Tuesday, May 11, 2010

Cameroon On The Mirror

By James Achanyi-Fontem,
Cameroon Link
System of Government
Multi-party presidential regime, universal suffrage: 180 parliamentary seats (five-year term). Executive power rests with the president.
Head of State President Paul Biya – Cameroon People’s Democratic Movement
Head of Government Prime Minister Philemon Yang– Cameroon People’s Democratic Movement
Main Political Parties The Cameroon People’s Democratic Movement (formerly known as the Cameroon National Union) has dominated Cameroonian politics since the country’s independence in 1960 and currently holds 153 parliamentary seats out of a total of 180. The Social Democratic Front is the main opposition party and was founded in 1990. With only 16 seats, the party yields only little power in parliament, yet represents an important voice for the opposition. Other parties represented in parliament: National Union for Democracy and Progress (6 seats), Cameroon Democratic Union (4), Progressive Movement (1)
Ongoing Issues Aside from the official transfer of the Bakassi Peninsula from Nigeria to Cameroon in August 2006, the two countries have recently demarcated the maritime border in the Gulf of Guinea in March 2008. Corruption, food prices and the president’s eligibility for a third term in office remain contentious issues.

Cameroon experiences relative peace and stability

Cameroon is the largest economy in the six-country Central African Economic and Monetary Union (CEMAC) created in 1991 to improve economic and political cooperation in the region. The other countries include Republic of Congo, Gabon, Central African Republic, Chad and Equatorial Guinea.
The country accounts for over 50% of the of the GDP in Central Africa. In comparison to other countries in the region, Cameroon has experienced relative peace and stability.
Cameroon was one-party socialist state until 1992. The constitution allows the president a seven year term. The current President, Paul Biya, has been in power for 28 years.
The 180 members of the National Assembly are elected every five-years by popular mandate. The legal system is complex. It is made up of local customary law, the French Civil Code and the British Law. There are current efforts to unify the laws in the country.
Both the legislature and the judiciary are subordinated to the executive therefore there is no real separation of power. This is reflected in the long tenure and undefined exit of the current President.
Central African Economic Community (CEMAC) is made up of Cameroon, Chad, Central African Republic, Gabon Equatorial Guinea, Congo, Sao Tome and Principe.

