HC 822 Published on 8 January 2014

by authority of the House of Commons London: The Stationery Office Limited

House of Commons

International Development Committee

The Closure of DFID’s Bilateral Aid Programmes: the case of South Africa

Seventh Report of Session 2013–14

Volume I: Report, together with formal minutes and written evidence

Ordered by the House of Commons to be printed date 11 December 2013

£6.50

The Committee Name

The International Development Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Office of the Secretary of State for International Development

Current membership

Rt Hon Sir Malcolm Bruce MP (Liberal Democrat, Gordon) (Chair) Hugh Bayley MP (Labour, York Central) Fiona Bruce MP (Conservative, Congleton) Sir Tony Cunningham MP (Labour, Workington) Fabian Hamilton MP (Labour, Leeds North East) Pauline Latham OBE MP (Conservative, Mid Derbyshire) Jeremy Lefroy MP (Conservative, Stafford) Peter Luff MP (Conservative, Mid Worcestershire) Mr Michael McCann MP (Labour, East Kilbride, Strathaven and Lesmahagow) Fiona O’Donnell MP (Labour, East Lothian) Chris White MP (Conservative, Warwick and Leamington) The following member was also a member of the committee during the parliament: Mr Russell Brown MP (Labour, Dumfries, Galloway) Richard Burden MP (Labour, Birmingham, Northfield) Mr James Clappison MP (Conservative, Hertsmere) Mr Sam Gyimah MP (Conservative, East Surrey) Richard Harrington MP (Conservative, Watford) Alison McGovern MP (Labour, Wirral South) Ann McKechin MP (Labour, Glasgow North) Mark Pritchard MP (Conservative, The Wrekin) Anas Sarwar MP (Labour, Glasgow Central)

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Committee staff

The current staff of the Committee are Dr David Harrison (Clerk), Chloe Challender (Senior Adviser), Louise Whitley (Committee Specialist), Rob Page (Committee Specialist), Polly Meeks (Committee Specialist), Anita Fuki (Senior Committee Assistant), Paul Hampson (Committee Support Assistant) and Hannah Pearce (Media Officer).

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Contents

Report Page

The Closure of DFID’s Bilateral Aid Programmes: the case of South Africa 3

Conclusions and recommendations 7

Formal Minutes 8

Witnesses 9

List of printed written evidence 9

List of Reports from the Committee during the current Parliament 10

3

The Closure of DFID’s Bilateral Aid Programmes: the case of South Africa 1. In 2010 the Department for International Development (DFID) undertook reviews of both its support for multilateral organisations in its Multilateral Aid Review (the MAR) and of its bilateral aid programmes in a Bilateral Aid Review (the BAR). As a result of the BAR, DFID decided to close a number of country programmes following criteria set out in the review. Ministers decided that by 2016 DFID should close its bilateral programmes in: Angola, Bosnia, Burundi, Cameroon, Cambodia, China, the Gambia, Indonesia, Iraq, Kosovo, Lesotho, Moldova, Niger, Russia, Serbia and Vietnam.1 The Bilateral Aid Review results: country summaries, published in March 2011, set out the priorities and expected results for the countries where bilateral programmes were to continue.2

2. While we have questioned the criteria chosen and have been critical of the decision to close the programme in Burundi,3 in general we approve of the method of undertaking decisions about bilateral programmes following a systematic review.

3. About 18 months after the publication of the country summaries, in November 2012, the new Secretary of State, the Rt Hon Justine Greening announced that DFID would not ‘sign off any new programmes’ for India, and financial aid programmes to the country would end completely in 2015.4

4. Six months later, on 30 April 2013, the Secretary of State announced that Britain’s bilateral development programme in South Africa would also come to an end in 2015.5 This was a contentious decision, which was criticised by the South African Government.

5. In 2013 DFID undertook an update of the MAR, but not of the BAR.6 In our recent report on the MAR update, published in July 2013, we recommended that there should be periodic BARs as well as MARs, in particular that DFID ‘periodically review the scope of its bilateral aid, say every five years, and that decisions about whether to end bilateral aid to particular partner countries, or to open bilateral programmes with new partner countries, should generally be made as part of a bilateral aid review and not on an ad hoc basis between reviews’. 7

6. We had hoped to have an evidence session with the Secretary of State about the decision to close the programme in South Africa before the summer recess, but were unable to question her until her next appearance before the Committee in October.

