Download 2015 Quarter 1 CAMEROON SNAPSHOT

CAMEROON
SNAPSHOT
2015 Quarter 1
Inflation - Inflation in Cameroon is generally low and stable thanks to the country’s membership to the Economic and Monetary Community of Central Africa
(CEMAC) and strong ties to multilateral organisations which help provide monetary as well as policy stability in the Central African nation. However, we
expect that inflation will be on the uptick during 2015 due to lower fuel subsidies and food price increases.
Growth - The sharp decline in international oil prices in recent months has adversely affected the economic growth prospects for the Central African nation,
despite a temporary spike in oil production. We expect Cameroon’s real GDP growth rate will decline to 4.1% this year, ticking up to a forecast 4.3% during
2016.
National development plan - Cameroon’s economic policy is embedded in the Strategy for Growth and Employment (DSCE), which is aimed at increasing
infrastructure investment, improving access to finance for the private sector, and higher spending on healthcare and education.
OPPORTUNITIES
STRENGTHS
Growth in the telecommunications sector has lagged that of other countries on Monetary and exchange rate stability afforded by membership in CEMAC.
the continent.
The tourism sector remains untapped largely due to the high level of political Low levels of public and external obligations and low debt servicing costs.
risk and poor infrastructure.
International reserves are sufficient to pay for more than five months of
imports.
The extractive industry remains a key opportunity for future investment.
Foreign direct investment is trending upward..
VULNERABILITIES
WHAT IS BEING DONE?
The economic base is extremely narrow, which exposes the country to
fluctuations in international commodity prices.
Not enough emphasis is being placed on improving the business and
investment climate in order to diversify the economy and boost economic
growth and job creation.
Progress is slow. The resolution of troubled banks has been delayed, and fiscal
arrears are mounting even further pressure on banks.
The status quo is expected to persist. Cameroonians are divided along ethnic,
religious, and linguistic lines and all these elements will come into play if there
is a power vacuum.
Increasing stock of domestic arrears by the government, and a number of
vulnerabilities in the banking sector - financial sector stability is threatened.
Cameroon has an upper moderate political risk rating. There is no succession
plan and if the 79-year-old president should die or become incapacitated
suddenly, we expect a messy fight for power.
A lack of infrastructure, particularly the poor quality of Cameroon's transport
The government's long-term development strategy (DSCE) aims to address
and energy infrastructure, remains a major obstacle to economic growth and
these shortfalls.
investment.
MEGA TRENDS
Population
23,130,708 (July 2014 est.); Age 15 - 64: 53.9%
Population growth rate (%)
2.6% (2014 est.)
Life expectancy at birth
Total population: 57.35 years; male: 56.09 years; female: 58.65 years (2014 est.)
HIV/AIDS
Adult prevalence rate: 4.27%; People living with HIV/AIDS: 603,809 (2013 est.)
Adult literacy rate (age 15 and over can
read and write)
Total population: 75.0%; male: 81.2%; female: 68.9% (2015 est.)
Urbanisation
Urban population: 53.3% of total population (2013); Urban population growth: 3.6% (2013)
Population below $1.25 (PPP) poverty line 27.6% (2007 est.)
Unemployment rate
4.0% (2013 est.)
Employment (% of total)
Agriculture: 53.3%; Industry: 12.6%; Services: 34.1% (2010 est.)
Labour participation rate (% of total
population ages 15+)
70.3% (2013)
Business languages
English, French
Telephone & Internet users
Main lines in use: 799,016; Mobile cellular: 15.66 million; Internet users: 1.48 million (2013)
Sources: CIA World Factbook, World Bank, UNESCO, ITU, UNAIDS & NKC Research
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Total
Cameroon
Corruption Perceptions Index 2014 (1 least, 175 most corrupt)
Doing Business 2015 (1 best, 189 worst)
189
158
Global Competitiveness 2014-15 (1 most, 144 least competitive)
144
116
Economic Freedom 2015 (1 most, 178 least free)
178
146
HDI Ranking 2013 (1 most, 187 least developed)
187
152
0
Source: NKC Research
175
136
20
40
60
80
100
120
140
160
180
200
Risk environment / Risk outlook
Sovereign Risk Ratings
S&P
Fitch
Moody’s
B/Stable
B/Stable
N/R
The ratings agency Standard & Poor’s (S&P) affirmed the sovereign credit rating for Cameroon on February 9, while also maintaining the country’s outlook.
Cameroon’s credit rating was affirmed at “B” with a stable outlook, despite many oil exporting nations experiencing adverse pressures on their credit ratings
due to the plummeting oil price. S&P noted that the declining oil price will only have a moderate adverse effect on economic growth prospects and the
government’s fiscal position. The country’s rating is supported by stable monetary policy and favourable government debt metrics. However, the rating is
dragged down by Cameroon’s weak institutions and governance, along with the agency’s forecast of persistent external deficits over the medium term. No
major improvements in governance indicators or external balances are envisaged in the near future.
