AFRICAN LEADERS CONSULTED IN RUN-UP TO APRIL

UNCLAS SECTION 01 OF 08 LONDON 000694

SENSITIVE
SIPDIS

DEPARTMENT FOR AF/EPS

E.O. 12958: N/A
TAGS: PREL ECON EAID XA UK
SUBJECT: AFRICAN LEADERS CONSULTED IN RUN-UP TO APRIL
LONDON ECONOMIC SUMMIT


1. (SBU) Summary. Prime Minister Gordon Brown hosted African
leaders (listed in para 17) in London at a consultative
pre-London Economic Summit meeting on March 16, where African
leaders delivered pre-agreed positions and a statement on
proposals for the G20 to mitigate the worst effects of the
global economic crisis in Africa. HMG officials said
discussions focused on a UK-proposed framework of five
themes, which Brown highlighted in his remarks (para 18).
These were Financing for African Countries; Social Safety
Nets for the Poorest; Governance Reform; Trade and Trade
Finance; and Tax Havens.


2. (SBU) Summary continued. While the African leaders'
finalized statement has not yet been released, their main
points, according to HMG contacts, included the following:

- Impact of the global recession is unknown and will be
highly individualized.

- Aid disbursements should be accelerated.

- The IMF Board should seriously consider selling gold
reserves to raise additional funds and to increase the
allocation of Special Drawing Rights (SDR).

- As African countries are squeezed from the capital markets,
additional capital from the African Development Bank is
increasingly important.

- Africa needs more market access; protectionism is not an
appropriate response. Trade finance needs special attention.


- Reform of the IFIs is important, and Africans would like
additional votes and more voice. End summary.

UK Objectives
--------------


3. (SBU) Prime Minister Gordon Brown and senior British
officials hosted in London March 16 African leaders (see para
17) to discuss practical proposals, for consideration at the
Lunch Economic Summit, to mitigate the worst effects of the
global economic crisis in Africa. The UK's core objective in
the day long event was to engage African leaders and Finance
Ministers and advance its development policy agenda. HMG
officials gave us a detailed read-out of these objectives and
the meeting.


4. (SBU) The UK's policy views are based on five themes:

- Financing for African Countries: International Financial
Institution (IFI) and Multilateral Development Bank (MDB)
lending needs to reflect changed circumstances and radically
change conditionalities as a consequence. Leveraging
additional resources from donors, the World Bank (WB),
International Monetary Fund (IMF),and the African
Development Bank over the next three years will be critical,
in London's view. Equally the international community must
be ready to revisit the way in which resources are allocated

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in response to the crisis, quickly deploying slow spending
funds into fast distribution instruments, being prepared to
revisit the performance based allocation system and further
reduce the weight of conditionality, including within an
enhanced Exogenous Shocks Facility (ESF) and Poverty
Reduction and Growth Facility (PRGF). G20 countries should
urge MDBs to make more use of their balance sheets to release
more finance, relax and/or eliminate IMF lending conditions,
and urge the World Bank to front-load International
Development Association (IDA) finance, abolish caps on
Development Policy Lending including IDA, allow IDA-only
countries with sustainable debt positions to access IBRD
funds, reconsider limits on individual country borrowing,
continue monitoring and assessing Africa's financing needs,
and work with finance institutions to reduce the costs of
remittances.

- Social Safety Nets for the Poorest: There is risk that the
global economic crisis will disproportionately impact the
poor and vulnerable. HMG, therefore, pressed Africa leaders
to affirm the need to strengthen social safety nets, and G20
countries should provide resources to a new Global Rapid
Social Response Fund which could be used to protect the
poorest, ensuring that development gains are not lost.

- Governance Reform: IFI governance reform should strengthen
political accountability and effectiveness. Britain wants
G20 countries to commit to principles, a process and
timetable for reform, building on commitments made at World
Bank Annual meetings and the Washington Summit, that
strengthen accountability of management through merit-based
selection; accelerate work on voting reform in the World Bank
Group; and reform the World Bank to give developing countries
more say in decision-making at all levels. Such reforms
should be supported by ratification of the April 2008 IMF
quota and voice reform and increase access limits under the
PRGF and ESF.

- Trade and Trade Finance: Increased trade and greater
integration into the global economy is vital if African
economies are to grow and thrive. While global trade is
predicted to decline this year, G20 countries should commit
to an ambitious and development-focused conclusion of the
Doha Trade Round as soon as possible and refrain from raising
protectionist barriers to trade and investment. Trade
finance availability and affordability is central to ensure
that trade flow continues, and G20 members should support,
including through contributions, the World Bank's proposal to
create a Global Trade Liquidity Pool to ease trade finance
gaps.

