Cameroon: A business revolution will take a lot more work

By Honoré Banda

Posted on Wednesday, 2 November 2022 15:46
An oil vendor reacts at the Mvog Ada market in Yaounde, Cameroon, January 29, 2022. REUTERS/Mohamed Abd El Ghany

The Cameroonian government would like to see the country supplying the Central Africa region with 'Made in Cameroon' goods and it would also like to diversify the economy, but how much progress is being made?

Cameroon, with a population of 27 million people, has the potential to feed and produce for many of the smaller countries of the Central African region, including landlocked neighbours Chad and the Central African Republic.

Agriculture, oil and gas, mining, construction and finance are important economic sectors, with unexploited iron ore deposits and other projects holding potential for future growth.

Are the government and private sector doing enough to diversify the economy, create jobs and develop new sectors? The government says it is making progress, but the business community and international financial institutions argue that the country needs vast reforms, stronger policies and better infrastructure for companies to be able to meet national demand and export more to the region and beyond.

‘Inadequate infrastructure’

In an August report, the IMF said there are many things standing in the way of the development of a stronger business environment: “These obstacles include inadequate infrastructure, high factor costs, limited access to financing, and various distortions [legal and judicial system requiring improvement].”

The Fund also said: “Cameroon could not envisage its industrialisation relying solely on domestic markets. The authorities also aim to facilitate the emergence of the private sector as the main driver of economic growth, with targeted public interventions in highly strategic sectors, using the public procurement lever, while promoting the emergence of national champions in the sectors leading to structural transformation.”

The first step must be national, and at this level, the prerequisite is the improvement of the business climate.

The government and some members of the business community have a tense relationship. Celestin Tawamba, the president of the Groupement Inter-patronal du Cameroun (GICAM) – a business lobby – is vocal about what he and his colleagues think should be done to improve the business climate. GICAM came up with a series of ideas for reforms in 2020, with Tawamba regularly critical of the country’s taxation system. He argues that the country’s taxes on turnover – rather than profits – slow economic growth. He says he hopes the government will listen to GICAM’s concerns about this and other concerns to launch a proper dialogue and more cooperation.

He told us in June that Africa needs to build up its champions in order to help it grow and protect itself from external shocks like the war in Ukraine: “The first step must be national, and at this level, the prerequisite is the improvement of the business climate. […] It requires awareness and public-private partner leadership based on a strong […] state, a developer, a catalyst of energies and that is capable of making strategic choices.” In its two most recent studies, the development finance institution has complained about the slow progress of President Paul Biya’s government on reforms that are part of its aid programme.

The government spent an estimated $1bn on projects linked to the hosting of the 2022 African Cup of Nations football tournament, while critical infrastructure lacks investment. For example, the port at Douala is used for the vast majority of the country’s imports and exports – in addition to being a critical link for Chad and the Central African Republic – but has been operating beyond its capacity for years. This means extended waiting times for shippers and higher costs for imports and exports.

Processing locally

The port of Douala has been processing between 12m-13m tonnes of goods per year, with a nameplate capacity of just 10m tonnes. To boost capacity, the port authorities signed a build, operate and transfer deal with British-Lebanese company Karam Trading Holding to build a new port terminal in Douala at a cost of about $350m. Once completed, the project is expected to more than double Douala’s port capacity to 21m tonnes per annum. There are also plans under discussion for a deep-sea port at Manoka.

In 2020, Cameroon’s top exports in terms of value were oil, cocoa beans, timber, gold and bauxite – and most of these produced were sold unprocessed or with little processing. Some entrepreneurs are boosting local processing, however. Kate Fotso, one of Cameroon’s richest businesswomen, runs Telcar Cocoa, the country’s leading exporter of cocoa beans, beating Singapore’s Olam. Telcar is planning on building a cocoa processing plant in Kribi, Southern Cameroon, to earn more profits by processing locally.

She is from Cameroon’s South-West Region, one of the areas involved in the conflict around the marginalisation of English-speaking areas of the country. In recent years, fighting in North-West and South-West Cameroon, in addition to instability in the Far North due to the activities of Boko Haram, has hurt the economy. The anglophone regions are major agricultural areas – they produced much of the country’s cocoa up until 2018 – but the Central Region is now the top cocoa producer.

Meeting national demand

Elsewhere, companies are also investing in Cameroon’s agricultural production. Compagnie Fermière Camerounaise, owned by France’s Castel through the Société Anonyme des Brasseries du Cameroun, has its eyes on the poultry and animal feed sector. This year, it announced plans for a maize plantation set to produce 40,000tn per year. The goal is to cut down on imports by growing corn – locally – for corn grits used in the beer brewing process. Alongside this project, it is growing chicks and selling eggs.

Cameroon’s cement production companies continue to expand their capacity with the hopes of meeting national demand and exporting to the region. In the construction sector, there are success stories in steel manufacturing.

International investors are betting that rising gross domestic product will spur the development of the middle classes, and with it, increase consumption. In July, CFAO – owned by Japan’s Toyota Tsusho Corporation – inaugurated the PlaYce Yaoundé shopping mall, billed as one of the biggest shopping centres in Central Africa.

To be profitable, manufacturing requires inexpensive and reliable sources of electricity. The government is thus developing a series of hydroelectric dams to expand access to electricity to households and businesses. The $1.1bn Nachtigal Dam, 65km to the northeast of Yaoundé, is set to add 420MW of capacity to the national grid in 2024. Meanwhile, the 211MW Memvé’élé Dam is set to begin producing at full capacity in October this year.

The crisis in Ukraine could lead to more investment in Cameroon’s oil and gas, where production is substantially lower than in several countries in the region. Cameroon’s state-owned Société Nationale des Hydrocarbures and Anglo-French oil and gas company Perenco have stakes in the floating liquefied natural gas plant at Hilli Episeyo, offshore Kribi, which started operations in 2018.

Low scores

Perenco is bullish on Cameroon’s hydrocarbon potential and has announced plans to buy New Age’s stake in the Etinde permit in June. However, that project could take a long time to develop as it is close to the border with Equatorial Guinea and it is not clear whether it would be possible to get both governments to agree on a deal to use Equatorial Guinean gas-processing infrastructure.

The Cameroonian industry is also using gas; for example, Victoria Oil & Gas supply industrial customers in Douala from the nearby Logbaba field.

Much of this investment is taking place in a difficult business climate and from a low national base. Before it was done away with due to concerns about its fairness, the World Bank’s 2020 Doing Business ranking put Cameroon as 167 out of 190 global economies. The country had particularly low scores for registering property, paying taxes, enforcing contracts and trading across borders. If there is going to be a business revolution in Cameroon, it is going to take a lot more work.

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