Investing for

development
What are DFIs and why
do they exist?

W&M, 8 April 2019

We are the UK’s development finance
institution

Our mission is to support the building of

businesses throughout Africa and South
Asia, to create jobs, and to make a lasting
difference to people’s lives in some of the
world’s poorest places.

 Founded in 1948
 UK government-owned
 Independent Board

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 Provides 338
investment
and Businesses in South
To grow
support businesses in Asia.
Africa and
South Asia

£5.1bn $1.1bn
At end 2017 CDC has total New investment
These
returns are assets of £5.1bn commitments
714
recycled
by CDC in 2017 Businesses in
into new
investments £2.0bn Africa.
These
businesses
10 years ago CDC had create jobs
total assets of £2.0bn

63,000
The businesses we invest in

created 63,000 jobs in 2017

Provide
7.5% And make a
$3.5bn essential
goods and
return for
In 2017, CDC-backed businesses services
Average return CDC
paid $3.5bn in local taxes
2012-2017 ($)
46k gwh
Our infrastructure investments

Pay local provided over 46,311 gigawatt

taxes hours (GWh) to electricity

How CDC works customers in 2016.

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Today, we’ll be taking you through a
journey to the heart of Uganda

Bujagali Dam

Uganda in 2016
 41m people, 78% below 30
 $630 GNI/capita; 42% below $1.90
poverty line
 81% firms experience regular
outages; 27% consider access to
electricity major constraint
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The private sector can play an important
role in social and economic development

Which of these development

outcomes can be supported by the
private sector?
 Creating good quality jobs
 Improving access to education
 Increasing life expectancy
 Improving nutrition
 Supporting gender equality
 Reducing environmental degradation
 Building state capacity

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Investments are critical for private sector
growth…

Investing = purchasing goods/services today to increase future income

Investment Capital Production / Business Economic

expenditure Productivity growth development
increase

 Equity  Land and  Economies of  Business  Increased

buildings scale/lower expansion access to
 Debt price of goods and
 Machinery production  Job creation services /
 …and and welfare
everything in equipment  Higher value  Reinvestment increase
between add/quality
 Technology improvement  Income
increase /
 Intellectual poverty
property reduction
 Education  Taxes /
and skills increased
funding for
public
services

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…but capital alone is never sufficient

People & management skills Institutions & infrastructure

What else?

Technology & know-how …and luck!

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The Bujagali dam was financed and is
operated by the private sector

3% of GDP Added 46% to

Uganda’s power
(2017) generation capacity

Significant Capital Cheap “baseload” Environmental

Technical risk
Commitment power for end users considerations

The dam cost more Although dams are Dams are technically Dams can impact
than $900m to build expensive to build, difficult to build local communities
over 5 years plants can run for and environments
40+ years, producing Private partners with (e.g. displacement,
Governments lots of power per unit experience building lost farmland)
typically can’t afford . dams reduce the risk
to build themselves of mistakes Private developers
i.e. cost per unit of have to adhere to
power is low global standards to
raise funding 8
Investment financed Bujagali before it
could generate revenue
Developers
negotiate
contracts with Private
Government the company
decides that Government responsible for
additional and financing operating the
power is with DFIs and dam
needed in the commercial throughout the
country. banks plant’s life

0 1 4 7 12

Hydropower projects can take years to complete

Private Once funding

companies bid and
for a chance to documentation
finance, build, is complete, the
and operate the plant is built
dam

Private companies finance development of project while

$
taking the risk that it does not complete
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Development finance institutions aim to
solve market failures…

Private investor view DFI view

• Job creation
Dvlpt / • Better access/quality
social to goods and services
• Lack of information • Systemic impact
Perceived • Lack of precedent benefits
risk • Misconceptions

Financial Financial
returns / • Country risk
returns /
benefits Actual risk • Market risk benefits Actual risk
• Long-term
• Lack of partners
• Weak governance

Risks outweigh returns Returns outweigh risks

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…which can lead to significant impact

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What has happened since?
CDC forms a joint venture with the Aga Khan Foundation for
Economic Development (2017)

CDC invested in the The joint venture will

Bujagali dam as part of look to invest in more
forming the joint (new) power projects
venture across Africa
1 3

Refinanced the debt in

2 the project, lowering
the tariff for end users
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Final thoughts

1. Working with the private sector

implies trade-offs – bottom-up v.
top-down, demand-driven v.
government ownership, influence v.
control
2. Development finance is just one
tool in the toolbox – and it is not
always better suited to address all
development challenges
3. It’s a long-term game – but it’s
worth it

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CDC Group plc
123 Victoria Street
London SW1E 6DE
United Kingdom
+44 (0)20 7963 4700
cdcgroup.com

Linkedin.com/company/cdc-group-plc
@CDCgroup

CDC Group plc is regulated by the Financial Conduct Authority. 14

Registered address as above. Registered in England No. 3877777