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  • Oil
  • Agriculture
  • Forestry
  • Financial services
  • Mining


  • Policy and business environment
  • Currency regulations
  • Markets
  • Investment promotions
  • Legal protection
  • Tax
  • Free zones
  • Labour
  • Utilities
  • Regional affiliations

    Economic and business prospects

    Cameroon has undergone something of a transformation in recent years, after a difficult period of political decline and economic atrophy. Dependence on a narrow base of commodity exports, especially oil, and the unchecked growth of a large and inefficient public sector, had contributed to the malaise of an economy with the potential to be amongst the most rich and diverse on the continent. But since the mid-1990s, after a difficult transition from one-party rule to multiparty democracy, Cameroon has enjoyed a degree of political stability unrivalled elsewhere in the region and an economy that has posted creditable growth despite difficult external conditions. Once-hostile opposition parties have been attracted into government, while previously sceptical donors have displayed increasing confidence in a reform process that is beginning to bear fruit. Moribund, patronage-riddled state ownership has given way to an aggressive programme of privatisation that has already attracted significant foreign direct investment. New policies are promoting the diversification of the agricultural sector and encouraging local processing of raw materials. Efficiency of government has improved. Donors have agreed a debt relief programme and are helping to fund a process of social and physical infrastructure renewal.

    By 1999, the reform process had reached a critical point. Growth had to be translated into an appreciable improvement in the living standards of ordinary Cameroonians if political stability were to be maintained. Donor tolerance of persistent corruption had worn thin. The most politically risky privatisations remained to be completed. President Paul Biya insisted that his government would not falter, but an uncertain regional security environment, weak prices and depressed demand for traditional exports on world markets were likely to complicate the process.

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    Recent economic developments

    Real GDP growth for 1997/98 was estimated at 5 per cent, with the inflation rate falling to 1.6 per cent in the 12 months to June 1998 from 9.6 per cent in the year earlier. Non-oil exports grew by 7 per cent, driven by coffee, cotton, and timber. In an indication of the success of efforts to promote reform, growth in the financial year 1998/99 was forecast at more than 4 per cent, despite a fall in prices for all of Cameroon's principal exports-oil, cocoa, timber, coffee, cotton and aluminum. An IMF mission to Cameroon in February 1999 praised the government's management of the economy, and endorsed the progress made in meeting targets set as part of the SDRl62 million ($220 million) enhanced structural adjustment facility (ESAF) agreed in 1997, despite the increasingly unfavourable external trade environment. 

    A strong performance in mobilising non-oil revenue more than offset the shortfall in oil revenue, and public expenditure was kept within the limits set by the IMF. Illustrating progress made in implementing structural reforms, the IMF cited the completion of an independent audit of the national oil company, liberalisation of the domestic market for refined petroleum products, adoption of a restructuring plan for the port of Douala, and the launching of competitive bids for the establishment of a second cellular telephone company. After a careful media campaign designed to prevent the kind of popular disturbances witnessed elsewhere on the continent over the introduction of new sales taxes, in January 1999 the government introduced value-added tax of 18.7 per cent on a wide range of goods and services. 

    Exemptions are limited to basic commodities such as fish, meat, milk, flour, books and pharmaceutical products, with officials warning that any price increases resulting from the introduction of the new tax will be due to overcharging by unscrupulous retailers. The introduction of VAT, the further strengthening of the tax administration, and the reduction of tax fraud were considered by the IMF to be critical for raising non-oil revenue collection and meeting the overall budgetary revenue target of CFAF893 billion ($1.6 billion) in 1998/99. Initial indications show that the new tax is performing well.

    Privatisation, which is at the cornerstone of the reform process, has generally proceeded smoothly. The ailing national railways company, the Regie nationale de chemin de fer du Cameroun (Regifercam), which recorded a substantial loss in 1998, has been successfully sold to a French-South African consortium Saga-Comazar. Bids have also been invited for the state-owned Cameroon Airways (Camair), with a sale due to be completed by mid-2000. The heavily indebted airline operates an ageing fleet of six aircraft and enjoys a dubious reputation for reliability and efficiency. However, Camair has rights to a number of potentially lucrative routes, and officials have already received preliminary inquiries from Air France and South African Airways.

