IMPORTANT NOTICE
You must read the following before continuing. The following applies to the Prospectus following this page, and you are therefore required to read this carefully before reading, accessing or making any other use of the Prospectus. In accessing the Prospectus, you agree to be bound by the following terms and conditions, including any modifications to them any time you receive any information from us as a result of such access.
THE FOLLOWING PROSPECTUS MAY NOT BE FORWARDED OR DISTRIBUTED OTHER THAN AS PROVIDED BELOW AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER. THIS PROSPECTUS MAY ONLY BE DISTRIBUTED OUTSIDE THE UNITED STATES AND WITHIN THE UNITED STATES TO “QUALIFIED INSTITUTIONAL BUYERS” (“QIBs”) AS DEFINED IN AND PURSUANT TO RULE 144A OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) (“RULE 144A”). ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. IF YOU HAVE GAINED ACCESS TO THIS TRANSMISSION CONTRARY TO ANY OF THE FOREGOING RESTRICTIONS, YOU ARE NOT AUTHORISED AND WILL NOT BE ABLE TO PURCHASE ANY OF THE NOTES DESCRIBED IN THE ATTACHED DOCUMENT.
NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION. THE SECURITIES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES EXCEPT TO QIBs PURSUANT TO RULE 144A.
Confirmation of your representation: In order to be eligible to view this Prospectus or make an investment decision with respect to the securities, you must be a person who is outside the United States unless you are a QIB in the United States. By accepting the email and accessing this Prospectus, you shall be deemed to have represented to the Republic of Cameroon (the “Issuer”), Société Générale and Standard Chartered Bank that you and any customers you represent, unless you are QIBs, are not in the United States; the electronic mail address that you have given to us and to which this e-mail has been delivered is not located in the U.S., its territories and possessions (including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands), any State of the United States or the District of Columbia unless you are a QIB in the United States; and that you consent to delivery of such Prospectus by electronic transmission.
You are reminded that this Prospectus has been delivered to you on the basis that you are a person into whose possession this Prospectus may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not, nor are you authorised to, deliver this Prospectus to any other person.
Any materials relating to the offering do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that the potential offering be made by a licensed broker or dealer and any underwriter or any affiliate of any underwriter is a licensed broker or dealer in that jurisdiction, any offering shall be deemed to be made by the underwriter or such affiliate on behalf of the Issuer in such jurisdiction.
This Prospectus is being distributed only to and directed only at (i) persons who are outside the United Kingdom, (ii) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) (the “Order”), and qualified investors falling within articles 49(2)(a) to (d) of the Order or (iii) those persons to whom it may otherwise lawfully be distributed (all such persons together being referred to as “relevant persons”). This Prospectus is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this Prospectus relates is available only to relevant persons and will be engaged in only with relevant persons.
This Prospectus has been sent to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently none of the Issuer, Société Générale, Standard Chartered Bank, any person who controls any such persons, or any of their respective directors, officers, employees, agents or affiliates accepts any liability or responsibility whatsoever in respect of any difference between the Prospectus distributed to you in electronic format and the hard copy version available to you on request from Société Générale or Standard Chartered Bank.
THE REPUBLIC OF CAMEROON U.S.$750,000,000 9.50% Amortising Notes due 2025
The issue price of the U.S.$750,000,000 Amortising Notes due 2025 (the "Notes") of the Republic of Cameroon ("Cameroon", the "Republic" or the "Issuer") is 98.426% of their principal amount. The Issuer will redeem the Notes at their outstanding principal amount (as determined in accordance with Condition 5 (Redemption and Purchase) of the Terms and Conditions of the Notes) on 19 November 2025. The Notes shall also be partially redeemed by the Issuer on each Amortisation Date (as defined in Condition 5 (Redemption and Purchase) of the Terms and Conditions of the Notes). The Notes are not otherwise redeemable prior to maturity. Interest on the Notes is payable semi-annually in arrear on 19 May and 19 November in each year, commencing on 19 May 2016. Payments on the Notes will be made in U.S. dollars without deduction for or on account of taxes imposed or levied by Cameroon to the extent described in Condition 7 (Taxation) of the Terms and Conditions of the Notes. This Prospectus has been approved by the Central Bank of Ireland (the “Central Bank”), as competent authority under Directive 2003/71/EC, as amended (the “Prospectus Directive”). The Central Bank only approves this Prospectus as meeting the requirements imposed under Irish and EU law pursuant to the Prospectus Directive. Such approval relates only to the Notes which are to be admitted to trading on a regulated market for the purposes of Directive 2004/39/EC or which are to be offered to the public in any Member State of the European Economic Area. Application has been made to the Irish Stock Exchange plc (the “Irish Stock Exchange”) for the Notes to be admitted to the Official List (the “Official List”) and trading on its regulated market (the “Main Securities Market”). The Notes are expected to be rated B (stable) by Standard & Poor’s Credit Market Services Europe Ltd. (“S&P”) and B (stable) by Fitch Ratings Ltd. (“Fitch”). All references to S&P and Fitch included in this Prospectus are to the entities as defined in this paragraph. Both S&P and Fitch are established in the European Union and registered under Regulation (EC) no 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies, as amended (the “CRA Regulation”). As such, both S&P and Fitch are included in the latest update of the list of registered credit rating agencies published by the European Securities and Markets Authority on its website: http://www.esma.europa.eu/page/List-registered-and-certified-CRAs in accordance with the CRA Regulation as at the date of this Prospectus. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning rating organisation. AN INVESTMENT IN THE NOTES INVOLVES CERTAIN RISKS. PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS DESCRIBED IN “RISK FACTORS” BEGINNING ON PAGE 12. The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”) or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered or sold within the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable state securities laws. Accordingly, the Notes are being offered, sold or delivered: (a) in the United States only to qualified institutional buyers (“QIBs”) (as defined in Rule 144A under the Securities Act (“Rule 144A”)) in reliance on, and in compliance with, Rule 144A (“Rule 144A Notes”); and (b) outside the United States in offshore transactions in reliance on Regulation S under the Securities Act (“Regulation S”) (“Regulation S Notes”). Each purchaser of the Notes will be deemed to have made the representations described in “Subscription and Sale” and is hereby notified that the offer and sale of Notes to it is being made in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A. The Notes will be offered and sold in registered form in denominations of U.S.$200,000 or any amount in excess thereof which is an integral multiple of U.S.$1,000. The Notes will initially be represented by two global certificates in registered form, one of which will be issued in respect of the Notes offered and sold in reliance on Rule 144A (the “Restricted Global Certificate”) and registered in the name of Cede & Co., as nominee for The Depository Trust Company (“DTC”) and the other of which will be issued in respect of the Notes offered and sold in reliance on Regulation S (the “Unrestricted Global Certificate” and together with the Restricted Global Certificate, the “Global Certificates”) and registered in the name of a nominee of a common depositary for Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking, société anonyme (“Clearstream, Luxembourg”). It is expected that delivery of the Global Certificates will be made on 19 November 2015 or such later date as may be agreed (the “Issue Date”) by the Issuer and the Joint Lead Managers (as defined under “Subscription and Sale”). Beneficial interests in the Global Certificates will be shown on, and transfers thereof will be effected only through, records maintained by DTC, Euroclear, Clearstream, Luxembourg and their respective participants. Except in the limited circumstances as described herein, certificates will not be issued in exchange for beneficial interests in the Global Certificates.
JOINT LEAD MANAGERS
SOCIÉTÉ GÉNÉRALE STANDARD CHARTERED BANK CORPORATE & INVESTMENT BANKING
The date of this Prospectus is 13 November 2015
RESPONSIBILITY STATEMENT
The Issuer accepts responsibility for the information contained in this Prospectus and declares that, to the best of the knowledge and belief of the Issuer, having taken all reasonable care to ensure that such is the case, the information contained in this Prospectus is in accordance with the facts and does not omit anything likely to affect the import and completeness of such information.
No person is authorised in connection with the offering of the Notes to give any information or make any representation regarding the Issuer or the Notes other than as contained in this Prospectus or as approved for such purpose by the Issuer.
Any such representation or information should not be relied upon as having been authorised by the Issuer or the Joint Lead Managers or any of their respective affiliates.
None of the Joint Lead Managers or any of their respective affiliates has independently verified or authorised the whole or any part of the information contained herein. Accordingly no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Joint Lead Managers or their respective affiliates as to the accuracy or the completeness of the information contained in this Prospectus or any other information provided by the Issuer in connection with the Notes.
Neither this Prospectus nor any other information supplied in connection with the offering of the Notes constitutes an offer of, or an invitation to subscribe for or purchase, any Notes.
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IMPORTANT NOTICES
A potential investor should carefully evaluate the information provided herein in light of all information available to it, recognising that neither the Issuer, the Joint Lead Managers nor any other person can provide any assurance as to the reliability of any information not contained in this document. Neither the delivery of this Prospectus nor the offering, sale or delivery of the Notes shall in any circumstances create any implication that there has been no adverse change, or any event reasonably likely to involve any adverse change, in the condition (financial, political, economic or otherwise) of the Issuer since the date of this Prospectus or the date upon which this Prospectus has been most recently amended or supplemented, or that the information contained herein concerning the Issuer is correct at any time subsequent to the date hereof, or that any other information supplied in connection with the offering, sale or delivery of Notes is correct as at any time subsequent to the date indicated in the document containing the same. The Joint Lead Managers and their respective affiliates expressly do not undertake to review the financial condition or affairs of the Issuer during the life of the Notes nor to advise any investor in the Notes of any information coming to their attention.
This Prospectus constitutes a prospectus for the purposes of the Prospectus Directive.
The distribution of this Prospectus and the offering, sale and delivery of Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes are required by the Issuer and the Joint Lead Managers to inform themselves about and to observe any such restrictions. For a description of certain restrictions on offers, sales and deliveries of Notes and on distribution of this Prospectus and other offering material relating to the Notes, see “Subscription and Sale”.
Generally, investment in emerging markets such as the Republic is only suitable for sophisticated investors who fully appreciate the significance of the risks involved in, and are familiar with, investing in emerging markets. Investors are urged to consult their own legal and financial advisers before making an investment.
Such risks include, but are not limited to, higher volatility and more limited liquidity in respect of the Notes, a narrow export base, budget deficits, lack of adequate infrastructure necessary to accelerate economic growth and changes in the political and economic environment. Emerging markets can also experience more instances of corruption by government officials and misuse of public funds than do more mature markets, which could affect the ability of governments to meet their obligations under issued securities.
Investors should also note that emerging markets such as the Republic are subject to rapid change and that the information set out in this Prospectus may become outdated relatively quickly.
Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:
have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained in this Prospectus or any applicable supplement;
have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio;
have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including where the currency for principal or interest payments is different from the potential investor’s currency;
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understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant financial markets; and
be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.
In this Prospectus, unless otherwise specified, references to a “Member State” are references to a Member State of the European Economic Area, references to “CFA franc”, “FCFA” or “CFA” are to the Central African CFA franc, the currency of the Issuer, “U.S.$”, “U.S. dollars” or “dollars” are to United States dollars, references to “€”, or “Euro” are to the currency introduced at the start of the third stage of European economic and monetary union, and as defined in Article 2 of Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the Euro, as amended. References to “billions” are to thousands of millions.
The language of the Prospectus is English. Certain legislative references and technical terms have been cited in their original language in order that the correct technical meaning may be ascribed to them under applicable law.
In connection with the issue of the Notes, Standard Chartered Bank (the “Stabilising Manager”) (or persons acting on behalf of the Stabilising Manager) may over allot Notes or effect transactions with a view to supporting the price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilising Manager (or persons acting on behalf of the Stabilising Manager) will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the Notes is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the Notes and 60 days after the date of the allotment of the Notes. Any stabilisation action or overallotment must be conducted by the Stabilising Manager (or persons acting on behalf of the Stabilising Manager) in accordance with all applicable laws and rules.
NOTICE TO PROSPECTIVE UNITED STATES INVESTORS
The Notes have not been approved or disapproved by the United States Securities and Exchange Commission or any other securities commission, any state securities commission in the United States or any other regulatory authority in the United States, nor have the foregoing authorities reviewed or passed upon or endorsed the merits of the offering of the Notes or the accuracy or the adequacy of this Prospectus. Any representation to the contrary is a criminal offence in the United States.
This offering is being made in the United States in reliance upon an exemption from registration under the Securities Act for an offer and sale of the Notes which does not involve a public offering. Each purchaser or holder of interests in the Notes will be deemed, by its acceptance or purchase of any such Notes, to have made certain acknowledgements, representations and agreements as set out in “Subscription and Sale” and “Transfer Restrictions”.
This Prospectus is being furnished on a confidential basis in the United States to a limited number of QIBs for informational use solely in connection with the consideration of the purchase of the Notes. This Prospectus is being furnished only (1) to a limited number of investors in the United States only to persons reasonably believed to be QIBs and (2) to investors outside the United States. Any reproduction or distribution of this Prospectus, in whole or in part, in the United States and any disclosure of its contents or use of any information herein in the United States for any purpose, other than in considering an investment by the recipient in the Notes, is prohibited. Each potential investor in the Notes, by accepting delivery of this Prospectus agrees to the foregoing.
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NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER CHAPTER 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this Prospectus constitute forward-looking statements.
Statements that are not historical facts, including, without limitation, statements about the Issuer’s beliefs and expectations, are forward-looking statements. These statements are based on current plans, objectives, assumptions, estimates and projections. When used in this Prospectus, the words “anticipates”, “estimates”, “expects”, “believes”, “intends”, “plans”, “aims”, “seeks”, “may”, “will”, “should” and similar expressions generally identify forward-looking statements but are not the exclusive means of identifying such statements. Therefore, undue reliance should not be placed on them. The Issuer has based these forward-looking statements on its current view with respect to future events and financial results.
Forward-looking statements speak only as at the date on which they are made and the Issuer undertakes no obligation to update publicly any of them in light of new information or future events. Forward-looking statements involve inherent risks and uncertainties. Forward-looking statements include, but are not limited to: (i) plans with respect to the implementation of economic policy, including privatisations, and the pace of economic and legal reforms; (ii) expectations about the behaviour of the economy if certain economic policies are implemented; (iii) the outlook for gross domestic product, inflation, exchange rates, interest rates, foreign investment, trade and fiscal accounts; and (iv) estimates of external debt repayment and debt service.
