2011 Investment Climate Statement - Cameroon
Openness to Foreign Investment
The Government of Cameroon (GRC) seeks to attract foreign investment in order to create much-needed economic growth and employment. Nonetheless, prospective foreign investors should be aware that Cameroon is still beleaguered by endemic corruption that makes it one of the world’s most challenging business environments.
Cameroon’s legislative body, the National Assembly, adopted an Investment Charter in April 2002 to attract international investors and replace the existing Investment Code of 1990. The 2002 Investment Charter has not been fully implemented. In May 2009, President Paul Biya signed a decree postponing to 2014 the deadline for implementation of some provisions of the investment charter.
The 2010 budget and finance law eliminated the tax on registering for incorporation and the tax on corporate equity offerings. Under the same law, imported used cars under seven years old are eligible for a 30% reduction in duties. In 2008, the National Assembly passed legislation that grants incentives to infrastructural projects worth more than $200 million. These benefits include tax incentives, such as an exemption on the Value Added Tax (VAT). The relevant portions of the 1990 Investment Code -- notably the provisions regarding the free trade zone -- remain in effect until the full implementation of the 2002 Investment Charter. In light of the incomplete implementation of existing legislation, investors must sort through conflicting and sometimes confusing legal requirements.
When the 2002 Investment Charter becomes operational, some foreign and domestic investments will become subject to GRC approval, depending on which “regime” the investment falls under. The “automatic regime” permits investment without prior government approval. The “returns regime” permits investment after an application and the passage of two days without government objection, while the “approval regime" permits investment after an application and the expiry of fifteen days without government objection. The Charter is unclear, however, on how to classify investments (i.e. which regime to use).
In an attempt to render the Investment Charter operational, the government put in place 23 committees to draft separate sector codes. Some of the codes have already been adopted, such as the Forestry Sector Code (1994), the Petroleum Sector Code (1999), and the Mining Sector Code (2001). The other remaining sector codes, including the Telecommunications Sector Code, are yet to be presented to the National Assembly.
On February 18, 2010, Cameroon piloted its “One-Stop-Shop” in Yaounde, which aims to simplify the process for registering a business. Theoretically, it should decrease from 30 days to 72 hours, although in practice the process is taking one to two weeks, according to sources.
The 2010 budget and finance law also changed several provisions relating to the taxation of businesses. The real impact of these measures is still unclear.
Although the 1990 Investment Code places some restrictions on foreign ownership, the 2002 Investment Charter permits 100 percent foreign equity ownership. In practice, substantial local equity ownership may help facilitate the investment approval process. Investors who intend to make direct investments of 100 million CFA francs (approximately USD 200,000) or more must declare their intent to do so to the Ministry of Finance (MINFI) 30 days in advance.
Cameroon is still in the process of privatizing its state-owned companies through a tender process. Donors such as the World Bank and the IMF have called for the privatization of the national telephone company, CAMTEL, which holds a monopoly on the international gateway as well as the network infrastructure. U.S. bidders are eligible to compete for tenders related to the privatization process, regardless of whether the financing originates from the public budget or from multilateral banks. The privatization process may also include call for tenders from consulting firms to help the government build terms of reference for the privatization. Some privatization programs are jointly managed by the government and the World Bank. Some of Cameroon’s recent international calls for tenders in the privatization process (since 2004) have suffered severe setbacks due to lack of interest from qualified bidders or disappointing bids, and several of them have had to be postponed, sometimes indefinitely.
Full privatizations are rare, as the government generally continues to hold 30-45 percent shares of “privatized” companies (although it is willing to reduce these ownership shares in most cases). In strategic sectors, such as the railway, airway transportation, or electricity, the foreign buyers retained market privileges provided for in previous lease contracts.
The privatization of Cameroon’s electricity distribution company, SONEL, resulted in a major foreign direct investment. For a purchase price of $70 million, U.S.-based AES Corporation acquired 56% of SONEL to create AES Sonel in 2001. The concession agreement initially granted AES exclusive market access for distribution over a 20 year period. In addition AES operating license allows it to own up to 1000 MW of installed capacity (which approximates its current production). AES may also bid for additional capacity.