    Other issues, however, are likely to prove more controversial. Local businessmen have expressed concern at reports that the government intends to sell the national water supply company, the Societe national des eaux du Cameroun (SNEC), and the national electricity company, the Societe national de l'electricite (SONEL) to French interests. The national business forum, the Groupement interpatronal du Cameroun, demanded a postponement of the sales to allow for a more competitive bidding process. The call was energetically adopted by elements of the media and the parliamentary opposition, which accused the government of relinquishing Cameroon's economic sovereignty in order to satisfy the IMF and World Bank. However, the enabling legislation was easily approved by the national assembly in November, and plans for the sale of the two utilities are now well advanced. Privatisation of one of the country's biggest, most successful and politically sensitive companies is also likely to prove problematic. 

    The Cameroon Development Corporation (CDC), which employs 13,000 people and has a registered capital of CFAFl5.6 billion ($26 million), produces and processes rubber, oil palm, bananas and tea and has attracted interest from American, French and south-east Asian firms. However, the CDC has historically been a focus for Cameroon's anglophone community, which is reluctant to see the corporation pass into private hands. The complexity of land rights in areas on which CDC has its major plantations is likely to further complicate and perhaps delay the process. 

    Restructuring of the overstaffed, underpaid, inefficient and demoralised civil service has also been an important focus of the reform programme. In late January the government launched a new civil service census, the second in ten years. Its aim is to identify and remove so-called"ghost workers" - salaries claimed on behalf of non-existent staff- from the government payroll. Officials believe that the probe will help to reduce the government's monthly wage bill to CFAF18 billion ($30 million), which will represent annual savings of about CFAF50 billion.

    Donors, however, have been less pleased with the government's record on corruption, which continues to present a major challenge. In September 1998, a German-based anti-corruption organisation, Transparency International (TI), ranked Cameroon as the most corrupt of 85 countries included in its annual survey. President Biya angrily rejected the survey's findings, but nevertheless launched a new campaign against corruption. However, until now, only junior officials have been detained in connection with alleged irregularities, fuelling speculation that the authorities are either unable or unwilling to pursue the "big fish."

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    Major sectors and business opportunities

    In 1998, Cameroon introduced new legislation that offered incentives for companies investing in marginal and deep-water fields. The government had hoped to reverse the oil sector's steady decline from a peak of nearly 200,000 barrels/day (bid) in the mid-1980s, and to attract the kind of substantial foreign direct investment pouring into the sector elsewhere in the region. However, depressed prices and the associated uncertainty across the industry in recent months, combined with a legacy of official mismanagement and corruption, have undermined the strategy. A border dispute with Nigeria around the Bakassi peninsula has also hindered exploration and development in the potentially oil-rich Rio del Rey basin. Most analysts, therefore, expect output to continue to fall from the 110,000 b/d recorded in 1998, as existing fields mature. Commercially exploitable reserves are forecast to be exhausted within ten years.

    The gloomy outlook for oil prices has also contributed to delays in a $1.4 billion project to construct a pipeline from Doba in southern Chad across Cameroon to a terminal at Kribi on the Atlantic coast. Separate environmental concerns and political factors mean development may not now begin until 2000. However, the project will bring substantial employment opportunities and numerous associated contracts, while in the longer term, Cameroon can expect to generate revenue from the pipeline and loading terminal.

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    The government has forecast a cocoa crop of 128,000 tonnes in 1998/99, compared with an estimated 122,000 tonnes in 1997/98, as a result of better weather, improved support services and encouraging prices. Coffee also enjoyed a good season, with the 1998/99 harvest nearly 10 per cent up on the 1.53 million bags recorded in 1997/98. However, Cameroon's other main agricultural sector export, cotton, has performed less well. In October the Compagnie francaise pour le development des fibres textiles (CFDT), which provides technical assistance to the Cameroon state cotton monopoly, Sodecoton, and controls 30 per cent of its shares, reported that cotton output in 1997/98 had fallen to 180,000 tonnes, down from 223,000 tonnes the previous year. Smuggling to Nigeria was also reported to have increased to 5.5 per cent of total output, double that estimated for 1996/97.

    In an indication of its new enthusiasm for liberalising the agricultural sector, in December the government sold its majority holding in the Cameroon Sugar Company (Camsuco) to the French agro-industrial group, Somdiaa, for CFAF11 billion ($20 million). Camsuco has 12,000 hectares of sugar plantations and a sugar mill with an annual capacity of 80,000 tonnes, In the 1980s it produced around 70,000 tonnes, but in recent years mismanagement contributed to a fall in production to just 5,000 tonnes.

    Somdiaa already owns Camsuco's rival, the Societe sucriere du Cameroun (Sosucam), and will now enjoy a monopoly position on the domestic market, which is estimated to have a capacity of 120,000 tonnes. In January, Somdiaa announced that it would invest CFAF 21 billion ($35 million) to double its local sugar production to 100,000 tonnes/year. 

