The government of Cameroon has had to cope with a big fall in oil production over the past five years from about 100,000 b/d to 60,000 b/d, but is better placed to manage this decline than many of its neighbours in Central Africa as it already has one of the most diverse economies in the region. As well as making the most of established sectors, Yaoundé is hoping to encourage the creation of new industries, taking advantage of both old and new technology in power generation, agriculture and mining.
In common with almost every other country in the world, the Cameroonian economy struggled in 2020 because of the impact of the Covid-19 pandemic and associated lockdown measures. Growth slowed to 0.5% in 2020 but is expected to have reached 3.5% for 2021 and the IMF forecasts 4.5% for 2022 and 4.8% from 2023 onwards, so there does not appear to have been any long term damage to the country’s economic prospects.
Despite the impact of the pandemic on government finances, credit ratings agency Fitch kept its main credit rating for Cameroon at B with a stable outlook in December because of the country’s moderate debt level and its “expectation that Cameroon will progress on fiscal consolidation and the economic rebound after the pandemic shock”.
Fitch expects agricultural and forestry exports to help drive the country’s growth but on a more negative note, it also pointed out low governance and development indicators, plus security challenges in the Anglophone and Northern regions.
An IMF team visited Cameroon in December and reached agreement with the government on several policy changes, including addressing fiscal risks from state owned enterprises and accelerating the implementation of structural reforms, with the aim of reducing the budget deficit to below 1% by 2024, while keeping public debt below 50% of GDP. The IMF called on the government to speed up efforts to restructure the national oil refinery SONARA. The firm’s debt is now equivalent to 3% of GDP but Yaoundé has reached an agreement with creditor banks to repay just over a third of this over 10 years.
About $116m in IMF funding is to be released to the government following the visit, in addition to the $690m financing arrangement over three years that the IMF has committed to help the country recover from the effects of the pandemic and implement economic reforms. About $177m was released immediately as budget support, despite the fact that there have been calls by political opponents and NGOs operating in Cameroon for an investigation into how a previous $326m loan to help in the fight against Covid-19 was actually spent. Another 685m euros was raised in July via a 12 year Eurobond with a yield of 5.95%.
A variety of domestic and foreign firms have recently announced new investment plans. Cameroon’s biggest brewer, Société Anonyme des Brasseries du Cameroun (SABC), is to build two new projects this year: a brewery in East region and a new corn procesing plant in Noun.
SABC CEO Emmanuel de Tailly said: “The ambition is to accelerate our vertical integration to develop an extremely efficient and competitive agro-industrial model and face future challenges related to our size and autonomy. The model will be based on local systems and the circular economy.” The company hopes to secure tax and customs exemptions to help fund its investment.
Although oil production has declined, Cameroon is making the most of its limited gas reserves. Oil company Perenco and Cameroon’s state owned Société Nationale des Hydrocarbures (SNH) have announced that they will increase the production capacity of their Golar LNG project by 200,000 tons this year to 1.4m tons/year. The scheme, which came on stream in 2018, was the world’s first floating LNG project and so utilises a giant vessel, the Hilli Episeyo, to produce, store and offload liquefied natural gas (LNG) to waiting carriers. Perenco and SNH also hope to drill new wells this year with the aim of supporting a further increase in LNG production to 1.6m tons/year from the start of 2023.
Golar chief executive Karl Fredrik Staubo commented: “We’ve invested in four trains and are currently utilising two. So, if we were to discuss an extension, it needs to be for the full capacity, or at least we need to be paid for the full capacity of the unit.”
The Hillli Episeyo could handle 2.4m tons/year if required. Cameroon has long had significant gas reserves but these have been scattered across several areas, with no one field big enough to justify the construction of an onshore LNG plant. However, the emergence of floating LNG technology enabled the two companies to producee LNG on the vessel from natural gas in the Sanaga and Ebomé fields for global distribution.
More of the country’s previously stranded gas reserves are piped onshore by British firm Victoria Oil & Gas. In January, the company signed a one year extension on its Matanda exploration licence to give it more time to complete the drilling programme that was delayed during the pandemic. Matanda lies close to its existing Logbaba gas field and any new discoveries will be tapped to complement Logbaba gas, which is piped onshore to industrial and power sector customers.
Investors are now beginning to commit to the country in a wider range of sectors. A raft of new hydro schemes are being built across the country, but the country’s vast solar potential is now also starting to be tapped. Given that photovoltaic (PV) construction and operating costs have fallen below those for thermal power plants in most parts of the world, it is likely that the technology will come to dominate the Cameroonian generation mix within the next couple of decades. In December, developer Scatec signed a lease agreement with national power company Eneo to build two combined solar PV and storage projects. The investment will add 36 MW solar and 20 MW storage capacity to the grid by mid-2022. Power storage costs are also falling rapidly as the technology begins to take off. The International Finance Corporation is to contribute up to 20% of project costs.
The IFC Country Manager for Central Africa, Sylvain Kakou, commented: “IFC is proud to partner with Scatec’s Release [solar system] to help bridge the power gap in Cameroon through a unique solution that enables solar power systems to be quickly deployed to help meet the electricity needs of today while paving the way for more competitive, cleaner and long term energy sector sustainability in Cameroon.” Financing was achieved without sovereign guarantees or parliamentary approvals.
The government is attempting to take advantage of growing demand for organic production. It is preparing a draft bill governing the sector to ensure that all production is appropriately certified. Although just 0.2% of African farmland is currently certified as organic, the real figure could be much higher because of the lack of use of pesticides and other inputs in some areas. French agricultural research and cooperation organisation CIRAD noted recently: “In Africa, a small number organic agriculture data is recorded in official statistics. Yet it is increasingly present in local and export markets. African consumers’ demand for those types of products is rising, providing a dynamic economic opportunity.”
In his New Year’s Day address to the nation, President Paul Biya said: “The government must also continue discussions with the private sector to identify further measures that can be implemented. If we have to meet the growth challenge, we must strive to reduce our imports and increase the volume of our exports by boosting domestic production.”
This article is part of a special report supported by Stratline Communications and investiraucameroun.com. The editorial content was commissioned separately and produced independently of any third party.