CDC

Formerly known as the Commonwealth Development Corporation, CDC is a DFID-owned company that invests in businesses in the poorer developing countries.

CDC was established more than 60 years ago. For much of this time it provided loans rather than equity (that is, providing investment by buying shares in an investee company). 

Since 2004, however, it has concentrated on private equity investment. It has also widened the type of businesses it invests in and operated as a “fund of funds” investment company, investing through specialist third party fund managers.

CDC commits its capital to funds managed by fund managers (the largest of which is Actis, which was spun off from the old CDC in 2004).  The fund managers are largely based in developing countries and use CDC’s capital, together with capital provided by others, to invest in private companies in these countries.

Typically after seven to 10 years the fund manager sells the investment to private sector investors. The net proceeds of the sale are returned to CDC, which recycles them into new investments. CDC is therefore self-financing; it has received no public money since 1995.

In 2008 CDC invested a total of £436 million; £194 million of this was invested in Africa and £230 million in Asia. In the same year it posted a profit of £118 million on realised sales and recorded an overall fall of £359 million in the value of its portfolio.

Over the last five years CDC has reported average positive returns of 18% per annum.

DFID owns CDC wholly but while CDC’s shares remain owned by the government, CDC operates independently and commercially, working within a set of defined investment targets and an ethical investment code agreed with DFID. 

From January 2009, CDC adopted a new five-year investment policy agreed with DFID. Under this policy, for Funds to which it commits after 1 January 2009, CDC will make at least 75% of new investments in low income countries and invest at least 50% in sub-Saharan Africa. Up to £125 million may also be invested over the period to 2013 in small and medium enterprise (SME) funds in other developing countries.

CDC also agreed an Investment Code with DFID. The Code sets out how and in what CDC may invest and covers such issues as the environment, social matters (including health and safety, labour and working conditions), governance and business integrity.
Read the Investment Policy and Code (pdf, 272 kb).

Chief Executive pay

The pay of CDC’s Chief Executive is tied to the performance of the company. In 2007, more than three-quarters of the Chief Executive’s pay was performance related. In 2008, the Chief Executive’s pay was reduced by 41% as a result of a fall in the company’s performance.

Public Accounts Committee and National Audit Office reports

In April 2009 the House of Common’s Public Accounts Committee published the report Investing for Development: the Department for International Development's oversight of CDC Group plc. Read the Committee’s report.

The PAC report is based on a 2008 NAO report. 

The reports identified a number of areas where DFID’s oversight of CDC could be improved upon.

DFID is acting on the NAO and PAC recommendations in these areas and will respond to the PAC report via a formal HM Treasury published Minute.