Identifier
Created
Classification
Origin
09YAOUNDE147
2009-02-13 06:59:00
CONFIDENTIAL
Embassy Yaounde
Cable title:  

CENTRAL AFRICAN BANK READY FOR CRISIS, ROCKED BY

Tags:  EFIN ECON ETRD KCOR ECIN PINR GB CM 
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ZNY CCCCC ZZH
P 130659Z FEB 09
FM AMEMBASSY YAOUNDE
TO RUEHC/SECSTATE WASHDC PRIORITY 9695
INFO RUEHZO/AFRICAN UNION COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 03 YAOUNDE 000147 

SIPDIS

STATE FOR AF/C AND EEB
PARIS FOR ROBERT KANEDA AND GREG D'ELIA
LONDON FOR PETER LORD
TREASURY FOR FRANCOIS BOYE

E.O. 12958: DECL: 02/14/2019
TAGS: EFIN ECON ETRD KCOR ECIN PINR GB CM
SUBJECT: CENTRAL AFRICAN BANK READY FOR CRISIS, ROCKED BY
SCANDAL

REF: LIBREVILLE 47

Classified By: Political/Economic Officer Tad Brown for Reasons 1.4 b a
nd d.

C O N F I D E N T I A L SECTION 01 OF 03 YAOUNDE 000147

SIPDIS

STATE FOR AF/C AND EEB
PARIS FOR ROBERT KANEDA AND GREG D'ELIA
LONDON FOR PETER LORD
TREASURY FOR FRANCOIS BOYE

E.O. 12958: DECL: 02/14/2019
TAGS: EFIN ECON ETRD KCOR ECIN PINR GB CM
SUBJECT: CENTRAL AFRICAN BANK READY FOR CRISIS, ROCKED BY
SCANDAL

REF: LIBREVILLE 47

Classified By: Political/Economic Officer Tad Brown for Reasons 1.4 b a
nd d.


1. (C) Summary. The member governments of the Economic and
Monetary Union of Central Africa (CEMAC) are well-prepared to
weather the fallout from the global financial crisis, but the
socio-economic impact of slower economic growth is harder to
predict, according to Rigobert Roger Andeley, a Congolese
national and Deputy Governor of the Bank of Central African
States (BEAC). Econoffs met with Andeley on February 4 to
discuss the outcome of a January 30 extraordinary meeting of
the CEMAC Heads of State in Libreville, which focused on a
controversial (and costly) placement of BEAC assets in a
French commercial bank. According to Andeley and media
reports, BEAC Governor Philibert Andzembe, a Gabonese
national, placed 500 million euro (about $640 million) with
the Societe Generale des Banques (SCB) under suspicious
conditions, contrary to BEAC,s statutes and without the
approval of BEAC,s governing institutions. BEAC only lost
25 million euro (about $32 million) when the deal went bad,
but the scandal has exacerbated already strained relations
between Gabonese President Bongo and other BEAC Heads of
State. End summary.

CEMAC Will Weather Financial Crisis
--------------


2. (C) According to Andeley, BEAC is "comfortable" that the
six CEMAC governments (Cameroon, Chad, Central African
Republic, Gabon, Equatorial Guinea and Republic of Congo) are
well-prepared to weather the impact of the global financial
crisis. Compared to the circumstances of previous economic
crises in 1985 and 1990 (which wreaked havoc on CEMAC
economies),the region has been running budget surpluses in
recent years, and reserves are sufficient to cover coming
budget shortfalls for two to three years, even if oil remains
at $40 per barrel. Andeley estimated current national

reserves as:

--Equatorial Guinea: $4 billion
--Congo Brazzaville: $2 billion
--Cameroon: $2 billion
--Gabon: $1.5 billion
--Chad: $200,000,000
--CAR: Negligible.


3. (C) CAR,s situation will continue to be difficult,
Andeley predicted, but Equatorial Guinea will experience the
biggest shock if low oil prices continue. He noted that EG
has the region's most ambitious investment program
(everything from roads to stadiums) and does not have the
budget discipline that an IMF program would require. With
the region's most diversified economy, Cameroon, by contrast,
is better prepared than the others to withstand the pressures
of low oil prices, he said.

But the Economy is Another Matter
--------------


4. (C) Considering the economies beyond government finances,
Andeley was much less sanguine. BEAC posits economic growth
for the CEMAC region will fall from 5.8% in 2008 to 4.3% in

2009. Andeley said BEAC is worrying less about inflation
because the data indicates that prices have already begun to
drop and will continue to do so (especially as fuel prices
are an important component of food prices). Unemployment, by
contrast, remains a preoccupation, especially because already
tense socio-economic pressures will be exacerbated by growing
unemployment as jobs are shed.


5. (C) Andeley said the sectors most vulnerable to
international economic trends are mining and forestry (which
is particularly labor intensive). Andeley said BEAC is
working with CEMAC member states to ease fiscal pressure on
the forestry sector and to foster value-added industries
within CEMAC, to move beyond exporting timber and towards
exports of finished products. Andeley said the CEMAC
governments had approved a BEAC regional economic plan that
will integrate eight important road corridors in the region
with financing from BEAC, France and domestic budgets.
(Reftel includes further info on BEAC's plan.) Andeley
cautioned that these solutions are, at best, medium term, and
that the pressures from high unemployment were unlikely to
ease in the short-term. Andeley said all of the region's

YAOUNDE 00000147 002 OF 003


governments suffer from an inability to be decisive (an
affliction he ascribed as an "African" problem). Asked for
his views on Cameroon's Kribi Port and other high-profile
projects, Andeley said Cameroon suffers from the lack of
decisive leadership more than any other CEMAC state.

