Examination of Witnesses (Questions 80
- 91)
TUESDAY 21 MARCH 2006
MS SHARON
WHITE, MR
WILLIAM KINGSMILL,
MR GAVIN
MCGILLIVRAY
AND MR
RICHARD BOULTER
Q80 Richard Burden: You seem to be
suggesting that we are fairly confident that as a project FinMark
makes economic sense for DFID. Extending what you were saying
before about where it goes here, how can you best make sure that
any benefits for the countries, in this case South Africa and
the surrounding countries but possibly elsewhere, can actually
offer sustainable benefits for the people there rather than good
information systems but that is it?
Mr Boulter: To some extent it
is the demonstration effect, that people see how the data is used
in southern Africa. To some extent now it is the involvement of
the World Bank providing additional credibility and this information
is important. In a sense how confident are we? We are confident
enough that people who have not been directly linked to DFID or
FinMark have been approaching FinMark saying "Can you bring
this to India?" or "Can you bring this to Bangladesh?".
People outside DFID are demonstrating that this information is
really important to the financial sector. The much harder answer
for you is at what stage in a smaller country like Uganda or somewhere
like that will the commercial banks make the methodology sustainable.
Obviously the formal banking sector is much smaller in countries
like that and so that is a difficult one.
Q81 Chairman: I wonder whether the
FinMark Trust has helped to deepen understanding of the case for
co-operation in areas where it is operating. One of the things
you have come across is that the Customs barriers, the tariffs,
the internal tolls and so forth really inhibit trade. I just wonder
whether financial services information across the board has helped
people to understand that collecting your revenue at the border
may be good for your income but in the long term it is bad for
your trade and therefore your economic growth potential. Is there
a role for something like FinMark in that?
Mr Boulter: I think the best comparison
perhaps is the World Bank's investment climate surveys where,
for example, in a large country like India what has happened is
the states are looking at each other to see how they are performing
on investment climate indicators. It is very much our hope that
the same thing will happen with the FinMark and World Bank data
on financial access and that governments will say why do, say,
25% of people in Botswana have bank accounts when the figure is
only 7% for Uganda. Those are not exact figures but a range of
examples. At the moment we are in an early stage there. We do
not know that that is the way it will happen. The investment climate
surveys are acting as a mirror to show up how different states
are doing and I hope the same will happen on access to finance.
Q82 Mr Davies: On the Investment
Climate Facility, in DFID you have really taken a very favourable
view of this initiative. You are the major donor so far that has
come forward. I think you offered $30 million the first three
years. My instinct is that this is a very sensible initiative
to back because I think all of us are very aware that one of the
sad ironies of the developed world is that donors and indeed private
individuals and charities are providing a lot of money in the
hope of contributing to poverty alleviation and therefore wealth
creation in the very big countries and a lot of the governments
in developing countries are spending an awful lot of their time
and energy through perverse and unnecessary bureaucracy, ill considered
tax regimes and so forth and preventing wealth creation from taking
place. If we can change the investment climate and we can remove
some of these obstacles we are obviously doing a very good day's
work. We have to probe on this Committee whether this money is
being sensibly spent. I wonder if you can fill us in on at what
stage you are at. I gather there was a board meeting yesterday
and I do not know what happened at that. It does seem to me that
the most crucial decision to be taken at this stage is the appointment
of the right chief executive because the personality and credibility
of the chief executive is going to be a determinant factor in
the influence that the ICF[7]
can have in those African governments. I see in the business plan
that some $6 million is provided a year for the cost of overhead
administration, in other words the internal bureaucracy of Johannesburg.
That $6 million should be able to buy you some reasonably good
people. I would like to know where you are at in setting the thing
up and whom you have so far selected for these key roles.
Ms White: The ICF came out of
the Commission for Africa last year and we see as one of the key
features the ownership that the African governments have on this.
We are the principal donor so far. We are hoping for $550 million
over seven years and we are making progress with that. We are
at about $34 million at this stage.
Q83 Mr Davies: You have committed
$30 million for the first three years. The $550 million relates
to the seven-year business plan. What is the business plan for
the first three years so we can look and see what proportion of
that DFID is contributing?
Ms White: At the moment we are
the major funders. We have got quite good partnerships with key
players within the private sector, ie Shell, Anglo American and
Unilever have all committed, but we are looking for broader ownership
and there is interest. What we are now looking to is the interest
that has been given by the World Bank, by Ireland, by Denmark—
Q84 Mr Davies: I do not think you
heard me correctly or you misunderstood my question. What is the
budget for the first three years to which our $30 million is a
contribution?
Mr Boulter: It is $110 million.
Q85 Mr Davies: Can you tell us where
you are at in appointing a chief executive?
Ms White: We have Co-Chairs with
Benjamin Mkapa (former President of Tanzania) and Niall FitzGerald
who is the Chairman of Reuters. The good thing is we now have
joint chairs who are working effectively, but we are still in
process with the rest of the staffing.
Mr Kingsmill: That is my understanding
too. The meeting yesterday was an exploratory meeting to try to
attract additional support for the ICF. There is a broad welcome
for the facility from a very wide number of potential partners.
