by Sasha Alyson
Last year British P.M. Boris Johnson abolished the U.K.’s Department for International Development (DfID), and merged its functions into the foreign affairs office. He explained that “we must mobilise every one of our national assets, including our aid budget and expertise, to safeguard British interests and values overseas.”
Actually, UK Aid funds were already well used for that purpose. A 2018 study found that 90% of UK spending on foreign aid contracts went to British firms.(1)
These days, much of it is done under the name “impact investing.” This is heralded as a new, long-term investment approach which merges three goals: Profits, people, and planet. Impact investors produce glossy reports with pictures of happy workers, and statistics which, they say, demonstrate that the private investment in Africa delivers jobs and development. The British government is leading the drive to funnel aid money into the private sector.
We looked at one so-called impact investor, the UK-based AgDevCo (short for African Agriculture Development Company), which says it exists to “invest social venture capital to develop sustainable agribusinesses in Africa that deliver transformational benefits for rural communities.”(2)
UK Aid has been AgDevCo’s biggest donor, giving it $250 million of taxpayer money.(3)
In its latest report,(4) AgDevCo uses all the correct words: It “empowers women” and “is addressing” climate change, always with “sustainable” approaches. It claims to have created 15,000 jobs with average annual earnings of $1,860 per employee, and states that its investments have “engaged” 760,000 small-scale farmers, and they expect to create another 25,000 jobs by 2030.
But the concrete numbers aren’t that impressive (those salaries amount to $155 per month) while the grander claims are uselessly vague. What does it mean to “address” climate change? As for “empowering women,” not everyone would use that term to describe black women in Africa working for $155 a month, in companies owned by white Europeans, so that white men in Britain can become even richer than they already were by extracting wealth from Africa.
AgDevCo’s recent investments include Victory Farms in Kenya, Uzima Chicken in Rwanda, Dekel Oil in Cote D’Ivoire, Jacoma Estates in Malawi, and Westfalia Fruit in a lot of countries.
What do they all have in common? Not one of them, from what I can find, is owned or run by black Africans. Mostly, they are based in the West (UK, USA, and Israel) and are run by white Europeans. Westfalia’s main office is in South Africa; 9 of the 10 executive committee members are white. This bias towards foreign- and white-owned businesses is the norm in Africa’s investing scene. A Guardian analysis in 2020 found that “of the top 10 African-based startups that received the highest amount of venture capital in Africa last year, eight were led by foreigners.”(5)
But that is venture capital. We expect venture capital to seek profits, with little regard for the social costs. In AgDevCo’s case, the UK is sending taxpayer money, which is budgeted as foreign aid, through one white-run UK agency, into white Western hands, to extract profits and European salaries from workers in Africa.
AgDevCo itself, which wants a “transformational” role in Africa, has nine directors (above); eight are white. Its seven-member executive committee (below), “responsible for AgDevCo’s day-to-day management,” is entirely white.
One of AgDevCo’s investments was $10 million to Kilombero Plantations (KPL), a wholly-owned subsidiary of Agrica Ltd.,(6) a company incorporated in the UK’s tax haven of Guernsey. Already there is cause for concern. Africa loses more to tax havens than it receives in aid.(7) Wealthy countries lose to them too. The only beneficiaries are the companies and investors who evade taxes, and the tax havens which collect a small amount of taxes but don’t have to do much in return. Here is UK (and USAID) taxpayer money, flowing to a company that is determined to avoid paying its share of taxes. Somebody knew how to make the system work for them.
In 2015, the Oakland Institute published Irresponsible Investment – Agrica’s Broken Development Model in Tanzania(8) which detailed numerous failings in the management of Kilombero’s 5,818-hectare rice farm in one of Tanzania’s poorest regions. KPL signed agreements with farmers: It loaned them money, then required them to buy an “input package” including Yara fertilizer made by a Norwegian company. “If you take a loan you are obliged to accept the tools offered by KPL. Even if you don’t want them, or need them, you must accept them in order to get the loan,” noted one farmer.
Why require Tanzanian farmers to buy a specific Norwegian fertilizer? Agrica and KPL got money from Norfund, a private equity company owned by the Norwegian Ministry of Foreign Affairs. Daniel Hulls, AgDevCo’s CEO, also sat on Agrica’s board of directors. So did someone from Norfund. But not a single Agrica director was black.
Farmers say they did receive useful training, and crop yields increased. Fertilizer does help! But often the added income wasn’t enough to cover their debt. And then, when they went to sell their rice to KPL, they received less than what they’d been led to expect. One farmer reported: “I was just about able to clear my debt to KPL, but when I had repaid everything I remained with no rice and no money. I even had to use some of the rice I had saved for food to pay back the loan.” Others had to sell their beds, bicycles, even their homes, to pay the debt. Some lost their land.(8)
In 2019, after bringing calamity to many farmers, Kilombero Plantations itself defaulted on its loans.(9) Black farmers in Africa had lost money, furniture, homes, land. What about the white investors in Europe? They’re not talking, but this is a group that knows how to watch out for its interests. A key concept for big investors is “other people’s money.” You make sure other people (or, if you have the right connections, aid agencies) take more of the risk; and that you get more of the gain.
So that explains what had been a mystery. AgDevCo has received more than $250 million from UK Aid alone; plus grants from other sources. Yet in its 2020 Impact Report it claims a 2020 year-end portfolio value of only $138 million and its website shows even less than this. Where’s the rest? Even generous salaries would have trouble covering that gap. It appears – and if they don’t want us speculating what they’ve done with taxpayer money, they always have the option to be more transparent about it – it appears that KPL wasn’t the only money-losing investment on AgDevCo’s list. Yet, in its latest annual review for 2020, as in the six preceding years, AgDevCo is awarded an “A” grade by UK Aid, showing that it is performing in accordance with its targets, as defined by UK Aid.(10)
Let’s remember that money lost on a bad investment doesn’t go up in smoke. It merely moves from one bank account into other well-positioned bank accounts.
Boris Johnson told us he wanted UK Aid funds “to safeguard British interests and values overseas.” He spoke the truth.
Notes and Sources
1. “UK ‘one of worst offenders’ for giving foreign aid contracts to own firms – report,” by Bethan Staton, Sky News, 17 October 2018
2. AgDevCo’s twitter account 21/07/2021
3. UK Devtracker. I have converted British pounds into US dollars in this story. AgDevCo also gets very small amounts of funding from USAID, the Rockefeller Foundation, DGIS (the Dutch aid agency), and AGRA (the Alliance for a Green Revolution in Africa, created and funded by the Gates and Rockefeller foundations.) This creates the appearance of broad base of support.
4. AgDevCo Impact Report 2020 (Clicking this will cause a PDF to download.)
5. “Silicon Valley has deep pockets for African startups – if you’re not African,” by Larry Madowo (@LarryModowo), The Guardian, 17 July 2020.
6. AgDevCo news release.
7. How Tax Havens Plunder the Poor, by ActionAid UK, May 2013
8. Irresponsible Investment, by the Oakland Institute. (Clicking this will cause a PDF to download.) The website This Is Africa offers further details about the Kilombero story.
9. “After defaulting on loans, Kilombero Plantation Ltd goes up for sale,” by Oakland Institute, 27 March, 2019
10. UK Devtracker.