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    Despite petitions from the timber industry, the government implemented legislation banning all unprocessed log exports in January 1999. The timber exporters' association, the Groupement de Ia filiere bois au Cameroun (GFB), estimates that the ban will lead to an annual loss of CFAF35 billion ($60 million) in budgetary receipts and CFAF13O billion in export earnings. In recent years forestry has been Cameroon's second most important source of exports. According to official figures, log production reached 3.6 million cubic metres in 1997/98, when the sector accounted for more than 7 per cent of GDP. However, officials believe that in the longer-term, the move towards local processing will make the sector more profitable, as well as yielding environmental dividends. Despite the new legislation and a fall in demand, forestry has continued to attract foreign investment. In January the Société forestiére de Chine du Cameroun (CFIC), a subsidiary of China Jilin Forest Industry, was awarded a timber exploitation licence. The company says that it plans to invest CFAF6 billion in a sawmill and plywood factory, which will process 150,000 cubic metres of wood a year and create 4,000 new jobs.

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    Financial services
    In recent months the government has adopted measures to strengthen competition in the banking sector. In late September measures were introduced to allow bank commissions to be determined by the market, and to deregulate foreign-exchange dealing so as to ease exchange operations and improve the quality of service. Previously, only commercial banks had been allowed to carry out foreign currency exchange operations. This additional competition may put further pressure on commercial banks, which are only now recovering from a loss of confidence and associated liquidity crisis at the end of 1998, when speculation of a devaluation of the CFA franc, which turned out to be false, had been rife.

    In a separate initiative to deepen the financial sector, in early 1999 Cameroon and its partners in the regional economic grouping, the Communauté économique et monétaire de l'Afrique centrale (CEMAC), agreed to work towards the establishment of a regional stock market by November 2000, with start-up capital of CFAF1 billion ($1.75 million). Officials believe a new bourse could have 60 listings within five years. Such an instrument has long been advocated by the private sector in Cameroon as a potentially vital source of financing. However, a number of political and logistical problems are still to be overcome, including, for example, rivalry between Cameroon and Gabon over the location of a new exchange.

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    The government has pledged to introduce a new mining code as part of an initiative to increase investment in the sector. The most encouraging prospects include the bauxite deposits in Minim-Martap, with reserves estimated at 900 million tonnes, and Ngaoundal, with 200 million tonneé, in central Cameroon. New development could help supply smelters at Edea, which are owned and operated by Alucam, a subsidiary of the French Pechiney group. Alucam is considering doubling primary aluminium production capacity from about 92,000 to 200,000 tonnes a year, but will first require cheaper and more reliable supplies of electricity, improved transport infrastructure and better access to the port at Douala.

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    Future directions

    Cameroon is proving itself to be one of the more successful examples of structural reform in Africa. That success is all the more remarkable given the failure of a series of reform initiatives since the 1980s, the fall in prices for most of Cameroon's traditional exports and the unsettled political and security environment in the region. The process is, however, far from complete. The achievements that led to the IMF's anticipated disbursal of the second tranche of its ESAF in 1999 were impressive, but there is little room for complacency. While a number of measures have been adopted to reduce the profile of the state, it remains the focus of the national political and economic agenda. Vested interests continue to benefit for a culture in which transparency and accountability do not easily thrive. Political tensions have been suppressed, but not resolved. However, if the process of renewal can be continued, Cameroon, which straddles English- and French-speaking Africa and enjoys an abundance of human and natural resources, could offer a potential business environment that would be the envy of the continent.

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    Investment focus

    Policy and business environment
    Cameroon has the potential to be one of the strongest economies in Sub-Saharan Africa. Improvements in economic management and the imposition of fiscal restraints are indications of government commitment to reforming the economy. The rate of privatisation of state-owned enterprises is increasing, as is the level of non-oil earnings. Recent positive macroeconomic figures will give support to Cameroon's appeal to the Paris Club for additional debt rescheduling. The business environment is becoming more encouraging, levels of investment in the oil sector have risen, and other areas of the diversified economy are benefiting from the many different investment and P production incentives. An overhaul of the financial sector is under way.

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    Currency regulations
    Foreign exchange is freely available. Capital and profits, royalties and other payments may be repatriated without charges. Domestic credit is available. Tied to the French franc, the CFA franc is fully convertible and stable and is now pegged to the Euro.

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    There is preferential access to markets of the EU.