We now need to see how the business rolls out following the meeting
yesterday and whether we can turn the expression of very strong
support into practical financial commitments. We are hopeful that
that will happen.
Q86 Mr Davies: Do you not agree,
Mr Kingsmill, that the personality and qualities of the chief
executive are going to be very crucial for the success of this
venture? Has it occurred to you that the personality and qualities
of the chief executive and the fact that he or she is in place
might be quite crucial for getting requisite donor commitments?
Therefore, rather than pushing to the back end of the queue the
issue of the chief executive and talking about something else,
as Ms White has just done when I raised the issue, would you like
to tell me what progress we are making, if any and, if we are
not, what DFID is doing about it in terms of recruiting the right
chief executive? If we are coming up with between 25 and 30% of
the money required we must have some influence on this.
Ms White: Our focus at the moment
has been through very active Co-Chairs. Niall FitzGerald in particular,
the Chair of Reuters, has been very, very active in fundraising,
in networking and in reaching out to the business.
Q87 Mr Davies: I know Niall FitzGerald.
He is an impressive man. He has a very fine business record. If
you are putting money into an organisation what you really want
to know is who is going to be running it and who you are backing,
not who the other backers are. Who is going to be spending the
money? I hope Niall FitzGerald is going to be playing a major
role in finding the chief executive who is going to be based in
Johannesburg, although where he is based is a secondary matter.
Who he or she is is very important. So far no progress has been
made in identifying the individual at all. Have you appointed
headhunters? Have you got a shortlist of names? If not, why not?
You are spending our taxpayers' money on this so we do want some
answers to these questions.
Mr Boulter: It is a sequencing
issue. At what point do you appoint the chief executive? Do you
do it very early in the process, in which case he or she can help
with the fundraising, or do you attract a better person if you
have a firmer idea about how big your budget is? It is laid out
in the plan. ICF, like FinMark, is an independent institution.
Yes, DFID is a major investor and we obviously have involvement
in the processes, but we have not had a full read out of the trustees'
meeting yesterday. Hopefully they will have addressed this particular
issue because they are very focused on when they can launch this.
Q88 Mr Davies: Did DFID see the agenda?
Ms White: Yes, and we have attended.
Q89 Mr Davies: Was the appointment
of a chief executive on the agenda?
Ms White: Not specifically. The
main issue for the meeting yesterday of the trustees has been
very, very focused on fundraising and getting from the position
where the UK is the lead donor—
Mr Davies: Ms White, we have a limited
amount of time. Can I put it to you that I think it would be sensible
to bring forward the issue of a chief executive? You want to make
progress with this. You want to have a business plan with slightly
more detail than you have got here. One of the important things
is that you want to line up the sort of people who are going to
be delivering this kind of agenda. I would suggest, if I may,
that the next time you have a meeting you make sure this matter
is discussed urgently. If you come back to this Committee in a
few weeks' time and you are still proposing to spend $30 million
over the first three years and you still have not the faintest
idea who is going to be delivering the services you have in mind
to finance, then I think you may get some rather more sceptical
questioning from us than you have had this morning.
Q90 Chairman: Perhaps you could provide
us with an answer as to what the timetable is.[8]
Ms White: We will obviously take
on board the very important points about making sure that we have
got the head and the staffing of this adequately reflected, but
we will also get back to the Committee with a note[9]
on just where we are in terms of the process with headhunters
and so on.
Mr McGillivray: It is quite a
complex area in terms of getting other donors onside. We completely
share your view that having the right person leading it is essential
for the success. How do you get the right person? Partly it is
in terms of assuring the marketplace of the right sort of people
that there is a substantial venture worth working for, but also
in terms of having a remuneration package
that is of interest. DFID has been quite progressive
over this and generally over our private sector infrastructure
facilities. We select chief executives through open and competitive
processes. In terms of getting other donors on board, particularly
some Nordics, it is a challenge to get agreement on paying the
right amount to get the right calibre of people.
Q91 Mr Davies: Mr McGillivray, you
are just confirming the impression that I already have; you have
not grappled with this issue. You had a meeting yesterday and
this was not even on the agenda. You did not try at the meeting
yesterday to get a consensus on what the remuneration package
would be, or what the procedure would be for identifying and appointing
someone. You have not got to first base on this. I repeat my point:
can you please look at this again and next time we see you we
would like to hear that there has been some concrete progress
on this matter or, if not, there are better reasons than you have
come up with today why progress cannot be made on appointing a
chief executive. My own view is that, unless you make progress
on this, you will not get this whole thing up and running.
Mr McGillivray: Yes.
Chairman: That point has been clearly
made. Thank you for coming. Picking up on John Bercow's point
from earlier on, it is clear to the Committee, as you yourself
acknowledge, that moving into the area and putting private sector
development as a major part of poverty reduction is relatively
new within DFID and in that sense you have been upfront about
the fact that you are learning. The Committee do believe that
we need to see practical results from what is happening and we
do want to see your ability to say to us what you are doing and
what the practical effects are in all of these areas. We commend
you for addressing the issues and for being honest in saying that
they are relatively new. We hope that they are not just a fashion
and that we will hear more from you. Thank you very much indeed.
7 Investment Climate Facility. Back
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