VZCZCXRO1985
PP RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
DE RUEHDK #0239/01 0561302
ZNR UUUUU ZZH
P 251302Z FEB 09
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 1929
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/USDOC WASHDC
RHEHNSC/NSC WASHDC
RUEHLMC/MCC WASHDC
RUEHZO/AFRICAN UNION COLLECTIVE

UNCLAS SECTION 01 OF 03 DAKAR 000239 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR EB/IFD/ODF, EB/ESC/IEC, AF/EPS AND AF/W 
TREASURY FOR AFRICA DESK 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ECON BTIO SG
SUBJECT:  U.S. INVESTMENT FUNDS LOOK FOR OPPORTUNITY IN WEST AFRICA 
 
DAKAR 00000239  001.2 OF 003 
 
 
¶1.  (SBU) Summary:  Senegal's President and U.S. private fund 
managers organized a conference in Dakar with U.S. and regional 
participants on pension fund management and investment promotion 
February 9-11.  While one of the themes, providing access to 
WAEMU-region pension funds for international investors was a 
non-starter, the conference was a successful venue for the exchange 
of ideas between U.S. and African public pension managers.  It also 
provided an excellent introduction to Africa for a large number of 
U.S. private fund companies.  Ambassador Bernicat underscored the 
need for improved fiscal management in Africa as a prerequisite for 
attracting new foreign investment.  President Wade sarcastically 
"took note."  End summary. 
 
ATTRACTED BY PENSION MONEY, BUT THERE'S A DISCONNECT 
--------------------------------------------- ------- 
¶2.  (U) More than 30 U.S. investment managers descended on Dakar 
February 9-11 to participate in a regional conference on pension 
fund management and investment opportunities.  Titled, "Destination 
Africa: The New Capital and Investment Frontier," the conference was 
organized by Chicago-based M.R. Beal and Co., New York- and 
Dakar-based Peacock Investments, and the Government of Senegal 
(which, in its own promotional brochure titled the event "The 1st 
International Conference on Investment and New Technologies for 
Managing Pension Funds in Africa"). 
 
¶3.  (SBU) According to M.R. Beal officials, the genesis of this 
event was a discussion they had with President Wade more than a year 
ago, in which Wade claimed that public pension fund regulations had 
been changed in Senegal, and by extension, the entire West African 
Economic and Monetary Union (WAEMU)/Franc CFA Zone to allow those 
funds to be managed and invested outside of the zone.  Conference 
organizers claim that within West Africa there is an estimated USD 
100 billion in such pension money being held in local banks, 
including an estimated USD 1 billion by Senegal's public pension 
fund for private employees, IPRES. 
 
¶4.  (U) Many of the U.S. fund managers and consultants were 
motivated to attend the conference based on the possibility of 
pitching their services to authorities from Senegal and other West 
African countries in the hopes of tapping into these "undiscovered" 
assets. 
However, during the course of the conference it was established that 
the WAEMU laws, which also govern Senegal's public pension funds, 
have not been revised and in fact remain very strict on requiring 
these accounts to remain in commercial banks or other restrictive 
investments within the Franc CFA zone.  In private conversations 
with U.S. participants, there was some disappointment expressed when 
the U.S. firms realized that African pension holdings, at least in 
the WAEMU region, were not free to move outside the continent. 
President Wade, in his keynote address to the conference's opening 
ceremonies and in press interviews, discussed how reforming pension 
law was something he was pursuing. 
EXCHANGING IDEAS ON MANAGING PENSIONS 
------------------------------------- 
¶5.  (U) One valuable aspect of this conference was the opportunity 
for African pension managers to meet with experienced money managers 
and investment officers from the U.S.  These U.S.-based experts 
included Joseph Haslip, Assistant Comptroller for Pensions for the 
City of New York; Dr. Louis Moret, Board Member, California Public 
Employees' Retirement System, and Darryle West, Chairman of Chicago 
Transit Authority's Investment Committee.  Public pension fund 
managers from a number of African countries participated:  Senegal, 
Benin, Burkina Faso, Cameroon, Cape Verde, CAR, DRC, Cote d'Ivoire, 
Gabon, the Gambia, Ghana, Liberia, Madagascar, Mali, Niger, Nigeria, 
Republic of Congo, Sierra Leone, and Togo. 
 
¶6.  (U) The feedback from these sessions was very positive.  From 
the U.S. side, there was some surprise at the size of some 
countries' pension funds; from the African side, there was much 
discussion on how the U.S. funds diversify their investment 
portfolios and spread risk. 
INITIAL STEPS FOR POSSIBLE INVESTMENTS 
-------------------------------------- 
¶7.  (U) The other important dynamic of the conference was the 
networking that took place between the American private fund 
managers and African investment promotion agencies, African fund 
managers and promoters, and local business leaders.  It became 
apparent early on that attracting potential U.S. investors to Dakar 
was the GOS's primary goal for this conference.  In particular, the 
government is hoping that some private firms will be interested in 
participating in Senegal's ambitious infrastructure development 
goals.  Participants also benefited from access to OPIC and U.S. 
Treasury officials throughout the conference. 
 
 
DAKAR 00000239  002.2 OF 003 
 
 
¶8.  (U) Treasury's presentation at the conference focused on the 
potential for mobilizing Africa's pension funds to finance 
investment in the region's infrastructure, noting necessary legal 
and regulatory reforms and highlighting Treasury's capacity to 
provide some of the relevant technical assistance. 
 
