Oversight of the Private Infrastructure Development Group - Public Accounts Committee Contents


1. On the basis of a Report by the Comptroller and Auditor General, we took evidence from the Department for International Development (the Department) and from the Private Infrastructure Development Group (PIDG) on the Department's oversight of PIDG and the steps it is taking to assess and improve its performance.[1]

2. PIDG is a multilateral agency, founded in 2002 by the Department and three other donors. PIDG looks to mobilise private investment in infrastructure projects in developing countries in order to boost growth and combat poverty. PIDG donors commit funds which are invested through investment vehicles ('facilities'). These mobilise flows of capital and expertise for investment in infrastructure. PIDG currently operates through seven 'facilities', each managed by a fund manager, providing a range of services and financial instruments. The United Kingdom is now one of nine donors. Based on current estimates the Department will fund PIDG up to a maximum of £700 million between April 2012 and March 2015. The Department is by far the largest contributor of funding to PIDG. In the period from its creation in 2002 to December 2013, the Department's total funding of £414 million represented 70% of all contributions. That level of contribution increased considerably to 88% for 2012 and 2013.[2]

3. We questioned the Department and the Private Infrastructure Development Group on alleged links between investments funded by PIDG with UK taxpayers' money and companies associated with known criminal fraudsters. Frontier Markets Fund Managers Ltd is the fund manager for two of PIDG's facilities, Emerging Africa Infrastructure Fund and GuarantCo. We asked PIDG whether Frontier Markets Fund Managers Limited had been part owned by Emerging Capital Partners, a company that had links with a convicted fraudster and money launderer, James Ibori.[3] 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).[4] However, neither PIDG nor the Department provided us with all documentary evidence necessary to support this assertion. PIDG also told us that in March 2014 Emerging Africa Infrastructure Fund approved a €25m investment in a power plant in the Ivory Coast in which Emerging Capital Partners has an interest. It was not clear from the evidence we received whether the Department was aware that Emerging Capital Partners was involved in a project in which Emerging Africa Infrastructure Fund was investing. The Department, along with the other donors, is only required to approve Emerging Africa Infrastructure Fund projects if they contradict the facility's investment policy.[5]

4. We also asked PIDG about the appropriateness of another of its investments given that a connected party was linked to allegations of looting of Nigerian oil revenues. The investment was made by Emerging Africa Infrastructure Fund in a company that itself invests in power plants in Africa, including a plant in Nigeria, in which Seven Energy has an interest. Seven Energy was named by the former Governor of the Central Bank of Nigeria in a 2014 investigation he conducted into the allegations of looting of Nigerian oil revenues. PIDG told us that in September 2014 Emerging Africa Infrastructure Fund decided to provide up to $30 million to Seven Energy Finance Ltd in support of the gas processing and distribution activities of Seven Energy in Nigeria.[6] Again, it was unclear from the evidence we received whether the Department was aware of this investment.

5. Until July 2014, PIDG's travel policy allowed fully flexible business class tickets to be purchased for flights of more than four hours. The National Audit Office found that between January 2011 and July 2014, PIDG employees booked 15 flights which cost more than £5,000 each, at a total cost in excess of £75,000. Subsequently, PIDG changed its travel policy, although this occurred almost two years after PIDG had reminded its directors of the need to seek permission to book fully flexible tickets. The Department told us that the 'tightening up' of the travel policy in 2012 had not gone as far as it had wanted. Despite being the most significant donor, the Department did not consider itself to be in a position to accelerate the pace at which PIDG's travel policy evolved.[7]

6. Whilst PIDG itself is domiciled in the UK for tax purposes, two of the facilities it funds—Emerging Africa Infrastructure Fund and GuarantCo—are domiciled in Mauritius.[8] The effective rate of tax in Mauritius is below 5%. We asked the Department how it made sure that PIDG conducts itself in a way that is in keeping with the Government's stated objectives and policies on increasing the tax revenues of developing countries to support their own development. PIDG told us that the reasons these facilities were incorporated in Mauritius were historic. At the time, over 13 years ago, Mauritius had been the only location in Africa with adequate governance and effective regulation for the location of public funds.[9] The Department told us that it considered Mauritius a suitable country in which to incorporate the Emerging Africa Infrastructure Fund and GuarantCo because Mauritius had, for example, a relationship with organisations in Eastern and Southern Africa, such as the Southern African Development Community.[10]

7. The Department recognised that it had been too 'hands off' in its oversight of PIDG. The Department told us that it was completing a review of PIDG's governance—its first since 2011. It also told us that its future level of oversight of PIDG would depend, in part, on the positions taken by the new donors, such as Norway, that PIDG was looking to attract.[11]

8. Between January 2012 and February 2014, an average of £27 million of the Department's funding sat in the bank account of the PIDG Trust[12] earning interest at a rate of just 0.016%.[13] The Department acknowledged that it had been an error to allow money to remain idle in bank accounts, as the funds were not available to either the UK Exchequer or developing countries, at a cost estimated by the National Audit Office to have been between £200,000 and £2 million. We questioned how it had been possible for the Department, PIDG, and the bank (SG Hambros) not to have been aware of this matter for 18 months. The Department noted that it had commissioned a wider review of its multilateral agencies to make sure that the same mistake had not been made elsewhere.[14]

9. Given that SG Hambros are likely to have made a financial return on the money in these accounts we asked the Department to write to SG Hambros to ask it to make a donation to a charity working in regions affected by the Ebola outbreak in West Africa. The Department subsequently wrote to SG Hambros on the lines we requested.[15]

1   C&AG's Report Oversight of the Private Infrastructure Development Group HC 265 Session 2014-15, 4 July 2014 Back

2   C&AG's Report, paras 1.10, 1.8, 1.25 1.27 and Figures 1 and 2 Back

3   Qq 6, 12, 21, 25, 34; C&AG's Report, Figure 2  Back

4   Written evidence supplied by the Private Infrastructure Development Group, para 1.1.2 Back

5   C&AG's Report, para 2.30; Memorandum from the Private Infrastructure Development Group, paras 1.2.1-1.2.4 Back

6   Qq 57-60; Memorandum from the Private Infrastructure Development Group, para 3.4.1 Back

7   Qq179, 186, 187; C&AG's report, paragraph 2.19  Back

8   Q 135 Back

9   Memorandum from the Private Infrastructure Development Group, para 4.7 Back

10   Qq 112, 113; C&AG's report, paragraph 2.19.  Back

11   Qq 72, 168, 244; C&AG's report, paragraph 2.2 Back

12   The Trust moves funds between donors and facilities and act as shareholder of the PIDG companies. It acts on behalf of PIDG's governing council. Back

13   Qq 146; C&AG Report para 3.34 Back

14   Q 144, C&AG Report para 3.35 Back

15   Qq 123, 150, 247 Back

previous page contents next page

© Parliamentary copyright 2015
Prepared 29 January 2015