mandate for

:05:50.:05:53.

exactly where St Helena is but I will take that away and have a look

:05:54.:05:58.

at it and in respect of CDC as you will know the Secretary of State is

:05:59.:06:02.

planning to agree with the board shortly the new strategy for CDC and

:06:03.:06:07.

that does touch on the issue what of right geographical areas are. It

:06:08.:06:11.

would be extraordinary if the British overseas territories, some

:06:12.:06:18.

are which very poor, some have had governance problems, when I was

:06:19.:06:21.

first elected to as an MP I was invited to the solicitor owemans and

:06:22.:06:26.

it was cancelled a because it was too dangerous. If they were excluded

:06:27.:06:31.

when other places were, even if they were roughly in the right

:06:32.:06:36.

geographical area, would that not be strange? It's a matter for the

:06:37.:06:39.

investment policy and they're reviewing the policy at the moment.

:06:40.:06:42.

So I will take away the point and consult the Secretary of State.

:06:43.:06:46.

There is an open invitation for you to lobby the Secretary of State. OK.

:06:47.:06:52.

We are moving into our main session on CDC, particularly in light of the

:06:53.:06:57.

bill going through parliament. I will pass over.

:06:58.:07:00.

Thank you very much for being here. There are a number of questions I

:07:01.:07:03.

want to ask relating to your strategy.

:07:04.:07:09.

First, to Sir Mark, do you think there has been a big benefit moving

:07:10.:07:15.

from a fund to fund strategy to more direct investments? Well, I think

:07:16.:07:20.

probably the company will want to comment on that, as well. The then

:07:21.:07:25.

Secretary of State in 2012 was very keen to do that in order to get CDC

:07:26.:07:30.

back in the business of being able to invest directly in companies

:07:31.:07:34.

where the company thought there was a good prospect for creating jobs

:07:35.:07:40.

and adding to the tax base and making development impact and the

:07:41.:07:44.

experience so far, it is early days in terms of the proven results, but

:07:45.:07:48.

the experience so far has been very positive. Yes, we think it's a good

:07:49.:07:53.

idea for CDC to have both the fund to funds vehicle and the direct

:07:54.:07:58.

investments, equity and debt. Yes, we are happy with our mandate. We

:07:59.:08:02.

think it gives us the full range of tools we need to achieve our mission

:08:03.:08:06.

to create jobs especially in the poorest places. There are some great

:08:07.:08:11.

things that funds, investing through funds can achieve. You are creating

:08:12.:08:15.

a layer of investing infrastructure effectively that will last for

:08:16.:08:24.

decades to come. And also you are - direct investing can be much more

:08:25.:08:30.

precise in targeting investments that alleviate poverty. The

:08:31.:08:34.

principle worry about this is you are moving from one set of

:08:35.:08:36.

investment, your investment professional, I read, so you

:08:37.:08:39.

understand that it is a very different thing to be a fund to

:08:40.:08:43.

funds manager than to be a direct investor. So you need a different

:08:44.:08:51.

skills set. How are you doing in expanding that particular skills

:08:52.:08:55.

set? If I can refer colleagues to page... Yes, the report covered it

:08:56.:09:00.

very well actually, that we have done a lot of work over the last

:09:01.:09:04.

five years to establish effective will you new teams, there is a

:09:05.:09:07.

figure that shows all the boxes of the teams in the colours. And so we

:09:08.:09:14.

have put in place product teams so a direct equity team and sector teams

:09:15.:09:16.

because you really need to understand the sectors that you are

:09:17.:09:21.

investing. Now we are beginning to expand our geographic reach as well

:09:22.:09:25.

to supplement this so that we can be really close to our portfolio

:09:26.:09:28.

companies but you are right it's a different skill. Do you think it is

:09:29.:09:35.

- I was looking at the compound growth rate, which I asked for

:09:36.:09:38.

specifically. I notice that it is sort of fallen off. Take the last

:09:39.:09:44.

four or five years, it is about 7. 7.5%. Whereas over 15 year period

:09:45.:09:49.

it's 10%. Is that related to the fact that you are shifting your

:09:50.:09:53.

focus? Do you mean the financial return is coming down? Yes, it is.

:09:54.:09:58.

It is not so much because we are investing direct, it's because we

:09:59.:10:04.

deliberately responded to the recommendations from this committee

:10:05.:10:08.

and also the development committee and international development

:10:09.:10:11.

committee in 2010 to push ourselves to make harders investments. You

:10:12.:10:15.

will have seen the development impact grid in the NAO report and

:10:16.:10:22.

that is that targets our tapes and pushes our teams to make investments

:10:23.:10:26.

in the harder countries. You will have seen our portfolio is more

:10:27.:10:30.

weighted to the harder bits so we think we are pushing our mission and

:10:31.:10:33.

that we think over time will continue to bring the financial

:10:34.:10:37.

return. If as you accept that the financial return is slightly

:10:38.:10:41.

decreasing, and that's what the numbers suggest, the issue that I

:10:42.:10:44.

would have is that how do you measure the development impact

:10:45.:10:48.

because it seems looking at the report and looking at other things

:10:49.:10:52.

that that's a difficult thing for you to get a handle on and you have

:10:53.:10:57.

used different criteria. So we think we have extraordinary impact and we

:10:58.:11:00.

think and we are demonstrating it, as well. So we want to try and

:11:01.:11:04.

maximise the number of jobs that are created. We can now show the last

:11:05.:11:09.

two years our portfolio companies created over a million jobs in each

:11:10.:11:14.

of those two years. A million jobs in each of those two years. We want

:11:15.:11:21.

to increase taxes paid. We can show that our portfolio companies paid

:11:22.:11:25.

over $7 billion over the last three years into local Exchequers, we want

:11:26.:11:31.

to power Africa. We can show that our power companies generated 56,000

:11:32.:11:38.

gigawatt hours, which is enough to support 28 million people. And we

:11:39.:11:43.

want to bring the private sector and other investors in alongside us and

:11:44.:11:48.

we can show that last year 700 million extra capital came in

:11:49.:11:51.

alongside our 3 punz million that we committed to funds. Forgive me,

:11:52.:11:57.

these are fluent answers but if you look at figure 15 of the report on

:11:58.:12:07.

page 34, it's not - the picture that you lucidly describe is not captured

:12:08.:12:10.

in that figure because there are a number of criteria that you

:12:11.:12:14.

discontinued for what reason, I am not sure why you would have done

:12:15.:12:17.

that. It looks to me like you have been moving the goal posts slightly

:12:18.:12:21.

in the sense that some of the criteria are no longer used or have

:12:22.:12:25.

I got the wrong impression? It's a different picture. Again the NAO

:12:26.:12:30.

report very clearly shows how much we have done and how much has

:12:31.:12:36.

changed since 2011. So, where we invest, how we invest, what we

:12:37.:12:43.

invest in and a lot of our processes and policies have changed, as well.

:12:44.:12:48.

Every time we enhance what we do we add something new to the way that we

:12:49.:12:52.

report. So the picture I want to paint is one of constant

:12:53.:12:57.

improvement, not one of wanting to change goal posts. You will

:12:58.:13:02.

understand if you alter the measure it is very difficult for committees

:13:03.:13:07.

like us to track progress. You understand that problem? Of course.

:13:08.:13:15.

But the main metrics that I described upfront, jobs created, tax

:13:16.:13:19.

paid, capital crowded in, power generated, these are not measures

:13:20.:13:25.

that are changing. We will report consistently on them year on year.

:13:26.:13:30.

Can I ask about jobs created. You talk about a million from the

:13:31.:13:34.

portfolio companies. Direct jobs is about 25,000, isn't it? Yes Seems a

:13:35.:13:38.

big jump from 25,000 to a million. Can you talk through how you make

:13:39.:13:43.

that, what measure you set in place and make sure you are not double

:13:44.:13:50.

counting? Of course. So it follows accepted economic advice which is

:13:51.:13:54.

when you look at the job effect of investing it falls into three

:13:55.:13:57.

categories. Obviously the direct jobs, we all understand that. Then

:13:58.:14:02.

there are indirect jobs generated through supply chains. Then there

:14:03.:14:07.

are induced jobs which result of bringing more power or finance to a

:14:08.:14:10.

country or a region that doesn't have enough of it.

:14:11.:14:15.

Your right to say that the methodology we put in place a couple

:14:16.:14:21.

of years ago, it is clear that the indirect jobs are much great and the

:14:22.:14:26.

direct jobs are much smaller as the proportion of the whole. But I think

:14:27.:14:31.

this is intuitive. As an example, we made an investment bringing

:14:32.:14:38.

hydropower to eastern Congo, this is off grid, the first of this region

:14:39.:14:44.

has had it, that we think will generate 250 direct jobs but it is

:14:45.:14:49.

part of planned to bring 40,000 new jobs to the indirect effect...

:14:50.:14:56.

Perhaps we can follow up on this but how do you measure your not double

:14:57.:15:01.

counting? You're creating the energy which could potentially create

:15:02.:15:04.

