Escaping the Funding Impasse

Notwithstanding ODA’s approval in March 1994 for CDC to extend its operations to the new South Africa, accompanied by strong encouragement to make an early impact, no additional funding was made available. Likewise, the department’s approval of the thrust of the strategy review was not accompanied by any positive resource message. Indeed the politics of the bilateral aid budget bore harshly on CDC in 1994. Its strong operating cash flow reinforced the official perception that CDC was rich and, moreover, that there were additional hidden riches to be prized out. ODA decided that it wanted a share of this cash flow for itself. In December CDC was informed that the ‘nil net funding’ regime would be transformed into one in which CDC would be required to make net contributions to the aid programme, starting in 1996/97, thus giving one year’s notice of its intentions.1 The news caused consternation and Leslie protested to the Minister in apocalyptic terms. It was not so much the amount of the prospective cut that hurt, as the utter absence of policy context and policy intention. A follow up meeting with Treasury officials early in 1995 confirmed that the block on market borrowing was still in place – indeed a new excuse had been devised. It was now argued that HMG’s own credit rating might be compromised by CDC raising funds on its own name and on less fine terms.2