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Cameroon: IMF points to Sonara and Camtel debt bomb

By Omer Mbadi
Posted on Tuesday, 22 June 2021 11:38

The autonomous Port of Douala, one of Cameroon’s most promising public enterprises. © DIT

A recent bombshell report by the IMF points to flaws in the oversight and governance of several state-owned companies, including Sonara and Camtel. State-owned companies make up 20% of the economy.

Of the 25 public companies in Cameroon with a surplus in 2020, only three paid dividends to the state, which amounted to a total of 10.8bn CFA francs (€16.5m). However, the cumulative profit of these companies was 74bn CFA francs (€112.8m).

According to the IMF, this underperformance reveals the lack of a clear remuneration strategy.

Taken from a recent report by the institution on the budgetary risks linked to the management of public enterprises, which was drawn up at Yaoundé’s request, this data is causing quite a stir in both the local media and social media.

Worrying debt

“Public companies are lagging behind in terms of performance and competitiveness, especially in competitive sectors such as air transport and telecommunications. Even if they keep their promises regarding the port sector,” says a senior official in charge of economic issues.

This situation is not helped by the lack of a single directory dedicated to public enterprises, inefficient service provision, a fragmented supervisory system made up of several entities, recommendations from auditing structures that are not followed up on, and worrying debt levels (at least 2,983bn CFA francs in 2019).

A large number of reciprocal debts between the state and these companies have also accumulated, which lead to non-transparent debt offsets.

17% of the nation’s wealth in 2019

Viviane Ondoua Biwolé, professor of management at the Université de Yaoundé II and an expert in governance issues, says she is not surprised “by any of the report’s findings or recommendations.” She adds that “experts within the field have often brought up the issues mentioned in this report. The fact that it has been compiled by the IMF simply gives these findings more weight.”

In particular, the document exposes the state’s failings as the sole shareholder, pointing to “the public companies’ fragmented system of management and supervision, which have no real pilot to ensure effective supervision.”

If we are concerned about how companies are governed, then we must ensure that there is a separation between control and operational management, by avoiding, for example, that the chairman of the board of directors is also the minister in charge.

Public companies’ influence on the economy should not be underestimated. In fact, the revenues of more than 160 public entities (companies, institutions and agencies) represented 17% of the nation’s wealth in 2019, for assets valued at 20% of GDP.

Operational inconsistencies

Cameroon is made up of a multitude of entities that ensure the technical and financial supervision of its public enterprises. In addition, due to the lack of prior consultation between administrators from different backgrounds (presidency, primacy, ministries), the state has difficulty adopting a coherent position within the boards of directors.

“A clear conceptual choice must be made. If we are concerned about how companies are governed, then we must ensure that there is a separation between control and operational management, by avoiding, for example, that the chairman of the board of directors is also the minister in charge,” says Biwolé. She adds that “the report implicitly states that the board of directors is, as it stands, nothing more than a charade and that its role has no effect on how public companies are managed.”

Biwolé has stated that a control mechanism, which would be primarily in the hands of the board of directors, should be implemented. And that the directors should be chosen “on the basis of objective criteria.”

“A more political problem”

Even worse is the fact that the Société Nationale des Hydrocarbures (SNH) and the Société Nationale d’Investissements (SNI), which have holdings in other companies, are not subject to any government control. Furthermore, SNH is supervised by the general secretariat of the presidency.

The IMF has recommended two options in its report. The first is to create an umbrella structure, which would carry the state’s holdings, something Côte d’Ivoire has adopted. This country managed to transform itself in 2016, by gradually opening up its private sector and taking control of the state’s portfolios. It even went so far as to privatise its commercial enterprises.

While Equatorial Guinea and the Republic of Congo have already made up a list of the public companies that should be listed on the reunified Central African stock exchange, Cameroon – like Gabon, Chad and the CAR – is dragging its feet over completing this regional requirement.

But the problem lies elsewhere, says our expert. “These companies may be viable if they are subject to rigorous management rules by competent people. We need to show managerial courage and confront the problems by attacking their real causes. The problem is more political than technical,” says Biwolé.

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