The Issuer cautions that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. The information contained in this Prospectus identifies important factors, including those discussed under “Risk Factors”, that could cause such differences, including, but not limited, to the following factors:
changes in international commodity prices, particularly prices of agricultural products, such as arabica and robusta coffee, prices of cocoa, bananas and palm oil, as well as prices for the quality of crude oil produced or purchased in Cameroon, which could adversely affect the Issuer’s balance of payments and budget deficit;
changes in foreign exchange rates or prevailing interest rates, which could effect the Issuer’s debt service, balance or payments or budget deficit;
recessions, political unrest, regulatory changes or low economic growth in countries that are the Issuer’s trading partners or neighbors;
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changes in the level of support by the Republic’s multilateral and bilateral creditors or changes in the terms on which such creditors provide financial assistance to the Republic or any of its agencies or fund new or existing projects;
changes in relationships with countries or organisations that currently provide aid, financing and technical assistance with the Issuer’s major infrastructure projects;
changes in the structure or stability of the regional currency union to which the Issuer belongs or changes in regulations relating to bank supervision by the regional central bank (“BEAC”); and
changes in or harmonisation of regulation flowing from the Communauté Economique et Monétaire de l’Afrique Centrale (“CEMAC”) trade union to which the Issuer belongs;
a decline in foreign direct investment (“FDI”), a decline in foreign currency reserves, increases in domestic inflation, exchange rate volatility, or a significant increase in the level of domestic and external debt, which could lead to lower economic growth or a decrease in the Issuer’s foreign currency reserves;
any failure to continue or complete planned infrastructure projects or reforms in particular industries or economic sectors;
changes in economic or other policies, including monetary policy applicable in the Republic, which could affect inflation, growth rates and/or other aspects of the Republic’s economy;
socio-economic factors in the Republic such as poverty, unemployment, income inequality and health- related issues, which could affect political stability;
any deterioration in investor perceptions;
the ability of the Republic to adequately address its infrastructure deficiencies, such as those in the transport, energy and telecommunications sectors, which may affect its ability to achieve the desired growth; and
instances of terrorism in the Republic.
The sections of this Prospectus entitled “Risk Factors”, “The Republic of Cameroon”, “The Cameroonian Economy,” “Foreign Trade and Balance of Payments,” “Public Finance,” “Public Debt,” and “Monetary System,” contain a more complete discussion of the factors that could adversely affect the Issuer. In light of these risks, uncertainties and assumptions, the forward-looking events described in this Prospectus may not occur. The Issuer does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by law or applicable regulations. All subsequent written and oral forward-looking statements attributable to the Issuer or to persons acting on its behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere in this Prospectus.
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EXCHANGE RATE HISTORY
The CFA franc has been selected as the functional and presentation currency for the purpose of this Prospectus, as the majority of the Issuer’s operations are denominated, measured or funded in CFA franc. The exchange rate of the CFA franc to the Euro is fixed at CFA 655.957 = €1.00 as at the date hereof.
The following table sets forth, for the periods indicated, the high, low, average and year end rates from Bloomberg, in each case for the purchase of CFA francs, all expressed per U.S. dollar. These translations should not be construed as representations that the CFA franc amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated as at any of the dates mentioned in this Prospectus or at all.
Period Period End (1) High Low Average
(CFA per U.S.$1) Year 2010 ...... 489.7761 495.5755 548.2101 451.9000 2011 ...... 507.0051 472.3485 508.1251 441.7350 2012 ...... 497.5025 511.2277 545.5800 488.4301 2013 ...... 477.1800 494.6724 513.6301 474.8148 2014 ...... 542.0909 496.0312 542.0909 471.4892 Month May 2015 ...... 600.1302 588.6744 603.1512 576.1900 June 2015 ...... 590.7000 585.2527 603.3602 575.4006 July 2015 ...... 594.7297 596.7977 606.9600 588.1968 August 2015 ...... 585.9637 589.4762 604.1402 566.4569 September 2015 ...... 587.6699 585.6243 592.2801 580.2105 October 2015 (through October 30) ...... 596.5143 587.9224 606.8601 577.6559
Source: Bloomberg
Notes: (1) Daily average for the period The following table sets out quarterly average and year average exchange rates between the CFA franc and selected international currencies.
Exchange rate (in CFA)
2013 2014 2015
Q1 Q2 Q3 Q4 Full Q1 Q2 Q3 Q4 Full Q1 Q2 Q3 Year Year
1 Yuan ...... 79.8 81.6 80.9 79.1 80.3 78.5 76.8 80.5 85.6 80.5 99.2 95.3 92.4
1 Yen ...... 5.4 5.1 5.0 4.8 5.1 4.7 4.7 4.8 4.6 4.7 4.9 4.9 4.8
1 Naira (Nigeria) ...... 3.2 3.2 3.1 3.1 3.2 3.1 3.1 3.1 3.0 3.0 3.1 3.0 2.9
Source: Afristat and Bloomberg
The U.S. dollar versus CFA franc exchange rate on 30 October 2015 was CFA 596.0456 per U.S.$ 1.00.
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PRESENTATION OF ECONOMIC AND OTHER INFORMATION
Annual information presented in this Prospectus is based upon 1 January to 31 December periods (which is the fiscal year for the Republic) unless otherwise indicated. Certain figures included in this Prospectus have been subject to rounding adjustments; accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be the sum of the figures which precede them.
Statistical information reported herein has been derived from official publications of, and information supplied by, a number of agencies and ministries of the Republic including but not limited to the Ministry of Finance of the Republic (Ministère des Finances, “MINFI”) including the Autonomous Sinking Fund of Cameroon (Caisse Autonome d’Amortissement “CAA”), the Economic Affairs Directorate (“DAE”) and the Customs Directorate (Direction Générale des Douanes “DGD”), the Ministry of Economics and Planning of the Republic (Ministère de l’Economie, de la Planification et de l’Aménagement du Territoire, “MINEPAT”), the Ministry of Foreign Affairs of the Republic (Ministère des Relations Extérieures, “MINREX”) and the National Statistical Insitute (Institut National de la Statistique, “INS”). Some statistical information has also been derived from information publicly made available by third parties such as the International Monetary Fund (the “IMF”), the International Bank for Reconstruction and Development (the “World Bank”), the United Nations Development Fund, the Organisation for Economic Co-operation and Development “OECD” and other third parties. Information has also been derived from official publications of, and information supplied by the BEAC.
Where such third party information has been so sourced the source is stated where it appears in this Prospectus. The Republic confirms that such information has been accurately reproduced and that, so far as it is aware, and is able to ascertain from information published by such third parties, no facts have been omitted which would render the reproduced information inaccurate or misleading.
Similar statistics may be obtainable from other sources, but the underlying assumptions, methodology and, consequently, the resulting data may vary from source to source. In addition, statistics and data published by a ministry or an agency of the Republic, or a third party, may differ from similar statistics and data produced by other agencies or ministries or the Republic or third parties due to differing underlying assumptions or methodology. Certain historical statistical information contained herein is based on estimates that the Republic and/or its agencies believe to be based on reasonable assumptions. The Republic’s official financial and economic statistics for previous periods are subject to review as part of a regular confirmation process. Accordingly, financial and economic information for previous periods may be subsequently adjusted or revised and may differ from previously published financial and economic information. In particular, estimates of financial and statistical information as at and for the years ended 31 December 2011, 2012, 2013 and 2014 and for the six months ended 30 June 2015 in this Prospectus may be preliminary estimates. While the Government of the Republic (the “Government”) does not expect revisions to be material, no assurance can be given that material changes will not be made.
References to gross domestic product (“GDP”) are to nominal GDP unless indicated otherwise.
Since 2001, the Republic has adhered to the IMF’s General Data Dissemination System (the “GDDS”), which guides members in the dissemination of economic and financial data to the public. The GDDS sets standards designed to guide all member countries in the provision of their economic and financial data to the public. Data covered includes the real, fiscal, financial and the external sectors as well as socio-demographic data.
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By participating in the GDDS, the Republic has undertaken to:
use the GDDS as a framework for statistical development;
designate a country coordinator; and
provide metadata to the IMF describing the current practices and plans for short- and long-term improvements in these practices.
A summary of the methodology under which the Republic prepares its metadata is found on the internet under the IMF’s Dissemination Standards Bulletin Board. The Republic’s metadata may be found on the IMF’s website site at http://dsbb.imf.org/Pages/GDDS/CtyCtgList.aspx?ctycode=CMR.
The BEAC website http://www.beac.int contains information, relevant legislation, press releases, publications, including statistics, research papers, guidelines and regulations and speeches.
Websites included in this Prospectus and information therein do not form part of this Prospectus.
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ENFORCEMENT OF CIVIL LIABILITIES
The Republic is a sovereign state and substantially all of the assets of the Republic are located in Cameroon. Consequently, it may be difficult for investors to obtain or enforce court judgments and/or arbitral awards in jurisdictions outside the Republic (including judgments predicated upon civil liability provisions of the securities laws of the United States or any state or territory within the United States) against the Republic.
The Republic agreed to resolve disputes by arbitration in accordance with rules and procedures of the London Court of International Arbitration (“LCIA”). The Republic is a party to the United Nations (New York) Convention on Recognition and Enforcement of Foreign Arbitral Awards.
In addition, the Republic has agreed to submit to the jurisdiction of the English courts. A judgment of an English court may be recognised and enforced by Cameroonian courts through an action for exequatur in which the Cameroonian courts may verify the following matters:
that the English court had jurisdiction in the matter of the dispute pursuant to the English jurisdiction rules;
that the English court applied the relevant law to the matter of the dispute according to the Cameroonian rules on conflicts of law;
that the procedure followed by the English court was admissible insofar as Cameroonian international public policy is concerned; in this respect, a Cameroonian court may check that (i) service of process was properly effected as agreed, (ii) each party was given an opportunity during the proceedings to plead and to respond to arguments raised by the other party and that in this respect, except in the case of a default judgment, the facts were properly proved by reference to elements of proof other than mere statements by the plaintiff and (iii) the defendant had the opportunity of appealing to the extent an appeal was possible in the relevant court, in particular by having had knowledge of the judgment in time necessary to make such appeal; and
that the judgment is neither repugnant to Cameroonian international public policy with respect to matters of procedure or of substance, nor to a final decision delivered in Cameroon.
The Republic has waived certain immunities in respect of disputes arising out of or in connection with the Notes. The Republic has not, however, waived immunity from execution or attachment in respect of certain of its assets. See “Terms and Conditions of the Notes—Governing Law and Jurisdiction —Waiver of Immunity” for further details. The waiver of immunity will have the fullest scope permitted under the Foreign Sovereign Immunities Act of 1976 of the United States and the State Immunity Act 1978 of the United Kingdom and is intended to be irrevocable for the purposes of such acts, but should otherwise constitute only a limited and specific waiver for the purposes of the Notes, and under no circumstances shall it be interpreted as a general waiver by the Republic or a waiver with respect to proceedings unrelated to the Notes. The Issuer reserves the right to plead sovereign immunity under the Foreign Sovereign Immunities Act of 1976 of the United States with respect to any actions brought against it in any court or in the United States of America under any United States federal or state securities law.
Arbitral awards obtained outside Cameroon may be enforced in Cameroon under the Law No. 2007/001 of 19 April 2007 “To Institute a Judge in Charge of Litigation Related to the Execution of Judgements and lay down Conditions for the Enforcement in Cameroon of Foreign Court Decisions, Public Acts and Arbitral Awards”. Because it may be difficult to obtain or enforce judgments in Cameroon, third parties may seek to attach assets of the Issuer abroad, including funds intended for use in payments for other third parties.
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The Republic will irrevocably appoint the Ambassador of the Republic of Cameroon in the United Kingdom as its authorised agent on whom process may be served in any action arising out of or based on the Notes in arbitration proceedings.
A judgment by a Cameroonian court will ordinarily be awarded in CFA francs, but may be awarded in a foreign currency. Similarly, when enforcing an arbitral award or a foreign judgment awarded in a currency other than CFA francs, a Cameroonian court may convert such award into CFA francs. In that event, there may be a discrepancy between the rate of exchange used by the Cameroonian court to convert such award into CFA francs, and the rate of exchange which may be obtained in the market to convert such award from CFA francs back into another currency. A Noteholder who is awarded an arbitral award or a judgement may therefore incur a loss as a result of such exchange rate differences. A currency indemnity has been included in the terms and conditions (see Condition 16 (Currency Indemnity)), however, the cost of enforcement of such condition may nevertheless result in a loss by such Noteholder. Any payment to be made from the Republic pursuant to any arbitral award or judgment will not require an exchange control approval.
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TABLE OF CONTENTS
Page
RESPONSIBILITY STATEMENT ...... i
IMPORTANT NOTICES ...... ii
EXCHANGE RATE HISTORY ...... vi
PRESENTATION OF ECONOMIC AND OTHER INFORMATION ...... vii
ENFORCEMENT OF CIVIL LIABILITIES ...... ix
OVERVIEW ...... 1
RISK FACTORS ...... 12
TERMS AND CONDITIONS OF THE NOTES ...... 35
THE GLOBAL CERTIFICATES ...... 58
USE OF PROCEEDS ...... 63
THE REPUBLIC OF CAMEROON ...... 64
THE CAMEROONIAN ECONOMY ...... 79
FOREIGN TRADE AND BALANCE OF PAYMENTS ...... 122
PUBLIC FINANCE ...... 138
PUBLIC DEBT ...... 150
MONETARY SYSTEM ...... 159
TAXATION ...... 172
CLEARING AND SETTLEMENT ARRANGEMENTS ...... 175
SUBSCRIPTION AND SALE ...... 180
TRANSFER RESTRICTIONS ...... 182
GENERAL INFORMATION ...... 184
OVERVIEW
The following is an overview of certain information contained elsewhere in this Prospectus. It does not purport to be complete and is qualified in its entirety by the more detailed information appearing elsewhere in this Prospectus. Any decision to invest in the Notes should be based on a consideration of this Prospectus as a whole. Prospective investors should also carefully consider the information set forth in “Risk Factors” prior to making an investment decision. Capitalised terms not otherwise defined in this overview have the same meaning as elsewhere in this Prospectus. See “The Republic of Cameroon” and “The Cameroonian Economy”, amongst others, for a more detailed description of the Republic. References in this overview to a “Condition” are to the numbered condition corresponding thereto set out in the Terms and Conditions of the Notes (the “Conditions”).
Overview of the Republic of Cameroon
The Republic of Cameroon is situated in central-west Africa and shares borders with Chad, the Central African Republic, Nigeria, Equatorial Guinea, Gabon and the Republic of Congo.
The population of Cameroon was approximately 21.5 million in 2014. English and French are the official languages, although French is spoken by approximately 80% of the population. The two largest cities in Cameroon are Yaoundé (which is the capital) and Douala, each with a population of approximately 2.4 million people. The rate of urbanisation over the 2010-2015 period is estimated to be approximately 3% per year.