- Tax Havens: Governments' ability to protect their tax bases
is an essential part of economic development, and G20
countries should take action to tackle tax havens.

--------------
African Leaders Conference Interventions
--------------

Ethiopia

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--------------


5. (SBU) Ethiopian Prime Minister Meles Zenawi set out three
core issues that were important for Africa: first, IFI
reform; second, African voices and votes in IFIs; and, third,
modifications of the World Bank's Country Policy and
Institutional Assessment tool to rate countries on
performance. On financing issues, Meles said that sources of
finance need to be easily accessible and disbursement should
be accelerated. Additional issuances of SDRs are required
and should not be tied to IMF program. Furthermore, the IMF
Board should seriously consider selling IMF gold reserves to
raise additional funds. With respect to the MDBs, Meles said
more money needs to be leveraged from MDBs, including
recapitalizing ADB and IBRD resources to make them more
widely accessible.

South Africa
--------------


6. (SBU) South African Finance Minster Trevor Manuel said
that the impact of the global recession in Africa is not
known yet and will be highly individualized. Manuel said
initial assessments of the most recent data indicate how
difficult it is to analyze the impact of the global economic
crisis on Africa. Angola is in the worst position: after 15%
growth last year, its economy is expected to contract 7% this
year. The situation has resulted in a huge dip in revenue
for all countries. Commodity prices have fallen, current
accounts are in deficit, remittances have dried up, returns
from company taxation have fallen, and capital flows have
been withdrawn. Countries that had been able to access money
from capital markets are finding that this has dried up also.
Manuel also said that the issue of trade finance needs to be
given special attention. As African countries are squeezed
out of capital markets, additional ADB capital becomes
increasingly important. Manuel said, "It is essential that
the IMF has the firepower to support countries that need it."


7. (SBU) In discussing the IFIs, Manuel said the IMF's "one
size fits all" approach should be stopped. The IMF needs to
be able to deliver flexibly, allowing countries to use a tool
box of measures. Difficulties, according to Manuel, were
arising around the table at the IMF Executive Board, and
there needs to be equality of treatment. Finally, Manuel
welcomed the WB's proposal that donor countries allocate 0.7%
of fiscal stimulus packages to the WB's Vulnerability Fund,
though he noted issues of eligibility and conditionality
would need to be resolved.

Egypt
--------------


8. (SBU) Egyptian Finance Minister Yousef Boutros-Ghali
highlighted that, although substance is important, the form
with which assistance is conveyed is more important. It is
essential to look at the immediate feasibility of delivering
assistance and not promise things that will take years to
deliver. In countries that have reached their IFI facility
limits, he argued, limits should be doubled. Money is not

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fungible between budget lines at the IMF and must be
concessional from the start. SDR allocations need to be
ratified by 85% of the voters, making them a largely
long-term measure. Boutros-Ghali also said facilities need
to be easily accessible, for example through IDA.

Botswana
--------------


9. (SBU) Botswana President Ian Kharma highlighted the loss
of diamond revenues in Botswana. He argued that it is
important that international commitments made at Gleneagles
are honored. Flexibility needs to be widely extended, and
interventions need to be rapid. He noted that even countries
that have reached MDG-defined Medium Income Country status,
such as Botswana, are seeing a downgrading of their credit
rating. He said migration will increase if countries cannot
provide for their people.


10. (SBU) Botswana Central Bank Governor Linak Mohoholo
emphasized that Africa wants to be part of the solution and
should not be at a distance from it. The C10 underscored the
need to acknowledge African progress on governance and wanted
to maintain those governance gains.

Tanzania
--------------


11. (SBU) Tanzanian President Jakaya Kikwete said that
"Africa is not responsible, but Africa is suffering." In
reality, African economies will decline, and more people will
fall into poverty. The issue, Kikwete said, is not one of
resources but of political will on the part of donors.
Africa needs additional resources and talk of cutting aid
will only increase the number of people in poverty. He
argued that developed countries must keep their development
promises and actually deliver additional resources in
innovative ways, including through debt relief. If Africa
was allowed to roll backwards, he suggested, there will be
more Darfurs and Somalias, and more ICC indictments. "How
many more people will you indict?"

Liberia
--------------


12. (SBU) Liberian President Johnson-Sirleaf said that
additional assistance is important, but availability is just
as important. It may be better to look at existing
facilities, enhancing those and enabling easier access.
Private capital is the engine of growth, she argued, and
investment in all sectors is needed, including agriculture,
forestry, and mining. Long-term facilities are required
within the IFIs to enable companies to continue investing.

