Cameroon: Large potential hindered by government meddling

An FSG On The Ground Insight: Cameroon benefits from a peaceful environment and diverse culture, but the country’s business potential is vastly undermined by complacency and poor government policies, finds Alexa Lion, our Sub-Saharan Africa analyst, currently on a research trip in Cameroon.

A stifled business environment

Cameroon is Central Africa’s largest market and its most diversified economy – people call it “L’Afrique en miniature” because of its diversity. However, the country has not met its economic potential because of corruption, bottlenecks, and short-sighted government policies.

Cameroon isn’t home to the vibrant competitiveness found in neighboring Nigeria. Many Cameroonians I spoke to are proud of their country’s stability, laid-back culture, and bilingualism. Unlike Côte d’Ivoire, for example, which has many foreign companies, Cameroon is home to several successful homegrown firms.

However, government interference makes it very difficult to scale a local business and for foreign companies to operate efficiently.

Services that should be public – water and electricity – are private (the grid was recently sold to private equity firm Actis), whereas entities that are public should be private – ICT, hospitality, and spirits. Monopolies abound, making it very difficult for companies to compete on price and for service to be of quality. Many contracts are awarded on a discretionary basis, such as the country’s 3G license that was given to a Vietnamese military organization. The result is a difficult environment in which to do business; 3G still has not arrived, water and electricity shortages are chronic, and prices are static.

The situation in which SONARA, the national refinery, is in reflects misguided government policies in a microcosm. It is 80% government owned, meaning it must abide by the government’s self-interest pricing mechanism. If SONARA purchases crude oil at market prices, it must sell its refined product at a price decided by the government. The gap should theoretically be financed by the government, but payments are irregular and rarely cover the amount needed, meaning that SONARA now faces a 380 billion CFA financing gap. Lower oil prices will help it in the short term by reducing the gap between the crude oil it buys and the refined product it sells, but its accumulated debt poses a risk to operations.


(Above: SONARA, the national oil refinery, is in a financial bind because of short-sighted government policies)

Snapshot of the retail sector

The consumer goods sector is dominated by French and Turkish brands. The latter are much liked because of their quality and fair price while French consumer goods enjoy popularity with higher-end consumers. French brands are very visible in the market in part because of historical legacy, but Turkish brands are rapidly gaining market share. The commercial relationship between Turkey and Cameroon seems to be strengthening, evidenced by the direct flights to Istanbul advertised on billboards throughout the city.

Although formal retail is slowly picking up and e-commerce is gaining popularity (websites Jumia and Kaymu are registering strong growth in the market since beginning operations last year) there doesn’t appear to be much bottom-up growth.

“Money tends to circulate in a pool of elites, with fewer lower income Cameroonians breaking into the middle class,” the CEO of a local distribution company told me. This perception was echoed by several other business leaders and lawyers I met who only observed multinational corporations in the industrials sector to be entering the market.

Chinese influence

The Chinese presence is very felt, whether through signs reading “Cameroon-China Friendship” outside government buildings, the second bridge being constructed by a Chinese company over the Wouri river, or the many “Tekno” stores found selling cheap electronics through the region. The Cameroonian and Chinese governments have a tight-knit relationship, and many multinationals struggle to compete on price as cheap products flood the market.


(Above: “Friendly China-Cameroon,” the building in downtown Douala reflects the deep commercial relationship between the two countries)

Looking ahead

Any bottom-up push to change counter-productive government policies is unlikely. “Cameroonians are too well-fed and laid-back to put pressure on the government,” according to one local business owner. Although higher transport costs and the partial removal of subsidies was greeted with few grumbles, the government’s suggestion to increase the tax on beer was met with nationwide demonstrations. The tax was eventually repealed while other government policies that incite corruption and unfair pricing remain.

However, Cameroon’s economic potential remains vast. The country is well-endowed with natural resources ranging from natural gas to agriculture and is connected to both West and Central Africa through Douala. Its large population and relatively good level of education mean recruiting challenges are easier to overcome than in neighboring Central African countries. Very importantly, the country is stable. Cameroon’s laid-back culture, peaceful environment, structured justice system, strong human capital, and natural resources provide ample business opportunities.

For the country to really take off, the government must overcome its short-sighted policies by reforming the private and public sector and setting its sights on long-term economic success.

FSG’s Alexa Lion is currently on a research trip through Cameroon. Follow her travels and insights on Twitter, and check back soon for more updates.

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