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Cablegate: Usau -- Congressmen Meeks, Watt Hear African Union

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DE RUEHDS #0326/01 0481126
ZNR UUUUU ZZH
R 171126Z FEB 10
FM AMEMBASSY ADDIS ABABA
TO RUEHC/SECSTATE WASHDC 7800
INFO RUEHZO/AFRICAN UNION COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCNDT/USMISSION USUN NEW YORK 8071
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHBS/USEU BRUSSELS
RUEWMFD/HQ USAFRICOM STUTTGART GE

UNCLAS SECTION 01 OF 02 ADDIS ABABA 000326

SIPDIS

STATE FOR AF/FO, AF/RSA, AND AF/EPS

E.O. 12958: N/A
TAGS: ECON EFIN PREL AU
SUBJECT: USAU -- CONGRESSMEN MEEKS, WATT HEAR AFRICAN UNION
VIEW ON FINANCIAL CRISIS

This message is from USAU Ambassador Michael A. Battle.

1. Summary: In a meeting on February 17 at African Union (AU)
headquarters, U.S. Congressmen Gregory Meeks, D-New York, and
Melvin Watt, D-North Carolina, received a briefing about the
impact of the global financial and economic crisis on African
countries from AU Commission Deputy Chairperson Erastus
Mwencha and Commissioner for Economic Affairs Maxwell
Mkwezalamba. The AU outlined Africa's response to the
crisis: promote regional integration, enhance domestic
resource mobilization, accelerate the process of establishing
pan-African financial institutions, and actively participate
in the G-20 process. The financial crisis was one of several
"external shocks" to hit Africa, but AU officials expressed
optimism about the coming recovery. Both sides agreed that
inadequate infrastructure posed a significant barrier to
development in Africa, and that international financial
institutions required new mechanisms to fund infrastructure
projects. End Summary.

2. During their brief visit to Ethiopia, Congressmen Meeks
and Watt and several staff members of the House Committee on
Financial Services Committee met with AU officials to discuss
the global financial crisis and its impact on African
economies. USAU Ambassador Battle also was present. In his
opening remarks, Rep. Meeks explained to AU Commission
Chairperson Mwencha and Commissioner for Economic Affairs
Mkwezalamba that the focus of the House Committee on
Financial Services during the current five-nation African
tour is to look at the impact of the financial crisis on
African economies, as well as governance issues.

3. Deputy Chairperson Mwencha acknowledged that the financial
crisis that harmed developed economies was contagious and
spread to Africa. He said that the AU responded to the
crisis by becoming an active participant in the G-20 process,
using that forum to call upon developed countries and
international financial institutions to urgently implement
the recommendations and commitments made during the
Pittsburgh G-20 Summit.

4. Mkwezalamba added that the financial crisis has
preoccupied the AU since 2008 when the crisis spread to
Africa and began having a negative impact on a number of
micro- and macroeconomic variables. In November 2008, the
African Development Bank, the AU Commission, and the UN
Economic Commission for Africa organized a meeting in Tunis
of African finance ministers and central bank governors to
permit an exchange of information about the coming crisis.
Mkwezalamba said the real impact did not come until 2009 when
most African economies began experiencing a drop in tourism
receipts, remittances, and export revenues, as well as weaker
economic growth. Continent-wide economic growth that had
been projected at 2.4 percent in April/May 2009 had to be
revised later in 2009 to 1.7 percent, Mkwezalamba said.

5. AU heads of state meeting in early 2009 decided on an
appropriate response. One priority was to promote regional
integration (i.e. greater intraregional trade among African
economies) as a way to avoid the negative consequences of the
financial crisis. Another priority was to focus on enhancing
domestic resource mobilization. A third was to accelerate
the process of establishing the pan-African financial
institutions, such as the African Investment Bank, African
Central Bank, and African Monetary Fund. The AU heads of
state also agreed that the AU must actively participate in
G-20 fora. The AU did, in fact, participate in the G-20
deliberations in London in April 2009, in Pittsburgh in
September, and in St. Andrews, Scotland in November. A
committee comprised of African central bank governors and
finance ministers will prepare for the next G-20 forum in
Canada in June.

6. At the G-20 meetings, the AU has advocated that the World
Bank and the African Development Bank be given adequate
resources to support African countries. The AU called for a
General Capital Increase to be made available to Africa, and
it called for an early replenishment of the International
Development Association (the World Bank's soft-lending arm)
and African Development Fund (the African Development Bank's
soft-lending arm). AU heads of state reiterated this call at
the January/February 2010 AU Summit. In addition, the AU has
continued to push for reforms within the International
Financial Institutions (IFIs), including advocacy for a third

ADDIS ABAB 00000326 002 OF 002


seat for sub-Saharan Africa on the World Bank Board of
Governors. Africa also is seeking changes in the way Special
Drawing Rights (SDRs) are allocated by requesting that
developed countries' unused SDRs be made available to
developing countries.

7. Mkwezalamba appealed to the Congressional delegation that
the United States and the AU should help one another in
addressing the financial crisis. The AU, he added, is
seeking ways of how best to reposition the continent to
recover from the crisis as soon as possible. Mwencha
reminded the Congressional delegation that Africa has been
hit with a series of "external shocks" that have included an
acute food shortage and a sharp rise in energy prices.
"Beyond that," he continued, "We have a chronic phenomenon
rising from climate change" that affects one-quarter of the
continent's population.

8. Despite these challenges, Mwencha said he remains
optimistic that growth can be generated in Africa. Some
African economies are experiencing growth rates of 8 to 9
percent, he told the delegation. Countries that have relied
on primary produce exports and that suffered during the
financial crisis are now starting to recover, he noted.
Further regional integration will lessen the impact to
African economies, and one way to accomplish that is to
promote greater intraregional trade, he said. But Africa is
"not out of the woods," Mwencha said. He sees a lack of
commitment and U.S. protectionism threatened progress on WTO.
Mwencha also noted the decline in Official Development
Assistance (ODA) support to Africa.

9. In response to the AU officials, Congressman Meeks
acknowledged that many economic reforms were under way in
Africa before the onset of the financial crisis. He said the
U.S. was studying whether to recapitalize the IFIs.
Congressman Meeks agreed with the AU view that regional
development was critical and noted that inadequate
infrastructure was one of the barriers to regional
development. He said the U.S. could contribute expertise and
capital to bolster Africa's infrastructure. Mwencha replied
that Africa lacked the mechanisms that would facilitate
infrastructure funding on a regional scale. All agreed that
this needed further study.

10. Congressman Watt addressed Mwencha's concern about U.S.
domestic considerations having an impact on potential trade
with Africa. He characterized it as a temporary phenomenon.
During the financial crisis, politicians have tended to pay
more attention to problems such as creating employment
opportunities in their constituencies. The AU officials
nodded in agreement.

11. The Congressional delegation said they looked forward to
continuing their exchange with the AU Commission officials
when they are in Washington in April for the planned dialogue
between the USG and the AU.
YATES

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