BEAC's Scandalous Deal with SGB
--------------


6. (C) Andeley confirmed independent media reports that a
series of recent senior meetings (among Finance Ministers in
Malabo on January 20 and in Yaounde on January 26 and then
among Heads of State in Libreville on January 29, per reftel)
were called to address a controversial decision made by the
BEAC Governor. According to Andeley, Gabonese President Omar
Bongo appointed Gabonese national Philip Andzembe as BEAC
Governor despite the latter's relative inexperience in high
finance and unfamiliarity with BEAC as an institution.
Andeley said he had been surprised to learn, four months
after the fact, that Andzembe signed a contract with French
bank Societe Generale des Banques (SGB) to place 500 million
euros of BEAC assets at SGB under terms that Andeley said
smacked of a dirty deal. Andeley said the deal was concluded
in contravention of BEAC rules (which limit BEAC investments
to Treasury Bonds and similarly safe investments) and
governing rules (which require board approval of such
placements). Andeley reported that Andzembe evaded the
normal channels for such a massive transaction and implied
that Andzembe's handling of the deal smacked of personal
interest and woeful ignorance of high finance.

Sharks Circle at Spring World Bank Meetings?
--------------


7. (C) Andeley said he was certain Andzembe hatched the
deal during side meetings on the margins of the annual spring
meetings of the World Bank in Washington. Andeley warned
Econoff, "You have to start watching what is happening on the
sidelines of the spring meetings of the World Bank in
Washington. The vultures descend and lie in wait for African
financial officials, offering them crooked or corrupt deals.
I can tell you! I saw it when I was Congo,s Finance
Minister."

The Fallout: Money, Prestige, and Regional Unity
-------------- ---


8. (C) Andeley estimated that Andzembe's deal would cost
BEAC about 5% of the investment, or 25 million euros, which
BEAC could relatively painlessly amortize against its annual
gains of 38 million euros ($49 million). More costly than
the lost wealth is the damage to BEAC,s credibility as a
well-governed financial institution. Andeley said the timing
of the scandal was particularly embarrassing because the
French Government had recently given BEAC a larger role in
managing BEAC's own resources. Whereas France and CEMAC
originally agreed that the French Central Bank would manage
65% of CEMAC's reserves (as part of the deal whereby France
guarantees the African Financial Community Franc, or FCFA),
the Government of France had recently asked BEAC to take on a
larger share, 50%, of the portfolio management. Andeley
reassured Emboffs that BEAC is still well managed and said
the World Bank and IMF have approached BEAC to route their
transactions through its books.


9. (C) Most importantly for the region, the scandal has
undermined the trust and cooperation among CEMAC members that
underpin BEAC's success. At the time of BEAC,s formation,
Cameroon and Gabon had the most significant reserves in the
region; BEAC,s headquarters were placed in Cameroon and
Gabon has traditionally had the prerogative of choosing the
BEAC Governor. As the region's financial balance shifted
towards Equatorial Guinea and, to a lesser extent, Chad, the
division of power in the bank became increasingly out of line
with each country's relative investment in the bank. Press
reporting after the BEAC Heads of State meeting in Ndjamena
in 2007 revealed the growing tension as Obiang and Deby
called for the Governorship to rotate among the six member
states. According to Andeley, Bongo adamantly refused to
give up his lock on the BEAC Governorship, but the scandal
implicating Bongo,s appointee has energized Cameroon to
argue in favor of a rotating presidency as well.


10. (C) Andeley said the Libreville meeting was heated,
with Biya and others taking a "hard" stance against
Andzembe's governorship. An impasse was avoided through an

YAOUNDE 00000147 003 OF 003


agreement to audit the BEAC under Andzembe but Andeley
believes the conclusion is all but certain, arguing that
Andzembe has been an awful governor and that a rotating
governorship would bring improved governance since each
governor will expect to be audited by his successor. Andeley
could not rule out the possibility that the impasse could be
serious enough to threaten BEAC,s continuation, believing
that Bongo is unlikely to ever surrender his hold on the
governorship and Obiang and others are equally unlikely to
allow their assets to be managed exclusively by Bongo's
nominees.

Comment: Regional Bank Drives
Regional (Dis)Integration
--------------


11. (C) Andeley reassured us that CEMAC budgets are
well-padded against coming financial shortfalls and that
BEAC, as an institution, remains well-managed. But he
offered no reason to hope that the region's unemployment and
macroeconomic woes would improve, raising the specter of
socio-economic tensions. Most worrisome is Andeley's
prediction that poor governance and feuds among CEMAC big men
will undermine USG efforts to promote greater regional
cooperation on security in the Gulf of Guinea and
peacekeeping operations in the region. End comment.


12. (C) Bio note: Andeley is unabashedly pro-American.
Two of his daughters attend university in the U.S. and his
son resides there. His two youngest children attend the
American School in Yaounde, where Andeley also served on the
board. He had already read President Obama's books in
English and raved about America's capacity for national
renewal and reinvention. In this and our previous
conversations with Andeley, he has lived up to his reputation
as exceedingly intelligent, competent and plain spoken. End
bio note.
GARVEY