Cameroon’s rankings in selected surveys is as follows:
TI Corruption Index
Heritage Economic Freedom
132 (World) 25 (Regional)
136(World), 27 (Regional)
World Bank Doing Business
MCC Government Effectiveness
MCC Rule of Law
MCC Control of Corruption
MCC Fiscal Policy
MCC Trade Policy
MCC Regulatory Quality
MCC Business Start Up
MCC Land Rights Access
MCC Natural Resource Mgmt
Conversion and Transfer Policies
The unit of currency used in Cameroon is the Communauté Financière Africaine (CFA) franc. It is issued by the regional central bank, the Bank of Central African States (BEAC in French), and is shared with the other members of the Central African Economic and Monetary Community (CEMAC, the regional grouping of Chad, Central African Republic, Gabon, Equatorial Guinea, and the Republic of Congo). Although it is at par with the West African CFA franc, the two currencies are not usually accepted for payment in each other’s zones. France’s treasury guarantees full convertibility of both currencies to the euro. Since 1999, the CFA franc has been pegged to the euro at a fixed exchange rate of 1 Euro to 655.957 CFA francs.
Dividends, capital returns, interest and principal payments on foreign debt, lease payments, royalties and management fees, and returns on liquidation can be freely remitted abroad. Liquidation of a foreign direct investment, however, must be declared to the Minister of Finance (MINFI) and the BEAC 30 days in advance. Commercial foreign exchange transfers must also be cleared by MINFI for business deals amounting to more than 100 million francs CFA (about USD 220,000). For transactions below this amount, the commercial banks are required to verify that the operations are genuine before proceeding with the transfer. These authorizations are routinely granted if the transactions comply with investment and fiscal regulations. The BEAC has a centralized computer system for electronic transactions within the banking network. This system (SYGMA is the French acronym), reduced financial transfer periods to one working day from the time the authorization has been granted.
Expropriation and Compensation
The 1989 Bilateral Investment Treaty (BIT) protects U.S. investments in Cameroon. Foreign and domestic investors receive legal guarantees that substantially comply with international norms, including full and prior compensation in the event of expropriation on the basis of public interest. American investors are advised to seek GRC approval to protect their investments under the BIT. Undeveloped land is more at risk for local expropriation than developed property. There are no confiscatory tax regimes or laws that could be considered detrimental to American or other foreign investments. The 2002 Investment Charter recognizes property rights and facilitates land acquisition. Cameroonian law does not require local ownership of land. Historically, there have been no major expropriations or other disputes involving American investment in Cameroon.
The 1990 Investment Code states that, at the time of incorporation or application for Investment Code benefits, a firm may choose one of several procedures: adjudication by local courts, arbitration by the international courts of justice, or international arbitration centers, according to Cameroonian law and the arbitration regimes of which Cameroon is a member (described below). Arbitration as a form of dispute settlement is gaining ground in Cameroon and should be considered by prospective foreign investors who wish to avoid entanglement in the court system. Under the 2002 Charter, petitions for redress or non-compliance with the provisions of the Charter should be forwarded to a Regulation and Competition Board, which was created in September 2004. Cameroon accepts binding international arbitration on investment disputes between foreign investors and the government.
Difficulty in resolving commercial disputes, particularly the enforcement of contractual rights, remains one of the serious obstacles to promoting investment in Cameroon. Foreign corporate plaintiffs are often frustrated with the slow pace of the Cameroon legal system. Local businesses routinely exert pressure on the courts, which may be swayed by bribes or by the clout of a political heavyweight. Some foreign companies have alleged that judgments against them were obtained fraudulently or as the result of frivolous lawsuits. The enforcement of judicial decisions is also slow and fraught with administrative and legal bottlenecks.
Cameroon's bankruptcy law is an integral part of its commercial law. In case of bankruptcy, negotiable and enforceable guarantee instruments cover creditors.
Cameroon is a member of the International Center for the Settlement of Investment Disputes (ICSID, also known as the Washington Convention), and is a signatory to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the New York Convention). In May 1997, Cameroon’s Council of Business Managers and Professional Associations (GICAM), an association of 207 companies and 15 professional associations representing 70 percent of all formal sector business activity in the country, created its own arbitration center to handle business disputes. In early 2001, CEMAC also established a court in N’djamena to adjudicate regional commercial disputes.