40,000 but other things which could contribute to this which you might

:15:05.:15:09.

also be investing in. The design of the methodology was not ours. We

:15:10.:15:12.

went out and find the best adviser to put it together and we are peer

:15:13.:15:18.

reviewing that methodology at the moment. Like you, we want to be as

:15:19.:15:23.

precise and accurate and honest about the impact we have. About this

:15:24.:15:30.

development, we had slightly more problems on this than I think you're

:15:31.:15:36.

answers may suggest. In 2008 there was an issue, was there not? This is

:15:37.:15:45.

to Sir Mark. There were a number of things in two dozen eight. This was

:15:46.:15:50.

a question that Mr Kaepernick Lakra bacon asked in 2008. Why was the tax

:15:51.:15:57.

paid by the date the company? Asking about the development company. There

:15:58.:16:02.

are none of damage and need element impact. Are these businesses are

:16:03.:16:07.

generating business and paying tax going back into the Exchequer? A big

:16:08.:16:11.

change in the element impact has been the eight fold increase in

:16:12.:16:14.

businesses paying tax. It is absolutely the case today that in

:16:15.:16:17.

2008 we were not tracking jobs created. It is also the case as the

:16:18.:16:24.

report pointed out that we were not in 2008 identified at the moment is

:16:25.:16:30.

the company was going to make an investment or not, will be predicted

:16:31.:16:34.

development impact would be. Those three things are enhancements. The

:16:35.:16:37.

report recommends we do more to enhance knowledge of the element

:16:38.:16:42.

impact, more evaluation work and so, and we agree with that I want to do

:16:43.:16:47.

that. There has been a lot progress since 2008. Can I ask you a specific

:16:48.:16:51.

question about this? By understanding is you had ?5 million

:16:52.:17:01.

of the 735 that you got in 2015, ?5 million allocated specifically to

:17:02.:17:07.

hire a senior evaluation Officer, or someone who would be looking at this

:17:08.:17:13.

very issue impact, development impact. Where have you got to

:17:14.:17:18.

intensify ring this person? The 5 million was not to hire the

:17:19.:17:25.

individual, to be clear. We were in the -- we were intended to hire an

:17:26.:17:29.

individual who had expertise in this and would be able to manage a 15

:17:30.:17:34.

year long study, checking in periodically to provide the

:17:35.:17:37.

aggregate picture of the element impact. I'm sorry to have to report

:17:38.:17:44.

to you, at the report says that we have not been able to find the

:17:45.:17:46.

person with the right skills to do that. What we have done is tender

:17:47.:17:51.

contract to provide the analysis in the study over that 15 year period.

:17:52.:17:55.

That is not the only thing we have done, we have also, the company

:17:56.:18:01.

should be to much bigger programme of work they have commissioned of an

:18:02.:18:06.

evaluative sword so we can tell a stronger story as we go along. Are

:18:07.:18:11.

you still looking for someone or had you abandon that? We will have

:18:12.:18:15.

another look at what I didn't want to do is delay the whole evaluative

:18:16.:18:19.

process because we were delaying finding the senior person for that

:18:20.:18:24.

we can let the contract and we have competent people. How long did you

:18:25.:18:27.

spend trying to define this person? Are you so. -- a year or so. The

:18:28.:18:41.

other thing I wanted to ask about is the quality of jobs because clearly

:18:42.:18:45.

that is a big issue you pride yourself on in terms of job

:18:46.:18:49.

creation. How do you measure the quality of the jobs you create? The

:18:50.:18:57.

NAO report recognises that we made a lot of progress in this area. And we

:18:58.:19:02.

agreed that it is not enough just to care about the number of jobs

:19:03.:19:06.

created, we should also care about the quality of those jobs, or decent

:19:07.:19:09.

work if you like. The things we have done, we have a code of responsible

:19:10.:19:16.

investing and that had standards in it that followed the International

:19:17.:19:23.

Labour organisation. It is very clear that we have standards set to

:19:24.:19:29.

avoid forced child labour or discrimination, we ensure safe and

:19:30.:19:32.

healthy working environments, and we ensure that our companies pay the

:19:33.:19:37.

minimum wage. It is fine to say these are standard but the important

:19:38.:19:40.

thing is are they actually did too? We have a great team that goes in

:19:41.:19:50.

and does due diligence before we invest and assess the compliance and

:19:51.:19:52.

if they are not complained they will put in place and action plan and

:19:53.:19:57.

they oversee real change. We don't stop there, we also assess how the

:19:58.:20:01.

companies are doing against the action plan and we will step in and

:20:02.:20:04.

help them if they are falling short. We had a traffic light system that

:20:05.:20:14.

go to the risk committee. If I may, it's a very compelling story, but

:20:15.:20:18.

I'm interested in your relation to the private sector. This is quite

:20:19.:20:28.

hybrid beast and I'm sure you would have been happy to receive capital

:20:29.:20:31.

underwritten by the taxpayer, I've looked at York account and there no

:20:32.:20:36.

cost of capital that I can see and yet you're competing on favourable

:20:37.:20:42.

terms on financing with the private sector -- your accounts. Is that

:20:43.:20:46.

something you are happy doing? Do you feel that you're competing not

:20:47.:20:53.

competing but operating in a fair environment with other people you

:20:54.:20:56.

are trying to do it on a commercial basis? CDC is a unique and

:20:57.:21:04.

extraordinary organisation. What you describe is actually its strength.

:21:05.:21:07.

It has permission to go to the very hard places that it uses and this is

:21:08.:21:13.

a strength of the team we have hired, it uses commercial skills to

:21:14.:21:17.

apply judgment to navigate the difficult places. The judgment about

:21:18.:21:23.

which team we should work with which management team we should not work

:21:24.:21:27.

with, what standards should we have in job quality and is this a company

:21:28.:21:34.

that is going to grow and be sustainable for the long term? These

:21:35.:21:37.

are important judgment that the team makes and these are commercial

:21:38.:21:42.

skills. But you see there may be an issue in terms of private investors

:21:43.:21:45.

operating in your space who feel they cannot compete and are being

:21:46.:21:49.

crowded out. This is an important topic. We use the phrase

:21:50.:21:59.

additionality. The meaning of that is that we always want to be clear

:22:00.:22:01.

that CDC is bringing something that CDC is bringing something

:22:02.:22:05.

unique to the investment we make and that can be capital. For example,

:22:06.:22:14.

during the Ebola crisis we provided much-needed liquidity to companies

:22:15.:22:17.

that were running out of working capital to the essential businesses

:22:18.:22:21.

going. No other investor was investing in cereal own at the time.

:22:22.:22:26.

That occur in Sierra Leone. Also we can bring things that the private

:22:27.:22:35.

sector would not bring -- in Sierra Leone. We have dramatically improved

:22:36.:22:41.

working conditions in a rail freight business intimately poorest state of

:22:42.:22:49.

India, which is an industry which is notorious for poor working practice.

:22:50.:22:52.

Or we may change the strategy of the investment that we work with. The

:22:53.:22:59.

report talks about global leg, our busiest investment, which is the

:23:00.:23:02.

biggest independent power producer in Africa. We make that investment

:23:03.:23:06.

but commercial capital would have invested in it. It is an attractive

:23:07.:23:10.

company. But what we have done is completely change the strategy from

:23:11.:23:16.

essentially a commercial strategy where the shareholders are taking

:23:17.:23:21.

out dividends each year and saying that we want those dividends and all

:23:22.:23:26.

the focus to go on developing the next generation of power plants

:23:27.:23:29.

across Africa which is not a fully commercial strategy. We have changed

:23:30.:23:33.

the board and the management team and the strategy. For my

:23:34.:23:39.

clarification, do you essentially go in as yourself or do you go in as

:23:40.:23:44.

joint ventures? Do you have a style or approach with respect to joint

:23:45.:23:48.

ventures and partners? We are very flexible. We can be very active, as

:23:49.:23:54.

I described with Globalec, we were a majority shareholder. One of the

:23:55.:23:59.

important things we do is to try to work with the best people. The magic

:24:00.:24:05.

of CDC is when you combine capital with people who share your values

:24:06.:24:10.

and what to do the right thing. One of the most important things we do

:24:11.:24:13.

is to try to choose those people and back them. You don't see any

:24:14.:24:20.

tension, any tension at all between those twin goals? You think this is

:24:21.:24:28.

a model that is completely without any wrinkles? Of course it's

:24:29.:24:37.

challenging. To the mandate we have, and the whole team that we've hired

:24:38.:24:41.

over the last five years, completely accept this, is to really push the

:24:42.:24:45.

impact part of our mission, to do the hard things that the committee

:24:46.:24:52.

wants us to do. But to do it in a responsible way that generates

:24:53.:24:58.

returns, crowds in the private sector as well, and also had a

:24:59.:25:02.

demonstration effect so future investors will follow us. It is a

:25:03.:25:07.

hard mission and it does have challenges and trade-offs, should we

:25:08.:25:10.

make this investment, will it achieve both those aims? Mr Wrigley?

:25:11.:25:28.

