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Enduring economic performance

Article - October 14, 2011
With sights set on diversifying the economy, Cameroon will rely on its vast natural resources
Like the 268 languages spoken within its borders, Cameroon has a GDP ecosystem teeming with natural resources and competitive advantages. Its manufacturing sector, which accounts for 19.2 per cent of GDP, is held as a model for the sub-region. Now, the goal is to maximize domestic assets in order to create jobs and reduce poverty – without relying on oil or mineral revenue. 

“Cameroon is a country at the heart of a bigger country. We are flanked by Nigeria to the north and many of the things we do are visible there and in neighbouring countries,” says Finance Minister Essimi Menye.

Since 2010, economic policy has been recalibrated in the Growth and Employment Strategy Paper (GESP). The document, an MDG-based policy roadmap, identifies the economic sectors that can grow above population growth and thus drive down the poverty level, estimated at 40 per cent. In Budget 2011, financial resources have been prioritised for public works, energy projects and agriculture.

The country has become a vast worksite for infrastructure companies working on roads, railroads, seaports and energy projects.

“For 2011, the Government has taken further measures to push the economy. We expect to surpass real GDP growth of 3.8 per cent this year. Many projects are currently under way, including the construction of the deep seaport at Kribi and a gas-fired power plant,” says Mr Menye.

Engineers are busy building a new generation of hydroelectric power plants. They include Memve’ele, Nachtigal, Song Mbengue, Warak, Colomines and Ndockayo. Lom Pangar, a regulating dam, is one of the mega-projects seeking to harness more than 6,000MW of the Sanaga River’s hydroelectric potential. By 2020, total installed capacity in Cameroon is expected to reach 3,000MW.

“In the future, we are going to build more hydroelectric stations to produce cheap electricity for those looking to invest in Cameroon. We will also export it to neighbouring countries,” says Mr Menye.

Rehabilitating the road network of 1,243 miles will take precedence. Then the Government will take steps to make bank lending more fluid for the private sector. The dense network of SMEs around Douala, which exports throughout Central and West Africa, cannot afford the high interest rates and short maturities offered by commercial banks. Therefore, encouraging banks to widen access to financial packages and leasing arrangements is key to strengthening the SME sector and spurring the creation of new businesses, which in turn will further bolster the nation’s economy.

External shocks during the global financial crisis impacted on Cameroon’s economic growth and GDP slowed to 2 per cent in 2009 as oil prices collapsed.

Demand for the country’s other export commodities, from cocoa to rubber and aluminium, also dropped. To help it adjust for weak external demand, Cameroon sought an IMF-sponsored package valued at $144 million.


Minister of Finance

As of 2011, the outlook has again turned positive with a global rebound under way and oil production ramps up next year after a successful three-year exploration period.

Despite a production slide in the oil sector to 57,500 barrels per day (bpd), oil revenue will grow in 2011. The Government expects exports to benefit from an increase in oil prices through the end of the year. Starting in 2012, new oil wells are scheduled to go on stream, giving oil and gas a second wind.

“However, we wish to keep a low profile in terms of oil and mineral production since our focus is on economic diversification and promoting the non-oil and non-mineral sectors,” says Mr Menye.

Agriculture, which accounts for 18.9 per cent of GDP, will be critical in reducing poverty as it employs more than half of the population, mostly subsistence farmers.

In February 2011, President Biya announced the inauguration of a tractor factory in Ebolowa, in the south of the country, to encourage farm mechanisation. The Government will also provide seeds and fertiliser inputs. In addition, a $100-million agricultural competitiveness project (Projet d’Amelioration de la Competitivite Agricole, PACA) was launched last year to provide incentives for sub-sectors like rice, maize, banana, plantain, poultry and palm oil.

However, agriculture continues to be held back by land issues, lack of farm credit and policies not always conducive to the interests of the 4.2 million smallholder farmers. The main challenge for this segment of the population is how to transition to an industrial type of production while ensuring food security.

“The head of state has called for more investment into the agricultural sector and I think in 2011 we will see an increase in seasonal crops,” says Mr Menye.

Cotton is produced mainly in the Far North and is the fifth-largest earner of export receipts for Cameroon. But an export ban has led to a 60 per cent  drop in production since 2004. Domestic cotton is marketed through the Societe du Developpement du Coton (Sodecoton), which is 59 per cent-owned by the state and has a regulated price regime. The result has been an increase in the amount of cotton smuggled across the border into Nigeria, where prices for cotton are currently almost three times as high as those offered by Sodecoton.

Exports of tropical hardwoods, meanwhile, are another important component of the non-oil economy. As in other countries in Central Africa, the official policy is to export only processed logs as opposed to raw timber. This will add value to local production and contribute to employment at sawmills and river ports.

In the meantime, Cameroon will continue to privatise state-owned companies to generate revenue. The companies that were well managed before being sold off have prospered. Privatisation in those cases was effective because it helped create new jobs and improve customer service. But in the electricity market, the sale of the public utility led to a de facto monopoly.

“Some privatised companies are performing well, but others not so much. Some are managed acceptably after the sell-off, but the state often needs to intervene to guarantee their performance. Ultimately, what we need is for these companies to provide jobs,” says Mr Menye.

Although the non-oil economy is expanding, a broader tax base has not emerged as planned. At the Finance Ministry, officials have vowed to simplify taxes for both large enterprises and SMEs. The number of tax forms has been reduced. At free trade zones, companies are only liable to pay taxes once they have developed their resources.

“Cameroon has created a network of free trade zones so that when investors come in they can take advantage of tax holidays when starting up a business. These tax laws include many add-ons to help develop the enterprise,” explains Mr Menye.

Beyond 2012, the economy will hinge on its ability to improve business conditions. Cameroon ranked 168th out of 183 world economies in the 2011 Doing Business Report of the World Bank. It placed behind Gabon (156th) and Equatorial Guinea (164th). But it was an improvement over the previous year, when it placed 173rd. The best measures in 2011 included dealing with construction permits, starting a business and protecting investors.

“Our vision is to continue to support the economic development of the country and to make sure the management of resources is under control,” says Mr Menye.

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