Editorial: Succession uncertainty scaring investors from Cameroon!.

According to the United States Department of State’s latest report, "it offers immense investment potential in infrastructure, agriculture and extractive industries, consumer markets, and modern communication technology".

Despite these advantages, coupled with its National Development Strategy, NDS30, that sets out to create an enabling environment for public-private partnerships, which can spur job growth, boost local production, develop infrastructure and leverage technology for growth and employment, foreign investors are not enticed.

With the advent of COVID-19, Cameroon’s Direct Foreign Investment, FDI, dropped by 35 percent in 2020.

According to the National Technical Committee on the Balance of Payments, Cameroon was able to attract 341.3 billion FCFA in direct foreign investments during the year 2020.

This is a drop of about 185 billion FCFA as compared to 2019, during which the country attracted 527 billion FCFA in direct foreign investments.

The National Technical Committee on the Balance of Payments attributed the drop to the Coronavirus pandemic as Cameroon recorded its first positive case in March 2020.

But the Coronavirus isn't the only cause of a dip in foreign direct investment in Cameroon, given that neighbouring countries like Gabon and Chad have in relative terms, attracted more investments than Cameroon within the same period.

Within the CEMAC Sub-region, Cameroon ranked third for Foreign Direct Investments in 2023, behind Gabon and Chad. While FDI in Cameroon decreased, Gabon saw an increase of $46 million, and Chad experienced a surge of nearly $300 million.

In detail, Gabon received 706.3 billion FCFA in FDI in 2023, up from 678 billion FCFA in 2022. Chad's FDI rose from 376.8 billion FCFA in 2022 to 560.3 billion FCFA in 2023.

According to UNCTAD's World Investment Report 2023, FDI inflows to Cameroon are traditionally low, compared to the potential of its economy.

Officially, most of the FDI inflows come from China, which has been Cameroon's leading foreign investor since the 2000s. 

"Between 2000 and 2014, Cameroon captured 2,750 billion FCFA in foreign direct investment, of which 1,850 billion FCFA came from China. 

That represents around 67% of FDI entering Cameroon. The other FDI came from countries like France, the United States and Nigeria," detailed UNCTAD 2023 World Investment Report. 

In 2023, Cameroon's Ministry of Finance announced a new agreement with China aiming to "prevent double taxation on income and curb tax evasion and avoidance." 

The agreement coincided with Cameroon's pursuit of various mineral exploitation projects, many of which are of significant interest to China.

Why then is Cameroon, with a market larger than all the other five CEMAC countries, not attractive, to the point of falling behind landlocked Chad and Gabon, in the current United Nations Conference on Trade and Development, UNCTAD ranking?

The reasons are numerous. Lloyds Bank Points some of the reasons as: a complicated business environment as evidenced by its 167th place (out of 190) in the Doing Business ranking of 2020.

"One of the highest tax burdens on the private sector in the world, high risk of corruption, lack of infrastructure, risk of high political tension: insecurity in the north at the border with Nigeria, and uncertainty over the succession of President Paul Biya, in power since November 1982," Lloyds Bank Points detailed. 

Some other economists with the common denomination being "succession uncertainty", also add corruption, red tape bureaucracies and then the marginal rates of returns from investments. 

Cameroon is not, however, unaware of some of the obstacles and has on the books measures to motivate foreign investors.

In order to attract more investors, significant programs are being implemented by the public authorities, with the support of financial backers, in order to improve judicial decisions, increase energy supplies, reinforce economic information, simplify procedures, support companies, and ensure the protection of the economic area against illegal threats.

Cameroon also has free trade zones in which all export companies can be set up. The free trade zones are only for the use of companies that produce goods and provide services meant exclusively for export. 

There are many advantages for such companies: exemption from all licenses, authorisation or quota limitation for both export and import, the possibility of being able to open a foreign currency account, no restrictions on sales operations, purchase of foreign currency, right to transfer profits abroad (25% has to be re-invested in Cameroon), tax and duty exemption for a period of 10 years from the beginning of operations and taxation at a general rate of 15% on profits starting the 11th year.

But without political certainty as being the dominant forecast for the country's presidential poll, slated for next year, all these incentives are not attracting direct investors. 

The CPDM regime needs to work doubly hard to ensure political certainty in a competitive environment as a whopping drop of 35 percent in Foreign Direct Investment is an economic and geopolitical scandal.

This story was first published in The Guardian Post issue No:3169 of Monday July 15, 2024