You summarised the balancing of the impact and the return. It is

:25:29.:25:32.

perpetual paranoia, are we getting the right balance? You can think

:25:33.:25:36.

about it on an investment level and a strategic level. Every investment

:25:37.:25:42.

comes to the investment committee, the teams and the committee has to

:25:43.:25:47.

make a judgment, a triangulation between the redevelopment impact,

:25:48.:25:50.

how can we make the world better, financial return, how we're to

:25:51.:25:55.

achieve our financial mandate from the UK taxpayer, are we going to be

:25:56.:26:02.

additional? Your question, we never want to crowd out and we don't crowd

:26:03.:26:06.

out and we have clear rules and guidelines. And are we managing UK

:26:07.:26:13.

money with full business integrity? That is every investment. Last year

:26:14.:26:18.

we made over 40 investments. At a strategic level, and we are very

:26:19.:26:24.

long-term business, we have to judge development impact and financial

:26:25.:26:30.

return, the tone of the National Audit Office inquiry eight years ago

:26:31.:26:34.

was a different set of questions. That is what we try to do. Those are

:26:35.:26:39.

the debate we are having at the moment with each shareholder for the

:26:40.:26:45.

next five years. I looked at the 2008 report and clearly there were

:26:46.:26:49.

big problems and it's a different picture. They were running it like

:26:50.:26:54.

hedge funds with 30% returns one year on taxpayer money and were

:26:55.:26:57.

being very well paid for it. You have moved on from that. I think, as

:26:58.:27:06.

the NAO report said, the returns that we've made and the taxpayer has

:27:07.:27:12.

made in the last five years, 84% of them came from that strategy and a

:27:13.:27:16.

lot of great mobilisation was done in that period. And the Joslin

:27:17.:27:21.

report from Harvard business School talked about 345,000 jobs created.

:27:22.:27:30.

What was the fall in 2008? You have been saying how wonderful it was but

:27:31.:27:35.

it was down 36% in one year? It was a volatile market. I'm talking about

:27:36.:27:42.

over the period. I remember this, I was on the committee at the time and

:27:43.:27:47.

one of your predecessors paid himself ?970,000 and was targeting a

:27:48.:27:52.

bunch of middle income countries, not the most difficult to help so

:27:53.:27:55.

they were mimicking what was being done by a private equity providers

:27:56.:27:59.

and hedge funds and very nice for them, thank you very much, but not

:28:00.:28:05.

clear that Mr and Mrs taxpayer need to be involved. And Sir Mark is

:28:06.:28:09.

nodding. The reason you sort the drop wasn't because it was volatile,

:28:10.:28:14.

although of course it was, but because there was a strategic choice

:28:15.:28:20.

made, a good one. I'm not speaking out of turn, I hope, that an

:28:21.:28:25.

accurate description? I think the change has been profound. The new

:28:26.:28:30.

strategy that started in 2012 is a fundamental change and we have now

:28:31.:28:36.

targeted, as it says on figure for on page 20, sub Saharan Africa and

:28:37.:28:41.

South Asia, the poorest states, so we have 90% of our new investment...

:28:42.:28:46.

Do you know how close signalling is to sub-Saharan Africa? As Mark said

:28:47.:28:54.

earlier... -- how close St Helena. As the NAO report said, we have

:28:55.:29:00.

fundamentally addressed the concerns of Parliament about that period.

:29:01.:29:05.

Figure seven on page 24 of the report demonstrates the rate of

:29:06.:29:16.

return and the 36% drop in 2008. In a sense there is another

:29:17.:29:21.

objective, which is rather bizarre at first which is actually Sir

:29:22.:29:24.

Mark's, if you like, objective, which is to spend a minimum of,

:29:25.:29:28.

which is the most bizarre, if you like, way of looking at this, as

:29:29.:29:34.

against clearly the more commercial objectives of trying to develop

:29:35.:29:38.

projects which will give you development improvement in some of

:29:39.:29:42.

these countries as well as a return on the investment made. So,

:29:43.:29:47.

presumably each of these projects has a different development value so

:29:48.:29:53.

to speak. So, Sir Mark, how do you make sure in your quest to make sure

:29:54.:29:57.

you spend all that money we aren't actually spending on projects which

:29:58.:30:01.

in the real world if we didn't have that target we wouldn't because it

:30:02.:30:05.

is not good value or a good rate of return for the taxpayers of the

:30:06.:30:08.

country because I am assuming there are some things which have a big

:30:09.:30:11.

impact fairly quickly, you have picked infrastructure targets, I

:30:12.:30:14.

suspect, because they're much better at doing that and the long-term

:30:15.:30:18.

sustainable advantages is clearly demonstrated, but are you going to

:30:19.:30:21.

be pushing now into territories which don't give you that sort of

:30:22.:30:26.

return and how are you dealing with that? So, obviously I think you are

:30:27.:30:30.

which is what the Government's which is what the Government's

:30:31.:30:34.

decided and parliament sort of put on statute book for the tax payer to

:30:35.:30:40.

spend every year on official development assistance. From that

:30:41.:30:44.

budget the Government has a choice about how much to capitalise CDC and

:30:45.:30:48.

the legislation which the chair referred to at the beginning which I

:30:49.:30:56.

think is going through the House of Lords process tomorrow, gives the

:30:57.:31:00.

Government the authority to invest with a statutory instrument on the

:31:01.:31:06.

way up to another ?10. 5 billion into CDC. Now the previous

:31:07.:31:11.

legislation which I think was passed in 99 or 2,000 capped what the

:31:12.:31:15.

Government could put in. The capitalisation of CDC over the last

:31:16.:31:19.

70 years has been here and there from the taxpayer, grown over time,

:31:20.:31:23.

sometimes coming down a bit as MrBacon observed in a bad year, but

:31:24.:31:32.

grown over time. The choice we face now is given that we had exhausted

:31:33.:31:37.

the ability to capitalise previously permitted by legislation, assuming

:31:38.:31:40.

the bill goes on the statue book, the choice that will be available to

:31:41.:31:47.

ministers will be whether to put more capital into CDC and ministers

:31:48.:31:50.

are absolutely clear during the House of Commons passage of the bill

:31:51.:31:56.

that they would only do that on the basis of a clear business case where

:31:57.:31:59.

it was absolutely transparent what the development impact would be,

:32:00.:32:02.

what the trade-offs would be, whether there was a need for capital

:32:03.:32:10.

or not. Now currently over the last two years what's happened in 2015

:32:11.:32:15.

the company made commitments of ?735 million and in 2016 of ?1. 2

:32:16.:32:21.

billion. Even in those African south Asian markets which have been

:32:22.:32:25.

traditionally harder, and obviously the Government wouldn't have tabled

:32:26.:32:28.

the bill if it didn't think there was a good case at some point in the

:32:29.:32:34.

future for more investment, but that decision on more investment hasn't

:32:35.:32:38.

been made yet. It will be subject to a business case. The quality of the

:32:39.:32:42.

business case will need to be as good as the last one by the NAO

:32:43.:32:47.

commented on, they say in the report it was a convincing business case

:32:48.:32:52.

last time and then if there is a convincing business case ministers

:32:53.:32:57.

will decide whether they do want to invest more. How do you measure the

:32:58.:33:03.

value? The reason I ask that and you will no doubt say it is about the

:33:04.:33:06.

number of jobs created and something other things you talked about, but

:33:07.:33:10.

in a sense that's easier with an infrastructure project than it would

:33:11.:33:15.

be than some of the things you are likely to be going into if they do

:33:16.:33:21.

grant you the money, so are you considering reviewing your whole

:33:22.:33:25.

measurement system so it is fit for purpose, that it is comparable

:33:26.:33:28.

against different types of investment you make because it seems

:33:29.:33:33.

that's quite important because the British taxpayer wants to see that

:33:34.:33:41.

it is a philantropic approach has delivered and you can see which

:33:42.:33:47.

investments have delivered more across the different measures? You

:33:48.:33:51.

describe almost perfectly what you will see in our next five-year

:33:52.:33:55.

strategy. So we want to be relentless about showing more, as I

:33:56.:34:00.

said upfront we show a lot of impact but there is always more you can do.

:34:01.:34:05.

So you will see in the strategy that we will be much clearer about the

:34:06.:34:10.

individual impact that we want to achieve on each case, on each

:34:11.:34:15.

investment that we make and you're right, it's different for each

:34:16.:34:18.

investment. Obviously jobs and taxes are a unifying force and that's

:34:19.:34:21.

where we started because we wanted to be able to show the impact of our

:34:22.:34:27.

whole portfolio. Now we need to drill in a bit more and look at the

:34:28.:34:30.

individual very much that is we make, what our expectations are,

:34:31.:34:34.

what we want that investment to do over time and we need to track it

:34:35.:34:39.

over time to see how we are doing. And will you look at that in the

:34:40.:34:47.

context of the poverty gap or poverty need the country that you

:34:48.:34:51.

decided to invest in, because you have picked projects presumably

:34:52.:34:54.

according to some crit year because you think you can make the most

:34:55.:34:58.

impact so to speak, but then do you go back to this country rather than

:34:59.:35:03.

just this project, how do you actually improve the overall quality

:35:04.:35:08.

of life there? What you see in the grid that we use and that really

:35:09.:35:13.

does it in a way in that it grades higher the poorer and the harder

:35:14.:35:18.

places to do business and the places that have the greatest need of our

:35:19.:35:24.

capital. But always when we assess an individual investment we do try

:35:25.:35:29.

and step back and say is this good for the country, is this good for

:35:30.:35:33.

poverty, is this good also, does it ling us to the sustainable

:35:34.:35:37.

development goals which obviously we are all unified in trying to

:35:38.:35:39.

achieve. Measurement.

:35:40.:35:44.