1 DFID, BAR Technical Report, March 2011, p 6.

2 DFID, BAR: Country Summaries, March 2001

3 International Development Committee, Tenth Report of Session, 2010-12, The Closure of DFID’s Bilateral Aid Programme in Burundi, HC 1134

4 “India: Greening announces new development relationship”, DFID press release, 9 November, 2012

5 “UK to end direct financial support to South Africa”, DFID press release, 30 April 2013

6 DFID, MAR Update, December 2013

7 International Development Committee, Fourth Report of Session, 2013-14, Multilateral Aid Review, HC 349, para 48

4

7. There were criticisms of the decision to close the programme because of concerns about the impact of the decision on South African people, notably the loss of funding for civil society and for programmes to combat the high levels of sexual violence and HIV in the country.8 Although DFID is ending its bilateral programme in South Africa, it has decided to maintain a continuing development partnership with the country, for example in the provision of technical co-operation;9 DFID has also decided to keep its regional office for southern Africa, based in Pretoria.10

8. There was as much if not more criticism of the timing of the decision and the manner in which it was announced as of the decision itself. Speaking at Chatham House on 2 May, the Hon. Pravin Gordhan, Minister of Finance, South Africa, said that no agreement had been reached with the South African Government about the announcement and, moreover, it seemed ‘there was an intention to demonstrate some kind of fiscal probity using South African assistance as a political tool’.11

9. In this report we do not comment on the details of the decision to close the UK’s bilateral aid programme or the manner in which the decision was announced, but we do wish to draw attention to the Secretary of State’s responses to our concerns about the ad hoc manner in which decisions to end bilateral programmes to Middle Income Countries are taken.

10. The Secretary of State explained the rationale for closing the programmes in India and South Africa as follows:

The decisions that we take are not purely in relation to the fact that these are middle-income countries. The per capita income level is one of the considerations we might take into account. Broadly, we will look at growth prospects for that country; we will look at the current levels of extreme poverty, but also the trajectory of those levels and then understand, similarly, finally, what the country’s own capability is, as you were saying, for itself being able to invest in tackling extreme poverty domestically. … Our assessment was that, ultimately, if we are going to continue to have the biggest impact from development spending that we are making on behalf of the taxpayer, which is about reducing extreme poverty, we should target it on countries that have higher incidences, less capability and generally bleaker prospects for the poor.12

11. DFID’s largest bilateral aid programme is to be another Middle Income Country, Pakistan. We questioned the Secretary of State about the consistency of policy towards Middle Income Countries.13 She replied:

8 UK should revisit its decision on South Africa and its concept of aid, Guardian, 2 May 2013; and see QQ213-14

9 Q 215

10 Q 216

11 Chatham House, Meeting Summary: South Africa’s Growth and Development: Implications for Regional and International Engagement, with Hon. Pravin Gordhan, Minister of Finance, Republic of South Africa, 2 May 2013, pp 7-8.

12 Q218

13 Q219

5

Pakistan, if you look at growth, it is far more challenging for that economy. There is not that track record of growth that you have seen in India. If you look at the current capacity of Pakistan to lift people out of extreme poverty, it is probably at a lower level than you would see in India, for example. I have been very clear with this budget: ultimately we want to use it to tackle extreme poverty. Alongside that, we should also not lose sight of the clear national interest that we need to have. Part of that is stability in making sure that we stop countries from sliding into more instability.14

The Secretary of State’s emphasis on the importance of security issues and stability reflects the criteria set out in the BAR, which stated that the UK would ‘Focus our efforts on essential services and peace, security and stability in Afghanistan and Pakistan’.15 However, it is important to ensure clarity about these objectives in future. We recommend that, in any future BAR, DFID spending reflect what it is able to achieve in increasing security. Large sums should not be spent just in the hope of increasing security and stability, but be based on what it is possible to deliver.

