(Business in Cameroon) - Cameroon's President Paul Biya recently signed a decree empowering the Minister of Economy to get a loan of $15 million (CFA9.2 billion) from the International Islamic Trade Finance Corporation (ITFC). The loan has been in the pipeline with this member of the Islamic Development Bank (IsDB) since 2021 to finance raw material acquisitions for the state-owned steel producer Alucam.

This measure is yet another rescue plan to get the only steel producer within the Cemac region out of bankruptcy. The dark period for Alucam started in 2014 when the Canadian firm Rio Tinto, which had control over 46.7% of the company’s assets, announced its withdrawal. The situation directly affected Alucam’s subsidiaries Socatral (sheet metal) and Alubassa (kitchen utensils).

In 2015, Rio Tinto’s assets were transferred to the State of Cameroon, which has been since looking for a partner without success. This means that 8 years after a call for investors was launched, no strategic partner seems to be interested in the aluminum company.

Falling exports

In 2017, Alucam experienced a slight improvement in activities, with a net profit of CFA2.2 billion. But this good momentum turned short in January 2018 when a sudden energy disruption weakened all of the company’s tanks, slowing activities. As a result, Alucam's turnover fell from CFA123.4 billion in 2017 to CFA99.2 billion in 2018. The net result came out with a deficit of CFA10.8 billion that year and the company even became one of the most insolvent customers of the power utility Eneo.

In July 2020, for example, during a consultation with stakeholders in the metal industry in Yaoundé, the Minister of Trade, Luc Magloire Mbarga Atangana, announced a decision to temporarily open the sheet metal market to fill the deficit, due to the decline in production of Socatral, Alucam’s sheet metal subsidiary.  “Because of the Alucam/Socatral incident, there is currently a gap between the offer and the demand. We will temporarily open the market” to fill that gap, the official explained.

In an attempt to get things back on track, the government finalized on December 4, 2020, the proposed absorption of Socatral by Alucam. The merger-absorption was ratified in 2021 and led to the transfer of all Socatral’s assets (CFA33.6 billion) and liabilities (CFA15.9 billion) to Alucam. The latter’s capital was also increased by over CFA2 billion. However, this move was not enough to bring Alucam out of the turbulence zone. The National Institute of Statistics (INS) reported that aluminum exports in Cameroon fell by 34.7% in H1 2021, despite the aforementioned merger-absorption.

Alucam faces risks of dissolution

The State of Cameroon has been negotiating since 2022 with a pool of three European banks (the International Tropical Conservation Fund (ITCF), the Franco-German financial group BHF, and investment bank BPI)  to rebuild the equity of Alucam, which has fallen from CFA5.9 billion in 2019 to -CFA8.3 billion in 2020, down 240.8%. Since that date, the company’s equity has been below half its CFA21 billion share capital. 

"The financial performance of Alucam in FY2020 has led the company to bankruptcy, despite the merger with Socatral. To dodge risks of dissolution, a reconstitution of equity is necessary", the Technical Commission for the Rehabilitation of Public and Para-Public Sector Enterprises (CTR) said in its 2020 report. Indeed, given the situation, and under Article 665 of the Ohada Uniform Act on the law of commercial companies and economic interest groups, the State of Cameroon had until 2022 to recapitalize Alucam and bring its equity to at least half of its share capital (about CFA10.5 billion). Per Article 667 of the same act, beyond that deadline, "any interested party may take legal action to request the dissolution of the company.”

Brice R. Mbodiam