    Investment promotion
    Regulations regarding investment were set up in 1990 and new tariff codes were introduced in 1994. The Investment Code Management Unit promotes and approves investment. Foreign and local investors enjoy the same rights. New small and medium-sized enterprises (SMEs) require 35 per cent local equity and there is no restriction on larger companies. Reserved sectors include petroleum, water, telecommunications, aluminium and cotton where direct foreign in investment is being resisted, but equipment and services may be provided to the parastatals. The Cameroon Investment Code, introduced in 1990 and amended in 1994, offers a package of incentives for investors.

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    Legal protection
    The legal system is bi-jural, with common law in the two provinces previously under English jurisdiction, and civil law in the eight provinces previously governed by France, but there is considerable harmonisation of the two jurisdictions. However, accurate legal information is not always available to private investors. Plans are under way for an arbitration centre to settle disputes between local companies and between local and foreign-owned companies. While the right of private property ownership is recognised, the government reserves the right to take up to 33 per cent of the registered capital in a foreign-owned project. Nationalisation requires prior compensation as agreed by an independent third party. Cameroon is a member of the Multilateral Investment Guarantee Agency (MIGA) of the World Bank which protects against expropriation, breach of contract and war and civil disturbance, as well as the inconvertibility or transfer of currency. Cameroon is also a member of the Paris-based International Chamber of Commerce. It is a member of the African Organisation for the Protection of Intellectual Property (OPI).

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    Value-added-tax (VAT) of 18.7 per cent as from January 1999 has been put on goods and services, with certain exceptions, such as milk, flour, books and pharmaceuticals. The corporate tax rate is 38.5 per cent, and there is a 25 per cent withholding tax (16.6 per cent if the receiver is resident in Cameroon). Businesses are also subject to a turnover tax of 18.7 per cent (8.8 per cent for certain goods). Capital gains tax is 25 per cent. Incentives available include a three-year exemption from registration fees and taxes on loans for companies setting-up and a 50 per cent reduction on company tax for the first year. A five-year tax holiday giving a 50 per cent reduction in company tax, a 50 per cent reduction in withholding tax and a carrying over of losses to the following five years is also available. Companies exporting finished or semi-finished products are exempt from export duties, insurance and transportation charges for products exported. Raw materials and intermediate products originating from Central African countries, and water and electricity, are also exempt from import duties.

    Companies establishing themselves in rural areas are able to deduct 50 per cent of transportation costs. There are double taxation agreements with France, Canada and Switzerland. The oil exploration tax law implemented in April 1998 offers inducements to exploit older, less profitable concessions. The costs arising out of dry wells can be put against tax liabilities, In the research and development stage, under certain circumstances, oil companies and their sub-contractors may be exempt from a 15 per cent special tax on income. An oil company's share of production will increase according to costs incurred in deep-sea exploration and the government may fund its own share of costs incurred by joint oil exploration.

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    Free zones
    The Industrial Free Zone (IFZ), for firms exporting at least 80 per cent of their products, operates throughout the country, both in industrial parks and in one-off special industrial free zones (SIFZ) for agro-processing factories. A wide range of activities are eligible, including manufacturing, and financial and information processing services. Applications are normally processed within 30 days. Companies in the IFZ are given a ten-year tax holiday, with a flat rate of 15 per cent corporate tax thereafter. IFZ firms enjoy tax-free repatriation of funds, and no foreign exchange regulations. There is, on the whole, exemption from customs duties and taxes but import taxes are imposed on certain categories of goods.

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    Both French and English are spoken although French is more widespread. Education levels are relatively good. Although there is a shortage of skilled labour, costs are fairly low. There is a minimum wage. A new labour code in 1992 introduced more flexibility, while continuing to protect the rights of workers. Expatriate workers are allowed, depending on the amount of invested capital, or where local skills are inadequate.

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    95 per cent of electricity is produced from hydroelectricity. Even with substantial oil and gas reserves, oil represents only a fraction of energy consumption. Considerable hydroelectric potential exists on the Sanaga river in the south that so far is unmatched by demand from industry or domestic consumers. Much of the telecommunications network is digitalised. There is a GSM cellular telephone service for some of the main administrative centres and a second GSM 900 cellular telephone service is expected to be established soon.

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    Regional affiliations
    Cameroon is a member of La Francophonie (the affiliation of French-speaking nations), the Franc Zone, BEAC (the Central African Bank), ECOWAS, ACP group of signatories to the Lomé Convention (which is due to expire in 2000), UDEAC and CEMAC. There are bilateral investment agreements in place with many countries.

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