12. There is a rationale for funding bilateral programmes in some Middle Income Countries while ending them in others. However, we have concerns about the timing of the decisions and, in particular, that they are neither methodical nor transparent, but related to short term political pressures.16 In response to this line of questioning, the Secretary of State told us:

The Bilateral Aid Review was a very robust approach, where we used a common approach for looking across the piece at what our bilateral aid programmes should be. We ended up reducing from 43 countries, when we came into Government in 2010, to originally 27 and then, when South Sudan broke from Sudan, to 28. People expect us, in a developing world, to continue to make sure we target the countries where we feel we can make the most difference. As I have said, the way that we approach that is to look at prospects for growth, levels of extreme poverty—it is worth pointing out that the incidence of extreme poverty in Vietnam is higher than that in South Africa— and their trajectory, and, critically, the capacity of the country itself to be able to lift its own people out of extreme poverty. Indeed, finally, it is whether we have the capability and the comparative advantage to be able to have a sensible relationship with that country. I think we do have a robust process. My sense is that, actually, the decisions we are taking that come out of that systematic look—whether on the Multilateral Aid Review or the Bilateral Aid Review—broadly are sensible ones….and reflect the progress that countries are making.17

We do not dispute that the BAR was a robust process, but the Secretary of State has not convinced us that the announcements to end bilateral programmes in India and South Africa were in accordance with the principles and process established by the BAR. They were made just 18 months and two years respectively after the publication of the BAR

14 Ibid.

15 DFID, BAR Technical Report, March 2011, p 13.

16 Q221

17 Ibid.

6

country summaries and appear ad hoc. We reiterate our recent recommendation: decisions to end a bilateral programme or to start a new one should be made only following a Bilateral Aid Review, except in exceptional cases such as South Sudan where an existing recipient country became two states after a referendum on independence for South Sudan.

7

Conclusions and recommendations

1. However, it is important to ensure clarity about these objectives in future. We recommend that, in any future BAR, DFID spending reflect what it is able to achieve in increasing security. Large sums should not be spent just in the hope of increasing security and stability, but be based on what it is possible to deliver. (Paragraph 11)

2. We do not dispute that the BAR was a robust process, but the Secretary of State has not convinced us that the announcements to end bilateral programmes in India and South Africa were in accordance with the principles and process established by the BAR. They were made just 18 months and two years respectively after the publication of the BAR country summaries and appear ad hoc. We reiterate our recent recommendation: decisions to end a bilateral programme or to start a new one should be made only following a Bilateral Aid Review, except in exceptional cases such as South Sudan where an existing recipient country became two states after a referendum on independence for South Sudan. (Paragraph 12)

8

Formal Minutes

Wednesday 11 December 2013

Members present:

Rt Hon Sir Malcolm Bruce, in the Chair

Fiona Bruce Jeremy Lefroy

Mr Michael McCann Fiona O’Donnell

Draft Report (The Closure of DFID’s Bilateral Aid Programmes – the case of South Africa), proposed by the Chair, brought up and read.

Ordered, That the draft Report be read a second time, paragraph by paragraph.

Paragraphs 1 to 12 read and agreed to.

Resolved, That the Report be the Seventh Report of the Committee to the House.

Ordered, That the Chair make the Report to the House.

Ordered, That embargoed copies of the Report be made available, in accordance with the provisions of Standing Order No. 134.

Written evidence was ordered to be reported to the House for printing with the Report (in addition to that ordered to be reported for publishing on 22 October 2013.

[Adjourned till Tuesday 17 December at 9.30 am

9

Witnesses

Wednesday 9 October 2013 Page

Rt Hon Justine Greening MP, Secretary of State for International Development, Susanna Moorehead, Director, West and Southern Africa, and Professor Stefan Dercon, Chief Economist, Department for International Development

http://www.parliament.uk/documents/commons-committees/international-development/CORRECTEDTRANSCRIPTIDC091013.pdf

List of printed written evidence

1 Department for International Development Ev 1

10

List of Reports from the Committee during the current Parliament

The reference number of the Government’s response to each Report is printed in brackets after the HC ( printing number.