Fitch Ratings affirmed Cameroon’s long-term foreign and local currency Issuer Default Ratings (IDR) at “B” with a stable outlook on June 6. Fitch noted that
Cameroon’s GDP growth beat expectations since their last review in December 2013, boosted by increased oil and gas output, and by the construction of large
infrastructure projects. However, the rating agency commented that Cameroon’s fiscal deficit deteriorated in 2013 due to ramped-up infrastructure spending as
well as oil subsidies granted via the national oil refinery Sonara. The larger deficit has seen debt rising more rapidly than expected. While Cameroon’s level of
public indebtedness remains manageable, Fitch noted that it could pose risks given the low financial flexibility of the Cameroonian government.
Cameroon is currently not rated by Moody’s Investors Service.
Infrastructure
Diversity of
the Economy
Banking
Sector
Continuity
of Economic
Policy
GDP Growth
Key Balances
Foreign
Investment
Socioeconomic
Development
Forex
Reserves
Improving; but
still fairly limited
Dominated by
oil and
agricultural
sector
Underdeveloped
Average
Improving
Twin deficits
Low but
expected to
increase
Low
Healthy and
rising
Stock Market
Listed Companies
Liquidity
Market Cap
Dominant Sector
Daily Trading
Volume
Douala Stock Exchange
3
Limited
$298.4m
N/a
N/a
Capital Market
Development
Liquidity
Maturity Range
Municipal Bonds
Corporate Bonds
Yes
Underdeveloped
Limited
13 weeks to 2 years
Yes
Yes
Macro-economic overview
The sharp oil price decline in recent months has had an adverse effect on economic growth prospects for oil exporting economies worldwide. Cameroon is no
exception to this fact albeit to a lesser extent (oil contributed 8.1% to GDP in 2013). Furthermore, the government has embarked on a range of infrastructure
programmes, particularly in the energy sector, and initiatives to boost growth in the agricultural sector, which should assist the economy to attain a higher
economic growth trajectory, post the oil price shock. We expect the Central African nation to see a fall in real GDP growth over the forecast period. However,
with new oil wells coming on stream and continued investment in agriculture, mining and infrastructure, a quick economic recovery is imminent.
Cameroon’s membership to the Economic and Monetary Community of Central Africa (CEMAC) and strong ties to multilateral organisations, like the
International Monetary Fund (IMF) and World Bank, help provide monetary as well as policy stability in the Central African nation. The regional central bank
regards low and stable inflation and maintaining the six-nation bloc’s currency peg with the euro as its main objectives, and has been successful thus far.
During 2014, Cameroon cut its fuel subsidies substantially. Although this move was welcomed by analysts and the IMF, it was met with stark opposition from
labour unions. In order to avert mass protest action as was seen in 2008, the government raised government and military salaries and later the general
minimum wage level as well, in addition to some other measures. At the end of the day, these cuts will do little to ease pressure on government finances, while
the wage increases will lead to heightened inflation pressures over the next few months.
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Economic Structure as % of GDP
2014 Estimate
Source: NKC Research
Agriculture/
GDP
20.9%
Service/GDP
53.6%
Industry/GDP
25.5%
The industrial sector accounts for roughly 25.5% of Cameroon’s GDP. In turn, Cameroon’s agricultural sector accounts for around 20.9% of GDP, providing
important export products such as cocoa, coffee, rubber, bananas, peanuts, palm oil and timber. This sector is also a notable employer, employing around
53.3% of the population. Finally, the services sector – dominated by wholesale and retail trade – makes a contribution of 53.6% to GDP.
Real GDP Growth & Net FDI/GDP
5.0
6.0
Source: NKC Research
5.0
4.0
4.0
3.0
3.0
2.0
2.0
1.0
0.0
1.0
2009
2010
2011
2012
2013 2014E 2015F 2016F
GDP Growth (y-o-y, %) (lhs)
Net FDI/GDP (rhs)
Despite Cameroon’s abundance of natural resources and minerals, the Central African nation performs poorly when it comes to attracting foreign direct
investment (FDI). Cameroon suffers from chronic electricity shortages, making it very difficult to conduct business and the poor state of infrastructure creates
difficulty in transporting hydrocarbon products, timber and cocoa for export. Furthermore, endemic corruption also complicates the Cameroonian business
environment. Overall, FDI forecasts are subject to a degree of uncertainty and tend to be more conservative. Rising security risk in Cameroon – with Boko
Haram active across the northern border and the conflict in the Central African Republic (CAR) encroaching on Cameroon’s territory from the east – has
caused potential investors in these regions to shy away. We expect net FDI flows into Cameroon will tick up to 1.7% of GDP in 2015, increasing slightly
further to 1.8% of GDP in 2016. In terms of GDP growth, the sharp decline in international oil prices in recent months has adversely affected the economic
growth prospects for the Central African nation, despite a temporary spike in oil production. We expect Cameroon’s real GDP growth rate will decline to 4.1%
this year, ticking up to a forecast 4.3% during 2016.
