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The UK government is set to double its economic investment in a number of developing countries, including Kenya and Tanzania, in a key policy shift in its £9 billion ($14.8 billion) aid policy.
The move announced by Britain’s Secretary of State for International Development Justine Greening in London is aimed at ending emerging economies’ dependence on aid and marks a shift from traditional priorities such as fighting disease and hunger.
The shift comes as other countries, such as Japan and the US rush to link more the aid they provide to poor countries with business opportunities.
A key aspect of the new UK policy is the appointment of Novastar, a venture capital fund based in East Africa, who will be the first beneficiary of a CDC-managed fund that will provide capital to promising businesses across the region, which benefit the community.
The fund will invest up to £9 million ($14.8 million) in Novastar to allow it to support more businesses and in East Africa which provide low-cost education, health care, energy, housing and safe water.
The Department for International Development (DfID) has already signed its first memorandum of co-operation with the London Stock Exchange Group to support emerging capital markets in Africa. This will allow the LSEG Academy to expand its training in Tanzania and, in time, across East Africa.
The UK government will also sign new partnerships with leading British and international companies to improve business conditions in Africa and South Asia, kick-start capital markets and drive more investment into frontier economies.
In a keynote speech at the London Stock Exchange, Ms Greening set out the DfID’s new approach to supporting growth and creating jobs in developing countries.
“Economic development is, without question, the only way countries can leave behind chronic poverty for good,” Ms Greening said.
“I have restructured my department to focus on jobs and growth and can now commit to more than double the amount we will invest in this crucial area.”
In May, the International Monetary Fund will hold its first pan-African economic conference in five years to discuss the economic boom on the continent.
Ms Greening said the shift towards economic development was a “radical” departure in the way that the UK has spent its aid budget. “It’s a pragmatic shift to be managed carefully but it’s arguably revolutionary,” she said.
The initiative is controversial amongst some aid agencies, as some fear that it will reduce funding available for more traditional areas.
– The East African