(Business in Cameroon) - The competition to raise funds on the Bank of Central African States’ (BEAC) government securities market will be tough today April 29, 2020. Three countries (Cameroon, Congo, and Gabon) out of the six CEMAC member countries will issue bonds (T-bonds) and Treasury bills (T-bills) on this market, in an attempt to raise a total financing envelope of between XAF112 and 122 billion.

Cameroon has been the main issuer in the market since its launch in 2011. It is also the country with the greatest demand (a 2-year T-bond for a total of XAF50 billion). By offering investors an interest rate of 3.5% during this operation, the Cameroonian Public Treasury hopes it can successfully conclude the series of three T-bonds it launched on April 8, 2020.  

Despite being competitive and attractive, with strict compliance and practically no defaulting over the past 10 years, Cameroon’s securities will face tough competition led by two other countries.

The first is Congo, which seeks between XAF30 and 35 billion on the same market today. To entice investors, the country is offering a 6% interest rate for 2-year T-bonds.  

This high-interest rate shows the poor quality of Congo’s securities in the said security market. According to various official reports, the country has mismanaged its revenues from crude oil, which is the main source of public revenues.  

Congo's weaknesses

Pinned by debts (non-transparent) owed to China, construction entrepreneur Mohsen Hojeij as well as to oil trading giants Glencore and Trafigura, Congo had great difficulty in reaching an agreement with the IMF in 2019 (in the framework of a support programme CEMAC countries decided to start implementing in 2016 after the crisis created by the collapse of oil prices).

With the current impacts of the Coronavirus crisis on economies, especially those already fragile like Congo (10.6% drop in revenues from oil, tourism and other export products, according to the UNECA), Congo’s bonds are all the more unattractive since the country is highly dependent on oil revenues and the commodity’s prices are once again slumping on international markets.

Gabon, a strong competitor

Then there is Gabon, which is also trying to raise funds on the Beac market today. The second-largest player on this market since its creation, this other CEMAC country is positioned as a real competitor to Cameroon.

The first reason is the variety of its offers which is flexible for investors. Indeed Gabon is issuing 4 and 2-year T-bonds to respectively raise between XAF12 and 15 billion, then XAF5 and 7 billion. The interest rate on the 4-year bonds is 6.5% while that of the 2-year bonds is 4.75%.  Also, the country is trying to raise XAF15 billion by issuing 13-weeks discounted T-bills, which are even more attractive to money market investors.

In addition to this diversification of securities, Gabon, unlike Congo, is preparing to complete a three-year assistance programme with the IMF, which imposed discipline and rigour for the management of the country's public finance.

Moreover, although oil constitutes an important part of its revenues, Gabon has in recent years launched the diversification of its economy and has become an important supplier for Cameroon’s palm oil purchases.

To combat Coronavirus, which is expected to make it lose about 5% (compared to 3.1% for Cameroon) of its financial resources from oil, tourism and other export products (according to the UNECA) Gabon recently obtained XAF88.2 billion from the IMF’s Rapid Credit Facility while Cameroon’s case has been postponed sine die.

Let’s note that all these aspects could reassure investors about the country’s securities.

Brice R. Mbodiam