Cameroon is a signatory to the Organization for the Harmonization of Corporate Law in Africa Treaty (OHADA in French). Among other things, OHADA provides for common corporate law and arbitration procedures in the 16-member signatory states: (Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Comoros, Congo, Côte d’Ivoire, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Mali, Niger, Senegal and Togo). Cameroon is a signatory to the 1985 Seoul Convention that established the Multilateral Investment Guarantee Agency (MIGA), aimed at safeguarding non-commercial risks. Cameroon is also a signatory to the Lome Convention (as revised in Mauritius in 1995), which created an arbitration mechanism to settle disputes between African, Caribbean, and Pacific states (ACP) and contractors, suppliers, and service providers financed by the European Development Fund (EDF).
In July 2008, Cameroon adopted a law on public-private partnership (PPP) agreements, providing more clarity for the administrative, financial, and judicial framework for such arrangements.
Performance Requirements and Incentives
Investment incentives will change when the 2002 Investment Charter is fully implemented, until which time the relevant incentives from the 1990 Investment Code remain in effect. Depending on the size and nature of the investment, investments fall under one of the following regimes of the 1990 Code, each of which has specific eligibility and performance requirements:
--Under the “basic” regime, firms must export at least 25 percent of their annual production, use Cameroonian natural resources for at least 25 percent of the value of their inputs, and create at least one local job for every 10 million CFA francs invested (approximately $20,000). Benefits from the regime include an initial three-year tax exemption; customs fees as well as an exemption on purchase taxes relating to production and operational equipment are also exempted. Eligible companies are entitled to a number of exonerations and other exemptions for the first five years of the operational phase. The basic regime applies when three conditions are met: job creation for Cameroonians at the above rate, export activities amounting to 25% of turnover and, finally, use of national natural resources.
--Under the small- and medium-scale enterprise (SME) regime, which applies to firms having total assets of less than 1.5 million CFA francs ($3,000), there is no requirement for job creation. SME enterprises will receive the same benefits as listed above if they fulfill the SME regime.
--Under the “strategic” regime, firms must export at least 50 percent of their annual production, use natural resources of at least 50 percent of the value of their inputs, and create at least one local job for every 20 million CFA francs invested (approximately $40,000). Strategic companies will enjoy the same benefits as above for the first five years. Strategic companies must be operating in sectors that have been earmarked as strategic in the National Industrialization Road Map such as energy and mining.
Additionally, the Industrial Free Zone regime, which applies to any location in Cameroon, grants broad exemptions from taxation and regulation, so long as 80 percent of production is exported. This provision of the 1990 Code is still in force, though it is unclear how the awaited implementation of the 2002 Investment Charter will affect it.
No requirements for technology transfer or restrictions on geographic location exist. Where domestic Cameroonian firms lack technical knowhow in research and development, foreign firms can bid for projects that benefit from GRC subsidies. Visa, residence, and work permit requirements do not inhibit foreign investors.
Quantitative restrictions on imports, non-tariff protection, and many import licensing requirements were lifted by the 1994 Tariff Code to conform to CEMAC regional customs regulations. In addition, many other price controls were abolished in 1998, and now remain only on “strategic” goods and services such as electricity, water, public transportation (roads), telecommunications, cooking gas, palm oil, imported fresh fish, pharmaceuticals, school books, and port-side activities (such as stevedoring).
Right to Private Ownership and Establishment
The government recognizes the right of private ownership. The Ministry for State Property and Land Tenure governs land property issues. The procedures for obtaining land titles have been simplified and the authority decentralized. These documents can now be obtained at Divisional levels within a timeframe of one to six months. Foreign and domestic individuals and firms are legally entitled to establish and own firms, engage in remunerative activities, and establish, acquire, and dispose of interests in business enterprises. Investors are permitted to dispose of their property via sale, transfer, or physical repatriation of moveable property.
Protection of Property Rights
Secured interests in property are recognized and usually enforced. The concept of mortgage exists in Cameroonian law, and the title is the legal instrument for registering such security interests, but in practice some lenders have experienced extensive delays in obtaining court rulings to enforce their claims on assets given as collateral. Cameroonian law provides foreign and domestic investors with property rights protections that substantially comply with international norms and do not discriminate between foreign and domestic firms. In practice, however, Cameroonian courts and administrative agencies often issue rulings favorable to domestic firms and have been suspected of corrupt practices.
