CDC's mission to support the building of businesses thoughout Africa and South Asia, to create jobs and make a lasting difference to people's lives in some of the world's poorest places. This means that our investments are made with two central objectives: to achieve development impact and financial returns.
Our methodology for directing capital to investment opportunities which best match this mission is described below.
A key outcome of the strategic work undertaken by CDC during 2012 was the decision to focus the impact we want to achieve on job creation, especially in places where the private sector is weak and jobs are scarce. We are still interested in achieving and measuring positive impact across a broad dimension, but the job creation focus is helpful in ensuring we direct capital thoughtfully and prioritise our limited resources behind a mission that inspires us and that we believe is genuinely impactful, both at a macro level, in stimulating the development of the private sector, and at the micro level, in the lasting difference it can make to people's lives.
We have created an ex ante tool that turns theory into practice and ensures we invest our capital towards our objective of creating jobs, especially in the more challenging places. This new methodology, designed with the help of our shareholder and academics and economists, is described in more detail here. It is embedded in our investment processes and we use it to assess every investment opportunity at Investment Committee for its potential to create the impact that we are seeking.
Throughout CDC’s history, we have consistently focused on generating a financial return as one of our two overriding objectives. This focus is important for a number of reasons.
- A rigorous commercial approach to investing designed to generate returns for CDC is an important gauge of our other objective, to contribute to long-term sustainable business growth and job creation. Studies from other investors with dual purpose missions such as the IFC demonstrate that there is a positive correlation between investments that generate good financial returns and those that create employment and broader development benefits.
- To be sustainable in the long term a business must be run profitably and responsibly. Profits enable companies to invest in training, research and development and expansion, as well as ensuring that they can withstand shocks. Our team uses its skills and commercial judgement to direct capital to those businesses and opportunities that it believes are managed with the same objectives – to achieve profit in a responsible manner.
- Financially sustainable businesses create jobs that can endure long after CDC has exited the investment.
- Investing with commercial rigour and generating good returns demonstrates to other potential investors that successful investing is possible in difficult geographies. Encouraging commercial and institutional investors to direct capital to opportunities in Africa and South Asia is vital if their economies are to achieve their potential.
- Investing profitably also enables CDC to be self-financing. When CDC’s investments and loans generate positive returns these are recycled back into future investments. This model means CDC has had no new capital from government since 1995, doesn’t cost the taxpayer a penny and can provide more capital over time and generate more impact from its own resources.
FIND OUT MORE
Click for CDC’s 2012 results press release.
Click to download CDC's 2012 Annual Review, including performance information (PDF).
A new framework for measuring actual long-term outcomes and judging CDC performance against these objectives is in development under the guidance of our new Director of Development Impact and is intended to be available on this page early in 2014.