Kenya
--------------


13. (SBU) Kenyan Prime Minister Raila Odinga said the
economic crisis is a global problem, requiring a global
solution. He said Africa needs more market access and

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support on debt servicing, while also noting Africa's resolve
to fight global warming. Africa, he said, is suffering from
extremes of weather, from drought to flooding, and five
million people are facing starvation in Kenya, which
undermines our ability to deal with the economic crisis.
Protectionism, he said, is not an appropriate response
because Africa needs more market access.

UK Response to African Leaders
--------------


14. (SBU) In response, UK Financial Secretary to the Treasury
Stephen Timms said he was hearing a good degree of agreement
on what needed to be done and concurred with the need to
protect the most vulnerable. Following the G20 Finance
Ministers' meeting, Timms noted that while there are still
many issues to be resolved, there are encouraging signs about
IMF resource increases. He said the importance of maintaining
commitments to the MDGs and climate change is clear. He also
explained that Switzerland had recently made changes to
provide more information on tax havens, a historic shift and
an example of an international willingness to look at these
issues.


15. (SBU) UK Development Junior Minister for Africa Ivan
Lewis welcomed the "frank and credible voices" from Africa.
He said the narrative and substance are important and
practical measures will make a difference; access is clearly
of crucial importance. Lewis said the international
community needs to move quickly and nimbly, differentiating
growth measures from poverty reduction measures. UK Foreign
Office Minister for Africa Mark Malloch-Brown said he took
from the discussion two main points: the international
community needs to honor the pledges they have made and that
both additional resources and access are crucial.


16. (SBU) PM Brown concluded the discussion by saying he want
to look at ways to raise hundreds of billions in extra
resources. Bringing back confidence, ending irresponsible
practices, and bringing shadow banking practices in to the
real markets are priorities. He noted that tax havens are
now saying that they will abide by international rules and
that the proper regulatory systems need to be re-built.
Brown emphasized the UK's commitment to ODA targets and said
he would encourage others to meet their ODA. He also said
President Obama had agreed to USD 2 billion in education and
healthcare funding. Safety nets are also important, and
Brown said he wants to have an announcement on the
vulnerability fund from the G20. The UK is also considering
trade finance support options to provide tens of billions in
credits. HMG is also looking at SDRs, gold sales, and
sovereign wealth funds. This will all mean a substantial
package of measures for the short, medium and long term.
Access to resources, he noted, is as important as additional
money. He concluded by saying that conditionalities of the
past are not the right way of looking at this and noted the
need for strong African voices.


17. (U) Meeting Participants included the following:


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UK Prime Minister Gordon Brown
UK Development Secretary Douglas Alexander
UK Foreign Office Minister for Africa Mark Malloch-Brown
UK Development Junior Minister for Africa Ivan Lewis
UK Financial Secretary to the Treasury Stephen Timms
Tanzanian President Jakaya Kikwete
Liberian President Ellen Johnson-Sirleaf
Botswana President Seretse Ian Khama
Ethiopian Prime Minister Meles Zenawi
Kenyan Prime Minister Raila Odinga
South African Finance Minister Trevor Manuel
Nigerian Finance Minister Mansur Muhtar
Egyptian Finance Minister Youssef Boutros-Ghali
Rwandan Finance Minister James Musoni
Tanzanian Finance Minister Mustafa Mkulo
Botswana Finance Minister Baledzi Gaolathe
Cameroonian Finance Minister Lazare Essimi Menye
Cape Verde Finance Minister Cristina Duarte
Mozambican Central Bank Governor Ernesto Gove
Botswana Central Bank Governor Linah Mohohlo
Algerian Central Bank Governor Mohamed Laksaci
Governor of the Bank of Central African States (BEAC)
Philibert Andzembe
African Union Commission Chairperson Jean Ping
UN Under-Secretary-General and Executive Secretary of the
Economic
Commission for Africa Abdoulie Janneh
President African Development Bank Donald Kaberuka
Africa Progress Panel Michael Keating
AU Commissioner for the Economy Maxwell Mkwezalamba

Prime Minister Gordon Brown's Remarks
--------------


18. (U) Begin text:

Can I first of all welcome you all to London. This is one of
the most important meetings we will have. The world economy
is in a recession that is affecting every continent and
affecting, as you know, every country, and it is our duty to
do everything that we can, first of all, to relieve the
pressure that people are facing as a result of the downturn,
and Africa knows more about these problems than any continent
in the world; and secondly, to prepare ourselves to get out
of the downturn by taking the right decisions for the future.

