Select Committee on International Development Minutes of Evidence


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

8   Ev 140 Back

9   ibidBack


 
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