Cameroon is a member of the 16-nation African Intellectual Property Organization (OAPI in French), which is a member of the World Intellectual Property Organization and offers patent and trademark registration in cooperation with member states. Patents in Cameroon have an initial validity of ten years. They can be renewed every five years upon submission of proof that the patent was used in at least one of the OAPI member countries. Without continued use, compulsory licensing is possible after three years. Trademark protection is initially valid for 20 years with renewal possibilities every ten years.
Cameroon is also a party to the Paris Convention on Industrial Property and the Universal Copyright Convention.
In 2008, Cameroon’s copyright registration system changed from a single body accepting registrations to multiple bodies divided according to field. One such organization, the Cameroon Music Corporation (CMC), charged with registering musical works, was liquidated by the Minister of Culture and a new structure, SOCAM (Societe Civile Camerounaise de l’Art Musicale), has been announced to replace CMC but is yet to begin functioning. The Minister of Culture’s decision to liquidate CMC has been overturned by Cameroon’s Supreme Court, leaving the status of copyright registration for music, a prolific industry in Cameroon, in question. Other registration bodies include the Copyright Corporation for Literature and Dramatic Arts (in French, SOCILADRA) which covers literature and software production; the Copyright Corporation for Visual Arts (in French, SOCADAP) for paintings; and the Copyright Corporation for Audio-Visual and Photographic Arts (in French, SCAAP) for audiovisual and photographic production.
IPR is constrained by poor enforcement of existing laws, the cost of enforcement, the pervasiveness of infringement, rudimentary understanding of IPR among government officials, and a lack of public respect for copyright laws. Software piracy is widespread; pirated DVDs are common. Cameroon is taking steps to implement the World Trade Organization’s TRIPs agreement and the United States Patent and Trade Office (USPTO) has provided training on intellectual property rights protection to Cameroonian officials (including custom officers, magistrates, and civil servants).
Transparency of Regulatory System
While Cameroonian business laws exist, implementation of these laws can be challenging. Under the current judicial system, local and foreign investors (including some U.S. firms) have found it complicated, time-consuming, and costly to enforce contractual rights, protect property rights, obtain a fair and expeditious hearing before the courts, or defend themselves against frivolous lawsuits. Implementation of the OHADA law -- in force since 2000 -- in French-speaking Cameroon has been satisfactory for some investors. The Anglophone regions of Cameroon, with business law inspired from common law, have sometimes shown resistance to implementing OHADA.
American, Cameroonian, and third-country firms complain that the tax system and its enforcement are predatory and prejudiced against the formal sector. Under the 2002 Investment Charter, however, taxation and customs enforcement mechanisms should apply equally to all taxpayers.
Efficient Capital Markets and Portfolio Investment
The cost of capital in Cameroon is high. The BEAC has been working to lower benchmark interest rates from 11 percent in the 1990s down to 5.75 in 2010. However, commercial banks in 2010 charged between eight and 16.5 percent interest, depending on the risk, with maximum repayment terms of three years. Some large lenders to major companies have been able to extend the term beyond five years. Microfinance institutions can charge even higher rates on lending, ranging between 8% and 35%. In his annual address to the nation, President Biya criticized the financial sector for its excess liquidity and its overly risk-averse lending practices.
Cameroon has a sovereign rating of B (Standard and Poors) and Fitch IBCA. Foreign investors are able to obtain loans on the local market, but usually prefer to borrow offshore due to very high domestic interest rates and the unavailability of long-term capital in the domestic market.
The Douala Stock Exchange (DSX) opened in April 2003. Three companies are currently listed on the DSX: water bottling company SEMC, agro-forestry company SAFACAM, and agro-industrial company SOCAPALM. SOCAPALM’s offering in 2009 was overbid. In late 2009, the World Bank’s Investment Finance Corporation issued bonds worth USD 40 million, one third of which will be traded on the DSX. In December 2010, the GRC issued its first sovereign bond to finance development projects and it will be traded on the DSX.
