Risk outlook for investors in Cameroon

01 March 2019

Risk outlook for investors in Cameroon thSecurity risks will remain elevated in 2019. Domestic instability will obstruct investment opportunities, particularly in the agribusiness sector. Increasing public dissatisfaction with the government’s handling of the Anglophone insurgency risks commercial disruption. Long-term real economic growth will require sustained political stability including a clear succession plan to President Biya.

Security Environment 

Businesses in Cameroon are exposed to multiple security challenges.

The internal security situation has deteriorated significantly since October 2017, with unrest and separatist violence in the Anglophone regions likely to continue in the coming quarters.

Major agri-business Telcar Cocoa, Olam and Theobroma, based in the Anglophone south-west have been forced to relocate staff and operations to Douala and Kumba.

The Cameroon Development Corporation (CDC) has been heavily disrupted by the secessionist violence.

Employees were attacked and mutilated in January 2019 forcing several of its production sites offline.

This will present security challenges in Harare and Bulawayo.The external threat of cross-border attacks by Nigeria-based Boko Haram has been contained to Cameroon’s north.

In February 2019, France renewed its commitment to military cooperation with Cameroon. This will reduce the likelihood of terrorist activity spreading beyond the north-east.

Cameroon’s security services will remain overstretched, leaving businesses and foreign employees exposed to high security threats over the short-to-medium term.

High-risk targets are state-run enterprises and infrastructure situated in the Anglophone south-west

Vulnerability to crime including robbery, kidnappings, car-jacking and property damage is very high for investors and foreign nationals in transit.

Marine cargo using Douala port is likely to continue facing severe delays and multiple demands for facilitation payments.

The main N1 highway heading north to Chad, other northern routes, and some eastern roads near the Central African Republic are subject to highway robberies.

Trading Environment 

Domestic demand will continue to drive Cameroon’s economy, with real GDP growth of 4.3% forecasted for 2019. Consumer spending will also benefit from relatively low inflation of 2.3% and low interest rates.

Natural gas and processed wood exports are expected to support real GDP growth in the medium- to long-term.

The country’s national development plan is prioritising infrastructure projects that connect inland iron ore resources to ports.

This includes a USD 3.5 billion railway project connecting the deep-sea port terminal in Kribi to the mining region of Mbalam.

Total exports are projected to be hurt in the short-term by declining oil production and weak agricultural export growth.

Cameroon Agr business Chart

However fiscal consolidation efforts, supported by the International Monetary Fund (IMF) Extended Credit Facility (ECF) program will help stabilise fiscal and external balances.

This will also sustain the recovery in foreign exchange reserves over the short-term.

The budget deficit is forecasted to decrease to 2.2% of GDP, from an estimated 2.5% shortfall in 2018.

Investment Environment

Foreign investors in Cameroon face a challenging investment environment. Cyber crime is an emerging operational threat.

A 2018 audit of 74 public and private organisations by the National Information and Communication Technologies Agency (ANTIC) detected 8,954 weaknesses that exposed public and private businesses to cybercrimes.

Fixed investment grew by 14.4% in the second quarter of 2018. In the medium term it will be supported by a rise in capital and transport goods imports.

World Risk Review Cameroon Map Stats 2The CFA-franc, pegged to the Euro, is expected to depreciate against the US dollar and will reach XAF 594.2/USD by the end of 2019.

Cameroon’s business climate is poor.

The decision to withdraw hosting rights for the 2019 African Nations Cup raises the risk of contract agreement repudiation in associated infrastructure projects.

Contract enforcement is slow and subject to undue political influence.

Cameroon has no law specifically addressing commercial competition and many decisions go in favour of politically connected individuals or business.

However multinational firms will increasingly seek alternative legal recourse through international arbitration.

Expropriation risks are low and limited mainly to land acquisition for major infrastructure projects.

Strong legal guarantees for commercial entities assure fair compensation in line with international standards.

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.

World Risk Review Zimbabwe Article Stats

5 Key Takeaways

  • Businesses in Cameroon are exposed to multiple security challenges
  • Protests in Anglophone regions and cross-border attacks by Boko Haram will be a major risk in 2019
  • Cameroon’s national development plan is generating investment opportunities in the infrastructure sector
  • Foreign investors in Cameroon face a difficult investment environment
  • The decision to withdraw hosting rights for the 2019 African Nations Cup raises the risk of contract agreement repudiation in associated infrastructure projects.

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

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