You are acutely aware from the answers that you have given of the

:35:45.:35:50.

need to measure and I know we don't yet have the individual in place, if

:35:51.:35:55.

we ever do, to look at this in the longer term, but pending that

:35:56.:35:58.

individual being in place it seems to me there is a need to ensure that

:35:59.:36:03.

you do take some action to make sure that what you think is happening is

:36:04.:36:07.

happening and is delivering what you need, so it would be helpful to have

:36:08.:36:13.

some spotlight on that as to how you go about it, and September this if

:36:14.:36:17.

you like, fix, that we hope you find and one specific issue I would like

:36:18.:36:23.

to address is one of corruption. Clearly you say that you look at the

:36:24.:36:27.

quality of the directors so they are not corrupt, which is clearly the

:36:28.:36:30.

right thing to do, but in many of these countries it is not just about

:36:31.:36:34.

whether the director is or is not corrupt, but there are business

:36:35.:36:38.

processes and business models which are simply not free of corruption so

:36:39.:36:43.

how do you deal with that because clearly one of the things that we

:36:44.:36:50.

face as politicians is a cry from the taxpayers say why are we

:36:51.:36:53.

spending money on this and that the country is wealthy or, you know,

:36:54.:36:57.

this is a project which could have been funded via the private sector?

:36:58.:37:03.

Yes, so we take all possible steps to try and ensure that we and our

:37:04.:37:08.

companies that we invest in avoid fraud and corruption and this

:37:09.:37:13.

requires a number of different work streams effectively. So, we inor

:37:14.:37:20.

dinnate efforts to make sure we work with the right people, that's really

:37:21.:37:26.

at the heart of of it. We try to avoid sectors that have particular

:37:27.:37:31.

propensity for corruption, ones with high levels of Government tendering

:37:32.:37:36.

and things like that. We have a very strong business integrity team which

:37:37.:37:40.

you will have seen from the report we built from scratch since 2011.

:37:41.:37:46.

That team is as large as the IFC's, which is the private sector on the

:37:47.:37:52.

World Bank, it has a portfolio of 15 times our size and our team is the

:37:53.:37:56.

real size and these are real professionals. And obviously we have

:37:57.:38:02.

lots of policies here. But again this isn't just about writing things

:38:03.:38:06.

on pieces of paper. As the report points out, 19% of our pipeline was

:38:07.:38:12.

turned down because we didn't meet the standards of integrity, either

:38:13.:38:14.

the people working with or the standards we found in the companies,

:38:15.:38:20.

or because of environmental and social issues. So, we are really

:38:21.:38:23.

careful about where we invest. Thank you.

:38:24.:38:27.

One of the things that is a bit of a riddle to me is the nature of the

:38:28.:38:34.

relationship you have with DIDOD. These are obviously huge amounts of

:38:35.:38:36.

money, the bill going through parliament is potentially giving

:38:37.:38:43.

more. I want to know more about the relationship between DIFOD

:38:44.:38:47.

ultimately responsible for the taxpayers money and the capable

:38:48.:38:51.

investment professionals. Well, as the report says, there has been some

:38:52.:38:55.

sort of revamping of the Government's arrangements and the

:38:56.:38:59.

report says we have a thorough set of arrangements. The basic construct

:39:00.:39:09.

is that the shareholder appoints the chair and sets the strategy and

:39:10.:39:14.

investment policy and then it is a matter for the chair to assemble a

:39:15.:39:20.

board on which she consults as new vacancies arise and to hire and

:39:21.:39:24.

supervise the executive, to execute the policy. So the construct is that

:39:25.:39:32.

there is a separation. As you will know, some of the low points in

:39:33.:39:37.

CDC's history over 70 years have been ones where civil servants,

:39:38.:39:41.

often well-meaning, came up with bright ideas on things that maybe

:39:42.:39:47.

the company could do and poor decisions all too often were made as

:39:48.:39:50.

a result. There is a deliberate separation. The report flags the

:39:51.:39:57.

point that it is important everybody across Government understands that

:39:58.:39:59.

separation and we have just sent guidance out to the whole of the HMG

:40:00.:40:06.

network overseas to explain it is up to CDC, who are accountable through

:40:07.:40:09.

the board to the shareholder and the Secretary of State, to decide what

:40:10.:40:16.

investments to make. It is not up to, you know, the - not the civil

:40:17.:40:19.

servants in my department or other departments. Clearly we don't want

:40:20.:40:27.

to go down to the schemes and that kind of stuff. Are there formal

:40:28.:40:35.

structures where DIFD communicate with CDC? Informal thing? There is a

:40:36.:40:44.

set in the report. As Mark said, I have a team of six who help Mark

:40:45.:40:48.

steward our relationship with the company. We have a formal process,

:40:49.:40:55.

four times a year to sit down with CDC, to go through a series of

:40:56.:41:02.

indicators about the portfolio, about the processes that Diane was

:41:03.:41:08.

talking about in terms of due diligence and the environmental and

:41:09.:41:16.

social plans and status of the underlying investments, it's a

:41:17.:41:19.

detailed set of information that we sit down, drill through it. So we

:41:20.:41:25.

feel that we are a very active and engaged and well-informed and we are

:41:26.:41:32.

able to debate, we are able to ask questions and that's at the core of

:41:33.:41:38.

our relationship, our ongoing relationship. And do you have a

:41:39.:41:44.

power of veto in terms of schemes that you feel are perhaps unethical

:41:45.:41:48.

or perhaps you feel that you don't wish taxpayers' money to be bound up

:41:49.:41:53.

in this way? What we have is a policy and the deal is the company

:41:54.:41:59.

are accountable for living within the policy. So in extremely rare

:42:00.:42:03.

circumstances there's been one case mentioned in the report the company

:42:04.:42:06.

brought an investment to us and asked us if we had a point of view,

:42:07.:42:10.

but that was not to get a decision from us. What was your point of view

:42:11.:42:15.

in that case was favourable? Had your point of view been, we are not

:42:16.:42:23.

happy, then what would happen? I don't know, maybe the chair could

:42:24.:42:31.

say what he would do. Graham Wrigley, what would have happened if

:42:32.:42:34.

they had said we are not sure or just no? The way the board and I

:42:35.:42:42.

feel accountable for is to deliver value for our shareholder and that

:42:43.:42:47.

means development impact, a steady increase in the balance sheet CDC so

:42:48.:42:52.

it's an evergreen facility that the UK Government can reuse and managing

:42:53.:42:59.

reputation. And all the issues that are laid out clearly in the code of

:43:00.:43:02.

responsible investment and the investment policy. And we explicitly

:43:03.:43:10.

through formal structures supplemented through informal

:43:11.:43:12.

conversations make sure we try and don't put our selves in that

:43:13.:43:16.

position and we haven't done. Had you been in that position what would

:43:17.:43:20.

you have done as a board? This is an informal relationship but it's

:43:21.:43:25.

important because in the end the money comes from DIFD. Taxpayers

:43:26.:43:31.

must be clear. So we would not do something that we felt that was not

:43:32.:43:37.

going to achieve those goals. But in terms of the investment

:43:38.:43:42.

decision-making itself... I need to publish you, it could be something

:43:43.:43:46.

would achieve those goals but would be something that DIFD didn't like.

:43:47.:43:52.

If it was, we are talking hypothetical, if it was something

:43:53.:43:56.

that was so obviously wrong it wouldn't get through our processes.

:43:57.:44:02.

If it was, coming up with an investment decision as I said

:44:03.:44:07.

earlier, is a triangulation of those different things. It's a judgment

:44:08.:44:10.

call you have to make at the end of the day.

:44:11.:44:15.

I have to questions. When things go well and things have been success.

:44:16.:44:20.

That's fine, but if things go horribly wrong, and there is a big

:44:21.:44:26.

investment like in 2008, resume and you are ultimately responsible for

:44:27.:44:29.

that? Me and the board are responsible, yes. You would take a

:44:30.:44:33.

full response ability, it has nothing to do with DfID. The

:44:34.:44:40.

strategy and objectives are set by the shareholder and our job as a

:44:41.:44:47.

board is to execute and deliver the strategy. But an ordinary

:44:48.:44:50.

shareholders would be able to get rid of you at some point? And they

:44:51.:44:56.

can. I went through a review for my reappointment last year, there was a

:44:57.:45:01.

thorough review. I get reviewed by the senior independent director

:45:02.:45:04.

every year, the shareholder comments on my performance. As Mark and

:45:05.:45:10.

Rachel said, we feel accountable to our shareholder. My last question,

:45:11.:45:16.

and Diana answered but I want to what Sir Mark and Graham had to say

:45:17.:45:22.

about it. Let's say a member of the public would say, I don't get this,

:45:23.:45:27.

why not bring it all in-house and we have no problem with the

:45:28.:45:31.

accountability? Or spin it off? But I can't understand, hypothetically.

:45:32.:45:39.

It is an absolutely key question, why not bring it in-house? Because

:45:40.:45:43.

civil servants in my department do not have the skills to run the

:45:44.:45:47.

investments. We are an excellent department in the grant giving thing

:45:48.:45:51.

we do. You're good at signing cheques. The supervision and

:45:52.:45:57.

implementation and the result and all that but it does not involve the

:45:58.:46:00.

management of the balance sheet. That is why not bring it in-house.

:46:01.:46:06.