BEAC, the regional central bank and banking regulator, is closely monitored and regulated by the French treasury. Cameroon has 13 fully operational commercial banks, a state-owned mortgage company, which provides medium term loan finance to home buyers, and 25 insurance companies. Aggregate assets of commercial banks are over 1,800 billion CFA francs (approximately USD 3.6 billion). Commercial banks and a wide network of micro-finance institutions constitute the largest part of the financial sector. The amount of non-performing assets held by these institutions is unknown. Cameroon has 430 operational micro finance institutions countrywide, grossing around 500 billion CFA (approximately USD 1 billion) in deposits. The Central African Banking Commission (COBAC) recently granted banking licenses to the West Africa financial group, Banque Atlantique, Gabon-based BGFI, and Banque Marocaine du Commerce Extérieur (BMCE), which focuses essentially on investment banking.
Mergers and acquisitions are undertaken through discreet negotiations. Private firms are free to associate with any partner they choose and are free to organize industry associations. Cameroon’s six privatization laws are complete, but have onerous bureaucratic requirements.
Cameroon's financial, legal and regulatory systems are solid but enforcement is inconsistent and often arbitrary. The government has not yet established a dedicated court system to protect and encourage investments. Cameroonian minority partners of foreign firms have occasionally attempted – in most cases unsuccessfully - to take over the operations of joint companies via court action or through harassment and intimidation by government officials.
Competition from State-Owned Enterprises
Private enterprises are allowed to compete with public enterprises when marketing products and services in Cameroon. Public companies are not eligible to participate in the bidding process when it comes to public tenders. However, if the government is certain that one of its companies can provide the service, it will typically not call for a tender.
State-owned companies are active in a number of areas: Telecommunications (CAMTEL), social security (CNPS), oil refining (SONARA), oil and gas exploration (SNH), both upstream and downstream petroleum product distribution (TRADEX), mail delivery (CAMPOST), mortgage finance (Credit Foncier), real estate (SIC), land development and management (MAETURE), cotton production and exportation (SODECOTON), textile manufacturing (CICAM), cocoa production (SODECAO), and tea and vegetable oil production (CDC). Cameroon also ran a national airline, now defunct, called CAMAIR. The Government of Cameroon intends to re-establish a national airline in early 2011 under the name CAMAIRCO. There are no direct flights between Cameroon and the United States.
Each state-owned company has an appointed board of directors and a parent ministry. The most prestigious state-owned company, the National Hydrocarbons Corporation (SNH in its French acronym), operates in the field of oil and gas exploration, mainly by taking production-sharing agreements with private companies. The president of the board of directors is appointed by the President of the Republic.
Cameroon does not have a sovereign wealth fund.
Corporate Social Responsibility
There is a general awareness of corporate social responsibility (CSR) among both producers and consumers. On a case by case basis, the Government of Cameroon requires elements of corporate responsibility as part of the permit and project development process. For example, some mining companies invest in social infrastructure, such as health centers or schools, and other projects to benefit the local populations in the areas of their mining operations. While not always mandatory, mining and other projects have increasingly been required to take environmental and social impacts into consideration. A common practice for many companies is to build bridges and classrooms in villages where its work site is located.
Post is not aware that the OECD's CSR principles have been embraced but it is evident that CSR is viewed favorably by the population and that many corporations engage in socially responsible projects.
In February 2008, Cameroon experienced its worst unrest in fifteen years, as a transportation strike expanded into a more general protest against rising food and oil prices and President Biya’s plan to amend the constitution to allow him to eliminate presidential term limits and extend his rule. The current political climate is fairly calm and peaceful. Presidential elections will likely occur in October, 2011, although an official election date and calendar have not been established. Many Cameroonian and international observers believe election-related political violence to be a real possibility.
As a result of UN mediation and the June 2006 Greentree Agreement, the International Court of Justice (ICJ) ruling on the Bakassi Penninsula territorial dispute with Nigeria has been implemented; Cameroon resumed full control of the region on August 14, 2008. Relations with Nigeria are increasingly friendly. In 2009, delegations from both countries travelled to the Far North Region to lay the first boundary pillar to demarcate the Cameroon-Nigeria land border and the parties continued to survey the border without major disputes in 2010.
Corruption is endemic in Cameroon, which consistently ranks as one of the most corrupt countries according to Transparency International’s Corruption Perceptions Index (see above). Transparency International has an active presence in Cameroon. The government signed the U.N. Convention Against Corruption (UNCAC) in April 2004 and ratified it in 2006. With the assistance of international organizations and financial institutions, Cameroon has undertaken several anti-corruption and good governance initiatives. There have been some high profile corruption-trials and convictions, and President Biya continues an aggressive campaign of corruption arrests dubbed “Operation Sparrowhawk.” The constitutional provision voted in 1996 requiring government officials to declare their assets has not yet been implemented.
