Previous Quarterly Editions
Expropriation Risk: 64 64 65 65 Political Violence Risk: 66 66 66 67 Terrorism Risk: 65 65 65 65 Exchange Transfer and Trade Sanction Risk: 73 73 73 73 Sovereign Default Risk: 66 66 66 66
TREND ►
Cameroon suffered its first economic contraction in over two decades with real gross domestic product (GDP) falling by 2.4% in 2020, from growth of 3.7% in 2019. The contraction is due to the fall in global oil prices, slowdown in domestic economic activities due to COVID-19-related restrictions and the worsening security situation in the north-west and south-west regions by Anglophone-region separatist militants and in the Far North region by Islamist militants.
The fall in oil exports and remittances widened the budget and current account deficits to about 5% of GDP in 2020. However, the economy is expected to grow by 3.5% in 2021 and 4% in 2022, subject to successful COVID-19 vaccine rollout, the containment of the security situation and the hosting of the African Cup of Nations (AFCON) tournament, which is scheduled from January 9 to February 6, 2022.
On the political front, President Paul Biya is serving his seventh term following his re-election in November 2018. In power since 1982, 88-year-old Biya’s political longevity comes from his ability to consolidate power and maintain control over state institutions and the military. Biya is showing no sign of stepping down; he is eligible to run again in 2025, as the 2008 constitutional amendment removed term limits. Without a clear successor to Biya, a sudden Biya departure is almost certain to trigger a succession battle within the ruling Cameroon People's Democratic Movement (CPDM). This could cause policy paralysis and severe disruption to executive branch operations. A messy transition could lead to a military intervention.
The worsening security situation in the Anglophone regions is concerning. With Biya still prioritising a military solution to the separatist conflict, albeit officially pursuing a negotiated settlement, separatist fighters are determined to embarrass and frustrate the government and military by expanding their attacks, including using improvised explosive devices. Any escalation and expansion of attacks into Douala, Cameroon’s commercial capital, which borders the south-west, would undermine the country's attempted economic recovery, and could raise calls for AFCON’s transfer to a safer venue.
TREND ► OUTLOOK ▲
The African Football Confederation (CAF) reconfirmed on March 30 2021 that Cameroon remains the host of the AFCON, while also raising concern about the progress of preparations. CAF withdrew the hosting of the 2019 tournament from Cameroon for lack of preparations. As the government intensifies its efforts to get its infrastructure ready in time for the tournament, contractors will face increasing threat of contract cancellation and seizure of assets if they fail to deliver.
Meanwhile, Minister of Public Works Emmanuel Nganou Djoumessi served a formal warning of contract cancellation to Chinese construction firm Sinohydro for its delays in the construction of a new headquarters for the Ministry of Public Works and rehabilitation of some roads. The warning came shortly before the CAF announcement.
Biya’s administration remains firmly in control, including occupying 148 of the National Assembly’s 180 seats and 81 of the 100 Senate seats. Meanwhile, Biya’s CPDM party also won nine of the ten administrative regions after the first ever regional elections were organised in December 2020. However, those elections were boycotted by the two main opposition parties, the Cameroon Renaissance Movement (CRM) and the Social Democratic Front (SDF).
Additionally, the administration will continue to crack down on the opposition, critics and members as well as sympathisers of the Anglophone separatist insurgency. The insurgency in the Anglophone regions (accounting for 20% of the country’s 24 million inhabitants), has led to over 3,000 deaths, while 700,000 people are displaced and 860,000 are children out of school since the insurgency started in 2017.
Biya has made some overtures in search of a settlement to the conflict including granting a ‘special status’ in December 2019 to the two Anglophone regions and holding the regional elections to elect regional councils. However, his overtures have fallen short of pursuing a significant reform including the full implementation of the decentralisation of the decision-making process that will empower the regional governors. Moreover, the outcome of the regional election has only reinforced Anglophone leaders' belief that the government is not genuinely committed to relinquishing some powers.
Nigeria-based Islamist group Boko Haram and its offshoot, Islamic State of West Africa Province (ISWAP), have escalated their attacks in Cameroon’s Far North region, where they have been waging an armed campaign since 2014. In 2021, Islamist militants have staged attacks using improvised explosive devices and suicide bombers. The Islamist groups have yet to expand their attacks beyond this region.
In the south, separatist militants are engaging in indiscriminate attacks on civilian and military targets, and burning public infrastructure including schools, markets and post offices. Furthermore, the contractor constructing the Babadjou-Bamenda road section of the Yaoundé-Enugu corridor leading to Nigeria was forced to abandon the project following an attack by separatist militants in January 2021.
Increasingly, the Anglophone militants appear to be copying Boko Haram’s tactics including targeting school children, using improvised explosive devices and kidnapping civilians, state officials and local businesspeople for ransom to raise funds and recruit new members. Nonetheless, collaboration between Anglophone militants and Boko Haram remains unlikely given their differing religious beliefs and ideology.
As a member of the Central African Economic and Monetary Community (CEMAC), Cameroon is bound by the foreign exchange regulation and directives emanating from the bloc’s Bank of Central African States (BEAC). The bank introduced a new foreign currency exchange regulation (which took effect on March 1, 2019) to regulate foreign exchange transaction in the bloc’s six member states.
BEAC has credited the new foreign exchange regulation for the significant improvement of the region’s foreign exchange reserves, which stood at 7.5 months of imports cover by end-2020. The new foreign exchange regulation has significant implications for commercial transactions and raises a variety of risks, including onshore bank credit, exchange rate, convertibility and transferability risks.
The regulation requires companies to seek authorisation from BEAC before opening offshore current accounts and to renew every two years the permission to maintain foreign currency accounts in the CEMAC region. The new regulation has increased from 30 days to within 150 days for the repatriation of exportation proceeds above 5 million Central African francs (about USD9,203) into a certified commercial bank.
However, resident companies operating in the mining and hydrocarbons sectors are currently exempt from the new foreign exchange regulation, after an initial deadline to comply was extended from December 31, 2020 to December 31, 2021, due to the COVID-19-related disruption.
Cameroon’s public debt rose from 12% of GDP in 2007 to 45.8% of GDP by September 2020. Nonetheless, the country’s public debt is well below the CEMAC region’s limit of 70% debt-to-GDP. Cameroon benefits from the G20 Debt Service Suspension Initiative (DSSI), enjoying a moratorium on non-commercial debt service until June 30, 2021. In late March 2021, the government signed an agreement with Japan to extend further its debt service moratorium within the DSSI framework until June 2022.
The moratorium brings much-needed relief to public finances and mitigates any short-term risk of sovereign default by the government. Moreover, recent improvement in global oil prices will boost public finances given that the 2021 budget was based on a benchmark price of USD40.3 a barrel.
The government is also in negotiation with the International Monetary Fund to restart a new economic and financial programme following the expiration of the last one (2017-20), amounting to about XAF400bn (USD736mn). Furthermore, local media reported that, as one option, the government was considering to refinance its 2015 Eurobond, whose amortisations are scheduled to start in 2023.
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