USA Africa Dialogue Series - British aid money flows into offshore fund

The Emerging Africa Infrastructure Fund (EAIF) has received funding from the British taxpayers' through a set of offshore companies. The British aid money is used to put together multi-million pound business deals in Africa.

A recent deal, signed last year, helped finance the purchase of 10 Boeing 787 Dreamliners – the world's most advanced passenger plane – by Ethiopian Airlines, owned by the Ethiopian government. The EAIF is managed by the Frontier Markets Fund Managers (FMFM), which receives about £4 million a year for its services from the money it receives from the Department for International Development (DfID) and other governments. But the company is registered in Mauritius, where foreign companies receive an 80 per cent discount on corporation tax, meaning any profits earned by companies linked to the fund pay tax at a rate of 3 per cent. This compares with a UK rate of 23 per cent.

A DfID spokesman said: "Providing commercial loans when other finance is simply not available helps African economies to flourish and end their reliance on development assistance. This is an excellent example of how investing in local companies and creating jobs can lay the foundations for future growth."

"International aid should be used to help the world's poorest, not invest in international airlines," said Matthew Sinclair, chief executive of the TaxPayers' Alliance.

John Hilary, executive director of the anti-poverty charity War on Want, said: "DfID is legally obliged to use the aid budget to combat poverty around the world. Instead, it is now channelling hundreds of millions of pounds of taxpayers' money to private investment funds run out of tax havens."