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Oversight of the Private Infrastructure Development Group

Full report: Oversight of the Private Infrastructure Development Group

The Department for International Development is the main funder of the Private Infrastructure Development Group (PIDG), a multilateral organization that invests in infrastructure projects in developing countries. DFID has worked to improve PIDG’s governance and strategic thinking, but its oversight of PIDG has overall been insufficient to ensure value for money from its substantially increased funding.

Many PIDG projects look likely to achieve good development impacts and financial returns, often in difficult environments in Africa and south Asia. PIDG aims to operate where the private sector would not otherwise invest, to demonstrate the commercial viability of infrastructure projects that provide jobs or services for the poor such as steel foundries in Nigeria or hydropower plants in Uganda. DFID has increased its funding of PIDG and, by December 2013, its total funding of £414 million represented 70 per cent of all contributions to PIDG to date.

According to today’s report by the National Audit Office, DFID has been successful in encouraging PIDG to improve its targeting of investments and performance reporting. The Department has also increased its resources for overseeing PIDG and wields more influence than other donors.

However, the Department has not ensured sufficient monitoring and transparency of PIDG administrative costs, although recent developments should strengthen PIDG’s processes. Some PIDG board members made large expense claims: for instance, 15 flights were booked from 2011, each costing over £5,000. PIDG revised its travel policy in July 2014. PIDG has not regularly published or monitored its total administrative and operational costs, which the NAO estimates were around £23.8 million in 2012, representing 2.8 per cent of funds available to invest.

DFID paid some money into the PIDG Trust well before funds were paid out, because of over-optimistic expectations. Between January 2012 and February 2014, an average of nearly £27 million remained in the Trust, with a cost to the UK taxpayer of between £0.2 million and £2 million. DFID kept its holdings under review but was too optimistic about when funds could be used.

The NAO considers that DFID’s decisions to invest in PIDG have sometimes been based on insufficient analysis and scrutiny, and is concerned that DFID lacks sufficiently robust information to demonstrate that investment in PIDG is the best option.

Amongst the NAO’s recommendations are that the Department should improve how it critically reviews its funding of the activities of multilateral bodies such as PIDG, releasing funds only once there is a clear need for the money and the capacity to make good use of it.

“The Private Infrastructure Development Group is providing important benefits to poor people in difficult environments, but DFID does not have enough good evidence to show that funding PIDG is the best option. Furthermore, DFID’s financial control has been lacking, allowing the PIDG Trust to hold nearly £27 million worth of DFID funding since 2012. The Department has recently made good progress in tackling these issues which will put it in a better position to demonstrate value for money, but I consider that it should have taken more action earlier given its decision in 2011 to increase funding for PIDG five-fold.”

Amyas Morse, head of the National Audit Office, 4 July 2014

Notes for Editors

£700m

Maximum anticipated DFID funding of PIDG between 2012 and 2015

70%

DFID’s share of all donors’ funding to PIDG by the end of 2013

185m

Number of people PIDG estimates will benefit from better services because of its agreed projects

£6.2 billion

Reported by PIDG as the level of total investment in 35 PIDG-supported projects which are fully constructed and operational, including £220 million of donor funds

96 per cent

Of DFID country teams agreed that lack of adequate infrastructure was a major barrier to economic development

£27 million        

Average amount of DFID’s funding held unused in the PIDG Trust between January 2012 and February 2014

50 million

Number of people PIDG estimates will benefit from new services from its investment in one project alone

12

Deals agreed by PIDG in 2013, compared with a target set in 2012 of agreeing 20

£6.5 million

Amount paid by DFID to PIDG in December 2011, which was only paid out to the relevant PIDG facility in April 2014

11,500

Estimated number of jobs created partly because of PIDG’s investment in a Ugandan hydroelectric power plant

1. The Department for International Development identifies a need for substantial infrastructure investment in developing countries which cannot be met by public funding and aid alone. It therefore aims to increase private investment from both international and domestic investors. It describes the Private Infrastructure Development Group (PIDG) as the most important way of supporting this aim. PIDG is a multilateral organisation, founded by four donors including DFID in 2002, and governed by development agencies from eight countries and the World Bank.

2. In January 2014, DFID published a strategic framework called ‘Economic development for shared prosperity and poverty reduction’, which said that trade and investment contribute to economic development. This may help countries move from aid dependency, by raising productivity, creating jobs and boosting incomes. DFID plans to double spending on economic development to £1.8 billion by 2015-16.

3. Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained by using the relevant links on our website.

4. The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Amyas Morse, is an Officer of the House of Commons and leads the NAO, which employs some 820 staff. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of £1.1 billion in 2013.

 

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