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Investment for development:

The UKs strategy towards

Development Finance Institutions

 

Evidence by

 

Roman Mazur MBA

Strategic Development Director

 

POLISH UNIVERSITY ABROAD IN LONDON

Charity Commission: 298510

 

 

IN CO-OPERATION WITH:

 

Prof. Grazyna Czubinska - Head of the Public Health Unit, Polish University Abroad

Teresa Naidoo PhD - Head of the Africa Studies Unit, Polish University Abroad

Adriana Gorka MA - Head of the Applied Psychology Unit, the Polish University Abroad

              This evidence is based on both - our academic research and the field experience, relating to easily scalable SDGs’ impact project: Floor4Africa.COM that is being carried out by us in Africa (Kenya, Sierra Leone, Ghana and Nigeria from 2018 to the present day).

 

 

THE BACKGROUND

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In 2018 we went to Africa for a research on education and labour market. While staying over there, we discovered how big is the scale of poverty in urban slum and rural areas. The first thing we noticed was related to public health issues: up to 80% of schools and big family houses in urban slum and rural areas had only dirt floors inside. You don’t have to be a Professor in Public Health to realise that people can’t clean school or home when they live or learn on the soil. Now we know well that lack of concrete floor is a source of soil-transmitted NTDs for instance. But that time we focused only on the scale of poverty. Our first reaction was instant: to activate local community to build the concrete floor in a random family house in a random village. We mobilised local resources only, incl. labour force. It appeared it’s so easy to build durable and cleanable concrete floor for £10/sqm with local cement, sand, stones and water. It appeared, there are many local construction professionals ready to work at once. Construction process took one week only. We built a concrete floor that: removed harmful germs and aggressive insects out of the house (SDG3), gave self-employment to a local cement trader and a local mason (SDG8), as well as made the house owner happy to buy a mop and cleaning agents from the local shop (SDG1). Moreover, up to 40% of adult inhabitants of the village declared that the change they see is so easy to do and they don’t even think about migrating anymore. In fact, in the village we worked that time (Mbale in Vihiga in Kenya) 80% of family houses had no concrete floor inside. It’s a general rate for Africa. The local construction market niche is so big that we couldn’t believe what a data we saw later in London. EY data was showing that British FDIs hardly work in jobs creation prism. Investing $18bn created less than 41,000 jobs in Africa between 2014 & 2018. Total output: 1 new job for each $429k of FDI.

What are the British Investment Partnerships (BIPs) and what are their objectives? What role does British International Investment (BII) play within them?

 

British Investment Partnerships include the British International Investment, Clean Green Initiative Just Energy Transition Partnerships, British Support for Infrastructure Projects (BSIP), UK Export Finance (UKEF) and other development finance instruments, inc. UK guarantees, to develop investments mostly in the Commonwealth countries. The BII, in our professional opinion, should play the leading role to build the FDIs efficiency for the British taxpayer. On the other hand, we face rising number of issues concerning illegal immigration in the UK. According to our professional experience, FDIs ought to be the first line of defence against the illegal immigration. When they relate to grassroots impact projects, it is possible to reduce the risk of illegal immigration from urban-slum and rural areas of Africa by up to 40%. Therefore, we think that thinking about BIPs should be also a way of thinking about the increase of FDIs efficiency for the British taxpayer ASAP.

 

How does the BIIs strategy align with the FCDOs development agenda?

 

The British International Investment’s strategy for 2022 - 2026 has three priorities: productive development (incl. job creation), sustainable development (incl. climate change response), and inclusive development (incl. SDG1 activities). The FCDO’s approach to international development is like: “a patient partner that champions openness, predictability and the rule of law.” (The UK Governments Strategy for International Development, May 2022) Both are reasonable and meet today’s standards. But there must be some strategic gap because more and more people try to get to the UK as illegal immigrants. In our opinion it’s the Home Office job to deal with it. But it’s also the FCDO’s duty to prevent it remotely.

 

How does BIIs strategic outlook compare with that of other overseas institutions?

 

It’s pretty similar. USA is the biggest FDIs provider in the world but their illegal immigration crisis looks pretty similar. We think that present FDIs are focused on the ROI much more than on the process of building equality, inclusion and local community strength in developing and emerging economies.

 

How effective are the governance structure and internal oversight mechanisms of BII (e.g., oversight over direct investments, fund investments, BII controlled companies)?