Government reforms in the public procurement process began in 2002 when observers were installed to perform systematical ex-post-facto audits on valuable procurements. Nonetheless, governance of the public procurement process remains problematic. In November 2004, the GRC published new anti-corruption measures for public contracts.
Corruption is a criminal offense in Cameroon, and carries jail time (five years to life) and a fine ($400 to $4,000). Sectors with high corruption potential include government procurement, customs, and public health facilities.
Bilateral Investment Agreements
Cameroon has bilateral investment and/or commercial agreements with the following countries: Austria, Belgium, Canada, China, Denmark, France, Germany, Greece, Italy, Japan, Russia, South Korea, Spain, Switzerland, the United Kingdom, and the United States. Similar agreements also exist with other countries in Africa, Asia, Latin America, and Eastern Europe. A Bilateral Investment Treaty (BIT) between Cameroon and the United States was ratified in 1986 and entered into force in 1989. While the original time frame for the agreement was 10 years, it was renewed automatically under the terms of the treaty. The United States invoked the BIT both in 1997 and 2004, and Cameroon acquiesced in both cases, agreeing not to implement legislation contrary to the treaty.
OPIC and Other Investment Insurance Programs
The U.S. Government signed an Investment Guarantee Agreement with Cameroon in 1967. OPIC has been receptive to American firms seeking war, expropriation, and inconvertibility insurance, and has guaranteed several ventures in Cameroon. The 1990 Investment Code guarantees protection from non-commercial risk, and Cameroon is a signatory of the Multilateral Investment Guarantee Agreement (MIGA).
Cameroon’s labor-management relations are governed by the 1992 Labor Code, which restored collective bargaining in wage negotiations, eliminated fixed wage scales, abolished employment-based requirements on education levels, eliminated government control over layoffs and firings, and reduced the government’s role in the management of labor unions. The Labor Code does not apply to civil servants, employees of the judiciary, and workers responsible for national security. In theory, the Labor Code provides a legal framework for the emergence of a flexible and efficient labor market, but such a market has not fully emerged. Cameroon is a party to the ILO Conventions 87 and 98 permitting the freedom to form unions and the right to collective bargaining.
After a long period of dissension between the government and labor unions, a new tripartite approach is being used to address labor issues. The tripartite approach includes worker and employer unions as well as government representatives. This method has substantially improved relations between the parties for the benefit of both the workers and the employers, and the government intends to improve further workers’ rights and establish a new concept of internal discussions within companies before workers resort to strikes. The Minister of Labor and Social Security refers to this policy as “Social Dialogue.” The Ministry of Labor has taken an increasingly broad view of certain aspects of the Labor Code, especially regarding payment of “legal rights” to employees in the event of a restructuring or sale.
Cameroon has a high literacy rate and offers a relatively well-educated labor force alongside a surplus of unskilled and non-technical labor. According to a 2005 survey conducted by the National Institute of Statistics in the two major cities, Yaounde and Douala, the unemployment rates (ILO criteria) in these cities are 14.7 percent and 12.5 percent, respectively. (The ILO defines an unemployed person as one who fulfills three conditions: a) without work, i.e. not having worked a single hour in a referenced week; b) available for work in the coming 15 days; c) actively seeking employment or having found one that will start later). In 2010, the Ministry of Employment and Vocational Training estimated that 75% of the active workforce is underemployed, and less than 1 million of Cameroon’s 19.5 million people are employed in the formal sector.
About 50 percent of adult Cameroonians speak both French and English. Due to inadequate vocational and technical training, however, some industries have experienced difficulties in recruiting skilled labor in the domestic market. Also, the ready availability of unskilled labor means that technology used in many sectors, especially construction, remains basic.
An individual raising a discrimination case against an employer may elect to bring the case where he resides or where he works. In practice most of these cases are filed in the complainant’s place of residence. This compels the company to dispatch officials to sometimes distant places where the individual might have better local contacts than the company.
