European Standing Committee B
Wednesday 18 November 1998
[Mr. John Butterfill in the Chair]
EC Development Aid to South Africa (1986-1996)
European Community Documents Nos. 11048/98, Annual Report
on the European Programme for Reconstruction and Development
in Africa, and 10533/98, report for 1997 on the evaluation of
development co-operation, and the unnumbered Explanatory
Memorandum submitted by the Department for International
Development on 22 September 1998 on the draft Guidelines for
strengthening operational co-ordination between the Community
and the Member States in the field of development co-operation,
are relevant.
10.30 am
The Parliamentary Under-Secretary of State for International Development (Mr. George Foulkes): The Government welcome the opportunity to debate the
European Commission's assistance programme to South
Africa and the effectiveness of the EC's development
programmes in general. More than 30 per cent. of the
budget of the Department for International Development
is channelled through the European Commission and these
issues are of importance and concern to us. We have given
considerable though in recent months to the European
Commission's contribution to poverty eradication. We
have also considered what more could and should be done
to maximise the impact of that contribution through the
development of the country strategy paper on our bilateral
programme in South Africa and of our objectives for
influencing the EC's development programme in the
institutional strategy paper. Both papers will be
published shortly.
The debate is timely. We welcome the recommendation
by the Select Committee on European Legislation that the
discussion should take place in this Committee. The
debate is also timely because the annual report of the
European Court of Auditors was published yesterday and
the negotiations on a new South Africa regulation and
other regional regulations have started.
I shall begin by making a few introductory remarks on
the EC's programme in relation to South Africa and by
briefly mentioning aid effectiveness in general. There
have been three distinct phases of EC assistance in South
Africa: before 1991; between 1991 and 1994; and since
1994. Important lessons can be learned from each phase,
all of which should influence the design of future
development programmes in South Africa.
The pre-1994 phase of assistance commenced in 1986
when the European Community began supporting
organisations in South Africa that were providing
assistance to the victims of apartheid and began
contributing to the efforts to secure a peaceful transition
to democracy. That programme was vigorously supported
by my colleagues, but it did not always receive the same
enthusiasm from some Conservative Members.
Mr. Eric Forth (Bromley and Chislehurst): Too right.
Mr. Foulkes: As the right hon. Gentleman says, too
right.
In reviewing the provision of that assistance, the Court
of Auditors criticised the Commission for not adequately
monitoring the management of funds transferred to the
three local South African organisations, known
collectively as the channels. In particular, as the local
situation improved in the 1990s, the channels failed to
submit financial reports accounting for the funds
transferred from the Commission to the European
non-governmental organisations. Excessive balances built
up in the channels where considerable interest and
exchange rate gain were earned. That is
maladministration, but it is not fraud.
Since the early 1990s, the Commission has been taking
steps to improve the financial management of its
assistance. The Commission has closed the majority of
outstanding pre-1994 projects and, where appropriate,
resources have been uncommitted. An account has been
opened in South Africa to receive those funds. At least
£8.6 million will be redeployed in South Africa under
special provisions allowed by the Commission, but I stress
that more can and needs to be done to strengthen the
European Commission's financial management and
accountability, and the British Government will continue
to demand such improvements.
On a positive note, however, while being alive to the
serious shortcomings of the channel system that were
identified by the auditor, we should not overlook the
impact and effectiveness of the special programmes,
which the report commends. An evaluation commissioned
by the EC in 1995 concluded that the special programmes,
"had a significant impact on political developments in the country
and "
thankfully
"accelerated the demise of apartheid."
The evaluation particularly commends the decentralised,
hands-off approach employed by the Commission,
especially the first phase 1986-90 during which a
locally designed and owned programme was produced
that was effective and responsive to local needs. Praise
should be given to the EC for these aspects of its
programme.
On the current phase of assistance, the auditors' report
makes particular recommendations. During the hectic
period between 1994 and 1996, the Commission in
order to show, without delay, its solidarity to the new
regime responded to requests from the Government for
support in a wider variety of sectors than could be
effectively managed. The Commission had good will, but
it overstretched itself.
The auditors identified a number of specific problems
in the Commission's administration of the European
Programme for Reconstruction and Development,
including multi-layered and centralised decision making,
poorly designed projects with unrealistic timetables,
inadequate reporting and monitoring procedures and poor
financial management. The Commission's annual report
on the first two years of the EPRD also acknowledges
that difficulties were encountered. The auditors' recommendations to address those shortcomings are practical and sensible. They reflect what member states
and the Commission already know about the management
problems of EC development assistance programmes in
South Africa and in general.
The DFID is pleased that some measures are already
being taken to address the problems, but more needs to
be done. To that end, the UK is actively working to
further improve the performance and focus of the
Commission's development programmes. We will seek,
with other donors and member states through our
contacts with Brussels and through our bilateral
programmes to ensure that the appropriate
recommendations of the auditors' report are implemented.
The key opportunity in South Africa will be during the
negotiations for a successor to the EPRD in 2000.
Preparations are already beginning for post-1999
co-operation, which we expect to be maintained at similar
levels for at least the first three years. The UK is actively
engaging in discussions on the future shape of the
programme.
I shall comment briefly on aid effectiveness in general.
In recommending the Court of Auditors report on the EC
aid programme to South Africa for debate, the Select
Committee on European Legislation noted rightly, in the
Government's view that it was not the first Court report
on EC development assistance that it had considered this
year. Recent Court reports on the Mediterranean and
PHARE programmes highlighted many of the same
shortcomings identified in the South Africa programme.
Members will therefore want to consider wider issues
relating to the effectiveness of EC development assistance
in general.
My Department wants to increase substantially the
effectiveness of Community development assistance
programmes, That is the only way to ensure that the EC's
contribution to the international development strategy and
to the international targets fulfils its potential. My
Department works hard to try to improve the effectiveness
of EC aid through a range of formal and informal channels
but we know that those efforts should be intensified. That
is why we have taken our thinking one step further. An
institutional strategy paper describing how the DFID will
seek to influence the EC's programmes in the coming
years and providing clear objectives for doing so will
be published next month. It will provide a critical
framework for developing further our contacts with the
European Commission and the Community in general. We
will pursue the objectives directly with the Court of
Auditors, Members of the European Parliament, other
member states and the Commission, and in close
consultation with external stakeholders.
In the light of the conventions of the Committee, and
having spoken for about 10 minutes, I shall conclude my
opening remarks. I am happy to answer questions.
The Chairman: We have until 11.30 for questions to
the Minsiter. I remind hon. Members that such questions
should be brief and should be asked one at a time. All
Committee members are likely to have amply opportunity
to ask several questions.
Mrs. Cheryl Gillan (Chesham and Amersham): I thank
the Minister for his brief and, I must say, rather general
statement on a particularly damning special report on the
aid programme for South Africa. When were the Minister
or the Secretary of State for International Development
first informed that there were monumental irregularities
in that programme?
Mr. Foulkes: Like Opposition Members, we received
the Court of Auditors' report. The auditors who are
appointed to conduct such investigations report to member
states, to the European Parliament and to the Commission,
and we received a copy of that report at the same time
as others.
As a result of previous reports, we have been aware for
some time of some of the failings in the administration of
the European Commission's programme. For a long time
we have put pressure on the Commission in relation to
decentralisation, to try to ensure that more decisions are
made by delegations in member countries. For some time
we have been putting pressure on it in relation to donor
co-ordination and several other matters, including the new
common services organisation, which is involved in the
delivery of aid. Those efforts follow pressure that we
applied previously, and we have applied much more
pressure over the past 18 months than was applied during
the previous 18 years.
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