Source: www2.dfid.gov.uk Date: 3 November 2008 Boosting business in the world's poorest countries 3 November 2008 New CDC investment targets announced Businesses in some of the world's poorest countries are set to receive a boost from new investment targets unveiled today by International Development Secretary Douglas Alexander. The targets relate to CDC, a UK Governmentowned body that invests money in private sector initiatives in the developing world. Over recent years, CDC (formerly the Commonwealth Development Corporation) has consistently matched or outperformed its targets, helping businesses to flourish across Africa, Asia and Latin America. The radical new targets, announced this morning before Parliament, will allow CDC to focus even more closely on reducing poverty in the most impoverished places in the world. Specifically, they require that, from 1 January 2009 to 31 December 2013, three-quarters of the company's new investments must be in Low Income Countries (those with an annual Gross National Income per capita of less than US$905 - World Bank 2006 figure), with at least half of all investments in Sub-Saharan Africa. However, other poor countries will not be left out. Over the same period CDC will be able to invest £125 million to support small and medium-size businesses elsewhere in the developing world. The announcement of the new targets comes at an extraordinary moment for global financial markets. Just when private businesses in many developing countries are facing the possibility of severe capital shortages, CDC will be demonstrating the true role of a development finance institution: being in difficult markets in difficult times to help businesses continue through the downturn towards a period of new growth. To meet this considerable challenge, CDC is also currently looking at the potential offered by both new and existing financial instruments and services. In addition, to ensure that all investments are made responsibly, the company is upgrading its Investment Code, which requires that CDC itself, its Fund Managers and its investee companies adhere to a set of clear environmental, social and governance principles. Also announced today was the appointment of Richard Gillingwater as the new Chairman-designate of the Board of CDC. Mr Gillingwater has an investment banking background, serves on three PLC Boards and is Dean of the Cass Business School. He succeeds Sir Malcolm Williamson, who is standing down after overseeing CDC’s substantial growth since 2004. Source: www2.dfid.gov.uk Date: 3 November 2008 More about CDC CDC is the UK's own bilateral Development Finance Institution. While its shares remain owned by the Government, it operates independently and on a commercial basis, working within defined investment targets and a set of clear business principles. Since 2004, it has been a "Fund of Funds" business, which means it invests UK public capital in private sector Fund Managers (the largest of which is Actis, which was spun-off from the old CDC in 2004). These Fund Managers, often based in developing countries, invest CDC and others’ capital in private companies in these countries. By building value in the company and helping it grow, the Fund Manager then sells its interest to other responsible investors, returning the net proceeds to CDC for further reinvestment. This virtuous circle has been very successful and has meant that the Government has not had to commit any new money to CDC since 1996. Since its reorganisation in 2003/04, CDC has: Committed £2.4 billion in the poorer countries of Africa, Asia and Latin America Attracted some £1.5 billion of third party capital to invest alongside CDC's own capital Grown in value from £1 billion to £2.7 billion at the end of 2007 Made 74% of new investments in the poorer developing countries and 64% in Sub-Saharan Africa or South Asia (on a five year rolling average) Realised investments that have returned £2.3 billion to CDC for reinvestment Supported some 600 businesses employing nearly almost 1 million people directly, supporting the lives of some four times that number, and paying an estimated £250 million in taxes and other charges to the local governments each year. Find out more on the CDC's website And read the stories below to find out how CDC investment in the private sector is helping to reduce poverty around the developing world. Investments that are paying off From microfinance in Kenya to a coal mine in India, here are some examples of the enterprises that Fund Managers have invested in using CDC capital. Source: www2.dfid.gov.uk Date: 3 November 2008 Kenya: Equity Bank Equity Bank offers microfinance to poor Kenyans who for years were shut out of the financial system, as banking services were restricted to a wealthy elite. Offering loans even as small as KSh500 ($6), Equity has been known to take marital beds as collateral. Although microfinance is a low-margin business, the bank has grown to become Kenya’s largest as a result of the volume of business it carries out. Around 2.8 million people now hold an account with Equity and it has 600,000 borrowers. The bank has also won a string of international awards, including Microfinance Bank of the Year at the 2008 African Banker Awards. In 2007, MicroCapital ranked Equity the best microfinance institution in Africa. Tanzania: Tatepa Tatepa produces Tanzania’s biggest-selling brand of tea, employing 27,000 people (including outgrowers). With Fairtrade accreditation, Tatepa supplies Cafédirect’s Teadirect brand, giving producers an above-average price. Teadirect provides the company with a Fairtrade premium, which has helped finance new schools, text books and health centres. Ivory Coast: Cavally Compagnie Heveicole de Cavally (CHC) is a rubber cultivation and processing company located in the Moyen Cavally region of the Ivory Coast. In a country plagued by economic turmoil and civil war, CHC has played a critical role in local development and employment. Employing over 1,000 people, the company has helped raise skill levels and economic activity in the area, training local villagers so that they too can supply rubber. There are currently 600 villagers growing rubber for CHC in this way, generating an annual income of over $7 million. This figure is expected to double over the next five years. Sub-Saharan Africa: Celtel Celtel is a mobile telecommunications company established in Sub-Saharan Africa in 1998. Operating in 15 countries and providing coverage to 30% of Africa’s population, it is the continent’s largest mobile phone operator outside South Africa. The company was acquired by Mobile Telecommunications Company in 2005 and re-branded as Zain in August 2008. Celtel has transformed access to communications in countries characterised by poor infrastructure. The company plans to provide services designed especially to improve livelihoods, for instance offering fishermen up-to-the-minute market prices by mobile phone, enabling them to find the best prices for their catch. Source: www2.dfid.gov.uk Date: 3 November 2008 Nigeria: Mouka Mouka is the largest single foam production plant in West Africa, providing Nigeria and neighbouring West African countries with millions of mattresses. Headed up by a new female CEO who cut her teeth in Europe, the company is embarking on a major new marketing campaign to further bolster its growth. Throughout this period of expansion, environmental concerns are high on the agenda, with environmental standards being introduced into production processes. Mouka directly employs 400 people and supports a further 5,000. India: Sainik Mining Sainik Mining operates the largest coal mine in India. The company has invented a new process to "wash" coal before selling it on, a process that reduces the ash content from 43% to 33% or less. In this way, the residuals - including greenhouse gases - that are released during the burning of coal, are also reduced. Sainik is also employing surface mining techniques, rather than blasting, to further bring down the pollution caused by coal extraction. According with best practice standards, the company provides good housing, schooling and healthcare facilities for 3,000 employees and their children.