Paul Biya has been president of Cameroon since 1982 and has won every presidential election since multi- party legislative elections were introduced in 1992. The next presidential election is expected to be held in 2018. There are currently approximately 300 active political parties in Cameroon, most of which are very small. The Cameroon People’s Democratic Movement (“CPDM”), the party of Paul Biya, holds majorities in the upper and lower houses of parliament.
Cameroon is a leading member of CEMAC, a trade and monetary union including the Central African Republic, Chad, the Republic of the Congo, Equatorial Guinea and Gabon. Cameroon has a common currency with other members of CEMAC, the CFA franc, which is pegged to the Euro. The CEMAC central bank, the BEAC, manages monetary policy and banking regulation for the entire region.
Economy
Real GDP of Cameroon grew at a rate of 5.9% in 2014, 5.6% in 2013, 4.6% in 2012 and 4.1% in 2011. The Government initially projected real GDP growth to equal approximately 5.8% in 2015. In mid-2015, the Government revised their estimate of real GDP growth for 2015 upwards to 6.4%, based on estimated preliminary results of GDP performance for the first half of 2015.
In 2014, the top five industries in the Cameroonian economy were (i) agriculture (including forestry, fishing and livestock), (ii) wholesale and retail trade, (iii) manufacturing, (iv) financial and business services and (v) extractive industries, including oil. In 2014, the oil sector accounted for an estimated 7.0% of total GDP, but approximately 47.5% of Cameroon’s exports by value. In order to decrease its dependence on the oil sector, Cameroon has attempted to develop non-oil segments of the economy.
In 2014, the primary sector (composed predominantly of agricultural production) grew by an estimated 4.2%, the secondary sector (comprised of industrial production, manufacturing and extractive industries, such as oil and gas) grew by an estimated 6.8% and the tertiary sector (including the financial and business services industry) grew by an estimated 5.6%.
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The Vision 2035 Plan, the Growth and Employment Strategy, and the Three Year Emergency Plan
The Vision 2035 Plan and the Growth and Employment Strategy
In 2009, the Government adopted its long-term “Vision 2035 Plan” (“Vision 2035”) with the goal to transform Cameroon an emerging country, with sustainable economic and social development, and an economy that is strong, diversified and competitive and in which manufacturing is the largest sector (in terms of both GDP and exports). Vision 2035 contemplates that, by 2035, Cameroon will be fully integrated into the global economy, with a low poverty rate and the per capita income of a middle-income country. Specific objectives are to:
Reduce the poverty rate below 10% and improve equitable income distribution;
Improve the availability and quality of healthcare, education and infrastructure to levels comparable with other middle-income countries;
Become a newly-industrialized country by first focusing on areas where Cameroon already possesses a comparative advantage, such as agriculture and extractive industries; and
Consolidate the democratic process and strengthen national unity.
In 2009, the Government developed its 10-year Growth and Employment Strategy, which covers the first ten years of Vision 2035, i.e. 2010-2020, and focuses on accelerating growth, creating jobs and reducing poverty. The primary goals of this plan were, and remain, to:
Maintain a growth rate of approximately 5.5% per year during the 2010-2020 period;
Reduce the under-employment rate; and
Reduce the poverty rate.
Three Year Emergency Plan
The Government’s Three Year Emergency Plan is a special programme of immediate measures and projects intended to accelerate growth and improve living conditions in Cameroon and to provide impetus on the implementation of the Vision 2035 Plan and the Growth and Employment Strategy. The plan budgets a total of CFA 925 billion to be spent throughout the national territory over the three year period from 2015 to 2017. The plan covers seven main spending areas:
1. Urban planning: (i) rehabilitating secondary roads and public lighting in the cities of Yaoundé and Douala, and (ii) building approximately 100 social housing units in regional capitals.
2. Healthcare: (i) building and equipping referral hospitals in the regional capitals that do not already have general hospitals, (ii) upgrading technical facilities in the general hospitals in Yaoundé and Douala, as well as the university hospital in Yaoundé, and more generally, (iii) improving and/or providing technical equipment to hospitals.
3. Agriculture and Livestock: (i) creating agropoles and installing hydroponic farming facilities covering approximately 120,000 hectares in the North, (ii) building wholesale market centres to facilitate the flow of agricultural products to urban centres, and (iii) constructing slaughterhouses and refrigerated warehouses for meat distribution.
4. Roads: building two major roads that connect Cameroon’s ten regions to facilitate the transport of products from each region.
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5. Energy Supply: (i) building power lines to improve energy supplies to large cities and (ii) completing the Warak Bini hydro-electric dam.
6. Water Supply: (i) extending the delivery network for drinking water and (ii) drilling approximately 4,000 wells throughout the country.
7. Security: (i) building additional police stations in Yaoundé and Douala and (ii) construction of border patrol stations.
It is expected that a portion of the proceeds from the issue of the Notes will be used to provide part of the funding for the Three Year Emergency Plan (See “Use of Proceeds”). The remaining funding for the Three Year Emergency Plan is expected to be provided by local and international commercial banks (See “Three Year Emergency Plan, Vision 2035 Plan, Growth and Employment Strategy”).
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Principal Economic Indicators
The following table sets forth the main economic indicators for Cameroon for the periods indicated. This information is qualified in its entirety by, and should be read in conjunction with, the detailed information appearing elsewhere in this Prospectus.
2011 2012 2013 2014 (in billions CFA, unless otherwise noted)
GDP (in current CFA) ...... 12,546 13,515 14,608 15,846 Non-petroleum-based GDP ...... 11,605 12,440 13,547 14,761 Petroleum-based GDP ...... 941 1,075 1,060 1,086 GDP (in constant CFA)(1) ...... 9,536 9,973 10,528 11,152 Non-petroleum-based GDP ...... 9,194 9,620 10,144 10,715 Petroleum-based GDP ...... 342 354 384 437 Annual growth rates (%) Real GDP Growth Rate ...... 4.1 % 4.6 % 5.6 % 5.9% Non-petroleum-based GDP ...... 4.6 % 4.6 % 5.5 % 5.6% Petroleum-based GDP ...... (7.3 )% 3.5 % 8.5 % 13.9% Population (‘000) ...... 19,891 20,387 20,917 21,461 Population growth rate (%) ...... 2.7 % 2.7 % 2.7 % 2.5% Exports (as a % of GDP) ...... 18.4 % 18.8 % 20.7 % 21.7% Imports (as a % of GDP) ...... 26.5 % 26.6 % 28.9 % 31.2% Government budget Government revenues (as a % of GDP) (other than donor funding) ...... 16.9 % 16.8 % 17.2 % 17.6% Non-petroleum-revenues ...... 11.8 % 11.9 % 12.4 % 13.4% Petroleum-based revenues ...... 5.1 % 4.9 % 4.8 % 4.4% Government expenditures (as a % of GDP excl. debt service)(2) ...... 19.3 % 18.4 % 20.0 % 22.1% Current(2) ...... 13.8 % 12.9 % 13.1 % 14.4% Infrastructure and capital investment (FBCF)(2) ...... 5.6 % 5.5 % 6.9 % 7.7% Budget deficit (global budget) ...... (2.2) % (1.6) % (4.3) %(3) (3.6)% (4)
Source: MINFI and MINEPAT.
Note: (1) Constant figures are based on 2000 price levels. (2) Formation Brute de Capital Fixe or Gross Fixed Capital Formation. Ratio from MINFI/MINEPAT and MINFI/DAE data. (3) 4.1% according to IMF calculations. (4) 5.7% according to IMF calculations.
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Overview of Risk Factors Relating to the Republic of Cameroon, the Notes and the Trading Market for the Notes
An investment in the Notes involves significant risks. These may include (among others) those highlighted below.
Risks relating to Cameroon
As an emerging market economy, an investment in Cameroon generally poses a greater degree of risk than an investment in more mature market economies.
Emerging market issuers’ notes face greater liquidity and credit risk.
There is no guarantee that Cameroon will remain politically stable, in particular in the event of a presidential succession.
Cameroon has been the subject of terrorist attacks in recent years from Boko Haram and other groups.
Cameroon has experienced large inflows of refugees.
Cameroon faces significant socio-economic challenges, including high levels of poverty and unemployment.
Cameroon may be unable to meet the objectives of Vision 2035, the Three Year Emergency Plan or its infrastructure goals, which could adversely affect Cameroon’s economy and growth prospects.
Failure to grow non-oil sectors of the economy or meet Cameroon’s goals for diversifying the economy may limit the development potential in the country.
Failure to adequately refinance SONARA could have significant economic consequences on the Cameroonian state budget and impair Cameroon’s ability to service the Notes.
The timing of the publication of the pending IMF Article IV report may have an adverse impact on the price, volume or yield of the Notes.
Cameroon’s economy is dependent on oil production and global oil prices.
A significant portion of the Cameroonian economy is not recorded.
Future increases in public sector wages could have an inflationary impact on the Cameroonian economy.
Changes in levels of debt or the cost of debt could have a material adverse effect on Cameroon’s economy and its ability to service its debt, including the Notes.
Cameroon’s level of debt was declared unsustainable in 2000 and Cameroon defaulted on approximately CFA 40 billion of domestic debt in 2004.
Cameroon may experience a deterioration in the level of support by its multilateral and bilateral creditors.
Deterioration in growth rates, in bilateral relationships or events in certain major trading partner countries could adversely affect the Cameroonian economy.
The Cameroonian banking sector is dominated by retail banks, microfinance and other quasi-banking institutions, which may be under-regulated, under-supervised or suffer from under-capitalisation.
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Cameroon’s membership of CEMAC may affect its ability to react to economic shocks and may subject it to economic policies that are not in its best interests.
Any significant depreciation of the CFA franc against major currencies would have a material adverse effect on Cameroon’s ability to repay its debt denominated in currencies other than the CFA franc, including amounts due under the Notes.
Failure to adequately address actual and perceived risks of corruption may adversely affect Cameroon’s economy and its ability to attract foreign direct investment.
Cameroon may use a portion of the proceeds of the Notes to fund or refinance certain state-owned entities, which are not obligors under the Notes and which proceeds may not be repaid to the state.
Statistical information published by Cameroon or its entities or subdivisions may be more limited in scope, published less frequently and differ from those produced by other sources.
The adverse outcome of legal and arbitral proceedings could have a negative impact on Cameroon.
Cameroon faces risks from various communicable and tropical diseases and may lack the healthcare infrastructure to address adequately a major health crisis, which could adversely affect its economy.
Natural disasters have negatively affected Cameroon in the past and may negatively affect it in the future.
Cameroonian territory encompasses many ecosystems and micro-climates, which are subject to varying levels of rainfall, and certain regions may therefore be subject to food and water security risks.
Risks Relating to the Notes
English law, which governs the terms of the Notes, may change over time.
Definitive Certificates not denominated in an integral multiple of U.S.$200,000 or its equivalent may be illiquid and difficult to trade.
There may be no active trading market for the Notes.
Cameroon is a sovereign state and consequently, it may be difficult for investors to obtain or realise arbitral awards or court judgments against Cameroon in other countries.
A claimant may not be able to enforce an arbitral award or a court judgment against certain assets of Cameroon in certain jurisdictions.
Holders of the Notes may be subject to the EU Savings Directive.
Fluctuations in exchange rates and interest rates may adversely affect the value of the Notes.
Legal investment considerations may restrict certain investments.
Credit ratings may not reflect all risks.
The Issuer may issue additional Notes that are intended to be fungible with the original Notes, but which may in some cases be treated as a separate series for U.S. federal income tax purposes, which may in turn affect the market value of the original Notes.
The Notes contain a “collective action” clause under which the terms of the Notes may be amended, modified or waived without the consent of all the holders of the Notes.
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The Issuer is not required to effect equal or rateable payment(s) with respect to the Notes or any other External Indebtedness, and is not required to pay other External Indebtedness at the same time or as a condition of paying sums on the Notes and vice versa.
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Overview of the Offering
Issuer The Republic of Cameroon. Description of Notes U.S.$750,000,000 9.50% Amortising Notes due 2025, to be issued by the Issuer on the Issue Date. Joint Lead Managers Société Générale and Standard Chartered Bank. Issue Price 98.426% Issue Date 19 November 2015 Maturity Date 19 November 2025 (the "Maturity Date"). Interest Interest on the Notes is payable semi-annually in arrear on 19 May and 19 November in each year, commencing on 19 May 2016. Redemption The Issuer will redeem the Notes at their outstanding principal amount (as determined in accordance with Condition 5 (Redemption and Purchase)) on the Maturity Date. The Notes shall also be partially redeemed by the Issuer on each Amortisation Date (as defined in Condition 5 (Redemption and Purchase)).
Events of Default Events of default under the Notes include the non-payment of principal within 15 business days of the due date for payment thereof, the non-payment of any interest due in respect of the Notes within 30 days of the due date for payment thereof, breach of other obligations under the Notes (which breach is not remedied within 45 days) and certain events related to the Issuer. The holders of the Notes who hold at least 25% in aggregate principal amount of the Notes then outstanding may declare all the Notes to be immediately due and payable at their principal amount together with accrued interest if any one or more of the Events of Default occurs. A declaration of acceleration may be rescinded in certain circumstances by the resolution in writing of the holders of at least 50% in aggregate principal amount of the outstanding Notes. (See Condition 8 (Events of Default)). Negative Pledge The terms of the Notes contain a negative pledge provision given by the Issuer in respect of Public External Indebtedness as described in Condition 3 (Negative Pledge). Status of the Notes The Notes constitute direct, general, unconditional and (subject to Condition 3 (Negative Pledge)) unsecured obligations of the Issuer and the full faith and credit of the Issuer is pledged for the due and punctual payment of principal of, and interest on, the Notes and for the performance of all obligations of the Issuer pursuant to the Notes and the Deed of Covenant. The Notes will at all times rank pari passu without preference among themselves and (subject to Condition 3 (Negative
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Pledge)) at least pari passu with all other unsecured External Indebtedness (as defined in Condition 3(b) (Exceptions)) of the Issuer from time to time outstanding; provided, however, that the Issuer shall have no obligation to effect equal or rateable payment(s) at any time with respect to any other External Indebtedness and, in particular, the Issuer shall have no obligation to pay other External Indebtedness at the same time or as a condition of paying sums due on the Notes and vice versa. Meetings of Noteholders A summary of the provisions for convening meetings of Noteholders and amendments is set forth under Condition 12 (Meetings of Noteholders; Written Resolutions) and Condition 13 (Aggregation Agent; Aggregation Procedures). If the Issuer issues future debt securities which contain collective action clauses in substantially the same form as the collective action clause in the Conditions, the Notes would be capable of aggregation with any such future debt securities. See “Risk Factors—Risks relating to the Notes—The Notes contain a “collective action” clause under which the terms of the Notes may be amended, modified or waived without the consent of all the holders of the Notes”. Taxation All payments of principal and interest in respect of the Notes by or on behalf of the Issuer shall be made free and clear of, and without withholding or deduction for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of the Republic of Cameroon or any political subdivision or any authority thereof or therein having power to tax, unless the withholding or deduction of such taxes, duties, assessments or governmental charges is required by law. In that event, the Issuer shall pay such additional amounts as will result in receipt by the Noteholders of such amounts after such withholding or deduction as would have been received by them had no such withholding or deduction been required, except that no such additional amounts shall be payable in respect of any Note in certain circumstances, as further described in Condition 7 (Taxation). Risk Factors There are certain factors that may affect the Republic’s ability to fulfil its obligations under the Notes. These are set out under “Risk Factors—Risks relating to Investments in Emerging Markets” and “Risk Factors—Risks relating to The Republic of Cameroon” below. In addition, there are certain factors which are material for the purpose of assessing the market risks associated with the Notes. These are set out under “Risk Factors—Risks Relating to the Notes”.
