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2012 Investment Climate Statement - Cameroon


2012 Investment Climate Statement
Bureau of Economic and Business Affairs
June 2012
Report
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Openness to Foreign Investment

Historically, the Government of Cameroon (GRC) sought to attract foreign investment in order to create much-needed economic growth and employment; in his annual speech to the nation on December 31, 2011, President Biya emphasized that 2012 would focus on these economic priorities fueled by, among other things, investment from “friendly nations.” In 2011, trade delegations from the United States, Thailand, Singapore, Germany, Holland, and many other nations visited Cameroon in search of investment opportunities. 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 GRC has not fully implemented the 2002 Investment Charter. In May 2009, President Paul Biya signed a decree postponing to 2014 the deadline for implementation of some provisions of the Investment Charter.

The 2012 budget and finance law reduced the tax burden on certain sectors, such as pharmaceuticals and renewable energy, by eliminating the Value Added Tax for products in those sectors. The same law attempts to exclude the deductibility of expenses charged to offshore “tax havens.” The National Assembly preserved changes made in the 2010 budget and finance law eliminating the tax on registering for incorporation and the tax on corporate equity offerings and reducing duties on, imported used cars under seven years old. 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 from 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 GRC put in place 23 committees to draft separate sector codes. The GRC has already adopted some of the codes, such as the Forestry Sector Code (1994), the Petroleum Sector Code (1999), and the Mining Sector Code (2001). In late 2011, the GRC adopted an Electricity Sector Code. 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. In 2011, Cameroon added “One-Stop-Shops” in the cities of Bafoussam, Douala, Garoua, and Bamenda. Theoretically, these offices should decrease the time it takes to open a business from 30 days to 72 hours, although practice varies, according to sources. The World Bank’s 2011 Doing Business report showed an improvement for Cameroon in the area of Starting a Business, estimating that businesses took an average of 15 days to open.

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. Institutions such as the World Bank and the IMF have long called for the privatization of the national telephone company, CAMTEL, which holds a monopoly on the international gateway as well as the landline 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 calls for tenders from consulting firms to help the government build terms of reference for the privatization. Some privatization programs are jointly managed by the GRC 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 GRC generally continues to hold 30-45 percent shares of “privatized” companies. 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 the AES operating license allows it to own up to 1,000 MW of installed capacity (which approximates its current production). AES may also bid for additional capacity.

The beach and tourist resort of Kribi rose in potential importance as an industrial hub in 2011, making it a more attractive investment destination. Currently, it is the terminus of the enormous Chad-Cameroon oil pipeline and maintains a small fishing port. In 2011, President Biya inaugurated a project to build a deep sea port near Kribi. Cameroon’s first natural gas fired power plant commenced construction in Kribi and will go online in the first quarter of 2013. A new road under construction from Yaounde to Kribi will reduce congestion on the principal Yaounde to Douala route and reduce vehicle travel times. Finally, several iron mining projects in southeastern Cameroon envision a new railroad with its terminus at the deep sea port at Kribi.

Cameroon’s rankings in selected surveys are as follows:

Index/ Ranking

2010

2011

2012

TI Corruption Index

146/178

134/182

n/a

 

Heritage Economic Freedom

132 (World) 25 (Regional)

136(World), 27 (Regional)

n/a

World Bank Doing Business

172/183

165/183

161/183

MCC Government Effectiveness

47%

55%

47%

MCC Rule of Law

40%

40%

41%

MCC Control of Corruption

40%

44%

39%

MCC Fiscal Policy

97%

88%

86%

MCC Trade Policy

17%

14%

7%

MCC Regulatory Quality

47%

50%

54%

MCC Business Start Up

27%

61%

64%

MCC Land Rights Access

49%

34%

35%

MCC Natural Resource Mgmt

59%

61%

58%

Conversion and Transfer Policies

Cameroon uses the Communauté Financière Africaine (CFA) franc as its currency. The regional central bank, the Bank of Central African States (BEAC in French), issues CFA for circulation among 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, regulators require commercial banks to verify that the operations are genuine before proceeding with the transfer. Regulators routinely grant authorizations 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 of authorization.

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 should 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.

Dispute Settlement

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). Prospective foreign investors who wish to avoid entanglement in the court system should consider arbitration as a form of dispute settlement. Under the 2002 Charter, claimants should forward petitions for redress or non-compliance with the provisions of the Charter 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 2011, however, approximately half of GICAM’s members separated to form a competing business association called “eCAM.”

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, although the visa application process can be cumbersome and delivery slow.

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, the GRC abolished many other price controls in 1998, leaving only controls 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 property issues. The GRC simplified procedures for obtaining land titles and decentralized some authority, although American companies still report difficulties obtaining clear title to land. These documents now remain at divisional levels within a timeframe of one to six months. Foreign and domestic individuals and firms may legally establish and own firms, engage in remunerative activities, and establish, acquire, and dispose of interests in business enterprises. Investors may dispose of their property via sale, transfer, or physical repatriation of moveable property.