 

We can’t assess. Up to now we have never had an opportunity to partner with BII, even though we are quite good at development with impact projects and African affairs.

How is BIIs budget determined? How does the budget inform BIIs programme of work and to what extent can BII scale up or scale down on its investment activity?

 

We find the budget well. The point is to diversify the scale of investments. We think that many more impact projects should be taken into investment plan. Focusing on ROI only leads to the fact we create not many job places in Africa. According to our research, there should be created over 15 million new jobs in Africa each year. It’s the only way to stop poverty and to think about efficient dealing with illegal immigration in the UK. Up to now not more that 3 million new job places appear yearly in the labour market in Africa. When you realise that the African population growth is is over 2% year after year, you just start to realise that we have to do much more in Africa than now.

 

How are the decisions of BIIs management scrutinised? What transparency is there over BIIs performance monitoring and reporting?

 

Nothing to comment on this side. We trust in constant development of the British model of FDIs, so organisational details are quite all right to us.

 

What criteria does BII use to determine investment decisions and how are financial returns balanced with achieving impact?

 

As said before, we conclude a low level of efficiency of the present FDIs. They hardly prevent the acceleration of the illegal immigration from Africa to the UK.

 

How do external events influence the investment decisions of BII (e.g., in response to the crises in Afghanistan and Ukraine, the depreciation of Sterling etc.)?

 

In 2022 the Extreme Poverty Committee accepted our proof on the efficiency in fight against extreme poverty in Africa. We carry out a very high social innovation and scientific impact projects with budgets lower than £850 in Africa. The point is to identify local community influencers to activate local resources in an efficient way. Thanks to this strategy we built - for instance - a trusted network of local researchers and activists in Ajegunle slum in Lagos, Nigeria. Only such an asset let us limit the project budget to the very minimum, in front of cuts of spendings or anything else.

 

What due diligence does BII undertake prior to making investment decisions and how does this compare with best practice?

 

We believe all the investment process goes the investment-banking-like way and we have nothing against. The point is the increase the scope of investments to start efficient way of dealing with illegal immigration remotely. Simple establishing of the local accelerators for self-employment and entrepreneurship in African universities can boost efficiency of investments for the British taxpayer. Activation of the local resources doesn’t require much, at all.

 

What current investments does BII hold?

 

We can say what current investments BII doesn’t hold. We see a huge market niche in AI inclusion like MimiKazi project not only for self-employment but also fair finance. British banking market has already been oversaturated (acquiring new customers and clients is limited). On the other hand, there’s no reliable credit scoring system letting British banks provide fair finance services in those Commonwealth countries in Africa where people miss a simple postcode and home address system. The same with EdTech in front of the ageing population in the UK and number of graduates of African universities. Lack of British co-working hubs in Africa implies the lack of opportunities relating to the remote covering teachers’ service in English classes for the basic instance. There are startups like “StorkSchool” that build the educational SDG4 bridge with Africa, because there is an enormous number of well-educated teachers over there. They can’t find employment locally (even 700 people can run for one school teacher position). But they can work remotely in the UK when really needed, to improve inclusion and equality rates.

 

How effectively does BII manage funds following its initial investment?

 

BII informs about this: “in 2018, we invested $180 million into Liquid Telecom, the largest provider of internet fibre cable and cloud storage in Africa, to accelerate Liquids expansion along its Cape-to-Cairo. Weve since invested a further $40 million. The impact case for investment, and the scale of need, was clear. World Bank estimates that growth in people connected to internet leads to GDP growth.” [Source: https://www.bii.co.uk/en/news-insight/insight/articles/cdc-explains-what-size-of-investment-should-a-development-finance-institution-focus-on/ ] While for instance GB NEWS informs about: “Channel crossings: Over a THOUSAND illegal migrants attempting to reach Britain today” [ https://www.gbnews.uk/news/channel-crossings-over-a-thousand-illegal-migrants-attempting-to-reach-britain-today/430493 ]. So, we think there must be more SDGs in British FDIs.

 

How does BII evaluate the impact of its investments?

 

It must be updated ASAP, with social innovations and SDGs approach. Illegal immigration to the UK can be easily prevented in Africa.

SUMMARY

 

Social innovation projects like Floor4Africa.COM show that BII as well as British international investments can balance British taxpayer interest in the ROI and impact prism. Changing living and learning conditions in Africa can easily prevent further growth of illegal immigration to the UK.

 

London, 25 January 202