Session 2013–14

First Report Global Food Security HC 176 (626)

Second Report Violence Against Women and Girls HC 107 (624)

Third Report Scrutiny of Arms Exports and Arms Control (2013): Scrutiny of the Government’s UK Strategic Export Controls Annual Report 2011 published in July 2012, the Government’s Quarterly Reports from October 2011 to September 2012, and the government’s policies on arms exports and international arms control issues

HC 205 (CM 8707)

Fourth Report Multilateral Aid Review HC 349 (694)

Fifth Report ICAI’s Annual Report 2012-13 HC 566 (946)

Sixth Report Implications for development in the event of Scotland becoming an independent country

HC 692

Session 2012–13

First Report DFID’s contribution to the Global Fund to Fight AIDS, Tuberculosis and Malaria

HC 126 (609)

Second Report Scrutiny of Arms Exports (2012): UK Strategic Export Controls Annual Report 2010, Quarterly Reports for July to December 2010 and January to September 2011, The Government’s Review of arms exports to the Middle East and North Africa, and wider arms control issues

HC 419 (CM 8441)

Third Report The Development Situation in Malawi HC 118 (641)

Fourth Report Tax in Developing Countries: Increasing Resources for Development

HC 130 (708)

Fifth Report DFID’s programme in Zambia HC 119 (759)

Sixth Report Afghanistan: Development progress and prospects after 2014

HC 403 (862)

Seventh Report UK Aid to Rwanda HC 726 (949)

Eighth Report Post-2015 Development Goals HC 657 (1065)

Ninth Report Department for International Development’s Annual Report and Accounts 2011–12

HC 751(1098)

Tenth Report Pakistan HC 725

11

Session 2010–12

First Report Appointment of the Chief Commissioner of the Independent Commission for Aid Impact

HC 551

Second Report The 2010 Millennium Development Goals Review Summit

HC 534 (HC 959)

Third Report Department For International Development Annual Report & Resource Accounts 2009–10

HC 605 (1043)

Fourth Report The World Bank HC 999 (1044)

Fifth Report The Future of CDC HC 607 (1045)

Sixth Report Scrutiny of Arms Export Controls (2011): UK Strategic Export Controls Annual Report 2009, Quarterly Reports for 2010, licensing policy and review of export control legislation

HC 686 (CM 8079)

Seventh Report The Humanitarian Response to the Pakistan Floods HC 615 (1435)

Eighth Report The Future of DFID's Programme in India HC 616 (1486)

Ninth Report

DFID's Role in Building Infrastructure in Developing Countries

HC 848 (1721)

Tenth Report The Closure of DFID’s Bilateral Aid Programme in Burundi

HC 1134 (1730)

Eleventh Report Financial Crime and Development HC 847 (1859)

Twelfth Report Working Effectively in Fragile and Conflict–Affected States: DRC and Rwanda

HC 1133 (1872)

Thirteenth Report Private Foundations HC1557 (1916)

Fourteenth Report Department for International Development Annual Report and Resource Accounts 2010–11 and Business Plan 2011–15

HC 1569 (107)

Fifteenth Report South Sudan: Prospects for Peace and Development HC 1570 (426)

Sixteenth Report EU Development Assistance HC 1680 (427)

International Development Committee: Evidence Ev 1

Written evidence

Written evidence submitted by the Department for International Development

Introduction: DFID’s Footprint in South Africa and the Region

1. DFID has had a bilateral programme in South Africa since 1993. In the current Spending Round this isworth £19 million a year. The volume of bilateral aid has reduced from a peak of over £40 million in 2003.Since 2010, UK bilateral aid to South Africa has helped reduce mother to child transmission of HIV fromabout 12% to under 3% and increase average life expectancy by six years; helped put in place a new healthcare system to reverse the current huge inequalities in health; and helped to establish a programme which nowprovides over 100,000 part-time work opportunities for poor people throughout South Africa.

2. The DFID Southern Africa (DFIDSA) office in Pretoria also manages regional programmes worth a totalof £58.8 million in this financial year. These cover regional trade integration and economic growth; regionalclimate change adaptation; and regional health issues. They are primarily implemented through RegionalEconomic Communities, and address issues which DFID judges can be tackled more effectively at a regionalthan a country level. The “region” varies by issue: at its widest (on regional trade) it covers 26 countries acrossAfrica. Though not all regional spend can be fully disaggregated by beneficiary country, DFID assesses that inthe current financial year a total of £1.7 million from the regional programme benefits South Africa directly.

3. A number of other DFID funding channels benefit South Africa, including central funding to civil societyorganisations working in South Africa, and support for competitively-tendered research proposals which includeSouth African institutions. The expected total of this other DFID spend benefiting South Africa in the currentfinancial year is £2.9 million. A share of DFID core contributions to those multilateral agencies which workin South Africa (including the UN, EU and Global Fund) will also benefit the country, though we do not holdinformation on the value of that share in this financial year.