And I think the report does a good job of justifying that. Why not sell

:46:07.:46:09.

it off? Another good question and the answer is because the public

:46:10.:46:14.

policy rationale for the taxpayer owning this operation is because it

:46:15.:46:21.

is a very good way of promoting development in Africa and South Asia

:46:22.:46:26.

which find it hard at the moment contract -- attract investment. It

:46:27.:46:30.

is about a million jobs a year, two and a half, $3 billion in tax,

:46:31.:46:34.

demonstrating a new development path and the goal obviously if at some

:46:35.:46:40.

point, just as in East Asia and Latin America, the markets we are in

:46:41.:46:47.

now are open and attractive to pure private investment and there is no

:46:48.:46:50.

longer a need for CDC. That is the goal. Let's put this on record. CDC

:46:51.:46:58.

isn't actually a big part of your overall spend at a department. It

:46:59.:47:02.

has a 4 billion balance sheet whereas you are spending 12, 13

:47:03.:47:09.

billion a year. 10 billion. Of course, for 25 years up till the

:47:10.:47:15.

year before last there was no investment in CDC from the

:47:16.:47:18.

department's budget. Over the last two years, we have put in ?730

:47:19.:47:22.

million and we are considering putting in more. That is because we

:47:23.:47:29.

think the CDC, as the secretary district set out in the economic

:47:30.:47:35.

element strategy, if the key vehicle in the British do much to promote

:47:36.:47:38.

private investment in the poorest and most fragile countries, which we

:47:39.:47:42.

think is the best way of creating good quality jobs and contributing

:47:43.:47:45.

to the taxpayers. That is the rationale. Thank you, Mr Kwarteng. I

:47:46.:47:55.

want to welcome some members of the Uganda bureau of statistics who are

:47:56.:47:59.

attending the session today and you are very welcome. You're helping to

:48:00.:48:06.

aid the bureau in their work. Mr Boswell. Following on from Mr

:48:07.:48:13.

Kwarteng's light of questioning, a different

:48:14.:48:19.

the -- it is not received intimation and above the CDC's decisions to

:48:20.:48:26.

invest however the Department government arrangements encourage

:48:27.:48:30.

CDC to share information in certain circumstances. Under what

:48:31.:48:36.

circumstances does DfID encourage the CDC to share information about

:48:37.:48:39.

investment decisions? It is really in the example that is covered in

:48:40.:48:47.

the report. It was a very big investment for CDC to take its stake

:48:48.:48:55.

in Kwarteng which is the biggest green feed that McCoy greenfield

:48:56.:49:01.

power generation in Africa, burgers and on low carbon technologies, gas

:49:02.:49:05.

and renewables. Because it was a big investment, the chair at the right

:49:06.:49:08.

thing to do was to check if the department had a point of view about

:49:09.:49:12.

it and it is the only case I'm aware of since 2012 where the chair want

:49:13.:49:18.

to do that. We're not going to set criteria which tells the chair when

:49:19.:49:24.

to make what judgment. We have appointed him because we trust him

:49:25.:49:28.

to note the cases when he wants to prefer things to us. And from the

:49:29.:49:36.

CDC side, dreich does not receive information on all of this integrity

:49:37.:49:42.

issues that CDC encounters in its investments. So why does CDC in a

:49:43.:49:48.

put in some business integrity issues encounters to DfID? We do

:49:49.:49:59.

share all the serious ones. You deem them to be serious and then...?

:50:00.:50:06.

That's right. There are sometimes details of those that we have to

:50:07.:50:11.

keep confidential customer for example, the whistle-blower policy

:50:12.:50:13.

protect the identity of the whistle-blower. And how does the CDC

:50:14.:50:20.

determine which is this integrity issues are reported to DfID, which

:50:21.:50:25.

really is what you just said, you deem it serious so what is the

:50:26.:50:29.

criteria you use? Is there a process? It about yourselves? We

:50:30.:50:34.

have ahead of business integrity who is a very experienced crime

:50:35.:50:39.

prevention officer and also experienced in the private sector as

:50:40.:50:44.

well. And he applied his judgment but according to some reasonably

:50:45.:50:50.

clear principles. The areas we really need to share with DfID are

:50:51.:50:58.

ones where either CDC ourselves or the companies we have invested in or

:50:59.:51:02.

the fund managers we have supported have perpetrated some level of

:51:03.:51:08.

crime, or where a crime has been alleged, I should say, against CDC.

:51:09.:51:20.

That is where we focus. We will move on to indications of increased

:51:21.:51:28.

funding I think. Mr Bacon? Can I stop the ?735 million? Can you

:51:29.:51:35.

reiterate or summarise the rationale with it being that amount -- can I

:51:36.:51:43.

start? It was only in July 2015 am not that long ago. Of course that

:51:44.:51:48.

was the limit because that was the limit of the statutory provision of

:51:49.:51:54.

that time. Why was it as much as that? It was basically because the

:51:55.:51:58.

business case demonstrated convincingly as the report says that

:51:59.:52:03.

there were lots of uses for more capital than the CDC had. That has

:52:04.:52:07.

been corroborated because in the last two years, there was 730

:52:08.:52:16.

million of new investments in 2015 and 1.2 billion in 2016 so what has

:52:17.:52:21.

happened, even the toughest market in Africa and South Asia, the

:52:22.:52:25.

business climate has got a bit better so there are more investable

:52:26.:52:31.

propositions. CDC is by far the most concentrated of any organisation

:52:32.:52:35.

that sort in Africa. There is 40% of its business in Africa compared to

:52:36.:52:39.

10% for the International Finance Corporation but it is still smaller

:52:40.:52:44.

than I see in Africa so there is a lot of need for capital to help

:52:45.:52:53.

generate that number -- smaller than IFC. Years ago I used to act for a

:52:54.:53:02.

big private equity investor so I was always putting out statements to the

:53:03.:53:06.

press about when they bought or sold investment and it became apparent

:53:07.:53:10.

that there came a point when there was plenty of money out there, I

:53:11.:53:16.

guess this was the late 90s and I know it goes in cycles, and not

:53:17.:53:18.

enough good investment propositions enough good investment propositions

:53:19.:53:22.

so you would have more money chasing those good propositions. That is a

:53:23.:53:26.

universal, a phenomenon of investment, not particular to or

:53:27.:53:32.

Africa or a category. But I attended a dinner recently where some Kenyan

:53:33.:53:35.

investment professionals were talking about the growing tendency

:53:36.:53:43.

to create successfully Africa to Africa fund, funds generated in

:53:44.:53:46.

Africa for Africa. That being the case have you noticed you are

:53:47.:53:50.

increasingly competing for those good investments? And if so, given

:53:51.:53:58.

your remit, how do you calibrate, no, that is too good? How do you

:53:59.:54:03.

balance that? I go back to the additionality guidelines I talked

:54:04.:54:06.

about earlier. Every investment we make we have to be clear we are

:54:07.:54:11.

bringing something you need that wouldn't happen without CDC. And it

:54:12.:54:18.

may be capital but it may be no or expertise that it may be know-how.

:54:19.:54:22.

It is that say there is more capital coming into Africa and South Asia

:54:23.:54:28.

and this is what we want but CDC's mission is to try to do the hard

:54:29.:54:33.

things and the need is there. If we look at the private sector

:54:34.:54:36.

environment in some of those countries in the UK we have 64

:54:37.:54:41.

million people and 15,000 companies with revenue is more than $50

:54:42.:54:51.

million. In Ethiopia there are 17. The existing investable

:54:52.:54:53.

opportunities that a lot of people are competing over may be small but

:54:54.:54:59.

it needs the hard work by teams like CDC to grow smaller businesses. And

:55:00.:55:03.

the other thing we do a lot of invest in good quality operators and

:55:04.:55:08.

partner with them and take them to those hard places. I suppose this is

:55:09.:55:18.

a double act, following on closely, for 20 years, from 95 until 2015,

:55:19.:55:22.

there was not a penny extra provided by the taxpayer. I look at your

:55:23.:55:27.

balance sheet and you have something like 2.7 billion of retained

:55:28.:55:32.

earnings. In lots of retained earnings that you've put back into

:55:33.:55:36.

the business also it should be noted that the taxpayer doesn't get a

:55:37.:55:44.

penny back. So why now aren't you ramping up the potential amount of

:55:45.:55:48.

capital? I know you are saying there is this investment but why was not a

:55:49.:55:53.

penny but in for 20 years and all of a sudden you talking about a 6

:55:54.:55:59.

billion cap. That seems to be a huge step up. To start with that, the

:56:00.:56:09.

main focus of the economic development strategy which the

:56:10.:56:11.

Secretary of State published last week is to try to make links to

:56:12.:56:17.

global markets to harness more trade opportunities and hence reduce

:56:18.:56:21.

poverty for Africa and South Asia which is where our focus is. It is

:56:22.:56:28.

to focus on job-creating sectors, so construction, power, health and

:56:29.:56:32.

education, financial sector. And we seem CDC as the principal mechanism

:56:33.:56:37.

of doing that. Why now, to your question, it's a very fair question

:56:38.:56:48.

and it adds up to the choice made by ministers of the day over the last

:56:49.:56:52.

period. You understand that why now is a critical question went for 20

:56:53.:56:59.

years, a long time, not a penny was put question you are getting good

:57:00.:57:04.

returns, your growth rate was good. I think the thing that has changed,

:57:05.:57:10.

a lot of the returns in the 90s up until I suppose halfway through the

:57:11.:57:19.

last decade were in East Asia where the markets were booming. Most of

:57:20.:57:22.

