Yaoundé - 02 October 2023 -

Industrial gas: Consumer association opposes proposed 20% price hike

Industrial gas: Consumer association opposes proposed 20% price hike
  • Comments   -   Thursday, 29 June 2023 15:40

(Business in Cameroon) - Gas company Gaz du Cameroun is steadfast in applying its 20% price increase on industrial gas despite the government’s order to postpone it till price approval requirements are met. The industrial gas users’ association is also determined not to let the decision pass. A letter sent, on June 26, 2023, to the British oil and gas firm set the tone. 

"On June 10, 2023, you sent a letter notifying us of the 20% increase in the price of natural gas and we, your customers, informed you of the negative impacts this change would have on our businesses.[...] We are ready to continue paying our invoices at the rates applicable as of May 2023, meaning without any price hike, per the instructions given by the Minister of Commerce in the letter he sent on May 30 and repeated on June 14, 2023. Consequently, if you maintain this 20% increase in your next invoices, we will pay you the value of our consumption without any price increase,” the letter reads.

The letter is signed by the executives of seven companies, including heads of some of Cameroon’s industrial giants like brewing market leader SABC. Other signatories to the letter include the Union camerounaise des brasseries (UCB), chocolate maker Chococam, pasta producer Panzani, wheat processor SCTB, salt producer Sasel and Agrocam, the CEMAC zone’s leading poultry producer.

Prior price approval

GDC announced the price hike on May 15, 2023, explaining it would take effect from June 1, 2023. This was its first price change in 10 years. It explains the decision with the rise in production costs following international market developments marked by accelerating raw material and freight prices as a result of the Russia-Ukraine war notably. 

For Commerce Minister Luc Magloire Mbarga Atangana, this unilateral decision is against price approval laws.  Article 115, paragraph 2-a, of the decree laying the guidelines for the May 4, 2023 petroleum code stipulates that "the market price of gaseous hydrocarbons sold on the domestic market is subject to prior approval” by the Minister of Commerce. 

In other words, economic operators wishing to increase their prices must first request the government’s approval giving all the evidence to back that decision. Depending on the circumstances, the government may simply reject the project, approve the suggested price or go for a much lower price increase. 

Soaring production costs

Gaz du Cameroun’s decision to raise the price of gas it supplies to its industrial clients comes after the special tax on petroleum products was extended to natural gas. The extension, provided by Cameroon’s 2023 finance law, requires companies using industrial gas to pay a CFAF70 tax for each cubic meter of gas consumed since January 2023.

At the same time, since January 2023, the electricity sector regulator ARSEL has increased energy tariffs by almost 30% for key customers, meaning industrial companies that are reputed energy consumers. In addition, since February 2023, the prices of premium fuel, diesel, and kerosene used by industrial companies have been on the rise. They have increased by an average of 15.8 and 36.5%.  

This explosion in energy costs in Cameroon's industrial sector since the start of 2023 is likely to cause a much greater increase in companies’ production costs. In 2022, those costs saw their highest increase in 6 years, reaching 13.3% according to the National Institute of Statistics (INS).

Brice R. Mbodiam

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