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Listing and admission to trading Application has been made for the Notes to be admitted to the Official List of the Irish Stock Exchange and to be admitted to trading on the Main Securities Market. Governing Law The Notes and any non-contractual obligations arising out of or in connection with the Notes shall be governed by, and shall be construed in accordance with, English law. Arbitration and Jurisdiction Subject to the Noteholders’ option set out in Condition 17(c) (Noteholder's option) to elect that a specific Dispute be heard by the courts of England, any dispute arising out of or in connection with the Notes shall be resolved by arbitration under the Arbitration Rules of the London Court of International Arbitration, as more particularly described in Condition 17 (Governing Law ; Jurisdiction and Arbitration). Form and Denomination The Notes will be issued in registered form in denominations of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof. The Notes will initially be represented by Global Certificates. One or more Restricted Global Certificates will be issued in respect of Notes offered and sold in reliance on Rule 144A. The Unrestricted Global Certificate will be issued in respect of the Notes offered and sold in reliance on Regulation S. See “Transfer Restrictions”. Credit Ratings The Notes are expected to be assigned on issue a rating of B (stable) by S&P and B (stable) by Fitch. The Issuer has been assigned a rating of B (stable) by S&P and B (stable) by Fitch. Both S&P and Fitch are established in the European Union and are registered under the CRA Regulation. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning rating organisation. See “Risk Factors—Risks Relating to the Notes—Credit ratings may not reflect all risks”. Selling Restrictions The Notes have not been and will not be registered under the Securities Act or the laws of any state of the United States or any other jurisdiction. Consequently, the Notes may not be offered or sold in the United States except pursuant to an exemption from or in a transaction not subject to the registration requirements of the Securities Act and applicable state securities laws. The Notes are subject to certain restrictions on sales and transfers. See “Subscription and Sale” and “Transfer Restrictions”. Use of Proceeds The net proceeds of the issue of the Notes are expected to be approximately U.S.$735,000,000 (after deduction of fees, commissions and certain expenses payable by the Republic of Cameroon).
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The Republic of Cameroon intends to use the proceeds of the issue of the Notes for financing development projects and, in particular, the repayment in full of the SONARA Bridge Loan, the partial financing of the Three-Year Emergency Plan and certain long-term investment projects identified in the 2015 budget. See “Risk Factors — Risks Relating to the Cameroonian Economy — Failure to adequately refinance the Société Nationale de Raffinage could have significant economic consequences on the Cameroonian state budget and impair its ability to service the Notes” and “— Cameroon may be unable to meet the objectives of Vision 2035, the Three Year Emergency Plan or its infrastructure goals and therefore may be unable to meet its goals for growing the wider economy” for further details. Fiscal Agent, Transfer Agent and Citibank N.A., London Branch. Paying Agent Registrar Citigroup Global Markets Deutschland AG. Unrestricted Global Restricted Global Certificate Certificate ISIN XS1313779081 US133653AA31 Common Code 131377908 131654189 CUSIP - 133653 AA3
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RISK FACTORS
An investment in the Notes involves risks. Accordingly, prospective investors should carefully consider, amongst other things, the risks described below, as well as the detailed information set out elsewhere in this Prospectus, and reach their own views before making an investment decision. The risks and uncertainties described below are not the only risks and uncertainties related to the Issuer and the Notes. Additional risks and uncertainties not presently known or believed to be immaterial, as at the date of this Prospectus, could also impair the ability to make payments on the Notes. If any of the following risks actually materialise, the economic condition and/or prospects of the Issuer could be materially adversely affected. If that were to happen, the trading price of the Notes could decline and the Issuer may be unable to make payments due on the Notes, and investors may lose all or part of their investment.
Risks Relating to Investments in Emerging Markets
Investing in securities involving emerging markets generally involves a higher degree of risk than investing in more developed markets Generally, an investment in the securities of an emerging market, such as Cameroon, is only suitable for sophisticated investors who fully appreciate the significance of the risks involved in, and are familiar with, investing in emerging markets. Investors are urged to consult their own legal and financial advisers before making an investment in the Notes.
Such risks include, but are not limited to: potentially higher volatility and more limited liquidity in respect of the Notes, a narrow export base, a less-diversified economy, infrastructure challenges which may limit economic growth, significant socio-economic challenges, greater political risk and a greater likelihood of significant changes in the political and economic climate. Cameroon’s status as an emerging market also makes it susceptible to risks and challenges linked to budget deficits, increased levels of corruption and misuse of public funds. Prospective investors should also note that the Cameroonian economy, as an emerging economy, is subject to rapid change and general fluctuation. This could prevent Cameroon from meeting its obligations to investors, including investors in the Notes.
Any of these risk factors, as well as volatility in the markets for securities similar to the Notes, may adversely affect the value or liquidity of the Notes.
Emerging market issuers’ notes risk facing reduced liquidity and increased credit risk
The disruptions experienced during previous years in the international capital markets have also led to reduced liquidity and increased credit risk premiums for emerging market issuers and have resulted in financing being unavailable for certain issuers. As an emerging market issuer, Cameroon may be particularly susceptible to disruptions in the capital markets, including “flight to quality” effects and the resultant reduced availability of credit and increased cost of debt, all of which could make it difficult for Cameroon to refinance or repay the Notes. In addition, the availability of credit within emerging markets is significantly influenced by overall levels of investor confidence and so any factors that impact market confidence, such as decreases in the credit ratings of the Issuer or those of a neighbouring country could affect the price or availability of funding within emerging markets generally and to the Issuer specifically.
Recently, Cameroon has been adversely affected by violence involving “Boko Haram” militants, events in Nigeria and the Central African Republic, and the recent Ebola epidemic as well as by global events, such as the Eurozone crisis and the 2008 global financial crisis. See “— Risks relating to the Republic of Cameroon — Political Risks — Cameroon is subject to terrorist attacks from Boko Haram and other groups” and “— Risks relating to the Republic of Cameroon — Political Risks — Cameroon has experienced large inflows of
12 refugees”. No assurance can be given that Cameroon will not be affected by similar events in the future. Trading in the Notes could be adversely affected by international investors’ reactions to negative economic, security and/or financial developments occurring in other emerging markets or regions such as those mentioned above.
As a consequence, an investment in the Notes and Cameroon carries risks that are not typically associated with investing in more mature markets. These risks may be compounded by incomplete, unreliable or unavailable economic and statistical data on Cameroon, including elements of information provided in this Prospectus. Accordingly, prospective investors should exercise particular care in evaluating the risks involved and must decide for themselves whether, in light of those risks, their investment is appropriate.
Risks Relating to the Republic of Cameroon
Political Risks
There is no guarantee that Cameroon will remain politically stable, in particular in the event of a presidential succession Cameroon has been under the leadership of President Paul Biya since 1982 and is considered politically stable relative to other countries in Central Africa.
President Paul Biya was re-elected for a seven-year term in 2011 and the next presidential elections are expected in 2018, before the term of the Notes.
As a result of the 2008 Constitutional Amendment (see “The Republic of Cameroon—Recent History”), (i) there is no limitation on President Paul Biya running for an additional term in office, if he so chooses and (ii) in the event of a sitting President’s death or incapacity, as determined by the Constitutional Council, new elections should be held not less than 20 days and not more than 120 days after the office becomes vacant, during which time the President of the Senate (currently 81 year old Marcel Niat Njifendji) would serve as interim President.
There is no guarantee that President Paul Biya will seek re-election at the end of his current term or that, if he chooses to do so, he will be re-elected. Furthermore, President Paul Biya is 82 years old and there is also no guarantee that he will complete his current term.
In November 1982, former President Ahmadou Ahidjo retired and Mr. Paul Biya became President for the remaining duration of the resigning President’s term, pursuant to a provision in the then-applicable constitution, enacted in 1979, providing for the Prime Minister (which was the position then held by Paul Biya) to automatically become President. While the 1982 transition occurred peacefully, it was followed by an attempted coup in early 1984, allegedly carried out by a dissident faction of the Republican Guard.
Since the 1990s, President Paul Biya has introduced a multi-party system and the opposition holds seats in both chambers of Parliament and in locally elected bodies. This multi-party political culture is still relatively recent (as at the date of this Prospectus, there are an estimated 300 active political parties, most of which are very small) and is layered upon a population comprised of around 240 ethnic groups, speaking approximately 230 languages and divided between three religions (Christianity, Islam and animism). While multi-party- elections have taken place relatively peacefully at the parliamentary and local levels, as well as when Mr. Biya was re-elected in 2011, there is no guarantee that future elections, and as the case may be the political transition that could result from such elections, would not be without difficulty. This risk is currently enhanced by the rise of terrorist attacks by Boko Haram in the north of the country and violence in neighbouring Central African Republic. See below “— Cameroon is subject to terrorist attacks from Boko Haram and other groups”.
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Any events of political instability could have a material adverse effect on Cameroon’s economy, its finances, the Government’s ability to function efficiently and Cameroon’s ability to meet its obligations, including those under the Notes.
Cameroon is subject to terrorist attacks from Boko Haram and other groups In recent years, Islamic militants and other terrorist groups, including Boko Haram, have operated in a number of countries bordering Cameroon and have affected trade between these countries and Cameroon. In the past, terrorism in Cameroon was largely concentrated in the Bakassi peninsula and the Niger delta.
Although such acts were initially isolated, there has been an increase in the presence of extremist organisations in Cameroon, which has posed security challenges to the Government both at the national level and at the regional level, particularly in the north, close to the Nigerian border.
Since 2011, Boko Haram has become the principal terrorist threat to Cameroon. Boko Haram has been responsible for a number of hostage takings in Cameroon, including the kidnapping of the wife of the vice- prime minister of Cameroon in July 2014. In February 2015, Boko Haram abducted at least eight girls and killed seven hostages after seizing a public bus in the north of Cameroon. On 17 April 2015, Boko Haram killed 16 civilians in the town of Bia and since July 2015, a series of suicide bombings have claimed more than 70 lives. On 17 April 17, 2015, Cameroon declared war on Boko Haram and has signed border-crossing right-of-pursuit agreements with its neighbours for the purpose of fighting Boko Haram. In a report published by Amnesty International on 15 September 2015, it is claimed that Boko Haram has killed at least 280 civilians in Cameroon since January 2014 and that the Cameroonian security forces have arrested and detained more than 1,000 people suspected of supporting Boko Haram.
Cameroon has had to close its borders on numerous occasions and has sent its army to border areas as a result of the threat posed by Boko Haram. A number of Cameroonian nationals have reportedly joined Boko Haram and other terrorist organisations. This security threat constitutes a major risk for regional long-term stability and may increase in the future.
While the Government has increased its counterterrorism efforts, any further incidents of terrorism could significantly reduce foreign direct investment in Cameroon, significantly reduce trade with Cameroon’s neighbours and adversely affect key sectors of the Cameroonian economy, such as oil production, agriculture and tourism. This could have a material adverse effect on the Cameroonian economy, Cameroon’s finances and its ability to meet its debt obligations, including those under the Notes.
Cameroon has experienced large inflows of refugees Since 2013, Cameroon has experienced a large influx of refugees from the Central African Republic and currently hosts an estimated 300,000 refugees from the Central African Republic. Despite a ceasefire, Cameroon continues to receive a large number of refugees from the Central African Republic. In addition, an estimated 40,000 refugees have entered Cameroon from Nigeria as a result of the threat from Boko Haram.
The presence of refugees has had an impact on the economic and social stability of Cameroon, placing particular strain on infrastructure and Cameroon’s resources. Providing refugees with basic accommodation and social services requires considerable resources and has created an additional burden on Cameroon’s finances.
If the flow of refugees from the Central African Republic and Nigeria continues and Cameroon does not receive adequate assistance from the international community to offset the cost of accommodation, the situation could strain the general resources of Cameroon and have a material adverse effect on its economy and finances and thus could impair its ability to meet its debt obligations, including those under the Notes.
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Cameroon faces significant socio-economic challenges, including high levels of poverty and unemployment The World Bank estimates that the Gross National Income (“GNI”, a statistic similar to Gross National Product (“GNP”)) per capita of Cameroon has been below the average GNI per capita of other developing Sub-Saharan African nations since 2010. According to the most recent information available from the World Bank, approximately 39.9% of the Cameroonian population lived at or below the national poverty line in 2007. The poverty level has remained roughly the same since then and is expected to be measured again by the World Bank in 2015. In addition, levels of unemployment and under-employment are high. According to the latest Survey of Employment and the Informal Sector, conducted in 2010 by the Cameroonian Institut National de la Statistique (“INS”), the unemployment rate for those aged 15 to 64 stood at 6.4% nationally, 11.9% in urban areas (where approximately half of the population resides) and 2.8% in rural areas. Overall, unemployment in Cameroon largely affects young people and women. According to the 2010 INS survey, the unemployment rate was 8.7% among women and 8.9% among those aged 15 to 34. In 2014, visible and invisible under-employment was estimated by the Government to affect approximately 71.9% of the total population with a much stronger impact in rural areas than in urban areas. Visible under-employment is defined by the Government as workers involuntarily working less than 40 hours per week, either at an employer’s behest or due to general recessionary conditions in the economy that render it impossible for the worker to find full time employment. The Government defines invisible under-employment as a situation where the worker’s actual hourly pay is less than that required by the relevant regulations.
Although public and private higher education institutions reported placing 50,647 graduates on the labour market in 2013, the unemployment rate remained at 15.1% among higher education graduates. For secondary education graduates, unemployment rates in 2013 were 7.5% for senior high school graduates and 10.1% for junior high graduates. Despite the introduction of numerous programmes targeting unemployment, the Government has been unable to improve overall employment levels as at the date of this Prospectus.
