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Letter to the Honorable Susan Whelan regarding the  Canadian Investment Fund for Africa

(en anglais seulement)

April 7th, 2003

The Honorable Susan Whelan
Minister for International Cooperation
200 Promenade du Portage Hull, Quebec K1A 0G4

Dear Minister Whelan,

We are writing to you today on behalf of the members of the Africa Canada Forum, a working group of more than 40 members of CCIC who work in Africa, to seek greater clarity on the $100 million Canadian Investment Fund for Africa.

The Africa Canada Forum met recently for two days to consider the implications of Canada’s new aid directions, and of the Canada Fund for Africa, for our work with African counterparts and colleagues. We were greatly assisted in these deliberations by CIDA officials who shared their views on program approaches, enhanced partnerships and the Canada Fund for Africa. We have, as well, benefited from informative meetings over the past few months with officials working with the Canada Fund for Africa and the Africa and Middle East Branch. Members of the Forum applaud CIDA for its renewed emphasis on aid effectiveness as well as the recently announced increases to Canadian aid, half of which is to be devoted to Africa. These are important policy initiatives that can address poverty, inequality and injustice in Africa and contribute to a new partnership with African governments and citizens. We also appreciate the increased attention to poverty as an overarching mandate as CIDA seeks new programming approaches and focus in its work with African partners.

It is in light of these new policies for improved aid effectiveness and CIDA’s overall commitment to poverty reduction and sustainable development that we wish to raise some concerns regarding the mandate and structuring of the Canadian Investment Fund for Africa. It is our understanding that the Canadian Investment Fund for Africa is to be financed with $100 million in Canadian aid resources, which will serve as risk capital to be matched by an equivalent or greater contribution from the private sector for infrastructure projects. The Canada Fund for Africa reflects the commitment of G8 leaders, at last year’s Kananaskis meeting, to an Action Plan which would "help ensure that no country genuinely committed to poverty reduction, good governance and economic reform will be denied the chance to achieve the Millennium Goals through lack of finance". There is little doubt that private investment, and particularly the development of small and medium sized enterprise in Africa by African entrepreneurs, has a role to play in achieving these Goals.

However, as the recently released draft CIDA policy, Expanding Opportunities: Framework for Private Sector Development, clearly sets out, a pro-poor lens is essential for assessing the strategies and contributions of private sector initiatives to development goals that benefit people living in poverty. Indeed, members have commented that it is essential that such strategies be consistent with our international human rights obligations and are informed by a rights-based approach.

It is our view that the Canadian Investment Fund for Africa must be managed in a manner that is consistent with overall Canadian policies that direct CIDA’s programming, and with basic OECD policies for identifying the allocation of donor resources for aid purposes. With respect to OECD aid policies, we understand that equity investment funds can qualify for ODA only if the donor demonstrates that the main reason for the investment is developmental rather than commercial. We have also been informed, by the OECD’s Principal Administrator of the Reporting Systems Division of the Development Cooperation Directorate, that all proceeds from the sale of such equity investments will count as negative flows against ODA when they are received. There have been a number of similar funds, for example the Swiss Development Finance Corporation, where the OECD has determined that they did not meet these basic criteria for ODA. Back to top

It is our perspective that it will be incumbent on CIDA and the Government to demonstrate specifically that the allocations from the Canadian Investment Fund for Africa will both meet these minimal OECD qualifications as ODA, and contribute to CIDA’s overarching goals for poverty reduction, sustainable development, and pro-poor private sector development. In establishing a private sector entity to manage the Canadian Investment Fund for Africa CCIC members are concerned that there will not be sufficient transparency and accountability for the investments made to determine these purposes. In this regard, we note the DAC peer review comment with respect to CIDA Inc. programming that "the minimal data provided to it was inadequate". It suggested that CIDA should "enhance transparency by providing more information".

Therefore, we are seeking the following clarifications on several outstanding issues with respect to the administration and allocation of capital in support of investments in Africa.

  1. What specific mechanisms will be in place to ensure public transparency and accountability with regard to the administration and allocation from the Canadian Investment Fund for Africa? Will the company managing the Canadian Investment Fund for Africa be required to submit to the public record details on all investments supported by the Fund?

  2. What expertise and due diligence is CIDA requiring of the manager of the Canadian Investment Fund for Africa to ensure social and environmental responsibility on the part of companies in which the Fund provides investment?

  3. How will CIDA ensure that the manager of the Canadian Investment Fund for Africa takes into account not only sound investment criteria, but also criteria relating to pro-poor lens in order to determine consistency with CIDA’s mandate to reduce poverty and demonstrate benefit to people living in poverty? 4) Finally, we encourage you to provide more information on the roles that African civil society, private sector and government officials might play in assuring that that investment proposals indeed represent the broad interests of African populations affected by these investments. We note that "local ownership" is a key principle of aid effectiveness and is one that must be rooted in participation by affected African populations. Africa Canada Forum members have long-standing relationships with African civil society organizations throughout Africa who can be called upon to monitor the implementation of NEPAD as well as the monitoring of investments from the Canadian Investment Fund for Africa to ensure its maximum impact for poverty reduction.

We understand that the bidding process to select the Canadian Investment Fund for Africa manager has not been concluded. But we believe that addressing these concerns will help formulate an approach to the Canadian Investment Fund for Africa that is consistent with the government’s intention to strengthen effectiveness, transparency, accountability and democratization in our relations with Africa. In thanking you in advance, we greatly appreciate your attention to this matter. Sincerely,

Gerry Barr President-CEO
Molly Kane Co-President, Africa Canada Forum
Denis Tougas, Co-President, Africa Canada Forum

cc. Honorable Minister Bill Graham
Mr Len Good President of CIDA
Mr Henri-Paul Normandin Director CFA

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