Partnership Shame

Njongonkulu Ndungane, then Archbishop of Cape Town (following on from Desmond Tutu) turned up on my doorstep in London shortly after the G8 Gleneagles Summit at which US$50 billion in additional commitments of international development assistance were made. His question, put simply, was how best to track the delivery of real money against these commitments.

Partnership Shame

Njongonkulu Ndungane, then Archbishop of Cape Town (following on from Desmond Tutu) turned up on my doorstep in London shortly after the G8 Gleneagles Summit at which US$50 billion in additional commitments of international development assistance were made. His question, put simply, was how best to track the delivery of real money against these commitments. My answer, crudely, was that he was watching the wrong ball, and that the real menace was the arrival in Africa of ‘private finance initiatives’.PFIs, for the uninitiated, involve private companies putting up the capital to build schools, roads and hospitals (public service infrastructure) in its many forms, in return for a commitment by government to pay for the arising services into the future. The plus for governments was that they did not have to use public money or raise more public debt for capital expenditure, even although they (or someone) would have to pay the bill later down the road. In the UK, they used to call this ‘living off tick’, put simply, ‘consume now, pay later’. The Archbishop listened intently to my argument that Africa was about to engage in a new round of indebtedness, not to governments, but to private companies. Moreover, as in the UK, I argued, the added political incentive to go this route was that one did not have to tell anyone that there was a huge bill to pay in the future, and in all likelihood the politicians signing the deals would be long gone before the debt collectors turned up for the cheque. In fact, this was in short a vast off-balance sheet scam, bought into by both incumbent and ‘wanna-be-re-elected and make a lot of promises’ politicians, leaving a vacuum in any serious oversight that is the core of the role of stately oppositions.The UK experience, I explained, was the exemplar that evangelical development agencies were using to persuade Southern governments to go this route. Either these folks had no idea of the embedded problems in the UK experience, or else they were disingenuously promoting an approach that contained undisclosed time-bombs. Over the preceeding years, I had approached many development outfits, from the World Bank to Instituto Ethos to the Ford Foundation, trying to raise the alarm on this pattern of debt-by-stealth. But in vain, the friendly foundations ‘could not commission work that explored the experience of developed countries’ and the others were simply in on the act. Highlighting the dangers through writing, such as in the Harvard paper “Governing Collaborative Governance”, has also sadly not alerted and mobilized folks interested in the fate of Africa and other countries whose governments chose the quick-and-easy path to accelerated investment. After four hours of feisty and fascinating debate, the Archbishop concluded. He understood my perspective, he explained, and could see that it was probably correct. But his constituency, he continued, was focused on accountability for international development assistance, and so this was the ball he would continue to chase. We parted, needless to say, on best terms. And so finally the pain of private finance initiatives has surfaced in the place in which they were born, the UK. Diligent use of the Freedom of Information Act has revealed that the UK taxpayers are in hock to the tune of £229 billion to pay for capital investments amounting to no more than £56 billion. In one case, the hospital built was worth just 10% of the rewards reaped by the anointed developer. Private contractors have reaped returns to capital of over 70%, placing them alongside the investment community in the Shame Index, second only to the politicians that promoted this approach and the civil society organisations that allowed this to happen on their watch. There is no decent data on how far PFIs have penetrated Africa, and also other developing countries duped by development officials. But there is no doubt that PFI-style approaches remain in vogue and are actively being enacted by many governments, whether acting in blissful ignorance or political guile. Today in the FT, the Egyptian Government is reported to be seeking to raise US$17 billion in PFI-style private capital to fund infrastucture. One can only wonder what will be the rate of return to capital providers at the end of the day. It is time for a calling to account, but also very much time that activists increased their financial literacy and focused on the balls that count rather than those floating in the limelight. It is simply essential that civil society organisations such as Revenue Watch need to jump on this agenda, working alongside folks focused on shifting the policies and practices of development agencies. …in the meantime, don’t forget to sign up for updates on my future blogs.