AN anti-poverty fund backed by Douglas Alexander, the international development secretary, is a key investor in a firm accused of plundering the pensions of thousands of African workers.

It is one of the biggest stakeholders in Alexander Forbes, a South African pensions firm which is in court this week over its alleged theft of some of the pensions of car workers and other factory workers.

Some of the alleged victims have died without getting redress, and there is growing anger in South Africa that the firm is refusing to pay back tens of millions of pounds that was allegedly pilfered in the 1990s. Two representatives of Actis, a private equity fund backed by the Department for International Development (DFID) sit on the company’s board. DFID uses Actis to try to alleviate poverty in the developing world through investments in what it describes as ethically sound companies. Experts are baffled that it was allowed to lead a takeover of a firm allegedly involved in one of South Africa’s biggest white-collar crimes.

“Alexander Forbes has behaved appallingly over the years and has contributed to the impoverishment of pensioners,” said Bruce Cameron, editor of Personal Finance, a national publication in South Africa, which has covered the scandal. “I don’t understand why [Actis] invested in a company that exploits pensioners and resists every attempt to rectify the situation.”

The case raises questions about DFID’s vetting procedure for its investments. Another recent Actis investment is a cosmetic company that markets skin-whitening products.

Actis, which manages funds for DFID’s investment body, CDC, was part-privatised in 2004 and was given a govern-ment-owned portfolio of more than £1 billion to manage and invest. CDC’s goal is to generate wealth in developing countries by shrewd investments. Actis has seen the value of its funds soar and The Sunday Times revealed last week how in just one year it gave £65m in bonuses to its staff. Paul Fletcher, the most senior partner, picked up £1m. Average pay for employees was on a par with those at Goldman Sachs.

In 2006, Actis led a £700m buy-out of Alexander Forbes, which had already been involved in one scandal in which it had “bulked” together separate pension funds and skimmed off the higher rate of interest payments. It has since paid about £40m in compensation.

Alexander Forbes also faces criminal charges and civil action over the alleged scheme to siphon off the surpluses from workers’ pension funds.

Along with other codefendants, it is charged with fraud in a 207-page criminal indictment lodged in the High Court in Johannesburg. There is a hearing in the case tomorrow. It also faces a civil action of £80m, but is fighting the claim.

“Alexander Forbes has broken every fiduciary rule in the book, but are employing all kinds of tactics to avoid paying this money back to the pensioners,” said one source acquainted with the civil case. “It’s unconscionable.”

Bruce Campbell, executive chairman of Alexander Forbes, appointed after the firm’s alleged involvement in the scheme, insisted the company had not profited from it, but said it was keen to settle the case.

He said it was resisting compensation claims for £80m from the pensioners. “It’s difficult to arrive at a figure that would be appropriate,” he said.

A spokesman for Actis said: “Actis does not shy away from companies that have problems where we can be an agent for positive change.” It described Alexander Forbes as a company “working hard to improve its business practices, governance and transparency”.

Another Actis investment was in the cosmetics company Unza in southeast Asia. About 20% of the company’s products were in the skin-whitening range, criticised by some Asian women’s groups for “denigrating” dark skin.

CDC managers concede they cannot rigorously check the ethical practices of all companies they invest in because of their use of private equity funds.

A DFID spokeswoman said Actis followed a strict code of practice when investing taxpayers’ funds. “The investment code requires that investments are environmentally, socially and ethically sound,” she said.

Additional reporting: Georgia Warren

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