Africa in that period wasn't really investable. And because the British

:57:23.:57:30.

development programme has always had a focus on Africa and South Asia, I

:57:31.:57:34.

give it would've been curious to invest in CDC so it could invest

:57:35.:57:38.

more in China when the markets were booming there. I think now that

:57:39.:57:41.

these markets are more viable than they were previously, there is more

:57:42.:57:48.

investable propositions and it also absolutely the case that the

:57:49.:57:52.

Secretary of State and her predecessors who believe strongly

:57:53.:57:57.

that the private sector is the engine development. Most jobs will

:57:58.:58:00.

have to come from the private sector, they will have to provide

:58:01.:58:04.

the tax base. It is that combination of things I would say. I think it's

:58:05.:58:12.

a great question and I can understand from all the conversation

:58:13.:58:15.

we have had with stakeholders in the last two months about the act of

:58:16.:58:20.

Parliament, why now and why this amount of money. The reality is that

:58:21.:58:26.

this plan to recapitalise CDC has been under development and

:58:27.:58:29.

discussion between the company and the shareholder since 2012 when the

:58:30.:58:35.

reforming strategy came in to say, is there a way in which CDC and the

:58:36.:58:42.

UK taxpayer could respond to the need for long-term, patient capital,

:58:43.:58:45.

doing exactly the sort of things Diana was talking about? In the

:58:46.:58:49.

prediction made in 2012 there was a variety of scenarios will sub the

:58:50.:58:54.

upside and the best in the base case one showed a need for more capital

:58:55.:58:57.

required and that led to conversations in 2014 with the

:58:58.:59:02.

shareholder for the recapitalisation that Mark is talked about. When we

:59:03.:59:08.

structured that investment, the recapitalisation, aware of exactly

:59:09.:59:14.

the danger Mr Bacon said that having force of pressure on capital, we

:59:15.:59:18.

structured that investment so it could be drawn down in the form of

:59:19.:59:21.

promissory notes over the next four years which is what we did but when

:59:22.:59:25.

we did the projections in 2015 week showed that if things carry on going

:59:26.:59:26.

we would need more capital. Last year we committed under 1. 2

:59:27.:59:36.

billion. So a large amount of the potential need, subject to a

:59:37.:59:39.

business case and the shareholder agreeing, is to allow CDC to

:59:40.:59:44.

increase its investment rate from what was about ?200 million a year,

:59:45.:59:50.

to what it is, 700 average for the last three years, 1. 2 billion last

:59:51.:59:59.

year. And that would permit CDC to be an evergreen, revolving, slowly

:00:00.:00:03.

growing balance sheet owned by the UK taxpayer but to commit money in

:00:04.:00:06.

the markets we are focussing on for the next five years. My

:00:07.:00:10.

understanding of the 735 is that you haven't even invested all of that.

:00:11.:00:17.

There is a 450 million promisory note you have got. Before you have

:00:18.:00:22.

invested that you are asking for... Well, so, it's a bit, a technical

:00:23.:00:30.

point. What we have done is deposit notes, that means the company knows

:00:31.:00:33.

they have the backing for their investments. What we didn't want to

:00:34.:00:38.

do is hand over the bank notes. Because that would have been handing

:00:39.:00:41.

over the cash before the company was going to be using it. So, the

:00:42.:00:44.

taxpayer doesn't have to hand over the bank notes until the cash needs

:00:45.:00:47.

to be drawn down. That's basically what's going on. You will appreciate

:00:48.:00:53.

capital is a scare commodity. The idea you have 735 million there

:00:54.:01:01.

which only 260 has been invested? The 735... You see the drift of what

:01:02.:01:07.

I say. I totally see the drift. This was a specific recommendation by the

:01:08.:01:14.

NAO in 2008 to make sure we manage our cash balances appropriately. At

:01:15.:01:17.

the same time as also for the company being able to honour its

:01:18.:01:21.

commitments that it has made into businesses. At the moment we have ?2

:01:22.:01:25.

billion of ongoing commitments, so the NAO report shows how we came up

:01:26.:01:29.

with the liquidity policy working with a Shear share and Treasury to

:01:30.:01:33.

do this. -- shareholder. At the moment we have at the end of last

:01:34.:01:38.

year, 223 million of cash which is 5% of our portfolio. The goal of the

:01:39.:01:48.

promisere note is to come up with a an efficient use of taxpayers' money

:01:49.:01:52.

as allowing us to make the scale of commitments we are doing. While you

:01:53.:01:55.

are expanding the balance sheet, as well. Yes. This brings me to my next

:01:56.:02:03.

point, the fear I have is that the risk of SATs rating CDC with cash,

:02:04.:02:08.

we have seen that in many places, the Reg gram noet fund, how are you

:02:09.:02:13.

going to manage that risk so it doesn't manifest itself in some of

:02:14.:02:16.

the ugly and unfortunate ways we have seen? That is the key question.

:02:17.:02:20.

That's the key question for the business case. The company are going

:02:21.:02:26.

to need to explain to us why the 1. 2 billion is going to continue into

:02:27.:02:34.

the future but why these are high quality investments which the

:02:35.:02:39.

taxpayer can be confident will sustain a decent return record. I go

:02:40.:02:46.

every few months or so have a sort of strategic discussion with the

:02:47.:02:51.

board. I thought you were going to say poke around... It's not anything

:02:52.:02:56.

the board wouldn't mind me saying. This is the point, you are going to

:02:57.:02:59.

need to persuade us that the quality of the investment pipeline is such

:03:00.:03:06.

as to justify any new capitalisation, never mind, you

:03:07.:03:10.

know, what the volume is. They have to make a case, never mind the

:03:11.:03:18.

next... Does the impact fund team have enough skill now to do this at

:03:19.:03:22.

the scale you are talking about? Let me describe the picture from the

:03:23.:03:26.

operating, from this chief executive's seat, I guess, so it is

:03:27.:03:31.

fair that back in 2012 when we were given the mandate of invest only in

:03:32.:03:36.

Africa and south Asia, but invest directly alongside funds, we didn't

:03:37.:03:41.

have a team and we didn't know what the demand was going to be. What we

:03:42.:03:45.

have learned over the last five years is if you put a highly

:03:46.:03:49.

committed and talented team behind the strategy, you give it very clear

:03:50.:03:55.

mandate of where you can invest additionality standards, development

:03:56.:03:58.

impact, etc, and you hire the people with the right motivation, it is

:03:59.:04:03.

amazing how much demand and need there is for the CDC team. Let me

:04:04.:04:08.

say clearly no one at CDC is motivated by scale. We are motivated

:04:09.:04:11.

by the quality of outcomes that we can general rate with capital. Do

:04:12.:04:17.

you see then, you didn't even know was there, but turns out to be

:04:18.:04:22.

latent demand, when somebody sees something done well and thinks

:04:23.:04:25.

perhaps we can do that and put together a sensible case, does that

:04:26.:04:29.

manifest itself? Very much so. Can you explore with us this question of

:04:30.:04:33.

additionality more. Are you saying your very presence, for example, in

:04:34.:04:37.

a territory that's rather marginal, would you would hope you are being

:04:38.:04:41.

additional, where perhaps the economy is not sufficiently

:04:42.:04:43.

diversified, where it is fragile, there isn't enough good

:04:44.:04:46.

infrastructure, where there are poor transport links, a lack of

:04:47.:04:50.

confidence, that your very presence is the thing that can make the

:04:51.:04:52.

difference potentially to other investors over a period of time?

:04:53.:04:56.

There is an element of that. But we haven't really even fully explored

:04:57.:05:01.

that yet. You will have seen in the report that our local country

:05:02.:05:03.

presence is still at a latent stage presence is still at a latent stage

:05:04.:05:09.

and we want to increase that. Actually I think the demand has been

:05:10.:05:13.

generated because the teams have gone out in a very focussed way, for

:05:14.:05:17.

example, the direct team from scratch, and said these are our

:05:18.:05:21.

seven priority sectors, what's the need in those sectors and

:05:22.:05:24.

particularly if you look at Africa and the poorest cases of India,

:05:25.:05:30.

there is enormous need, and what's the best way to get companies going,

:05:31.:05:35.

get companies growing and what can we invest in? They've gone out and

:05:36.:05:40.

knocked on doors and found really high quality aligned partners to

:05:41.:05:45.

invest in. So in many ways, certainly on the direct side where

:05:46.:05:48.

we had to start from scratch we generated our own pipeline. In funds

:05:49.:05:52.

where we have been doing it since 2,000 or before 2,000, we were a

:05:53.:05:57.

pioneer of this industry across Africa and south Asia, we now have

:05:58.:06:01.

such a reputation in funds in that any high quality fund manager will

:06:02.:06:05.

want to come to CDC first and get the seal of approval. It would help

:06:06.:06:08.

a project to have your name alongside it, good, yeah. One more

:06:09.:06:12.

question. You have had recruitment and retention difficulties, what are

:06:13.:06:16.

you going to do about that? We will be working very hard to make CDC a

:06:17.:06:22.

place that high quality people want to come to and to stay in,

:06:23.:06:26.

long-term, and that's about selecting the right people, but it

:06:27.:06:31.

is also about creating an environment of, say inspiration,

:06:32.:06:37.

that people really enjoy and we all know that the next millennium group

:06:38.:06:40.

of great graduates are coming in out of business school, this is the kind

:06:41.:06:44.

of thing, this is the kind of work that inspires them. They don't just

:06:45.:06:47.

want a financial bottom line, they do want to make the world a better

:06:48.:06:51.

place and CDC can offer that to them. Thank you.