Protection of Property Rights

The law recognizes and usually enforces secured interests in property. The concept of mortgages exists in Cameroonian law, and the title is the legal instrument for registering such security interests, but in practice some lenders report 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. The Minister of Culture liquidated one such organization, the Cameroon Music Corporation (CMC), charged with registering musical works, and attempted to set up a new structure, Societe Civile Camerounaise de l’Art Musicale (SOCAM). Cameroon’s Supreme Court invalidated the Minister of Culture’s decision to liquidate CMC , 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) provided training on intellectual property rights protection to Cameroonian officials (including customs officers, magistrates, and civil servants) in 2011.

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 four percent in 2011. However, commercial banks in 2011 charged between eight and 14 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%.

Cameroon’s sovereign rating stayed around B and B– over the last several years, according to Standard & Poors and Fitch. 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 $40 million, one third of which are traded on the DSX. In December 2010, the GRC issued its first sovereign bond (five years) to finance development projects, which is also currently traded on the DSX. On December 14, 2011, the GRC issued one short-term treasury bill, which investors fully subscribed, and raised CFAF 50 billion ($100 million).

The French treasury closely monitors the CEMAC central bank, the BEAC. 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 more than 430 operational micro finance institutions countrywide, grossing around 500 billion CFA (approximately USD 1 billion) in deposits.

Enterprises undertake mergers and acquisitions 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 GRC 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 may 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 exports (SODECOTON), textile manufacturing (CICAM), cocoa production (SODECAO), and tea and vegetable oil production (CDC). Cameroon also ran a national airline, now defunct, called CAMAIR. In March, 2011, the GRC re-launched its national airline under the name CamairCo. Although it flies to Europe, 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 by 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 Republic appoints the managing director, and the chairman of the board of directors remains the Secretary General of the Presidency 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 GRC 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, the GRC increasingly requires mining and other projects to take environmental and social impacts into consideration. A common practice for many companies is to build bridges, health centers, and classrooms in villages near the work site. For example, in 2011, the Electricity Development Corporation built an entire new village for an indigenous population displaced by the future Lom Pangar dam project.

The U.S. Embassy is not aware whether the GRC embraces the OECD's CSR principles but the population views CSR favorably and many corporations engage in socially responsible projects.

Political Violence

In February 2008, Cameroon experienced its worst unrest in 15 years, as a transportation strike expanded into a more general protest against rising food and oil prices, as well as 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. Cameroonians re-elected Paul Biya president for another seven year term in October 2011; he has served in that capacity since 1982. Cameroon will likely conduct parliamentary and local elections in July 2012.

As a result of UN mediation and the June 2006 Greentree Agreement, Cameroon and Nigeria implemented the International Court of Justice (ICJ) ruling on the Bakassi Penninsula territorial dispute; 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 2011. The parties expect to complete the 250-kilometer border survey in 2012.

Corruption

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. Cameroon gained some high profile corruption trials and convictions, and President Biya continues an aggressive campaign of corruption arrests dubbed “Operation Sparrowhawk.” In 2011 Cameroon’s Anti-Corruption Commission published its first report and Cameroon created a special tribunal to prosecute corruption cases. However, the GRC has still not implemented a constitutional provision voted in 1996 requiring government officials to declare their assets.

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. On December 9, 2011, the GRC created a special ministry dedicated to government procurement.

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. The U.S. Senate ratified a Bilateral Investment Treaty (BIT) between Cameroon and the United States in 1986, and it entered into force in 1989. While the original time frame for the agreement was 10 years, it 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 and avoiding lengthy dispute resolution.

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).

Labor

Cameroon’s 1992 Labor Code governs labor-management relations, providing for collective bargaining in wage negotiations, eliminating fixed wage scales, abolishing employment-based requirements on education levels, eliminating government control over layoffs and firings, and reducing 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, including worker and employer unions as well as government representatives, addresses labor issues. 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 relative to Sub-Saharan Africa 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. Cameroon’s National Statistics Institute cites Cameroon’s unemployment as 4.4 percent, according to 2005 data.

About 50 percent of adult Cameroonians speak both French and English. Due to inadequate vocational and technical training, however, some industries have difficulties 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 complainants file most of these cases in their 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. In sectors where human resources costs are high, the practice can make it difficult for foreign investors to divest.

Foreign Trade Zones/Free Ports

 

While Cameroon currently 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 must not have detrimental effects on the environment, and enterprises must export 80 percent of production. 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 which oversees and administers Cameroon’s IFZ program.

Though well-intentioned, the GRC has never really fully implemented the IFZ regime.

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. The 2012 finance law requires foreign companies to seek the help of a tax advisor for mergers or acquisitions of a Cameroonian entity. Local affiliates of French transnational companies carry a large amount of capital formation, although domestic banks are fueling some investment.

 

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.

Dole raises and exports bananas, and 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 Region. Cameroon Alumina Ltd. (CAL), a consortium with ten percent American equity, 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 operations. 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 manages 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 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.



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