On June 19, 2019, Cameroon’s public treasury will issue new 13-week treasury bills in BEAC’s financial market to raise XAF20 billion.  

This new operation is being launched a week after a series of three bond operations aimed at raising XAF150 billion. According to the finance ministry, the country had already raised XAF121 billion after the second operation.

This year, in terms of fundraising in capital markets, the country may largely exceed the XAF260 billion planned in the 2019 finance act. It is worth noting that this act, passed in November 2018, was amended following a decree signed by the president on May 29, 2019.

Based on the success in various financial markets during bond issuances, the funds to be raised was increased by XAF361 billion in the amended act.  

BRM

Public investment in Cameroon was sluggish in the first quarter of 2019. According to the information note on the operation to mobilize XAF150 billion on the Beac market, which the government has just closed, investments made with public funding fell by 76.5% over the first three months of the year.

“Capital expenditure amounted to XAF78 billion at the end of March 2019, compared with XAF332.4 billion at the end of March 2018, down XAF254.4 billion (-76.5%). Compared to the initial forecasts of XAF337.4 billion, expenditures are down XAF259.3 billion, or an implementation rate of 23.1%,” indicated the document.

This drastic decrease is explained by the sharp decline in investments made both on equity and on external financing. “Investment expenditure on equity reached XAF41.2 billion at the end of March 2019, decreasing by XAF101.2 billion (-71.1%) year-on-year. Compared to the forecast of XAF204.4 billion, this expenditure is down XAF163.2 billion, representing an implementation rate of 20.2%.”

“Investment expenditure on external financing stood at XAF32 billion at the end of March 2019, down XAF151 billion. Compared to the XAF123 billion forecast for the first quarter of 2019, implementation rate is 26%. Restructuring expenses amounted to XAF4.8 billion, compared with XAF7 in Q1 2018, and down XAF5.2 billion compared to the XAF10 billion forecasted. This makes an implementation rate of 48%.”

Moreover, these investments are expected to improve as from the second half of 2019, thanks in particular to the increase in external financing disbursements. The budget decided on 29 May 2019 by the Head of State reveals a significant increase in the sum earmarked for investment expenditure on external financing (+XAF158 billion).

Brice R. Mbodiam

In 2018, Cameroon spent XAF956 billion in salaries and wages. This represents 98.6% of the XAF969.8 initially forecasted to be used, according to the 2018 Budget Execution Report issued proposed by the Finance Department.

The wage sustainability ratio over the period was 35.6%, slightly above the 35% decided in the sub-region, CEMAC. Ratio is however down compared to 2017 when it was 39.7%, much higher than the Community norm.

CEMAC has set the wage-to-tax revenues ratio as an indicator of wage sustainability under the multilateral surveillance system. The ratio is calculated by dividing staff costs (permanent expenditure and other staff costs) by gross tax revenues. CEMAC believes that in order to be sustainable, the wage bill must be less than or equal to 35.0% of tax revenues.

The wage sustainability evaluates the State's ability to remain solvent or creditworthy, while ensuring sustainable wage payments without a continuous increase in debt stock. It refers to the State's ability to meet all its commitments, taking into account both its potential of available resources and the volume of wages it is expected to pay to all public agents.

Sylvain Andzongo

Cameroon’s mineral water company SEMC is expecting to achieve a positive net result of XAF410 million this year. The information was disclosed during the company's combined general meeting held May 15 in Douala.

To achieve this result, SEMC is relying on a decline in its operating expenses, the growth of the mineral water market in Cameroon in 2019 and the recovery of its market share. On this last aspect, Semc is focusing on boosting sales of its “Vitale” brand. It is expecting sales to increase by 21% and production by about 35%.

These positive prospects may explain the decision taken by shareholders, during the general meeting, not to consider the early dissolution of the company, in accordance with the provisions of Article 664 of the Ohada Uniform Act on the Law of Commercial Companies and Economic Interest Grouping (EIG).

In view of these forecasts, 2019 should be the year of SEMC’s rebirth. The company has accumulated losses of about XAF2 billion over the past three years. It closed its 2016 and 2017 financial years with negative results of XAF316 and XAF936 million, respectively. At the end of 2018, despite a 3.8% increase in turnover to 6.4 billion, Semc's net income was once again negative (-XAF-799 million).

The reason for the decline of this company, which dominated the mineral water market in Cameroon until 2015, is that competition has become very fierce with the very aggressive return of Source du Pays. After being off the market for a few years, this company finally took over the leadership in the local mineral water market in 2016.

Brice R. Mbodiam

At end-FY2018, Cameroon’s unpaid arrears amounted to about XAF55 billion, the budget execution reports showed. The sum is split into XAF20.9 billion for goods & services, XAF30.2 billion for capital expenditures, XAF2.3 billion for transfers & subsidies, and XAF1.8 billion for other costs.

The government explained that to clear the previous years’ arrears that were valued at XAF755.9 billion at the beginning of the year, it paid XAF360.7 billion in cash and by transfer. Monies went to goods and services (XAF123.4 billion), capital expenditure (XAF207.5 billion), transfers and subsidies (XAF21.1 billion) and other costs (XAF8.7 billion).

Another XAF340.2 billion was spent to cancel provisional commitments for non-serviced expenditure. This covered XAF58.1 billion for goods and services, XAF203 billion for capital expenditures, XAF35.6 billion for transfers and subsidies and XAF43.5 billion for other costs.