4. From 2011, DFIDSA has also managed a Global Development Partnerships Programme (GDPP) withSouth Africa. This is not for domestic benefit within South Africa, but enables the UK and South Africa towork jointly for development results in third countries and to cooperate on global policy issues. It recognisesSouth Africa’s role as an emerging development partner in its own right, and as a member of the G20 andBRICS. It includes joint work with South Africa on customs reform in Kenya, Malawi and South Sudan; onaccess to affordable medicines in Zambia and Mozambique; and sharing DFID experience and expertise withthe new South African Development Partnerships Agency. In the current financial year GDPP spend with SouthAfrican partners is expected to total around £4 million.

Decisions between 2010 and 2013 about Bilateral Aid to South Africa

5. As part of the Bilateral Aid Review carried out for the 2010 Spending Review, DFID refreshed its analysisof the need for an aid programme in South Africa. This assessed that South Africa’s trajectory since 1994 hadbeen positive, with stable institutions, steady growth, and improvements to the lives of the poor. However therewas still a role for a bilateral programme in helping translate South African public expenditure into effectiveservices and results. The bilateral programme budget was held at a constant level—a real terms reduction—with the recognition that DFID’s role in South Africa would increasingly be to tackle regional and global issuesalongside South African partners. Ministers agreed that further consideration should be given to a transitionfrom bilateral aid towards the end of the Spending Round, and that the programme would set a path towardssuch a transition.

6. In 2012 DFID conducted a further review of the evidence for a continued bilateral programme in SouthAfrica, drawing on analysis of DFID’s future role and presence in middle income countries. It noted that interms of future growth prospects, South African gross national income per head ($6,090) was higher than China($4,270) or India ($1,330), and the Standard & Poors’ sovereign debt rating for South Africa (BBB+) wasequal to that of Spain or Italy. While, on South Africa’s institutional capacity to address poverty, according tothe Fund For Peace’s “Failed State Index”, South Africa scored better than China, India or any other DFID-funded country in Africa.

7. DFID recognised that, like many other middle income countries, South Africa’s own impact ondevelopment in Africa and on the global economy is increasing, through finance, trade and aid to poorercountries. In 2011 it joined the “BRICS” group alongside Brazil, Russia, India and China. It is also the onlyAfrican member of the G20. It is in the process of establishing its own development agency to providecooperation and assistance to its African neighbours. In June 2012 it made available a $2 billion credit to theIMF to tackle financial uncertainty in Europe. Over the past decade UK-South Africa trade has grown by 58%;total overall trade between the UK and South Africa is worth £10.5 billion. Other bilateral and multilateralagencies in South Africa are also evolving their support, providing a wide range of new types of investmentfor development. For example, the World Bank is exploring innovative ways of providing knowledge andexpertise in South Africa, rather than large-scale funding; others such as USAID are exploring trilateralcooperation arrangements with South Africa in third countries.

8. DFID assessed that while challenges remain in South Africa, there was less justification for a continuedUK bilateral aid programme in South Africa as the primary means to address these issues. Other mechanisms,

Ev 2 International Development Committee: Evidence

including partnerships with the FCO and other UK departments, the provision of small amounts of targetedtechnical assistance, and continuing to work for an effective response from multilateral agencies, would offermore appropriate ways to engage in future.

9. DFID therefore concluded that the current programme of direct financial support to South Africa shouldend once existing commitments were concluded in 2015, but that the UK should retain the ability to providetechnical assistance for poverty reduction within South Africa being undertaken by the South AfricanGovernment. This would enable the UK to provide expert advice on a range of technical development issueswhere this could best support delivery of South Africa’s National Development Plan. DFID would continue tomanage its regional programme from the office in Pretoria, and should continue to work with South Africa fordevelopment results elsewhere on the continent and on global policy issues.

Discussions with Partners in South Africa and Whitehall

10. Alongside routine meetings, Ministers and officials from DFID discussed our intention to end the UK’sbilateral aid programme from 2015 with the South African National Treasury, Department of InternationalRelations and Cooperation, and Presidency. In parallel DFID conducted a process of consultation andinformation sharing across Whitehall departments.

11. The biannual South Africa—UK Bilateral Policy Forum has now been scheduled for September 2013,and will be an opportunity for the South African and UK governments to set out a joint process to formalisemore detailed plans for the future aid relationship.

5 September 2013

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