MP's question DFID infrastructure investment strategy

MPs have questioned whether millions of pounds worth of UK taxpayer money, invested in infrastructure projects abroad, have been tied up with “companies associated with known criminal fraudsters”, according to a recent report.

The House of Commons Committee of Public Accounts (PAC) delivered a withering assessment of the Department for International Development (DfID) in its report ‘Oversight of the Private Infrastructure Development Group (PIDG)’.

“We are concerned that the department has insufficient assurance over the integrity of PIDG’s investments and the companies with which it works and the department has not done enough to put a stop to PIDGs wasteful travel policies and poor financial management.”

“The department has not used its position as by far the dominant funder of PIDG to influence the direction of its operations and improve its performance,” said the report. 

“The departments oversight of PIDG has not been sufficiently “hands on”,” it added. “We are concerned that the department has insufficient assurance over the integrity of PIDG’s investments and the companies with which it works and the department has not done enough to put a stop to PIDGs wasteful travel policies and poor financial management.”

PIDG, founded in 2002, is a multilateral agency funded principally by DfID and other donors. The agency invests in infrastructure projects in developing countries, with the goal to spur economic growth and end poverty. 

The UK is the largest donor of PIDG, with DfID estimated to contribute close to £700M in a three year span between April 2012 and March 2015. In the last two years, especially, DfID has contributed 88% of PIDG’s funding. 

According to the PAC report some of PIDG’s investments raised questions over its decision making and the department’s oversight.  

“Concerns were raised with us about the complex corporate structure that PIDG’s partners have sometimes established making it difficult to be certain about the ownership of companies and creating a risk that those involved may have criminal connections,” the report explained.

MPs particularly scrutinised alleged links between investments made by PIDG through Emerging Africa Infrastructure Fund and Guarant Co with Emerging Capital Partners, a company with ties to “convicted fraudster and money launderer, James Ibori”. 

“The department and PIDG told us that at no point had Emerging Capital Partners been involved with the ownership, management or operations of Emerging Africa Infrastructure Fund, GuarantCo or their current fund manager (Frontier Markets Fund Managers Ltd). However, neither PIDG nor the department provided us with all documentary evidence necessary to support this assertion, “ the PAC report said.

“The department must ensure PIDG has a robust and appropriate approach to due diligence in general and that it receives detailed briefing when concerns are raised about specific investments,” it added.

PAC was also critical that DfID’s oversight of PIDG “means that PIDGs operational decisions are at odds with the department’s objectives”.

It went on: “The department’s aspiration is to support countries to build their tax base to support their own development. However, for historical reasons some of PIDG’s investments pay taxes in Mauritius where the effective tax rate is below 5%.”

The committee was also disparaging of PIDG’s travel policy. Up until July 2014, PIDG had a flexible ticket scheme that allowed employees to buy business class tickets for flights longer than four hours. 

The National Audit Office subsequently found in the period between January 2011 and July 2014, PIDG employees purchased tickets worth up to £5000 each for 15 flights, totalling almost £75,000. 

PIDG has since changed its travel policy.

DfID conceded it had been too “hands off” in its oversight, and revealed the department was reviewing PIDG’s overall governance, its first review since 2011.