:06:52.:07:05.

Recapitalisation decisions, particularly the CDC DfID

:07:06.:07:11.

relationship. In 2015 the decision to recapitalise by 735 million was

:07:12.:07:15.

made by DfID. According to the National Audit Office the DfID

:07:16.:07:20.

report arguing the case was quality assured internally. It is

:07:21.:07:25.

potentially a dangerous statement. So, was the DfID recapitalisation of

:07:26.:07:33.

the CDC by 735 million in 2015 first suggested by DfID indly or was the

:07:34.:07:38.

matter looked into upon question by CDC? As the chairman said, since

:07:39.:07:45.

2012 we have been, certainly I personally have been making the case

:07:46.:07:49.

and when Andrew Mitchell, when he was the Secretary of State, was

:07:50.:07:51.

encouraging us to think this through. We weren't ready to do it

:07:52.:07:56.

at that stage. So, I don't think it is the case that the shareholder was

:07:57.:08:01.

pushed by the company to do this. I think the shareholder wanted to

:08:02.:08:04.

encourage the company to have a bigger ambition, to make a bigger

:08:05.:08:10.

distribution because we do think the CDC is a very unusual, got an

:08:11.:08:15.

unusual capability. London obviously can be the capital market for

:08:16.:08:25.

Africa. Other countries have DfIDs bigger. There was an opportunity not

:08:26.:08:28.

being taken. We basically challenged the company to build a capability,

:08:29.:08:33.

to absorb more resources and to use them well, that was basically the

:08:34.:08:39.

direction of the conversation. So the recapitalisation, DfID produced

:08:40.:08:44.

a report find ago strong case for recapitalisation. Because this was

:08:45.:08:48.

quality assured internally, why did the department deem an external

:08:49.:08:52.

analysis and audit on the report unnecessary? Why was it internal?

:08:53.:08:56.

Well, there was quite a lot, Rachel may want to speak. There was a lot

:08:57.:09:02.

of external dialogue. We had experts like Paul Collier, for example,

:09:03.:09:06.

advised us on the future direction for CDC. The reference to the

:09:07.:09:10.

quality assurance is part of a general system we have in the

:09:11.:09:14.

department, so that the case put to ministers for spending large sums of

:09:15.:09:17.

money doesn't come just from the team who would be spending the

:09:18.:09:21.

money, there is an independent assurance from a group which is run

:09:22.:09:27.

by the chief economist who has to - who is dispassionate, doesn't mind

:09:28.:09:30.

which team gets the money, if you like, but provides a different point

:09:31.:09:34.

of view inside the department to justify the case. But there was a

:09:35.:09:39.

lot of external collaboration and dialogue, as well. You can see

:09:40.:09:44.

because of the relationship between DfID and CDC there is a certain

:09:45.:09:50.

discomfort when the watchdog is watching itself effectively. If DfID

:09:51.:09:55.

felt it was ail to analyse the merits of the recapitalisation

:09:56.:09:58.

itself but does not appoint a board member as it considers it not with

:09:59.:10:02.

the depth of commercial investment and experience, can you explain why

:10:03.:10:08.

DfID felt it was ail to analyse the recapitalisation case itself if it

:10:09.:10:12.

does not feel it is capable of appointing a board member? Well, two

:10:13.:10:17.

different things happening here. The job of the board and the board

:10:18.:10:22.

members is to review proposals put forward by the executive team, Diane

:10:23.:10:25.

and her colleagues, on each particular investment. Is it a good

:10:26.:10:31.

idea to invest in this company? That is not a skills set that we are

:10:32.:10:35.

hiring people to have inside the department. What we are hiring

:10:36.:10:39.

people to be able to do inside the department is understand and make a

:10:40.:10:43.

broader case for whether investing more in CDC versus other things we

:10:44.:10:48.

could spend the money on is going to be conducive to achieving the

:10:49.:10:52.

strategic goals that ministers have set. So, the report does explain -

:10:53.:10:57.

explains and we talked this afternoon about the sort of pros and

:10:58.:11:01.

cons of us appointing a civil servant to be on the board and our

:11:02.:11:06.

view is that we appoint the chairman as the chairman has said, you know,

:11:07.:11:11.

we can unapoint a chairman, but while they're accountable to us, we

:11:12.:11:15.

don't think in addition to that we need to appoint civil servants on to

:11:16.:11:20.

the board. The contradiction if you like in

:11:21.:11:23.

what you are trying to do, on the one hand you said it was basically a

:11:24.:11:28.

political decision massively to expand the balance sheet of CDC. Yet

:11:29.:11:33.

on the other hand, you are saying that you don't want any oversight in

:11:34.:11:40.

terms of how the new entity with expanded balance sheet potentially

:11:41.:11:46.

will run. Well, I am trying to say something else. What I am trying to

:11:47.:11:52.

say is there could be a strategic case for investing in the business

:11:53.:11:55.

which is what the business case for the 735, which the NAO were

:11:56.:12:02.

convinced by was, that's completely different to once you have a capital

:12:03.:12:06.

base, how do you pick the businesses in which to invest? What I am saying

:12:07.:12:09.

is the Government doesn't think it is a very good idea for civil

:12:10.:12:12.

servants to be taking those decisions. You said that the demand

:12:13.:12:15.

for more capital was something that was coming from the department, it

:12:16.:12:18.

was coming from ministers. You mentioned Ministers, it wasn't the

:12:19.:12:22.

CDC asking for more capital. It was the policy decision. Was it not?

:12:23.:12:26.

Yeah, that's exactly right. We saw a bigger opportunity in these markets

:12:27.:12:30.

for the reasons I have tried to run through. And those were politicians

:12:31.:12:34.

and civil servants. Yet, at the same time, you are saying that you don't

:12:35.:12:40.

wnt to get involved in that. Having identified the opportunities and

:12:41.:12:43.

being... I am not doing very well... What I am trying to do is draw the

:12:44.:12:50.

distinction between the strategic and the individual investment. Thank

:12:51.:12:55.

you. You said earlier the previous Secretary of States supported this

:12:56.:12:59.

idea. Isn't it true that the previous Secretary of State to that,

:13:00.:13:02.

Mr Benn, who was the Labour Secretary of State, said, I remember

:13:03.:13:06.

hearing him saying it on the radio, said explicitly that trade and

:13:07.:13:09.

business and the private sector ought to do more to lift people out

:13:10.:13:16.

of poverty than anything else, you mentioned Paul Collier, his book was

:13:17.:13:21.

given that title because two billion people above that had been lifted

:13:22.:13:25.

out of poverty by the private sector but until they've been lifted

:13:26.:13:29.

they're still in that grey zone that you were talking about, is that

:13:30.:13:33.

fair? I think that is fair. I don't normally help witnesses by the way!

:13:34.:13:42.

Thank you very much. From the company side we think we

:13:43.:13:48.

have an engaged active shareholder. We have quarterly shareholder

:13:49.:13:52.

meetings, we have AGMs, committees within the board who interface with

:13:53.:13:56.

relevant counterparties across DfID. We have a series of relationships

:13:57.:14:01.

with DfID as a partner level, trying to create investments and work in

:14:02.:14:04.

harmony together. I think CDC is a fundamentally

:14:05.:14:15.

long-term business. We are the oldest DFI in the world, and I will

:14:16.:14:19.

give it a couple of examples which goes to this incredibly important

:14:20.:14:23.

point about the governance of CDC and how it must work over the decade

:14:24.:14:29.

and a cross-party consensus. Kenya team was set up in 1964 by CDC. 20

:14:30.:14:39.

years later in 1983 there was 145,000 smallholder farmers giving

:14:40.:14:45.

product for 39 factories which made one in four cups of tea in the UK.

:14:46.:14:52.

20 years for that investment. 20 years later, sell Pell, the first

:14:53.:14:57.

big mobile phone company in Africa, was sold, and it has transformed the

:14:58.:15:06.

economy in Africa and that was a CDC investment -- Celltel. And over a

:15:07.:15:11.

long period, this is six years, if you look at Sierra Leone today,

:15:12.:15:15.

which you asked earlier, it is a poor country, last year I was in

:15:16.:15:25.

Freetown with the president and he thanked me, I did not do any of the

:15:26.:15:29.

work but I was happy to hear the praise, about the work the teams at

:15:30.:15:36.

CDC had done with the Ebola facility with Standard Chartered. There was

:15:37.:15:40.

an amazing amount of work done by NGOs and DfID that we can't

:15:41.:15:46.

contribute to but we did our bit to create the straight facility and

:15:47.:15:50.

keep businesses going. He said, the thing we need now is power. Last

:15:51.:15:58.

month CDC announced it is part providing the debt and the majority

:15:59.:16:04.

amount of equity in a $150 million investment in plant which will give

:16:05.:16:11.