Cameroon Political SWOT Analysis

Cameroon has experienced a long period of political stability, though Cameron has not experienced wide spread disparity in its religious, ethnic, linguistic and social diversity Both the legislature and judiciary are subordinate to the executive. Governmental separation of powers is not apparent.
Political power is held by a relatively small ethnic and linguistic group. This increases the risk of a violent transition to power. Despite attempts to curb corruption in the country it remains rampant and increasing. The absence of clear timetable for the exit of President Paul Biya poses a threat to long-term political stability. Cameroon has complied with the financing programme of the IMF. This should encourage transparency. Cameroon has established an election authority, Elections Cameroon (ELECAM) that has the potential to encourage free and fair elections.
Economic Outlook
The Cameroonian economy is expected to fully recover from the effects of the global
financial crisis by 2011. In 2008 the population of the country was estimated to be 17
million and is forecasted to at a CAGR (2005-2009) of 1.2%. Cameroon accounts for over 50% of the population in the CEMAC region.
Cameroon is a member of the African Financial Community (CFA). Members share a common currency- the CFA Franc, which is closely linked to the Euro at a fixed exchange rate.
The main economic activities are agriculture, solid minerals, oil and gas and tourism. Falling commodity prices as a result of the global financial crisis threaten economic growth which averaged 3.7% per year in 2000 to 2006 and 3.6% in 2007. A further reduction is expected in 2008 and beyond as the government falls short of its 10% target.
In 2008, the GDP of Cameroon stood at CFAF 10,000 billion (US$ 23.3billion). The GDP growth rate is expected to fall drastically from previous years’ average of 6% to 2.4% in 2009 and 2.6% in 2010. On the brighter note, the economy is expected to recover quickly by 2011.
However, despite an average economic performance, 40% of Cameroonians live below the poverty line and unemployment rates are extremely high at 30%. The country is also characterised by weak purchasing power, absence of an effective social healthcare system and inadequate legislation.
The anticipated post-recession growth in commodity prices is expected to boost the Cameroonian economy
Commodity exports accounted for 22% of the GDP of Cameroon in 2008. This dipped to 16% in 2009 as the effects of the global economic crisis deepened. The recovery of the global economy is expected to be led by growth in commodity prices.
Cameroon is not as dependent on oil to the extent like major oil producers such as Nigeria and Angola. However, the commodity is still the country’s primary foreign exchange earner and a primary source of revenue. Oil prices are forecasted to reach $83 per barrel in 2010 from recession prices of $30 per barrel.
The government promoting higher output in the agriculture sector especially cocoa and coffee sectors. Although cocoa prices are expected to remain at their lofty levels, the sector’s contribution to GDP is expected to grow from 2% to 3.6% between 2008 and 2013.
Another driver of growth of the Cameroonian economy is the resource extraction industry. In a bid to diversify the economy, the government has been trying to attract billions of foreign direct investment (FDI) into the extractive industries.
Recent developments have proved that the government’s efforts have proved successful. FDI has been received from China, India, the United Arab Emirates and South Korea.
The demand for imported goods increased steadily from 2006 to 2008. In 2009, the demand for imported goods dropped from CFAF 1.8 Trillion (US$4.2 billion) to CFAF 1.6 Trillion (US$3.8 billion). Reduced consumer spending, increased inflation and global economic crisis are responsible for the drop in demand.
Demand for imported good is expected to grow in pick up in 2010 and reach CFAF 2.3 trillion (US$5.3 billion) by 2013. Other economic indicators such as inflation are expected to remain stable in 2010. In 2008 headline inflation was at a record high of 6.2% (y-o-y). The adverse effects of price increases were felt in the agriculture and pharmaceutical sectors.
For instance the discontent over high food prices led to massive riots. In 2009, a number of government taxes on food were cut by 25%. This, inter alia, reduced headline inflation to 4.3% in 2009. In 2010 we expect inflation to be at an average of 3%. Cameroon’s short term and long term economic risk profile are better than African, emerging markets and global average
The euro-pegged CFAF keeps inflation rates and therefore interest rates low by Sub-Saharan African standards. Nominal interest rates were reduced from 15% in 2006 to 8% in 2009. Prudent budgeting and high oil prices have enabled to the country acquire huge surpluses in the last few years. A look at the short term economic risks of Cameroon places it ahead of the African, emerging markets and global average.
In the short-term Cameroon does better than other countries in the CEMAC region, however, in longer term, Gabon fares better. If global oil prices continue to grow as well as demand, Angola could overtake Cameroon as the most significant economy in Central Africa.
Healthcare is a priority for the government but the system lacks basic infrastructure
In Cameroon healthcare is a top government priority. 28% of government expenditure is spent on healthcare and total expenditure on healthcare a percentage of GDP is 5%.
However, the healthcare system is still underdeveloped. Private sector healthcare expenditure is largely out-of-pocket. Other payments systems contribute less than 5% to the private expenditure on health.
Furthermore the number of healthcare workers is insufficient for the needs on the country. The physician density (per 10,000 populations) is 2, while the pharmaceutical personnel density (per 10,000 population) is less than 1.
Despite efforts of the government major health indicators are poor. Life expectancy at birth is put at 51 years while infant mortality rate is high at 87 per 1000 live births. Source: WHO
Life expectancy at birth: 51 years
Infant mortality rate (per 1,000 live births) : 87
Under-5 mortality rate (per 1,000 live births) : 149
Pharmaceutical personnel density (per 10,000) : < 1
Physicians density (per 10,000) : 2
Number of pharmaceutical personnel: 700
Number of physicians: 3,214
Source: BMI
Cameroon Economic SWOT Analysis
Cameroon has a strong agricultural sector. The Heavily Indebted Poor Countries Initiative has enable Cameroon shed some of its external obligations. Unemployment rate is 30%. The employment opportunities cannot keep up with the population growth. Poor infrastructure continue to slow down the development of the entire economy. Failure to meet targets of its current IMF programme may dampen investor confidence. The proposed establishment of the ministry of mining will facilitate the exploration of mineral resources such as cobalt and nickel believed to be available in abundance. Although oil production has been falling, it remains large enough to bring substantial benefits to the country.
No local participation in capital is required for a foreign enterprise to start a business in Cameroon
Source: Delloitte
To start a business in Cameroon, investors are free to choose from a wide selection of business forms inherited from the French and English. Under the English system, the most commonly used are the public limited liability and private limited liability companies.
While under the French system Société Anonyme and Société à Responsabilité Limitée are the most common forms. The creation, purchase or extension of any business entity which includes the purchase of more than 30% of the share capital of a company that is not quoted is referred to as inward direct investment.
The authorization of the Department of Economic Control and External Finance of the Ministry of Finance and Budget is required for funds received from foreign shareholders or from a foreign enterprise within the same group. Local participation in capital is not required except in insurance companies and banks. The investment code provides general guarantees such as non-discrimination between enterprises owned by nationals and foreigners.
Resident entities are assessed for tax on income generated within Cameroon or from transactions carried out outside Cameroon. Company tax is levied at 35% in addition to a local surcharge of 10%. This brings the effective tax rate to 38.5%. Expatriates may apply for authorization to repatriate part of their earnings on a regular basis. Employees may repatriate 20% of their net salary if they are single or with family that reside in Cameroon. However, if their family resides out the CFA zone, they can repatriate 50%.
It takes about a month to start a business in Cameroon, compared to the rest of Africa where it takes an average of two months
Source: World Bank, BMI, Euromonitor
Cameroon ranks 171 out of 183 countries surveyed on the World Bank’s Ease of Doing Business Rankings. The country performance is better than African Regional Average on most sub-components.
It takes about 37 days to register a company which is better than the regional average of 62 days. Also the time taken to register a property is put at 93days for Cameroon and 105 days for Africa.
On the downside the cost of registering the property is prohibitive at 18% of the property value. The process of filing and paying taxes is also tedious as companies spend 1,300 hours compared to the regional average of 336 hours.
Cameroon has one of the most well educated populations in the CEMAC region and Africa in general with an adult literacy rate of 75%. However, poor transport and energy infrastructure, weak judicial system and a relatively inflexible labour force pose major constraints to the business environment Ease of Doing Business Rating
Cameroon Business SWOT Analysis
Cameroon has a well educated workforce. Literacy rate is 70%. According to the World Bank, the time it takes to start a business and register a property are much lower than the African average. Red tape is a considerably large problem. There are high levels of corruption in public life.
Despite being relatively stable in recent years, macroeconomic conditions are prone to volatility as a result of fluctuating commodity prices. Political risk is a factor to be borne in mind, as the eventual struggle over the succession to President Paul Biya could have a negative effect on the operating environment
IMF-supported economic policies in place since 1997 are pushing the economy towards greater reliance on market mechanisms, deregulation and privatisation. Low salaries and high unemployment mean new investment projects can draw on a plentiful supply of competitively-priced labour.