Some thoughts on Penny Mordaunt's vision for UK Aid

 Juma Mohammed Duli, who has participated in beekeeping workshops organised by Traidcraft Exchange, pictured with his daughter in Tamtamsona, Tanzania. Credit: Traidcraft Exchange\Kate Holt

Juma Mohammed Duli, who has participated in beekeeping workshops organised by Traidcraft Exchange, pictured with his daughter in Tamtamsona, Tanzania. Credit: Traidcraft Exchange\Kate Holt

Earlier this week, Secretary of State for International Development Penny Mordaunt outlined her vision for UK Aid at the CDC Group. In this blog, we reflect on some of the points she makes in her speech.

Click here to read Penny Mordaunt’s full speech.

Traidcraft Exchange is dedicated to fighting poverty through trade and is committed to implementing trade programmes that directly benefit smaller-scale producers and businesses. It is for that reason that the overseas aid budget, with its focus on poverty reduction, is of paramount importance to us.

As the Secretary of State herself pointed out, efforts to meet the Sustainable Development Goals (SDGs) face a colossal financing gap of $2.5 trillion. However, now is not the time to redefine aid in a way that reduces the public contribution. Any funding for sustainable development which is generated through or profits from private investments sets the stage for full-scale privatisation of aid spending.

Although CDC investment already counts as aid, the notion that increasing economic activity will equate to development is a flawed one. There is no guarantee that the proposed new finance vehicles directly linked to the SDGs are poverty-focused and will reach the most vulnerable. There is also a danger that in seeking quick and high returns, such investment vehicles would instead exacerbate the extraction of value and resources from developing countries without creating the real conditions for broad and inclusive development, and would also lead to a push towards the privatisation of services in developing countries. The global challenges of poverty reduction and climate change are inextricably linked and greatly affect the poorest countries and communities, who rarely see the benefits of private investment and remain disconnected from global value chains.

Fair and ethical trade can transform people’s lives, but without the right policy framework and deliberate interventions, using UK Aid to boost private investment and trade could reinforce existing power imbalances in global trade and finance. For investment to really contribute towards the SDGs we know that national governments must be able to shape it to promote decent jobs and protect the environment. Furthermore, foreign investment is not the only way to plug the financing gap: DFID could support the growth of value-added industries which will contribute more directly to domestic resource mobilisation, and end tax evasion and other illicit outflows which sap domestic finances.

We hope to hear much more from DFID on this subject to understand how they will focus on making markets fair so that trade can work for everyone and ‘Leave No-one Behind’.

Carla Rivero is Traidcraft Exchange’s Senior Programme Funding & Partnerships Manager.

Nancy Demuth