Exports ($ bn)
Imports ($ bn)
2014E
2015F
2016F
Machinery & boilers, etc.
Main Imports: % share of total
2014E
2015F
2016F
Machinery & boilers, etc.
11.68
13.16
11.65
Electrical, electronic equipment
7.38
8.31
7.36
Cereals
6.73
7.57
6.70
Vehicles other than railway, tramway
5.99
6.74
5.97
Main Exports: % share of total
2014E
2015F
2016F
Electrical, electronic equipment
Cereals
Vehicles other than railway, tramway
Oil and oil products
Wood & articles of wood, wood
charcoal
Cocoa & cocoa preparations
Cotton
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5
Source: NKC Research
Oil and oil products
51.40
56.15
58.34
Wood & articles of wood, wood
charcoal
11.57
12.90
13.41
Cocoa & cocoa preparations
8.89
9.91
10.30
Cotton
2.64
2.94
3.06
The majority of Cameroon’s export revenue comes from hydrocarbon products. As such, the recent sharp decline in the international oil price will likely lead
to large export revenue losses for the country. In addition to crude oil, Cameroon also exports refined oil, though it accounts for only a small percentage of
total hydrocarbon exports. The country’s single oil refiner is currently not able to refine the heavy crude that is produced in Cameroon; hence, crude oil is
imported for refining purposes. This is then used in the domestic market, while the surplus is exported. Therefore, relatively small amounts of refined
petroleum are imported. Other than oil, Cameroon's principal exports are timber, aluminium, cocoa, coffee, rubber, cotton and bananas. Cameroon is the
world’s fifth largest cocoa producer and we expect cocoa exports to increase over the next two years due to ramped up government investment in this sector
and higher forecast cocoa prices. As for imports, given the government’s ramped up infrastructure spending programme, a large proportion of Cameroon’s
import bill is capital investment-related goods, such as machinery and vehicles.
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Current Account & Budget Balance
(% of GDP)
-1.0
0.0
-2.0
-1.0
-3.0
-2.0
-4.0
-3.0
-5.0
-4.0
-6.0
-5.0
-6.0
-7.0
Source: NKC Research
-8.0
-7.0
2009 2010 2011 2012 2013 2014E 2015F 2016F
Current Account/GDP (lhs)
Budget Balance/GDP (rhs)
Owing to the significant decline in the international oil price, Cameroon is expected to run substantial trade deficits over the medium term. The persistent run
of trade deficits will contribute to the Central African nation’s current account shortfall widening from 3.8% of GDP in 2014 to 6.3% of GDP this year,
widening somewhat further to a forecast 6.9% of GDP next year. In turn, we expect the budget deficit to widen to 6.5% of GDP this year, from 5.4% of GDP
in 2014, before starting to narrow over the medium term.
Average CPI (% change, y-o-y)
3.5
Source: NKC Research
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2009
2010
2011
2012
2013 2014E 2015F 2016F
The Institut National de la Statistique du Cameroun released its 2014 consumer price index (CPI) report in March. On average, inflation eased marginally from
an average of 2.1% in 2013 to 1.9% last year. Inflationary pressures during 2014 were driven by a 7.7% rise in transport costs as a result of the reduction in
fuel subsidies by the authorities on 1 July 2014. Despite the subsequent increase in public sector compensation of around 28.5% (brought about by public
discord as a result of higher fuel prices), the resultant increase in demand was lower than anticipated. As such, average inflation for the last five months of
2014 was only 0.8 percentage points higher than for the last five months of 2013 (and primarily driven by the increase in transport costs). We expect inflation
for Cameroon to come in at 2.6% during 2015, thereafter softening to an estimated 2.5% during 2016.
CONTACT DETAILS
KPMG
NKC
NKC Independent Economists CC
René Libong – designation is Partner
Tel +237 33 43 96 79
Email [email protected]
12 Cecilia Street Paarl, 7646, South Africa
P O Box 3020, Paarl, 7620
Tel: +27(0)21 863-6200
Fax: +27(0)21 863-2728
Email: [email protected]
GPS coordinates
S33°45.379'
E018°58.015'
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such information or opinions.
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