To alleviate the impact of high poverty and underemployment levels, some basic commodities are subject to price controls. Any changes to these price controls resulting in higher prices for basic commodities may result in social unrest and civil protest. For instance in 2008, the Government reduced the level of fuel subsidies, resulting in an increase in fuel prices for consumers. This action led to violent protests, a significant number of arrests and the deaths of several people.
If the above issues are not addressed they pose a risk of becoming a source of political, social or economic instability in Cameroon. Any such instability could have a material adverse effect on the Cameroonian economy, Cameroon’s finances and its ability to meet its debt obligations, including those under the Notes.
Risks Relating to the Cameroonian Economy
Cameroon may be unable to meet the objectives of Vision 2035, the Three Year Emergency Plan or its infrastructure goals and therefore may be unable to meet its goals for growing the wider economy Insufficient basic infrastructure to support and sustain growth and economic development has had a negative effect on the Cameroonian economy. Infrastructure problems relating to power generation, power shortages, transmission and distribution, a lack of clean drinking and irrigation water, a deteriorating network of roads and bridges (especially in the northern regions), congested ports and airports and obsolete rail infrastructure have severely constrained Cameroon’s socio-economic development. Although significant progress has been made in recent years in some of these sectors, specifically in the area of power generation, ports, telecommunications and roadways, Cameroon’s infrastructure remains under-developed in comparison with more developed economies.
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The Government has identified infrastructure weaknesses as an impediment to economic growth. In particular, power shortages affected various parts Cameroon in 2014 and 2015. In 2015, power rationing was in effect in the towns of Bafang, Melong, Nkongsamba, Loum, Mbanga, Bekoko, Bonaberi, Bepanda, Bonamatoumbe, Tiko, Mutengene, Ombe, Mile Four and Limbé, as well as parts of Kumba and parts of Buea. The Government has an ambitious infrastructure strategy that includes significantly expanding the production of electricity (using, in particular, renewable hydro-electric resources), reinforcing and strengthening power transmission to urban and industrial centres, building or renewing the road and rail networks throughout the country, constructing or improving port facilities and shipyards, and improving telecommunications access through the country. In particular, hydro-electric dams are under construction at Lom Pangar, Memve’elé and Mekin, and improved or expanded power installations are underway or planned at Song Loulou, Mbengué and Warak, as well as several other sites. In addition, new or improved roadways and rail lines are under construction or planned to connect over 25 Cameroonian cities and towns. Major ports and additional maritime resources are planned at Kribi and Limbé. The Government’s objective is to increase access to landline telephones and wireless telephone access by the end of 2020.
Such projects require significant funding over a number of years, and as at the date of this Prospectus, they are only partially financed. These projects are expected to be financed through state funds, borrowing on the international debt markets (including through the issuance of the Notes), public-private partnerships, project finance transactions, grants from foreign donor countries or organisations or any combination thereof. See “The Cameroonian Economy —Three Year Emergency Plan, Vision 2035 Plan, Growth and Employment Strategy” and — Investment”.
No assurance can be given that any of these projects will be adequately planned, funded or completed. Even if completed, there is a risk that the projects will not achieve their objective of facilitating sustainable economic growth in Cameroon or that such projects will not be completed within the timeframes contemplated. Delays may impact the productivity or utility of other infrastructure projects or the rate of growth for the country as a whole. Continued pursuit of the Government’s stated long-term objectives, particularly with respect to putting in place an adequate and reliable national power grid, is dependent on a number of factors, including: continued political support for these projects after the next presidential election, adequate funding from both public and private sources, improved security and continued access to hard currency to import the equipment, technical assistance and coordination needed for many of the above projects. The funding requirements are significant and the Government may find it difficult or impossible to meet them. The Government has projected shortfalls in its budgets for certain projects, which may lead to an increase in Cameroon’s outstanding sovereign debt or may cause the Government to guarantee private debt under certain project financing arrangements. If fiscal resources prove insufficient, or if Cameroon fails to secure appropriate external funding, it may not be possible adequately to pursue all of the projects set forth in the Government’s infrastructure strategy.
The success of these infrastructure objectives may be undermined by factors beyond the Issuer’s control and may impair the Issuer’s ability to achieve its national growth and modernisation strategy. The economic and other assumptions underlying Cameroon’s objectives may not be correct, including assumptions with respect to GDP growth, oil prices and production, economic diversification, inflation, attracting foreign and domestic investment, decreasing external debt and decreasing the fiscal deficit. This could undermine the Government’s ability to achieve its stated objectives. If the Government is not able to fund or implement its medium-term objectives, or if there is a delay in such funding or implementation, it may not be able to meet its long-term strategic objectives, which could result in a material adverse effect on the economy of Cameroon and on its ability to service the Notes.
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Failure to grow non-oil sectors of the Cameroonian economy or meet its goals for diversifying the Cameroonian economy may limit the development potential in the country In order to decrease its dependence on the oil sector, Cameroon has attempted to develop the non-oil sectors of the economy by increasing production of other mineral resources, encouraging the building and construction industries, increasing tourism, encouraging the farming of cash crops, and developing the telecommunications sector. The non-oil sectors of the economy grew by 5.6% in 2014, compared to 5.5% in 2013. However, limited availability of credit to companies, local shortages of skilled labour, inadequate basic infrastructure (including power supply, road networks and telephone coverage), restrictive licensing procedures for various industries and price controls on retail sales of certain goods risk compromising growth and/or preventing entrepreneurial activity. If fiscal resources prove insufficient it may not be possible adequately to pursue all educational, agricultural or private sector business projects set forth in the Government’s Growth and Employment Strategy. A failure to grow the non-oil sectors of the economy may constrain Cameroon’s growth and may result in material adverse effects on Cameroon’s ability to meet its debt obligations, including under the Notes.
Cameroon’s economy is dependent on oil production and global oil prices In 2014, the oil sector accounted for an estimated 7.0% of GDP, 47.5% of exports by value and 26.6% of fiscal revenue. As at the date of this Prospectus, oil reserves in Cameroon are estimated to equal approximately 325 million barrels, with production in 2014 of approximately 27.5 million barrels.
Cameroon’s oil revenues are a function of the level of oil production in the country and prevailing world oil prices. Oil prices are subject to wide fluctuations caused by external factors, including political conditions in the Middle East, production levels in the Organisation of Petroleum Exporting Countries (“OPEC”) and other oil-producing countries, consumer demand, government regulations, the price and availability of alternative fuels and overall economic conditions.
These factors have led to significant fluctuations in world oil prices in recent years. For example, according to Bloomberg, the average spot price of Europe Brent crude FOB was U.S.$107.38 per barrel for December 2011, U.S.$111.11 per barrel for December 2012, U.S.$110.80 for December 2013, U.S.$57.33 for December 2014, and U.S.$47.38 for September 2015. Reductions in oil revenues from sales of the oil produced in Cameroon could have a material adverse effect on the Cameroonian economy and the ability of Cameroon to meet its debt obligations, including those under the Notes. Following its mission to Cameroon in September 2015, the IMF published a press release on 25 September 2015 outlining its preliminary findings (the "IMF September 2015 Press Release"), which stated, inter alia, that declining oil prices have impacted state revenues.
Conversely, Cameroonian state finances would also be impacted by an increase in the price of oil as this would result in an increase in the price of the crude oil imported by SONARA for sale on the domestic Cameroonian retail market. Such an increase in world crude prices could thereby increase the amount of the subsidies payable by the Cameroonian state to SONARA, which are intended to compensate SONARA for the losses incurred due to compliance with the price controls on retail fuel sales. For more information, see “The Cameroonian Economy — SONARA”.
The Government estimates that recent decreases in oil prices will have a net positive effect on the level of subsidies due to SONARA, but a net negative effect on Cameroon’s budgetary revenues due to decreased revenues from taxes on oil exports and oil production. For further information, see “Public Finance — 2015 Budget”.
If prevailing world oil prices remain at their September 2015 levels for the remainder of 2015, the Government estimates that this would have a negative effect on the oil sector as a whole, but could benefit the
17 agricultural and forestry sectors and other non-oil export sectors due to lower costs of transportation and shipping.
Taxes on petroleum products represent approximately 20% of budgeted Government revenue and fluctuations in oil prices could therefore have a material adverse effect Cameroon’s economic condition, the budget of the Cameroonian central Government and Cameroon’s ability to meet its obligations, including those under the Notes.
Future increases in fuel prices or in public sector wages could have an inflationary impact on prices Fuel prices are controlled by the Government through fuel subsidies and in 2008 such subsidies were reduced, resulting in a price increase for consumers, which led to violent protests (see “ ̶ Cameroon faces significant socio-economic challenges, including high levels of poverty and unemployment”). Any future increases in fuel prices to Cameroonians, because of a further reduction of such subsidies or because of an increase in the prices of imported oil or the costs of refining imported oil at the Société Nationale de Raffinage (see “ ̶ Failure to adequately refinance the Société Nationale de Raffinage could have significant economic consequences on the Cameroonian state budget and impair Cameroon’s ability to service the Notes”), or a combination of these factors, would impact the overall level of inflation, as underlined by the IMF following its Article IV visit to the country in September 2015. Scheduled increases in the prices of certain petroleum products contributed to increased inflation during the first six months of 2015.
In the 2015 budget, personnel costs accounted for approximately CFA 900 billion, or 24.0%, of the central Government’s budget out of a total budget of approximately CFA 3.7 trillion. Civil servants and other Government employees accounted for the largest segment of workers in the formal sector. A Government survey estimated that the “modern sector” of the Cameroonian economy created approximately 990,639 new jobs in 2013, of which approximately 34.4% were in the public sector, including jobs in central administration, public entities and entities involved in large infrastructure projects in Cameroon. Increases in the public sector wage bill could have an inflationary impact on the overall economy, especially in urban areas. Failure to increase public sector wages, however, could result in future protests, demonstrations and/or strikes. Any instability in the public sector could, in turn, have a material adverse effect on the Cameroonian economy, the Government’s finances and its ability to meet its obligations, including those under the Notes.
Any increase in inflation could also have material adverse effect on the Cameroonian economy, the Government’s finances and its ability to meet its obligations, including those under the Notes.
A significant portion of the Cameroonian economy is not recorded. A 2010 study by the World Bank estimated that between 1999 and 2006, the informal sector, or shadow economy, represented approximately one-third of Cameroon’s total nominal GDP. The informal sector includes day-labour and temporary work, occasional entrepreneurship, casual employment, activities in subsistence agriculture, holding multiple part-time positions, unofficial or unregistered business activities, and illegal trade activities. In a 2012 report, the World Bank estimated that, in 2010, approximately 90% of the active population was employed in the informal sector and the formal private sector and the public sector employed approximately 4% and 6% of the workforce, respectively. The informal sector consists primarily of agriculture, and agricultural workers accounted for an estimated 53% of the informal work force in 2010. The same 2012 World Bank report estimated that another 37% of informal labourers worked in services (such as telecommunications, manufacturing and construction) and retail.
The informal economy is not recorded and is not (or is only partially) taxed, resulting in a lack of revenue for the Government, ineffective regulation, unreliability of statistical information (including the understatement of GDP and the contribution to GDP of various sectors) and an inability of the Government to effectively monitor or otherwise regulate a large portion of the economy. Lack of effective regulation and enforcement in
18 this respect also gives rise to other issues, including health and safety and employment issues. Although the Government is attempting to address the informal economy by streamlining certain regulations, particularly through reform of tax laws and the improvement of its statistical apparatus, such reforms may not adequately address the issues nor bring the informal economy into the formal sector in the short term.
The failure to regulate, monitor or tax the informal economy may have a material adverse effect on the ability of Cameroon to collect revenues and meet its obligations, including those under the Notes.
Failure to adequately refinance the Société Nationale de Raffinage could have significant economic consequences on the Cameroonian economy and state budget and impair Cameroon’s ability to service the Notes The Société Nationale de Raffinage (“SONARA”) is the national refining entity, which has a monopoly on refining petroleum products in Cameroonian markets. It is 80.3% owned by the Government and 19.7% owned by Total SA. Because it is not equipped to refine the main grade of crude oil produced in Cameroon, SONARA must purchase crude oil on the international market, mainly from Nigeria. It sells its refined products to distributors in Cameroon on the basis of a state-mandated pricing structure. The state compensates SONARA for the difference between its production costs and the mandated prices by way of a subsidy. The state is in significant arrears with respect to the payment of this subsidy to SONARA, which has created significant funding difficulties for SONARA, in particular with respect to crude oil suppliers. Furthermore, a change in tax law in 2012 resulted in SONARA being required to pay 5% custom duties on crude oil and other oil products imported by it. Prior to 2012, SONARA had previously been exempt from such taxes.
As at 31 December 2014, the accumulated subsidy arrears owed to SONARA by the state amounted to approximately CFA 401.9 billion including 207.1 billion for 2013 and 194.8 billion for 2014. In addition, in December 2011, May 2012 and December 2012, the state and SONARA agreed to convert a certain amount of pre-existing subsidy arrears into interest-bearing, unsecured bonds governed by Cameroonian law. As of 31 December 2014, the amount of principal and accrued interest outstanding under those bonds was CFA 150.7 billion. As at 31 December 2014, the amount owed by SONARA to its suppliers of crude oil equalled approximately CFA 552.7 billion, including CFA 352.9 billion due as at 31 December 2013.
On 10 February 2015, a consortium of banks extended a CFA 143.5 billion Bridge Loan to the Government (the “SONARA Bridge Loan”) of which CFA 135.9 billion was remitted to SONARA to enable funding of the subsidy arrears and allow the payment of SONARA’s outstanding invoices with respect to certain suppliers of crude oil. On 28 February 2015, the Government paid SONARA approximately CFA 103.7 billion of the 2013 subsidy arrears. As at 30 June 2015, following advances to SONARA by the Government, the subsidy payments remaining in arrears amounted to approximately CFA 154.7 billion. In addition, following payments made by the state, the amount of principal and accrued interest outstanding under the bonds issued by the state to SONARA was CFA 137.9 billion. The amount owed by SONARA to its crude oil suppliers amounted to CFA 383.5 billion after receiving payments under the SONARA Bridge Loan, including CFA 217.0 billion already in arrears as at 31 December 2013.
A portion of the proceeds under the Notes will be used to repay the SONARA Bridge Loan in full, in accordance with the terms of the SONARA Bridge Loan. See “Use of Proceeds”.
SONARA remains in a precarious financial situation, with significant amounts owed to its suppliers and other creditors. According to the IMF, excessive exposure by most Cameroonian banks to a financially fragile SONARA is a source of systemic concern.
Crude oil suppliers already require credit support for their sales to SONARA, which translates into increased costs for SONARA, contributing to a worsening of its financial situation. Suppliers could reduce their sales of crude oil to SONARA or cease them altogether. They could also seek immediate payment of their claims,
19 which may force SONARA to declare bankruptcy. Any of these events would impact SONARA’s ability to continue to supply refined oil products in Cameroon. Shortages of such products in Cameroon would have a material adverse effect on the Cameroonian economy and, as a result, on Cameroon’s ability to service the Notes.
