(Business in Cameroon) - Last week, SCB Cameroon (the local subsidiary of the Moroccan banking group Attijariwafa Bank) published a tender notice on its website for the recruitment of an expert in plant assembly. According to the notice, the expert will dismantle the plant of an agro-industrial unit in Kekem, Western Cameroon.
Reading this rather special service offer (for which bids are expected until November 27, 2020), observers of the Cameroonian economic scene quickly understood that the plant in question belongs to Neo Industry, whose annual cocoa processing capacity is estimated at 32,000 tons (according to the National cocoa and coffee board, the company processed only 4,286 tons of cocoa during the 2019-2020 campaign).
Indeed, in 2018, Neo Industry received a XAF13 billion loan (which was guaranteed at XAF6 billion by the African Guaranty Fund-AGF) from SCB Cameroon to build its Kekem assembly plant. From internal sources within SCB Cameroon, the bank plans to dismantle the plant because Neo Industry is having difficulties honoring its commitments towards the bank.
Despite this, one should wonder why a bank can decide to dismantle a factory for which it granted a 7-year loan after just two years. "In some credit agreements, clauses are inserted to allow the bank to resort to forced recovery before term, as soon as it is discovered that some of the information provided during the loan process was not honest, or when certain practices of the credit beneficiary are likely to complicate the repayment," a business analyst explains.
Beyond what could be called "the SCB Cameroon-Neo Industry case", a source close to the case believes that what prompted that decision is the volume of credits owed by Emmanuel Neossi (promoter of Neo Industry) to the local banking sector. The source indicates that, via various companies, the CEO of Neo Industry borrowed tens of billions of XAF from the local banking sector. Nearly 80% of that debt portfolio is owed to SCB Cameroon, our source reveals.
Due to the difficulties encountered by Emmanuel Neossi in honoring his commitments towards the banks, COBAC (regulator of CEMAC countries’ banking sector) instructed the credit institutions concerned to take the required steps to protect the savings of their clients. A first bank affected by the payment defaults of Emmanuel Neossi is said to have set aside about XAF5 billion for that purpose.
SCB Cameroon chose the forced recovery option due to the high volume of funds it will set aside to meet the order of COBAC. By dismantling the processor’s factory, it can transfer it to a new operator or outright sale could allow it to recover the various loans it granted to the promoter of Neo Industry.
"Although the promoter of this factory is insolvent as we learn, the real question that must be asked is how a bank could take so much risk on a single client, even if he owns several companies. I think that for large transactions, like the one concerned in this case with Mr. Emmanuel Neossi, banks must first carry out due-diligence missions, i.e. make certain due diligence checks, before deciding whether or not to grant credit. Banks must also monitor the activities of their clients to ensure that everything is working in such a way as to guarantee the repayment of the credit received," an expert from the financial community suggests.
Brice R. Mbodiam