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DE RUEHDS #0326/01 0481126
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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