The States’ priority is to revise the rates of customs duties and the formulas for calculating mandated prices on the domestic market in order to improve SONARA’s profitability in the medium term. To guarantee the continued production of SONARA, however, the State could be forced to effectively add SONARA’s debts to the State budget, through any number of mechanisms. While this would allow SONARA to continue to function and supply the market in refined oil products, it would increase the Cameroonian public debt, thus impacting Cameroon’s ability to meet its obligations, including those under the Notes.
The Cameroonian fiscal deficit has increased in recent years and the state’s budget is subject to increasing pressures that could lead to a widening deficit, which could impair Cameroon’s ability to service its debt, including the Notes. Cameroon’s fiscal deficit has been increasing in recent years, from 2.2% of GDP in 2011, to 1.6% in 2012, 4.3% in 2013 and 3.6% in 2014. According to IMF calculations, Cameroon’s fiscal deficit was 4.1% of GDP in 2013 and 5.7% of GDP in 2014 — a higher figure than according to Government calculations. For 2014, the difference between the two figures reflects the fact that the figures are based on estimates, which are themselves based in part on different macroeconomic assumptions. Cameroon estimates that its fiscal deficit will further increase in 2015 (see “Public Finance”). This increase in the fiscal deficit is due to several factors, that continue to affect Government spending and revenues and whose impact is likely to continue in the near future and in the medium term. These factors include:
an increase in capital expenditures driven by the Government’s ambitious infrastructure and other investment projects (see “The Cameroonian Economy ̶ Three Year Emergency Plan, Vision 2035 Plan, Growth and Employment Strategy” and “ ̶ Investment”);
an increase in military expenditure in the context of the war Cameroon has declared against Boko Haram (see “ ̶ Cameroon is subject to terrorist attacks from Boko Haram and other groups”);
the potential need to refinance state owned companies (see “ ̶ Failure to adequately refinance the Société Nationale de Raffinage could have significant economic consequences on the Cameroonian state budget and impair Cameroon’s ability to service the Notes” and “Cameroon may use a portion of the proceeds of the Notes to fund or refinance certain state owned entities which are not obligors under the Notes and which proceeds may not be repaid to the state”);
failure to collect tax revenue from the informal sector (see “ ̶ A significant portion of the Cameroonian economy is not recorded”);
the need to increase public sector wages (see “ ̶ Futures increases in fuel or in public sector wages could have an inflationary impact on prices”);
the impact of potentially adverse outcomes in legal and arbitral proceedings to which the Government, or entities relying on the Government for financial support, are a party (see “ ̶ The adverse outcomes of legal and arbitral proceedings could have a negative impact on Cameroon’s economy”);
an increasing public debt burden, both as a result of an increasing deficit but also as a result of more onerous financing conditions (see “ ̶ Changes in the levels of debt or the cost of debt could have a material adverse effect on Cameroon’s economy and its ability to service its debt, including the Notes”, “ ̶ Cameroon’s level of debt was declared unsustainable in 2000 and Cameroon defaulted on
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approximately CFA 40 billion of domestic debt in 2004” and “ ̶ A deterioration in the level of support by its multilateral and bilateral creditors could have a material adverse effect on Cameroon’s economy”; and
failure to collect tax revenue from the informal sector (see “̶ A significant portion of the Cameroonian economy is not recorded”).
Any increase in Cameroon’s fiscal deficit would adversely and directly impact the Government’s ability to service the Notes.
Changes in levels of debt or the cost of debt could have a material adverse effect on Cameroon’s economy and its ability to service its debt, including the Notes Cameroonian public debt attributable to the central Government equalled 22.0% of GDP at the end of 2014, of which 73.4% was attributable to external lending and 26.6% was attributable to domestic sources. Gross debt service for Cameroon’s public debt equalled approximately CFA 227.0 billion in 2014 and CFA 193.6 billion in 2013. The increased use of loans in currencies other than the CFA, which exposes Cameroon to variations in exchange rates (for example, against the U.S. dollar, the Chinese yuan and Japanese yen), may increase debt service payments. Furthermore, in 2013, according to the IMF, the stock of arrears and other payment obligations of the Government rose to CFA 668.8 billion, or 4.6% of GDP. An inability to pay arrears or other payment obligations (including those under the Notes) or the accumulation of further arrears could undermine fiscal sustainability. Drawings under currently available or future credit facilities or financing agreements may cause total debt and debt service to further increase, which would in turn increase the budget deficit in the future. As of 30 June 2015, such amounts available but undrawn under currently-available or future credit facilities or financing arrangements, amounted to CFA 925 billion for those earmarked for the Three Year Emergency Plan and CFA 2,805.0 billion for other projects or uses.
Relatively high levels of debt, continued borrowing, the inability to pay arrears, further accumulation of arrears or decreases in GDP may adversely affect Cameroon’s sovereign credit rating or may impair Cameroon’s ability to access international debt markets at reasonable interest rates or to service the Notes. Any significant future borrowings, including the issuance of internal debt to finance Cameroon’s fiscal deficit and the issuance of external debt on local and foreign capital markets, the inability to pay arrears or the accumulation of further arrears could have a material adverse effect on the Cameroonian economy, the Government’s finances and its ability to meet its obligations, including those under the Notes. For more information on the external debt profile of Cameroon, see “Public Debt”. For more information on public finance, see “Public Finance”.
The timing of the publication of the pending IMF Article IV report may have an adverse impact on the price, volume or yield on the Notes
In September 2015, an IMF delegation visited Cameroon for the purpose of gathering data in preparation for its next Article IV report on Cameroon, due to be released in November 2015 (the "2015 Article IV Report").
The IMF September 2015 Press Release, which set out the delegation's preliminary findings from the mission, noted that the global and regional economic environment has deteriorated significantly since the last IMF consultations in Cameroon in May 2014. The IMF September 2015 Press Release also noted that the decline in world oil prices has impacted government revenue and that terrorist attacks in the far north, displaced persons within the country and refugees from the Central African Republic have generated additional government expenditure. In addition, the IMF noted that overall fiscal deficit has deteriorated significantly (from 4.1% of GDP in 2013 compared to 5.7% of GDP in 2014, based on the IMF’s calculations) and that it has triggered an upturn in financing requirements has led to an increase in public debt. The IMF further noted
21 that the level of public debt is growing rapidly and has been be contracted on increasingly onerous terms. It recommended that the public investment programme be rationalised and consolidated with other investment plans, such as the Three-Year Emergency Plan. The IMF also noted the weak financial performance of public enterprises.
The Republic expects the 2015 Article IV Report to be in line with the IMF September 2015 Press Release. Nonetheless, the Republic cannot give any assurance that the timing of the publication of the 2015 Article IV Report or its content will not have an adverse impact on the price, volume or yield on the Notes.
Cameroon’s level of debt was declared unsustainable in 2000 and Cameroon defaulted on approximately CFA 40 billion of domestic debt in 2004.
The Heavily Indebted Poor Countries Initiative (“HIPC”) is administered by the IMF and the World Bank, and was launched in 1996. HIPC provides debt relief and low-interest loans that serve to refinance or reduce external debt repayments to sustainable levels. To participate in the initiative, countries must face an unsustainable debt burden, which cannot be managed with traditional means. Assistance under the HIPC is conditional on national governments subsequently meeting a range of economic management and performance targets.
In December 2000, Cameroon’s debt was declared unsustainable by the IMF and the World Bank and, as a result, Cameroon became eligible for debt relief under HIPC. At the end of 1999, the baseline used by the IMF and the World Bank for the purposes of the HIPC to measure total debt and debt relief, Cameroon’s nominal stock of public external debt equalled approximately U.S.$7.6 billion (or 85% of 1999 GDP).
In 2002, under the auspices of HIPC, Cameroon completed London Club negotiations with 80% of its commercial creditors in order to obtain debt relief. This debt relief was granted in August 2003. The remaining U.S.$200 million in outstanding commercial debt was owed to creditors, who did not participate in 2002-2003 London Club negotiations. Although Cameroonian authorities achieved settlements with most of these creditors, two creditors pursued court claims against Cameroon. One of these creditors obtained judgments and seized approximately €38 million of SNH assets, while the Government reached a settlement with the other hold-out creditor.
In 2004, despite the partial provision of HIPC debt relief, Cameroon’s debt remained unsustainable with a debt to GDP ratio of 61.6%. In September 2004, Cameroon defaulted on CFA 40 billion of local law, local currency bonds. This default was followed by a distressed exchange of bonds in 2005 with a total value of approximately U.S.$1.0 billion, which accounted for 10.5% of its total debt at that time and amounted to approximately 6.5% of GDP. Twelve months after the initial default, the relevant creditors agreed to extend the maturity of the defaulted bonds. This extension to the maturity was not accompanied by a reduction in the principal or coupon amounts due to the creditors. Cameroon’s ratio of debt to GDP was thereby reduced from 61.6% of GDP, before the distressed exchange, to 51.6% of GDP, immediately following the distressed exchange.
In 2006, the IMF and the World Bank agreed that Cameroon had made sufficient progress and taken the necessary steps to reach sufficient milestones under the HIPC, such that it qualified for disbursement of all debt relief for Cameroon under HIPC. Under HIPC, the 1999 net present value of total relief was U.S.$1.267 billion, which included bilateral, multilateral and commercial creditors.
Despite the termination of Cameroon’s participation in HIPC, Cameroon continues to receive debt relief in the form of grants from the French government under the Debt Reduction and Development Contracts programme (Contrat de Désendettement et de Développement “C2D”), which is a debt relief, poverty reduction and development programme.
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High levels of debt may affect Cameroon in the future and necessitate participation in future or existing debt relief programmes, such as HIPC or C2D. High levels of debt may cause Cameroon to default on its domestic or international debt, or fail to pay commercial arrears. Such defaults, or failures to pay arrears, may be accompanied by claims by creditors, lower credit ratings for Cameroon, increased cost of new debt issuances, an inability to repay or refinance debt, or an inability by Cameroon to meet its obligations to creditors, including those under the Notes. For more information see, “Public Debt— Debt Record”.
A deterioration in the level of support by its multilateral and bilateral creditors could have a material adverse effect on Cameroon’s economy As at 31 December 2014, multilateral and bilateral debt accounted for 37.7% and 57.9% of Cameroon’s external debt, respectively. Cameroon expects to rely on multilateral and bilateral support to provide a significant portion of its public and external financing requirements in the coming years. Changes in the level of support by Cameroon’s multilateral and bilateral creditors or changes in the terms on which such creditors provide financial assistance to Cameroon or fund new or existing projects could have a material adverse effect on the financial position of Cameroon.
There can be no assurance that funding from such sources will be available in the future. If Cameroon is unable to issue further bonds or otherwise borrow at an acceptable cost, this could have a material adverse effect on the Cameroonian economy, Cameroon’s finances and its ability to meet its obligations, including those under the Notes.
Deterioration in the growth rates, economic conditions or bilateral relationships or other events in certain major trading partner countries could adversely affect the Cameroonian economy Cameroon’s major trading partners include the EU (in particular France, the Netherlands, Portugal and Spain), Nigeria and China. Trends in the types and amounts of goods imported or exported by country are not necessarily similar and they may be affected by a variety of events, which could have a material adverse effect on the Cameroonian economy.
In 2013, the EU represented approximately 35.0% of Cameroon’s imports and approximately 46.0% of Cameroon’s exports. Imports from EU countries include automobiles, chemicals and pharmaceutical products. The majority of exports from Cameroon to the EU are raw materials, such as petroleum products, raw and sheet aluminium, wood products and agricultural products, such as cocoa, coffee, bananas and rubber. Exports to the EU can be affected by economic downturns, such as the 2008 financial crisis and the Eurozone crisis, which reduced European demand generally for all imports, and may also be affected by other developments, such as regulatory changes.
China is one of Cameroon’s fastest growing trade partners and in 2012 accounted for approximately 15.3% of Cameroon’s exports. Chinese entities have also been instrumental in financing and providing technical assistance on major infrastructure projects, including the construction of the deep-water port at Kribi, the construction of highways between Douala-Yaoundé-Bafoussam and between Yaoundé-Nsimalen, the construction of the Lom Pangar and Memv’ele dams, the construction of the hydro-electric complex at Makin and the reinforcement of the “Backbone” 3,200 kilometre fibre-optic cable network. Chinese entities have also been involved in the construction of educational, health and sports facilities. If the collaboration with Chinese entities in such projects were to cease or if relations with China were to deteriorate for any reason, this could have a negative impact on the Cameroonian economy. In addition, diminished growth rates in the Chinese economy or higher levels of development in China may modify Chinese demand for Cameroonian exports and have a materially adverse effect on Cameroon’s economy.
Nigeria is also an important trading partner of Cameroon, accounting for approximately 17.8% and 13.8% of Cameroonian imports in 2012 and 2013, respectively. However, Cameroon and Nigeria have been in sporadic
23 armed conflict over the last decade due to issues such as sovereignty over the Bakassi peninsula. In addition, the presence of terrorist organisations along Cameroon’s borders, such as Boko Haram, and outbreaks of diseases in Nigeria, such as Ebola, have caused Cameroon to close its borders for extended periods of time in the recent past, completely interrupting the flow of trade with its regional trade partners, including Nigeria and Chad. Continued trade disruptions due to events of this nature could have a materially adverse effect on Cameroon’s exports to Nigeria and on the Cameroonian economy as a whole, which in turn could adversely affect Cameroon’s ability to meet its obligations, including under the Notes.
The Cameroonian banking sector is dominated by retail banks, microfinance and other quasi- banking institutions, which may be under-regulated, under-supervised or suffer from under- capitalisation The Cameroonian banking system is dominated by 14 commercial banks (including the Banque Camerounaise des Petites et Moyennes Entreprises (“BC-PME”) created in 2014), a majority of which are backed by foreign capital or are part of foreign banking groups. The state retains an equity stake in the capital of three foreign-controlled banks. Rising foreign ownership or control of many banks operating in Cameroon is the consequence of a long-term strategy to disengage the Government from the banking sector in order to avoid conflicts of interest in regulation, enforcement and supervision. Regulation of retail banks in Cameroon falls under the authority of the Cameroonian Central Bank and the BEAC, whose regulations conform, for the most part, to the guidelines under Basel II (application of Basel III to banks in the region is being examined and compliance would require significant investment). The Government in coordination with the COBAC has identified various issues in certain Cameroonian banks relating to the application of control standards, including risk management, measurement of capital, financial communication and internal controls for which it has undertaken reforms. These issues, or failure to implement reforms to address these issues, amongst others, could introduce instability in the Cameroonian retail and commercial banking system.