Now that is why I am so pleased that President Kikwete,
President Khama, President Johnson-Sirleaf, Prime Minister
Odinga and Prime Minister Meles Zenawi are all here with us
today and I am very pleased that Trevor (Manuel),as Head of
the Group of the Finance Ministers that has been involved in
making proposals to us, is also here.

And I want us to come out of this meeting today with not only
a determination that every continent, and that means Africa,
has its fair share of support over the next few months, but
equally every continent feels that it can play a part in
drawing up the plan for recovery.

There will be of course representatives at the G20. I know

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that your preference is also for reform of the international
system and I agree with you that big changes need to be made
in the representation and the quotas and the allocations for
individual countries and individual continents, and I believe
that that wish will come out of the G20 meeting.

Now in dealing with this global crisis, the first thing that
we have got to do is to make sure that where we can we
protect people against the impact of this crisis. And Douglas
Alexander has announced that we will make our contribution to
a World Bank Social Protection Fund, and we are calling on
all countries to make such a contribution. There is a need
for a safety net against the vulnerabilities that people
face. We know that 100 million more people are being forced
into poverty, we know that half a million children a year
could die as a result of the absence of healthcare because of
the deterioration of the finances of families. So that is the
first thing - we have got to protect people, and provide real
help now for people in difficulty.

The second thing is that we have got to make sure that every
continent has the ability to protect itself against the
banking failures that have happened. A situation that
started in America and spread to the rest of the world is now
affecting the poorest countries most, and we want the
different international institutions to be in a position to
support whatever restructuring of the financial system is
necessary, and to support the funds flowing again to
businesses to invest.

And that leads on to the third point - and that is trade. We
know that there is an interruption in trade taking place. We
know that this will be the first year in 30 years that trade
has actually fallen, and we know that the impact of that is
mostly on the poorest countries. So we have to find a way in
which we can stop protectionism, encourage people to sign up
to Doha - which has of course the effect of releasing about
four billion of extra resources for infrastructure and other
support for development - and monitor what is happening. If
other countries are adopting protectionist policies we will
know about it and the world is in a position to take action.
But perhaps most of all we have to make available trade
credits to enable trade to flow round the world and enable
Europe to trade with each other and others to trade with you.
And this is one of the main aspects of policies that we need
to discuss at the G20 and your views on this would be most
welcome.

And then to the international institutions themselves. I have
said that they need to reform in terms of their
representation. I think that they also need to be in a
position to provide the resources with less conditionality
than we have had in the past. I want the International
Monetary Fund to have available a crisis facility, but it
will need to be properly resourced. I want the Monetary Fund
also to be able to set up a preventative facility to prevent
the damage that could be done if banks fail and if countries
are put in a difficult position because of that. We want the
World Bank to be in a position to deliver more resources for
infrastructure, not as a promise, but in detail this year, as

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a result of advancing their programmes, and I have talked to
President Zoellick of the World Bank about what he can do in
this respect. We want the World Bank to be in a position to
sponsor - with other countries, export credit agencies and
the private sector - billions of pounds of trade credits that
would enable the
flow of trade around the world.

So for the outcome of this G20 meeting we want there to be
immediate action, the medium term reforms that are necessary
for our financial system. And we want, finally, the big
reforms to take place in the International Monetary Fund and
the World Bank that were set up in the 1940s that do not meet
all the needs that we have in 2009. And when we set up a
preventative facility to enable people to draw on it, I want
it to be without the conditionality that normally attaches to
International Monetary Fund programmes.

I think you can look on this as one of the problems that this
globalising world has got to deal with. We have problems of
climate change, we have problems of great inequalities
between nations. We have problems of security arising from
the mobility of people and obviously the insecurity that
arises when groups who are violent try to take part. We have
also the problem of financial instability.

If we can solve these four big problems of globalisation,
then we are able to say that the global economy could start
to work in the interests of all those who depend upon it, and
we are on the way to building a global society where people
can work together for the future.

So the challenge is big. It is not simply about getting out
of this financial crisis; it is about building a global
economy that is a force for justice on a global scale. I
believe that we would be true to the Millennium Development
Goals only if we see that solving the present financial
crisis is part of building a world that is more equal and
more fair and not using the crisis to delay that, but
actually seeing the crisis as a means by which we have to
move quickly, more quickly indeed, to bring that about.

So I look forward to our discussions and thank you all for
being here today.

End text.

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