In recent years, Section 42 of the Cameroon Labor Code has posed some challenges to foreign companies selling their assets in Cameroon. Section 42(2)(b) allows employees or their labor organizations to demand compensation from the selling entity in advance of the sale of the asset. They may ask for termination of their contract and severance pay prior to the transfer, knowing that the new acquirer would still hire them or would need their acquired experience and service. This is seen as detrimental to foreign investment, especially in sectors where human resources costs are high, as it can make it difficult to divest.
Foreign Trade Zones/Free Ports
While Cameroon presently has no designated foreign trade zones or free ports, it has an Industrial Free Zone (IFZ) regime applicable at any location through “industrial parks” or “single-factory” zones. Created in 1990 to promote internationally competitive export industries, the IFZ regime creates certain broad regulatory and tax exemptions for investors. It is unclear how the 2002 Investment Charter will affect the IFZ regime privileges.
To qualify for IFZ status, the goods or services produced by an enterprise must not have detrimental effects on the environment, and 80 percent of production must be exported. IFZ firms receive a ten-year exemption from taxes and are subject only to a flat tax of 15 percent on corporate profits beginning in the eleventh year. They have a right to tax-free repatriation of all funds earned and invested in Cameroon and are exempt from foreign exchange regulations. They are also exempt from existing and future customs duties and taxes, including those on locally purchased production inputs. The National Agency for Industrial Free Zones is the regulatory body established to oversee and administer Cameroon’s IFZ program.
Though well-intentioned, the IFZ regime has never really been fully implemented.
Foreign Direct Investment Statistics
Although foreign direct investment (FDI) plays a key role in the Cameroonian economy, reliable FDI statistics are not available. Neither the government nor the Chamber of Commerce has compiled a comprehensive list of foreign investments in Cameroon or estimates of current values. A large amount of capital formation is carried by local affiliates of French transnational companies.
The Chad-Cameroon pipeline, which runs over 1,000 kilometers from Chad’s Doba oil fields to the sea at Kribi, is one of the largest U.S. investments in sub-Saharan Africa, estimated at USD 4.4 billion when it was constructed in 2000. Exxon/Mobil and Chevron/Texaco jointly hold a majority interest in the pipeline company; this single project accounts for the lion’s share of American investment in Cameroon.
Outside of the petroleum sector, U.S.-based AES Corporation owns a majority stake in SONEL, the privatized national power producer and distributor. In 2009, AES launched “African Power Development Corporation,” headquartered in Douala, as a holding and investment vehicle for both its operations in Cameroon and planned activities elsewhere in Cameroon, Nigeria and possibly the Democratic Republic of Congo.
Del Monte, which has a U.S. equity stake, runs a banana production sharing contract with the country’s leading agro-industrial corporation, CDC. Colgate-Palmolive manufactures oral care/hygiene products for the local and regional markets at its Douala plant. In April 2003, the government awarded a permit to Geovic, a U.S. mining firm, to extract rich deposits of cobalt and nickel in Cameroon’s East Province. Cameroon Alumina Ltd. (CAL), an American-led project development consortium, is planning to develop bauxite resources in Cameroon’s Adamoua region in a multibillion dollar project that will entail investments in the rail, port and power sectors. Additionally, several dozen U.S. companies are currently represented in Cameroon either directly or through agents or distributors.
France is still a major economic partner in Cameroon. Three commercial banks are majority French-owned. French interests are present in sugar production plants, cement production, food and drink and in the French telecommunications firm Orange, which operates one of Cameroon’s three GSM mobile telephone companies. French interests are also dominant in distribution (auto and machines), logistics, and transportation ventures, ranging from railway network operation to the port terminal operatorations. French exports of pharmaceuticals make up 70% of the Cameroonian market share. In all, there are more than 100 French branch companies in Cameroon employing some 30,000 people, and more than 200 enterprises owned by French nationals.
China, South Korea, South Africa, Morocco and India are increasing their involvement in Cameroon’s economy. Royal Air Maroc has regular flights to Douala and Yaounde, a Moroccan investment bank has opened a regional office, and a Moroccan company was awarded the management contract for the national water utility. Chinese and Korean companies are exploring mining opportunities and projects to manufacture cement. South African firm MTN operates one of Cameroon’s three mobile telephone licenses. A South African group has also acquired the Cameroon Development Corporation’s tea sector and is now known as Cameroon Tea Estates (CTE). Indian nationals are involved in retail sales and Hindalco shares an equity stake in the CAL bauxite mining project.