Cameroon: Anglophone protests weigh on investor confidence

01 December 2017

Political risks constitute the main threat to Cameroon’s robust economic and investment environment. There are growing concerns of a succession crisis, given President Paul Biya’s age. Unrest in Cameroon’s Anglophone regions will be a further risk for investors. Infrastructure investment should yield long-term economic benefits, however the escalation in external borrowing to fund spending has increased sovereign credit risks.

Security Environment

President Paul Biya has been in power since 1982 and, at 84-years old, concerns are growing that Cameroon will experience a destabilising succession, particularly if Biya decides to contend the 2018 presidential election. Biya has not appointed a successor, and his death or incapacitation could cause a power struggle in the ruling Cameroon People’s Democratic Movement (RDPC), which would likely undermine the investment environment.

Protest risks are mounting in Cameroon’s Northwest and Southwest Anglophone regions. Cameroon’s Anglophone minority have launched a number of demonstrations since October 2016, in protest at perceived marginalisation by the government. In December 2016, protests in Bamenda turned violent, as police used live ammunition and tear gas on participants. At least four protestors were killed. Since then, the government has tried to diffuse the situation, by promising to recruit more English-speaking teachers. However, the risk of civil unrest will rise as the 2018 election approaches.

A growing number of hard-line separatists will increasingly demand an independent Anglophone Cameroon, and may target security forces. In September 2017, an explosive device was detonated at a major roundabout in Bamenda, injuring 3 police officers. Protests will be concentrated in predominantly English-speaking cities, such as Bamenda and Kumba, and have the potential to turn violent, elevating death and injury risks for bystanders.

Trading Environment

Since 2010, the Cameroonian government has undertaken a significant infrastructure investment programme. Whilst this should yield long-term economic benefits, elevated public spending has also weakened the country’s sovereign credit profile. Public capital expenditures rose to 8.5% of GDP in 2016, nearly double the figure in 2010. A significant portion of the investment programme is being funded by foreign lending, much of which is on non-concessional terms. Around 75% of debt is held in foreign-currency, whilst overall government debt is forecasted to reach 40.9% of GDP in 2019, from 19% in 2013. In the context of declining oil export revenues, a ramp-up in external borrowing has raised the risk of external debt distress.

However, the completion of major infrastructure projects in the next 5 years should ease pressure on Cameroon’s fiscal deficit, allowing it to fall from 7.6% of GDP in 2016 to 3.0% in 2023. The deterioration in sovereign debt metrics is also offset by the International Monetary Fund’s (IMF) approval in June 2017 of a 3-year USD 666.2 million Extended Credit Facility (ECF) with Cameroon.

Designed to enhance fiscal sustainability and debt affordability, the ECF should reduce the likelihood of government non-payment in the medium term outlook. In November 2017, the IMF recognised the steps taken by the Cameroonian government to enhance revenue mobilisations, increase budget transparency and rationalise public spending. 

Investment Environment

Private investors in Cameroonian infrastructure will benefit from a well-developed public-private partnership (PPP) model, which has been in place since 2006 and currently covers 20 projects. Recent projects announced under this model include a USD 1 billion framework agreement with EDF to build a 420MW hydropower dam at Nachtigal Falls. Use of the PPP model is likely to expand in coming years, as the government seeks to reduce its unsustainable reliance on borrowing for funding.

Despite a generally pro-investor government stance, foreign telecommunications companies may be at risk of arbitrary tax demands and fines. In January 2016, the National Anti- Corruption Commission (CONAC) claimed that telecoms companies owed around USD 291 million in unpaid taxes and benefits accrued through tax incentives. Market leaders MTN and Orange rejected CONAC’s claims but received combined fines of USD 160 million.

December Risk Outlook 2017 Cameroon 

In this month's Risk Outlook, we also provide a detailed forward looking assessment of developments within the security, trading and investment environments for Zimbabwe, Chile, Saudi Arabia and South Africa all of which have been the subject of recent enquiries from JLT's client base.

December Risk Outlook 2017 spider chart

The monthly Risk Outlook is supported by JLT’s proprietary country risk rating tool, World Risk Review (WRR) which provides risk ratings across nine insurable perils for 197 countries. The country risk ratings are generated by a proprietary, algorithm-based modelling system incorporating over 200 international sources of data. 

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For further information, please contact Eleanor Smith, Political Risk Analyst on +44 (0)121 626 7837 or email eleanor_smith@jltgroup.com

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