According to the BEAC, approximately 79.3% of the Cameroonian population did not have a bank account (the so-called “un-banked”) in 2013. This lack of banking, combined with the significant size of the informal sector, creates risks for commercial banks. First, the high percentage of the population which remains “un- banked” results from the large informal sector within the Cameroonian economy, which creates insecurity of financial and real assets and can lead to large swings in savings rates, which the banking system may be ill- equipped to manage. Second, the low usage of commercial banks (as evidenced by the high proportion of the “un-banked”) reduces loan opportunities for banks, which causes deposits to remain under-utilised and diminishes the profitability and stability of retail banks. Between 2012 and 2014, the level of over-liquidity (un-loaned deposited funds) was estimated to be between 18.7% and 28.2% of total deposits. Within the retail banking sector, existing loan quality in Cameroonian banks is considered mediocre for both personal and commercial loans. At the end of 2014, approximately 10.36% of loans were classified as under-performing or non-performing. Although provision rates on such loans were estimated to equal approximately 8.44% as at the end of 2014, the poor quality of the domestic loan portfolio and an underdeveloped loan pipeline constitutes a threat to the stability and growth of the banking sector. These conditions have led to a decrease in loans to large, private sector businesses in Cameroon since 2010. In addition, the limited availability of credit to companies may have a negative effect on the performance of the Cameroonian economy.
Cameroon has the largest microfinance network of any CEMAC country with about 418 microfinance institutions (“MFIs”) licensed to operate in 2015, and approximately 1100 accredited microfinance agencies in 2014. At the end of 2013, MFIs accounted for approximately 64% of deposits and 72% of loans made in the CEMAC region. At the end of 2013, industry estimates valued total deposits in MFIs in the region of approximately CFA 490 billion and estimated that loans distributed as at that date equalled more than CFA 252 billion. Within Cameroon, the Government estimates that approximately 1.5 million inhabitants had their banking needs met by MFIs at the end of 2012. Due to the diversity of structures, as well as the
24 geographically diffuse nature of these lenders, however, the micro-finance sector remains under-regulated and under-supervised. Despite these institutions falling under the regulatory auspices of the BEAC and despite several regulations having been put in place to control the operation of MFIs, deficiencies in the regulation and supervision of MFIs constitute a significant risk to the stability of the financial system in Cameroon.
In 2013, Cameroon recapitalised one of its banks and it is possible that the Cameroonian banking sector will need further support during 2015 and thereafter, as the Government estimated in 2015 that three of fourteen main banks in Cameroon are estimated to have negative equity. As of 30 June 2015, two banks out of fourteen were classified by Cameroon critically distressed. These distressed banks, whilst not posing a systemic risk because of their relatively small size, need to be re-capitalised. See “Monetary System — Banking” for further details on Cameroon’s banking system. According to the IMF, excessive exposure by Cameroonian banks to SONARA is a source of systemic concern. See “— Failure to adequately refinance the Société Nationale de Raffinage could have significant economic consequences on the Cameroonian state budget and impair its ability to service the Notes” for further details. Should the Government be required to provide support to the Cameroonian banking sector and/or SONARA, or otherwise address any of the other issues described above, this could have a material adverse effect on Cameroon’s finances and its ability to meet its obligations, including those under the Notes.
Cameroon’s membership in CEMAC may affect its ability to react to economic shocks and may subject it to economic policies that are not in its best interests As a member of CEMAC, Cameroon has no independent monetary or exchange policies. Cameroon uses budgetary policies, including wage policies and price controls, and other regulations to react to external shocks and improve national competitiveness. The BEAC sets interest rates, monetary policies and reserve requirements and regulates banks across the CEMAC. The stated goal of CEMAC’s monetary policy is to maintain the exchange rate of the CFA franc to the Euro and protect the currency from fluctuations due to external shocks. The BEAC makes interest rate decisions in the best interests of the currency union as a whole and is unable to make jurisdiction-specific decisions, other than amending national reserve requirements. The Cameroonian economy accounts for approximately 40% of the total GDP of the CEMAC region. As at 31 December 2014, reserve requirements in all CEMAC banks were set at CFA 6,587.7 billion and are based on member countries’ exports. See “Monetary System—Monetary Policy and the BEAC”.
For the reasons detailed above, Cameroon cannot unilaterally change interest rates to stabilise its economy, combat inflation or improve its balance of payments. This situation may have an adverse effect on Cameroon’s economy and its ability to service the Notes. Cameroon’s membership of the CEMAC also means that it may be adversely affected by events in other member states. This exposure to other member states is out of its control and may have a material adverse effect on the position of Cameroon’s economy and, consequently, Cameroon’s ability to meet its obligations, including those under the Notes.
Any significant depreciation of the CFA Franc against major currencies would have a material adverse effect on Cameroon’s ability to repay its debt denominated in currencies other than the CFA Franc, including amounts due under the Notes The Cameroonian CFA Franc is pegged to the Euro. As the Notes will be issued in U.S. dollars, any change to this exchange rate could have a material adverse effect on the Cameroonian economy and on Cameroon’s ability to repay its debt. As at 31 December 2014, Cameroon’s external debt was held in the following denominations: 46.2% in Euros, 39.3% in U.S. Dollars, 9.2% in Chinese Yuan, 4.1% in Japanese Yen and 1.2% in other currencies.
While CFA Francs currently have a fixed exchange rate to the Euro and are currently convertible into Canadian Dollars and U.S. Dollars, they may not always have a fixed exchange rate or be convertible in the future. Were this to change, it would affect the ability of Cameroon to pay its international debt, which may
25 have a material adverse effect on the economy and on Cameroon’s ability to meet its obligations, including those under the Notes.
Failure to adequately address actual and perceived risks of corruption may adversely affect Cameroon’s economy and its ability to attract foreign direct investment Although Cameroon has implemented, and is pursuing, initiatives to prevent and fight corruption and unlawful enrichment, there have been allegations and incidents of corruption and misuse of public funds. In 2014, Cameroon was ranked 136 out of 175 countries in Transparency International’s Corruption Perceptions Index, with a raw score of 25 (on a scale of 1 to 100, with 1 being the most corrupt). This compares to its rank of 144 out of 177 in 2013. As in many other emerging market jurisdictions, the incidence and perception of elevated levels of corruption remain a significant issue in Cameroon. Cameroon’s financial sector, in particular, has been subject to allegations of corruption and financial mismanagement, although the public sector and international aid sectors have also been subject to accusations of corruption.
Future allegations, perceived risk or failure to address continued or perceived corruption in Cameroon could have a material adverse effect upon the country’s ability to attract foreign investment, lead to political instability and have a material adverse effect on the Cameroonian economy, the Government’s finances and its ability to meet its obligations, including those under the Notes.
Cameroon may have to refinance certain state owned entities which are not obligors under the Notes and these entities may not be in a position to repay such amounts to the state There are several entities within Cameroon that are majority owned or controlled by the Cameroonian state and which are very important to the local economy. Moreover, the state has plans to privatise or has recently privatised several state-owned entities. Such important entities include SONARA, the Société Nationale des Hydrocarbures (“SNH”), Actis – Société Nationale d’Electricité (“Actis-SONEL”), the national aluminium smelting company (“ALUCAM”), Cameroun Télécoms (“CAMTEL”), Cimenteries du Cameroun (“CIMENCAM”) and Cameroon Airlines Corporation (“CAMAIR”). These entities and others of a similar nature may receive funding from the Cameroonian state.. They are not, however, and will not become, obligors under the Notes. Certain of these entities, including notably CAMAIR, are currently or have recently been insolvent, subject to protection from creditors or the object of other bankruptcy-type procedures.
There can be no guarantee that the state will have access to any payments or other funds from such entities for the purpose of servicing or repaying the Notes. Moreover, the financial condition and/or cashflows of these entities may be weak, and if any of these entities were to enter into insolvency, seek protection from creditors or engage in liquidation or any similar proceedings, it is uncertain what legal recourse the Government would have to recover any such funds.
Due to the private or mixed nature of certain of these (state-owned or state controlled) entities, the state may have limited access to, or limited ability to use, any profits from their activities to service the Notes. If any of the entities receiving funding is privatised following the issuance, there can be no guarantee that any subsequent or down-stream agreements would be signed with these entities to oblige them to reimburse any funds received. The risk of insolvency of state-owned entities, non-repayment of any sums loaned or granted to state-owned entitles, or the dissolution of ties to such entities as a result of privatisation (or otherwise) may have a material adverse effect on the Cameroonian economy, the Government’s finances and its ability to meet its obligations, including those under the Notes.
Statistics published by Cameroon or its entities or subdivisions may be more limited in scope, published less frequently and differ from those produced by other sources Statistics relating to Cameroon and its economy are produced by a number of different Government institutions. Since 2001, Cameroon has adhered to the General Data Dissemination System (GDDS) prepared
26 by the IMF. These statistics may be less accurate and reliable, more limited in scope and published less frequently than those utilised by other countries, which makes adequate monitoring of key fiscal and economic indicators more difficult. Statistical data included in this Prospectus has, unless otherwise stated, been obtained from public sources and documents. Similar statistics may be obtainable from other sources, but the underlying assumptions, methodology and, consequently, the resulting data may vary depending on its source.
For instance, and despite Cameroon following the GDDS of the IMF, the Government’s and the IMF’s figures for Cameroon’s 2013 and 2014 fiscal deficit differ. The fiscal deficit was 4.1% as calculated by the IMF versus 4.3% as calculated by Cameroon for 2013 and 5.7% as calculated by the IMF and 3.6% as calculated by Cameroon for 2014. For 2014, the difference between the two figures reflects the fact that they are based on estimates which are themselves based in part on different macroeconomic assumptions.
Certain statistical information has been based on information currently available and should not be relied upon as definitive or final and such information may be subject to future adjustment. In certain cases, statistical information is not available for recent periods and, accordingly, certain historical statistical information has not been able to be updated. In addition, Cameroon’s official financial and economic statistics are subject to review as part of a regular confirmation process. Accordingly, financial and economic information may differ from previously published figures and may be subsequently adjusted or revised. Information presented for past periods should not be viewed as being indicative of current circumstances or periods not presented. For further information, see “Presentation of Economic and Other Information”.
The adverse outcome of legal and arbitral proceedings could have a negative impact on Cameroon Cameroon has been and is currently involved in a number of legal and arbitral proceedings. See “The Republic of Cameroon — Legal and Arbitral Proceedings”.
On 15 April 2015, Capital Financial Holdings Luxembourg (“CFHL”) filed a claim against Cameroon at the International Centre for Settlement of Investment Disputes (“ICSID”) under the Luxembourg-Cameroon bilateral investment treaty (“BIT”). CFHL is claiming over €100 million for the alleged expropriation of its 47% stake in the Commercial Bank of Cameroon following a state-imposed capital restructuring of the bank, which CFHL says was against its will, and that of other shareholders. CFHL claims it also suffered unfair and inequitable treatment and unjustified and discriminatory measures. While the loss of CFHL’s shares occurred in 2014, the alleged act of expropriation by the State dates back to 2009, when the Commercial Bank of Cameroon was placed under a regime of “provisional administration”. CFHL claims that the shareholders lost control over the management of the bank at that time as the provisional administrator exercised executive powers in place of the bank’s CEO and board of directors and that this “provisional administration” led to the loss of shares. In accordance with the terms of the BIT, CFHL filed for ICSID arbitration following a formal notice to the Cameroonian Government in 2014, by which it invited the State to resolve the dispute amicably within a six-month period, to which notice, CFHL claims, the Government did not respond.
On 31 May 2001, the Republic of Cameroon signed a concession contract with the company RSM Production Corporation (“RSM”) covering the Logbaba block for oil exploration. On 8 August 2011, RSM filed a conciliation request before ICSID Arbitration Centre, making several claims. On 11 June 2013, the ICSID conciliation commission concluded that the conciliation had failed. On 31 May 2013, RSM filed arbitral claims against Cameroon before the ICSID, claiming irregularities in the laws applied to set the price of gas and that Cameroon wrongfully expropriated the remaining 44 square kilometres in the Logbaba block. Following the first hearing held 20 March 2014, RSM requested a two-month adjournment of the arbitration proceedings to allow the parties to reach a private settlement and an amicable solution. Since 17 November 2014, the adjournment of the arbitration proceedings has been tacitly renewed and RSM has made no formal
27 request with the ICSID to resume proceedings. As at the date of this Prospectus, no settlement solution has been reached.
Although Cameroon intends to actively defend these claims, there is no guarantee that it will be successful. An adverse outcome of these, or future other legal proceedings, could result in Cameroon having to pay financial compensation to the plaintiffs, which would have a material adverse effect on its finances, cause potential damage to its reputation with international investors and therefore on its ability to meet its debt obligations, including those under the Notes.
Cameroon faces risks from various communicable and tropical diseases and may lack the healthcare infrastructure needed adequately to address a major health crisis, which could adversely affect its economy The following diseases are present in Cameroon: cholera, malaria, meningococcal cerebrospinal meningitis, yellow fever, measles, polio, Buruli ulcer, trypanosomiasis, onchocerciasis, lymphatic filariasis and schistosomiasis. According to the 2014 World Health Organization (“WHO”) Global Health Observatory, approximately 4.3% of the total population is HIV positive with regional variation in infection rates. Malaria is the leading cause of maternal and neonatal morbidity and mortality as well as the leading cause of morbidity and mortality for children under five years old. According to the 2015 WHO’s Regional Office for Africa February Outbreak Bulletin, in the period from January to December 2014, Cameroon reported two major public health events, including cases of cholera and polio. No cases of Ebola have been reported as at the date of this Prospectus. The presence and the persistence of these diseases may have an adverse impact on the Cameroonian economy by affecting the size of the working age population likely to enter and stay in the workforce. It may also impair the levels of exports or imports as Cameroon’s borders have in the past, and may in the future, be closed as the result of outbreaks of infectious diseases either in Cameroon or in neighbouring countries. In August 2014, Cameroon closed its border with Nigeria for 76 days to prevent the spread of Ebola from Nigeria.
Cameroon’s health care system may be inadequate to face its current or future healthcare needs. Between 2000 and 2009, Cameroon maintained 15 hospital beds per 10,000 people, as well as approximately 50 private hospitals and 70 state hospitals. In 2011, international organisations estimated that there were approximately 1.9 doctors per 10,000 people in Cameroon. According to international observers, however, Cameroon has no operational non-communicable diseases department within the Ministry of Health and no operational national policy or action plan concerning the risks of non-communicable diseases. The WHO has stated that Cameroon’s laws are not strong enough to regulate effectively the quality and quantity of pharmaceuticals and vaccines in the country. Epidemics, pandemics, the generally high rate of diseases in Cameroon and the lack of access to treatment may have a material adverse affect on the economy of Cameroon and therefore on its ability to meet its debt obligations, including those under the Notes.