49 megawatts of electricity which, in the low season, will double the

:16:12.:16:15.

amount of electricity given to the whole country. And that is a

:16:16.:16:26.

country, we have one 200th of the electricity they use. If we work on

:16:27.:16:31.

it for two years and it is a long time, so it is incredibly important

:16:32.:16:38.

that we have an institutional relationship which goes over the

:16:39.:16:43.

years. I get all of that. I think you have described it very

:16:44.:16:47.

persuasively and in a way I'm trying to use that to say, quite suddenly

:16:48.:16:53.

ramp up the balance sheet? In theory we are custodians of taxpayers

:16:54.:16:57.

money. I look at your balance sheet and it is very conservatively run,

:16:58.:17:02.

you have 10% of your assets in cash. I think you are slightly

:17:03.:17:07.

underinvested in terms of the extra 735 million. You have this

:17:08.:17:10.

incredible track record of success and all of a sudden we are saying

:17:11.:17:15.

we're going to transform this thing and completely expand the balance

:17:16.:17:18.

sheet and you can see why we would be concerned about it. You're asking

:17:19.:17:24.

the question I'm asking of the team in the Department and the company

:17:25.:17:30.

about why can explain to me the business case for another

:17:31.:17:32.

capitalisation. We will not be recommending another capitalisation

:17:33.:17:37.

even if Parliament gives us the authority to, unless we are

:17:38.:17:44.

persuaded that there is a case. Can I probe on that? This has puzzled

:17:45.:17:52.

us. As Mr Kwarteng said, it seems like a policy decision to have more

:17:53.:17:56.

available capital but it could go up to 12 billion. You go to CDC and

:17:57.:18:00.

asked them to put a business case to see if they can spend it question of

:18:01.:18:03.

CDC comes to you with a business case but would you ever say no. I'm

:18:04.:18:09.

not sure who starts the process. If you have an opportunity in a

:18:10.:18:16.

country, do you say to DfID, we think we can invest 2 billion in

:18:17.:18:19.

something could you let us have the money and then put the business case

:18:20.:18:27.

to DfID? No, that's not how it works, this is a long-term business

:18:28.:18:32.

and the teams go out and generate pipelines of opportunities that are

:18:33.:18:35.

sometimes a year, two years in the cooking. I would recommend the

:18:36.:18:43.

committee looked at the rate of investment we have already achieved,

:18:44.:18:48.

that is highlighted in the report, the ?1.2 billion a invested in these

:18:49.:18:55.

markets in 2016. Even if we only stayed at that level and didn't grow

:18:56.:18:59.

at all, we would need some money, and quite a large amount, to fund

:19:00.:19:04.

that step up. Because we are such a long-term investor, it'll only be

:19:05.:19:09.

when those seven, ten year investment start returning money

:19:10.:19:14.

that we become... You've got a lot of cash, this promissory note, you

:19:15.:19:21.

can actually expand your investments without additional capital. Do I

:19:22.:19:30.

make a point, a broader point -- can I make a point? In relation to the

:19:31.:19:35.

investment needs of Africa and South Asia over the next generation or

:19:36.:19:44.

two, which are calculated in the trillions, what CDC is able to do at

:19:45.:19:50.

the moment is very small. As we said earlier, CDC, although it has four

:19:51.:19:54.

times as much of its business in Africa than the IFC does, it is

:19:55.:20:01.

still small in aggregate terms. The investable opportunity and the

:20:02.:20:07.

taking of it is what will get Africa beyond its a dependency and give

:20:08.:20:11.

people their jobs and livelihoods and better futures. The investable

:20:12.:20:14.

opportunity is going to be dramatically bigger than what CDC

:20:15.:20:19.

can do. The question for us is, not how many good investment are there

:20:20.:20:26.

out there, the question is, what is the rate at which CDC can sensibly

:20:27.:20:30.

absorb more capital and spend and use it in a way that does not repeat

:20:31.:20:34.

some of the mistakes of the pass? That is what we're focused on. That

:20:35.:20:40.

is very reassuring. The fact you are focused on that is reassuring but

:20:41.:20:42.

can I ask Mr Wrigley another question? You emphasised the

:20:43.:20:48.

long-term nature of what you do so would you say the role for CDC

:20:49.:20:52.

potentially in and invest the country where the conditions were

:20:53.:20:56.

right to be assisting in the creation of a development

:20:57.:20:59.

Corporation locally with you investing with other partners over a

:21:00.:21:04.

long period of time? We have a whole series of ideas about how you can

:21:05.:21:10.

take an idea to a country and creating development banks like in

:21:11.:21:17.

the UK, the old three I invested in history, we have been thing about

:21:18.:21:20.

that as one of the platforms we might do. So the only criterion

:21:21.:21:27.

would be a political one, which is, if it within your remit? Are we

:21:28.:21:34.

going back to St Helena here? I'm very glad you said it first, but

:21:35.:21:39.

yes! If the remit were OK, that is the sort of thing, in a territory,

:21:40.:21:43.

let's call it that, that would be among the many things you would

:21:44.:21:46.

discuss question mark potentially, but can I add an important point?

:21:47.:21:51.

You were nodding, can you put that on the transcript? And can I add one

:21:52.:22:01.

incredibly important thing to this point about the absorptive capacity

:22:02.:22:07.

of CDC and its ability to invest? I got asked a question in the select

:22:08.:22:12.

committee about if the board of CDC will take capital from its

:22:13.:22:14.

shareholder evicted nothing it could invest it in high development

:22:15.:22:19.

impact. Meeting our return requirements and doing that well and

:22:20.:22:23.

thoughtfully and I said absolutely clearly, no. The point I've been

:22:24.:22:28.

trying to make is that we have been developing this business

:22:29.:22:30.

operationally, all of the things they talked about with the teams

:22:31.:22:34.

from the last five years and the conversations with the shareholder

:22:35.:22:37.

about how can fund it, hopefully over the last five years, it is a

:22:38.:22:42.

mutual decision. The shareholder has to want to provide the cash and the

:22:43.:22:48.

company is to believe it can execute it well. I think we are reassured by

:22:49.:22:55.

that, but turning to figure 18 on page 39, which gives the operating

:22:56.:22:58.

costs as a percentage of portfolio value and no doubt those costs are

:22:59.:23:04.

also have costs which figure 19 and others cover. And actually figure 20

:23:05.:23:11.

is also useful. You have a projection, operating costs as a

:23:12.:23:18.

percentage of portfolio value. You can read behind that there is a

:23:19.:23:21.

portfolio value prediction you are making so you have a plan, but when

:23:22.:23:31.

do you go to DfID and say, we are sure it is on track so we need to

:23:32.:23:35.

draw down some money and he is our business case, will you do it? And

:23:36.:23:39.

when do you think, we are not going to manage that? What assurances do

:23:40.:23:43.

you put in place? You have this extra staff that is ready to do this

:23:44.:23:47.

which is a cost and unless you are doing the business but they are a

:23:48.:23:52.

dead weight cost. The process for that is that we in the middle of

:23:53.:23:57.

concluding the strategy for the next five years and after that has been

:23:58.:24:01.

approved and with the Secretary of State, we would work to create a

:24:02.:24:06.

business case to provide any funding going forward. The reason that

:24:07.:24:10.

metric is in there, by the way, something that we have developed

:24:11.:24:13.

ourselves over the last three years, and it is thinking of the purpose of

:24:14.:24:19.

this committee, value for money. And one of the things we will be doing

:24:20.:24:24.

with the business case and the strategy discussions is saying to

:24:25.:24:28.

the shareholder, here are a range of options of what we can do. Different

:24:29.:24:32.

activities have different costs. Investing in high impact, people on

:24:33.:24:37.

the ground, not through intermediary vehicles is much more expensive than

:24:38.:24:41.

working in providing debt from London. Those numbers with the

:24:42.:24:49.

illustrative forecast to show the NAO how we are strategically

:24:50.:24:53.

thinking about costs. And on the staffing issue, we touched on this

:24:54.:24:56.

earlier, but there will be a pressure on salaries because of

:24:57.:25:01.

competition out there. You made a cogent case for how people want to

:25:02.:25:04.

do this because they are not just after the bottom line, but figure

:25:05.:25:13.

A19 highlights some of the issues around celery and we are worried

:25:14.:25:20.

that there is a pressure on salaries. How are you managing that

:25:21.:25:25.

risk to the business? When you need the people to do the job, but you

:25:26.:25:28.

also don't want to go back to the bad old days when salaries went

:25:29.:25:32.

exponentially to ridiculously high levels. I think the report paints a

:25:33.:25:39.

clear picture of the changes being made as a result of the

:25:40.:25:42.

recommendations, it was one of the first things I did as a new CEO. Now

:25:43.:25:49.

we have to look at the sustainability of the organisation,

:25:50.:25:52.

we have hired a lot of people quickly and it is a fantastic team

:25:53.:25:55.

with a lot of different skills in it but matched to us being a long-term

:25:56.:26:02.

business is we need long-term staff. We don't want to be a revolving door

:26:03.:26:04.

and this is something that takes... I beg leave to ask the question

:26:05.:30:34.

standing in my name on the order paper. We already have domestic law

:30:35.:30:39.

that safeguards the environment. The great repeal bill also to be

:30:40.:30:43.

introduced in the next parliamentary session will incorporate EU law

:30:44.:30:51.

relating to environment and biodiversity into UK law. The UK

:30:52.:30:52.

Recorded coverage of the Public Accounts Committee's session on overseas investment, with evidence from the International Development Department, chief executive of CDC, Diana Noble, and CDC chair, Graham Wrigley, from Wednesday 8 February.