S.A

The Cameroonian Treasury is expecting to mobilize on 12 June 2019, through the issue of 5-year Fungible Treasury Bond (OTAs), XAF50 billion on the Beac securities market, reliable sources announced.

This operation, initially planned for 5 June 2019, but finally postponed because of the Ramadan holiday, aims to complete the XAF150 billion sought by Cameroon since May 2019. According to our sources, the Treasury has already mobilized CFA121 billion at the end of the two previous OTA issues.

The total sum will be used to carry out all the infrastructure projects listed in the information note produced by the Department of Finance. Projects include the Douala-Yaoundé motorway which needs XAF25 billion.

BRM

Cameroon's floating debt in 2018 reached more than XAF128 billion, the budget execution report showed. According to the finance ministry (Minfi), floating debt refers to all expenditures authorized on domestic debt credits to settle unpaid government bills accumulated in the Consolidated Revenue Fund.

These unpaid debts result in particular from the contractual commitments of the public administrations, current consumption, rents, shortfalls in income of the National Refining Company (Sonara) and marketers in connection with pump fuel subsidy and offset tax debts.

However, Minfi notes, the authorizations made by the Directorate-General for Budget (DGB) to settle the State's unpaid bills at the level of the budget chain have contributed considerably to the reduction of the stock of floating debt. But the fact remains that this practice poses a problem of accounting sincerity and effective cash management.

“The control of the volume of floating debt is not perfect. In addition, these debts are charged to domestic debt credit lines, regardless of the economic nature of the operations in question, in violation of the principle of budgetary specification. Also, the payment of these operations burdens the cash requirements of the financial year, and raises the problem of their predictability,” the ministry said.

To control and avoid the occurrence of new floating debts, the finance department, in its report, believes “that it would be appropriate to carry out an inventory of all the State's liabilities upstream of the Treasury as well as the debts. The results of this audit should be forwarded to the autonomous amortization fund (CAA) for payment on unstructured domestic debt according to a predetermined schedule.”

Minfi also points out that a mechanism for monitoring new debts at the DGB could be considered. The objective is to have a good control of debts and to ensure their systematic recording in the respective budgets of the administrations that generated them or in the common chapters for the other cases, while respecting the economic nature of the said operations.

Sylvain Andzongo

Following the revision of the 2018 Finance Act, decided on 29 May 2019 by the Head of State, the Ministry of Finance increased the amount dedicated to the acquisition of holdings by XAF10 billion, a source said.

According to the same source, this new provision was set up to recapitalize the Cameroonian Bank for SMEs (BCPME). In January 2019, the bank’s Board announced the increase in capital from XAF10 to 20 billion.

The government support comes after a financial penalty coupled with the opening by the Central African Banking Commission (Cobac), on 30 August 2018, of disciplinary proceedings against BCPME and its leaders. The banking sector regulator accused BCPME of not complying with an injunction issued in 2017 following the finding, since August 2015, that the bank had not complied with the prudential standard relating to minimum capital. This means that since that time, BCPME did not have enough equity capital.

The announced recapitalization of BCPME comes while the bank is in a restructuring phase; a reform governed by the three-year economic and financial program (2017-2019) with the International Monetary Fund (IMF). The latter said the SME Bank's business plan will be updated and possibility of encouraging the provision of guarantees or financing lines to commercial banks rather than direct loans will be explored.

Since the end of 2015, the bank’s Managing Director called for a fund injection by the State. This call for funds, according to Agnès Ndoumbe Mandeng (photo), should enable BCPME to be able to grant clients long-term loans, more suitable for investment for SMEs.

BCPME, launched in 2015, is so far only operational in Cameroon's two main cities (Yaoundé and Douala). It aims to reduce the difficulties of access to finance for SMEs, which constitute more than 90% of Cameroon's industrial fabric.

For example, in a report on “the evolution of lending rates applied by CEMAC credit institutions,” the Bank of Central African States (Beac) reveals that SMEs only captured 18.8% of bank financing in the second half of 2018, compared to 63.5% for large companies.

Brice R. MbodiamA

In the 2018 Budget Execution Report, the Cameroonian ministry of finance announced the government spent XAF956 billion to pay salaries and wages to its employees, out of an allocation of XFA969.8 billion. This represents 98.6% of the allocation provided for in the 2018 amending finance law; a savings of XAF13.8 billion.

Amount spent on pension over the period is XAF202.6 billion out of an allocation of XAF209.0 billion, a consumption rate of 96.9%. This makes a total savings of XAF20.2 billion on both salaries and pensions compared to forecasts. The amount represents almost a quarter of the monthly resources allocated (XAF79.6 billion) for salaries and more than a month's worth of resources (XAF16.8 billion) needed for pensions.

“Savings was made mainly thanks to the first results of the reorganization of the State balance file through the Physical Counting of State Personnel (Coppe) 2018,” the ministry said.  This operation made it possible to remove persons who were illegally paid, especially deceased persons whose transfers had not been suspended.

Sylvain Andzongo

On 5 June 2019, the Cameroonian government issued 5-year fungible treasury bonds (OTAs) to mobilize between XAF50 and 100 billion on the securities market of the Beac, with an interest rate of 5.6%.

This fundraising operation is part of a series of three, launched on 15 May 2019, to mobilize a total of XAF150 billion on the market. According to an information note issued by the Ministry of Finance, these funds will be used to carry out certain infrastructure projects in the country. The most important of these projects is the construction of the Yaoundé-Nsimalen motorway, which will cost XAF25 billion.

BRM