(Business in Cameroon) - Gaz du Cameroon (GDC), the local dealer of British Victoria & Gas, sent a letter to its customers last May 15 informing them about an upcoming rate increase. The company said it plans to implement a 15% increase in its rates, effective from June 1, to adjust with the current global situation. This is the first price increase in 10 years.
The rate hike comes after the government recently extended the special tax on petroleum products to natural gas. As per this move, industrial companies are required to pay a CFA70 levy for each cubic meter of gas consumed. Also, the Electricity Regulatory Agency (Arsel) raised its tariffs by almost 30% for energy-intensive industrial companies in January 2023. The following month saw a significant increase of 15.8% to 36.5% in the prices of super, diesel, and kerosene.
The industrial sector in Cameroon is grappling with soaring energy costs, further adding to production expenses. The post-pandemic period and the ongoing conflict in Ukraine (with the substantial surge in sea freight and raw material prices on the international market) have intensified pressures on the sector. The Industrial Producer Price Index (IPPI) published by the National Institute of Statistics (INS) reveals a 13.3% year-on-year increase in production costs in the industrial sector in 2022, marking the highest rise in six years. This rise predominantly impacted the extractive sector, specifically the oil and gas industry, which experienced a 29% increase in factory gate prices, and the steel and metallurgy sector, with a 16.9% increase. In comparison, the chemical, pharmaceutical, and plastics industries saw a rise of 5.8%, the textile industry a 1.9% increase, the food industry a rise of 10.9%, and the leather industry experienced a 15.9% increase.
The situation also led to a 6.3% increase in final household consumption prices in 2022, surpassing the 3% threshold set by the Cemac. This indicates that companies have absorbed the increment in producer prices to some extent, either through government incentive measures or reduced profit margins. The companies forced to reduce their profit margins include those whose product prices (concrete reinforcing bars, cement, sheet metal, palm oil, refined oil, etc.) to the consumer are subject to the regulatory approval procedure. The government has prevented any market price increase for these products, even in the face of inflation. The last time concrete reinforcing bar prices were approved in Cameroon was a decade ago, as stated by the Cameroon Organization of Steel Processing Industries (Ocita). The steel and metallurgy industry, which produces concrete reinforcing bars and other ferrous materials, is identified by the INS as the second industry with the highest increase in production costs for the past two years. With rising electricity and natural gas rates, which are major energy sources for steelmakers, the situation in this industry is expected to become more challenging in 2023.
Translated from French by Firmine AIZAN
Written by Brice R. Mbodiam