The UK government is set to double its
economic investment in some developing countries, including Kenya and
Tanzania, in a key policy shift in its £9 billion (about Sh1.3 trillion)
aid.
The move announced by Britain’s secretary of
state for international development Justine Greening in London this week
is aimed at ending emerging economies’ dependence on aid and marks a
change from traditional priorities, fighting hunger and disease.
The
British plan comes as other countries, Japan and US, rush to link the
aid they provide to poor countries with business opportunities.
A
key aspect of the UK policy is the appointment of Novastar, a venture
capital fund based in East Africa. It will be the first beneficiary of a
CDC-run fund that will provide capital to businesses in the region.
The
fund will invest up to £9 million in Novastar to allow it to support
businesses which provide low-cost schooling, healthcare, energy, housing
and safe water in East Africa.
The Department for
International Development (DFID) has already signed its first memorandum
of cooperation with the London Stock Exchange Group (LSEG) to support
emerging capital markets in Africa.
This will allow the LSEG Academy expand its training in Tanzania and, in time, across East Africa.
IMPROVE BUSINESS CLIMATE
The
UK government will also agree on a series of new deals with leading
British and global firms to improve business climate in Africa and South
Asia, kick-start embryonic capital markets and drive more investment
into frontier economies.
In a keynote speech at the
London bourse, Ms Greening set out the DIFD’s new approach to supporting
growth and creating jobs in developing countries.
“Economic
development is, without question, the only way countries can leave
behind enduring and chronic poverty for good,” Ms Greening said.
“I’ve
restructured my department to focus on jobs and growth and commit to
more than double the amount we will invest in this crucial area.
“Working with world-class businesses ensures frontier developing economies get the best support, advice and expertise they need to grow and Britain is well placed to benefit from this growth.”
“Working with world-class businesses ensures frontier developing economies get the best support, advice and expertise they need to grow and Britain is well placed to benefit from this growth.”
In May the
International Monetary Fund will hold its first pan-African economic
conference in five years to discuss business in Africa.
Ms Greening said the shift towards economic development was a “radical” departure in the way the UK has spent its aid budget.
MARKET TRAINING
The initiative is controversial amongst some aid agencies, as some fear that it will reduce the funding available for more traditional areas.
The initiative is controversial amongst some aid agencies, as some fear that it will reduce the funding available for more traditional areas.
Ms
Greening also met the first delegation of East African businessmen,
civil servants and regulators to be trained in managing capital markets
through the DFID-backed London Stock Exchange Group Academy.
In
2015/16, DFID will plan to target £1.8 billion of its budget on
economic development, more than doubling the amount spent in 2012/13.
DFID’s
policy will also involve a partnership with 12, UK high-street names to
improve working conditions and job opportunities for over 700,000
workers and smallholder farmers in Kenya, South Africa and Bangladesh.
This
will include working with Sainsbury’s to help workers gain
qualifications as well as Marks and Spencer to develop leadership and
management skills for farm workers.
A DFID statement
also noted that a lack of adequate and affordable insurance prevents
promising business investment in fragile states.
A £20
million investment in the Multilateral Investment Guarantee Agency will
enable it to support up to £270 million of new private investment in
fragile countries.
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