¶9.  (U) The OPIC official observed that the need for private FDI in 
Senegal and neighboring companies definitely emerged as the focal 
point of the conference.  This occurred despite the reality that 
most of the program was geared toward exploring the potential for 
U.S. fund managers to offer expertise and services to West African 
pension funds.  OPIC's participation in the event reinforced its 
visibility in West Africa and Senegal and several projects were 
identified that OPIC could potentially support.  Although OPIC has 
not financed any projects in Senegal, many of the West African 
conference attendees have had discussions over the past couple of 
years with OPIC on specific financing opportunities, particularly 
projects in the housing sector.  In addition, OPIC is mobilizing up 
to $2.3 billion in capital for Africa through 11 OPIC-sponsored 
private equity funds that were approved by OPIC's Board in 2007 and 
¶2008. 
 
¶10.  (SBU) During the conference, officials from several countries' 
respective housing agencies expressed interest in following up with 
OPIC regarding mortgage finance projects in their home countries.  A 
few U.S. asset managers expressed 
interest in specific direct investment projects in Africa apart from 
their fund management businesses.  In addition, several of the 
attending African investors have projects that warrant OPIC's 
follow-up, including: SAGEF Building System's housing projects in 
Senegal, a start-up movie theater chain in Dakar, and a Cape Verdean 
ferry transport project.  According to the OPIC official, of the six 
to eight projects brought to his attention, about half are in the 
process of seeking U.S. equity capital or partners that would make 
the projects eligible for an OPIC loan.  The others already have 
sufficient U.S. investor involvement to meet OPIC eligibility 
requirements. 
 
¶11.  (SBU) For many, but not all, of the U.S. fund managers, this 
was their first exposure to Africa and the continent's business and 
investment opportunities and realities.  Because the majority of the 
U.S. private sector participants represented African-American-owned 
firms, the organizers also played up the possibilities of new 
linkages between Africa and its Diaspora in the U.S.  By the end of 
the three days, our impression of the prevailing attitude from the 
U.S. side was that significant interest was generated, but the 
financial managers recognized that this visit represented a very 
preliminary step in what would be long-term efforts to gather 
information and analyze risk before any money under their management 
would come to Senegal or the other countries represented.  There was 
greater interest expressed in the possibility of investing in one or 
more of the growing number of Africa-focused venture funds. 
AMBASSADOR SHINES SOME LIGHT ON INVESTMENT CLIMATE 
--------------------------------------------- ----- 
¶12.  (U) During her remarks at the opening of the conference, 
Ambassador Bernicat thanked the U.S. participants for their 
heightened interest in Africa and noted that the continent's 
development needs will only be met with the infusion of large 
amounts of private capital.  The Ambassador also provided a 
much-needed "reality check" on potential problems for investors in 
Africa.  In particular, the Ambassador underscored the need for 
reform of public finance management, including greater transparency 
and accountability and fair and equal application of national laws 
impacting the private sector and foreign investors.  The Ambassador 
highlighted some well known specific reforms that are needed in 
Senegal as well as other countries: 
-- the judiciary should be well structured and well-trained to 
handle commercial disputes in a fair and balanced manner; 
 
-- labor laws need to protect workers while also ensuring that labor 
costs are competitive, that employer rights to dismiss 
underperforming or misbehaving employees are recognized, and that 
legal and bureaucratic requirements enhance, not slow, productivity; 
 
 
-- countries should have an office of the inspector general that is 
truly independent of the executive and fully operational to provide 
genuine oversight of government operations; and 
 
-- anti-corruption entities should be totally independent of the 
executive and legislative branches and have the authority to 
investigate and present cases for prosecution. 
 
¶13.  (SBU) The Ambassador also promoted the important role the 
 
DAKAR 00000239  003.2 OF 003 
 
 
private sector needs to play, especially foreign investors and 
partners, in promoting reforms that encourage good governance, 
transparency, accountability, and other strong anti-corruption 
measures.  Press reports noted that after the Ambassador's remarks, 
President Wade made an off-hand comment to the gathering, which 
translates as: "When she was speaking, I couldn't tell if she was 
offering recommendations or giving orders, but I have taken note." 
Largely due to Wade's apparent sarcastic remark, the Ambassador 
received a number of requests for the text of her remarks. 
 
COMMENT 
------- 
¶14.  (SBU) President Wade may have been upset that the Ambassador 
did not play the role of an overly-enthusiastic support of Senegal 
as an investment destination (though the organizers certainly did). 
However, the U.S. business people deserved to hear a clear-headed 
assessment of the potential difficulties they could face in Senegal. 
 The fact that Wade was playing fast and loose with the truth about 
local pension fund laws underscores the need for this kind of 
honesty. 
 
¶15.  (U) While President Wade clearly wants to have some leeway for 
more creative investment options for Senegal's public pension funds, 
this is unlikely to happen anytime soon since such changes would 
first require that less restrictive regulations be promulgated by 
the WAEMU Central Bank.  Such reform would also require significant 
technical assistance and training for the country's pension fund 
managers and enhanced laws on transparency and accountability for 
handling those funds.  Still, this introduction to U.S. public 
pension fund systems is a welcome possible first step. 
 
¶16.  (SBU) The conference was clearly another "special project" on 
the part of Wade, but the turnout from U.S. private equity and fund 
managers was impressive.  We are hopeful that useful contacts were 
made and that the U.S. experts will consider adding carefully 
selected African investments to their portfolios.  These fund 
managers could also advise on new ideas for funding infrastructure 
and other needed investments.  In the case of Senegal, which under 
its PSI program with the IMF cannot use non-concessional financing 
from outside the WAEMU region for government projects, attracting 
private project capital is an ever-present need. 
 
BERNICAT