Natural disasters have negatively affected Cameroon in the past and may negatively affect it in the future Natural disasters such as floods, droughts, epidemics and infestations have negatively affected Cameroon in the past and may negatively affect it in the future, in particular because agriculture, forestry and livestock comprise a significant portion of Cameroon’s GDP.
Floods may lead to human casualties, the large-scale internal displacement, the outbreak of waterborne disease, the destruction of infrastructure, such as roads and bridges, and the destruction of crops, livestock and other property. During 2012 and 2013, Cameroon experienced significant floods in certain areas which resulted in the destruction of infrastructure, crops and loss and displacement of human life and livestock.
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Droughts may negatively affect the supply of agricultural commodities, the food supply in general and the generation of hydroelectric power. Approximately 80% of Cameroon’s power is generated through hydro- electric resources, which makes its electricity sector highly vulnerable to droughts during the dry season, which typically runs from November to June.
Infestations and phytosanitary issues have affected many segments of the primary sector including cash crops and forest products. Increases in these and other climatic events could negatively affect Cameroon’s economy or the economies of its nearest trade partners, leading to a diminished ability to service or repay debt obligations, including under the Notes.
In addition, Mount Cameroon is an active volcano located approximately 60km from the city of Douala, which is the largest trade centre in Cameroon. This volcano erupted in April 1999, May 2000 and February 2012 without material negative consequences.
Natural disasters and expenditures associated with natural disaster relief efforts may adversely affect Cameroon’s budgetary position and could have a material adverse effect on the Cameroonian economy and consequently on Cameroon’s ability to meet its obligations, including those under the Notes.
Cameroonian territory encompasses many ecosystems and micro-climates, which are subject to varying levels of rainfall, and certain regions may therefore be subject to food and water security risks. Cameroonian territory encompasses many ecosystems and micro-climates, including dense tropical forests, high volcanic mountains and semi-arid savannahs. These areas may be affected by varying levels of rainfall, and certain regions may therefore be subject to food and water security risks. Water shortages, floods and drought can affect the agricultural sector and the economy generally. Low, excessive or unpredictable rainfall has in the past and may in the future impact Cameroon’s primary rainfall patterns and disrupt groundwater levels and other water supplies. There is a risk that Cameroon’s water resources may fail to meet demand (especially in the North of the country). Any such overexploitation, floods, droughts, hurricanes or other climatic disasters could have a material adverse effect on the Cameroonian economy, the Government’s finances and its ability to service its debt.
In addition, the rainy season in Cameroon typically runs from March to October and may have a negative effect on travel. Transport during the rainy season may be difficult or impossible due to flooding that may make roads slow or impassable. Thus, any restriction on travel during this seven month period could have a material adverse effect on its economy and consequently on Cameroon’s ability to meet its obligations, including those under the Notes.
Risks Relating to the Notes
English law, which governs the terms of the Notes, may change over time The Conditions are based on English law in effect as at the date of this Prospectus. No assurance can be given as to the impact of any possible judicial decision or changes in English law or practice after the date of this Prospectus.
Definitive Certificates not denominated in an integral multiple of U.S.$200,000 or its equivalent may be illiquid and difficult to trade The Notes have denominations consisting of a minimum of U.S.$200,000 plus integral multiples of U.S.$1,000 in excess thereof. It is possible that the Notes may be traded in amounts that are not integral multiples of U.S.$200,000. In each, such holder who, as a result of trading such amounts, holds an amount which is less than U.S.$200,000 in his account with the relevant clearing system at the relevant time may not
29 receive a Definitive Certificate in respect of such holding (should Definitive Certificates be printed) and would need to purchase a principal amount of Notes such that its holding amounts to U.S.$200,000.
If Definitive Certificates are issued, holders should be aware that Definitive Certificates which have a denomination that is not an integral multiple of U.S.$200,000 may be illiquid and more difficult to trade than Notes denominated in an integral multiple of U.S.$200,000.
There may be no active trading market for the Notes Although an application has been made to list the Notes on the Irish Stock Exchange and to admit the Notes to trading on the Main Securities Market, there is no assurance that such application will be accepted or that an active trading market for the Notes will develop or, if one does develop, that it will be liquid or maintained. If an active trading market in the Notes does not develop or is not maintained, the market price and liquidity of the Notes may be adversely affected.
In addition, if the Notes are traded after their initial issuance, they may trade at a discount to their initial offering price, depending upon prevailing interest rates, the market for similar securities, general economic conditions and the financial condition of the Issuer. As a result of the above factors, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market.
Cameroon is a sovereign state. Consequently, it may be difficult for investors to obtain or realise arbitral awards or court judgments in other countries against Cameroon Cameroon is a sovereign state. As a result, it may be difficult for investors to effect service of process upon Cameroon within their own jurisdiction, obtain judgments against Cameroon in foreign or Cameroonian courts or to enforce against Cameroon arbitral awards or court judgements obtained in their own jurisdiction, including judgments predicated upon civil liabilities under the securities laws of the United States or any state or territory within the United States against Cameroon.
Cameroon has waived certain immunities in respect of disputes arising out of or in connection with the Notes. Cameroon has not, however, waived immunity from execution or attachment in respect of certain of its assets. See “Terms and Conditions of the Notes—Governing Law and Jurisdiction—Waiver of Immunity” for further details. Furthermore, Cameroon reserves the right to plead sovereign immunity under the Foreign Sovereign Immunities Act of 1976 of the United States with respect to any actions brought against it in any court or in the United States of America under any United States federal or State Securities law. Moreover, the enforcement of English court judgments and arbitral awards is subject to the conditions and limitations described under “Enforcement of Civil Liabilities” and such limitations and conditions may make it difficult for investors to obtain or realise arbitral awards or judgments of courts outside Cameroon.
A claimant may not be able to enforce an arbitral award or a court judgment against certain assets of Cameroon in certain jurisdictions There is a risk that, notwithstanding the waiver of sovereign immunity by the Republic, a claimant will not be able to enforce an arbitral award or a court judgment against certain assets of the Republic in certain jurisdictions (including the imposition of any arrest order or attachment or seizure of such assets and their subsequent sale) without the Republic having specifically consented to such enforcement at the time when the enforcement is sought.
The foreign exchange reserves of the Republic are controlled and administered by the BEAC, which conducts monetary and supervisory activities independently from the Government and acts as banker and fiscal agent to the Republic. Accordingly, such reserves would not be available to satisfy any award, claim or judgment in respect of the Notes.
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A judgment by a Cameroonian court will ordinarily be awarded in CFA francs, but may be awarded in a foreign currency, depending on the underlying type of contract or transaction. Similarly, when enforcing an arbitral award or a foreign judgment awarded in a currency other than CFA franc, a Cameroonian court may convert such award into CFA francs. In that event, there may be a discrepancy between the rate of exchange used by the Cameroonian court to convert such award into CFA francs, and the rate of exchange which may be obtained in the market to convert such award from CFA francs back into another currency. A Noteholder who is awarded an arbitral award or a judgment may therefore incur a loss as a result of such exchange rate differences. A currency indemnity has been included in the Conditions (see Condition 16 (Currency Indemnity)), however, the cost of enforcement of such condition may nevertheless result in a loss by such Noteholder.
Holders of the Notes may be subject to the EU Savings Directive Under EC Council Directive 2003/48/EC on the taxation of savings income (the “EU Savings Directive”), EU Member States are required, from 1 July 2005, to provide to the tax authorities of another EU Member State details of payments of interest (or similar income) paid by a paying agent established within its jurisdiction to (or for the benefit of) an individual resident, or certain types of entity established, in that other EU Member State. However, for a transitional period, Austria will (unless during that period it elects otherwise) instead operate a withholding system in relation to such payments. The transitional period is to terminate at the end of the first full fiscal year following agreement by certain non-EU countries to exchange information procedures relating to interest and other similar income.
According to the Luxembourg law dated 25 November 2014, the Luxembourg government has abolished the withholding tax system with effect from 1 January 2015 in favour of automatic information exchange under the EU Savings Directive.
On 24 March 2014, the Council of the EU has adopted a Directive 2014/48/EU (the “Amending Directive”) which will, when implemented, amend and broaden the scope of the requirements of the EU Savings Directive described above. The Amending Directive will expand the range of payments covered by the EU Savings Directive, in particular to include additional types of income payable on securities, and the circumstances in which payments must be reported or paid subject to withholding. For example, payments made to (or for the benefit of) (i) an entity or legal arrangement effectively managed in an EU Member State that is not subject to effective taxation, or (ii) a person, entity or legal arrangement established or effectively managed outside of the EU (and outside any third country or territory that has adopted similar measures to the EU Savings Directive) which indirectly benefits an individual resident in an EU Member State, may fall within the scope of the EU Savings Directive, as amended. The Amending Directive requires EU Member States to adopt national legislation necessary to comply with it by 1 January 2016, which legislation must apply from 1 January 2017.
A number of non-EU countries and certain dependent or associated territories of certain EU Member States have adopted similar measures to the EU Savings Directive.
According to a Communication of the European Commission on tax transparency to fight tax evasion and avoidance dated 18 March 2015, the EU Savings Directive may, however, be repealed in due course in order to avoid overlap with the amended Council Directive 2011/16/EU on administrative cooperation in the field of taxation, pursuant to which EU Member States other than Austria will be required to apply other new measures on mandatory automatic exchange of information from 1 January 2016. Austria has an additional year before being required to implement the new measures but it has announced that it will implement them from 1 January 2016.
If a payment were to be made or collected through an EU Member State which has opted for a withholding system and an amount of, or in respect of, tax were to be withheld from that payment pursuant to the EU
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Savings Directive or any other Directive implementing the conclusions of the Economic and Financial Affairs (“ECOFIN”) Council meeting of 26/27 November 2000 on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to such Directive or Directives, neither the Issuer nor any paying agent nor any other person would be obliged to pay additional amounts with respect to any Note as a result of the imposition of such withholding tax. Furthermore, once the Amending Directive is implemented and takes effect in EU Member States, such withholding may occur in a wider range of circumstances than at present, as explained above. The Issuer is, however, required to maintain a paying agent in an EU Member State, if any, that will not be obliged to withhold or deduct tax pursuant to the EU Savings Directive. Noteholders should consult their own tax advisers regarding the implications of the EU Savings Directive in their particular circumstances.
Fluctuations in exchange rates and interest rates may adversely affect the value of the Notes The Issuer will pay principal and interest on the Notes in U.S. Dollars. This presents certain risks relating to currency conversions if an investor’s financial activities are denominated principally in a currency or currency unit (the “Investor’s Currency”) other than U.S. Dollars. These include the risk that exchange rates may significantly change (including changes due to devaluation of the U.S. Dollars or revaluation of the Investor’s Currency) and the risk that authorities with jurisdiction over the Investor’s Currency may impose or modify exchange controls. An appreciation in the value of the Investor’s Currency relative to U.S. Dollars would decrease the Investor’s Currency-equivalent yield on the Notes, the Investor’s Currency equivalent value of the principal payable on the Notes and the Investor’s Currency equivalent market value of the Notes.
Government and monetary authorities (including where the investor is domiciled) may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal. In addition, investment in the Notes involves the risk that subsequent changes in market interest rates may adversely affect the value of the Notes.
Legal investment considerations may restrict certain investments The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent the Notes are legal investments for it, the Notes can be used as collateral for various types of borrowing and other restrictions apply to its purchase or pledge of the Notes. Financial institutions should consult their legal advisors or the appropriate regulators to determine the appropriate treatment of the Notes under any applicable risk-based capital or similar rules.
Credit ratings may not reflect all risks S&P and Fitch are expected to assign credit ratings to the Notes. The ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may affect the value of the Notes. Each of S&P and Fitch is established in the EU and registered under the CRA Regulation. A credit rating is not a recommendation to buy, sell or hold securities and may be revised or withdrawn by the rating agency at any time which may, in turn, affect the trading price of the Notes in the secondary market.
In general, European regulated investors are restricted under the CRA Regulation from using credit ratings for regulatory purposes, unless such ratings are issued under the CRA Regulation (and such registration has not been withdrawn or suspended). Such general restriction will also apply in the case of credit ratings issued by non-EU credit-rating agencies, unless the relevant credit ratings are endorsed by an EU-registered credit rating agency or the relevant non-EU rating agency is certified in accordance with the CRA Regulation (and such endorsement or certification, as the case may be, has not been withdrawn or suspended).
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The Issuer may issue additional Notes that are intended to be fungible with the original Notes, but which may in some cases be treated as a separate series for U.S. federal income tax purposes, which may in turn affect the market value of the original Notes The Issuer may, without notice to or the consent of the Noteholders, create and issue further Notes having the same terms and conditions as the Notes in all respects (or in all respects apart from the first payment of interest) (see Condition 14 (Further Issues) for further details). These further Notes, even if they are treated for non-tax purposes as part of the same series as the original Notes, may in some cases be treated as a separate series for U.S. federal income tax purposes. In such a case, the further Notes may be considered to have been issued with original issue discount for U.S. federal income tax purposes (“OID”) even if the original Notes had no OID. These differences may affect the market value of the original Notes if the further Notes are not otherwise distinguishable from the original Notes.
The Notes contain a “collective action” clause under which the terms of the Notes may be amended, modified or waived without the consent of all the holders of the Notes The Conditions contain provisions regarding amendments, modifications and waivers, commonly referred to as ‘‘collective action’’ clauses. Such clauses permit defined majorities to bind all Noteholders, including Noteholders who did not vote and Noteholders who voted in a manner contrary to the majority.
In the future, the Issuer may issue debt securities which contain collective action clauses in the same form as the collective action clauses in the Conditions. If this occurs, then this could mean that the Notes would be capable of aggregation with any such future debt securities. This means that a defined majority of the holders of such debt securities (when taken in the aggregate) would be able to bind all holders of debt securities in all the relevant aggregated series, including the Notes.
Any modification or actions relating to Reserved Matters (as defined in the Conditions), including in respect of payments and other important terms, may be made to the Notes with the consent of the holders of 75% of the aggregate principal amount outstanding of the Notes, and to multiple series of debt securities which may 2 be issued by the Issuer with the consent of both (i) the holders of 66 /3% of the aggregate principal amount outstanding of all debt securities being aggregated and (ii) the holders of 50% in aggregate principal amount outstanding of each series of debt securities being aggregated. In addition, under certain circumstances, including the satisfaction of the Uniformly Applicable condition (as more particularly described in the Conditions), any such modification or action relating to reserved matters may be made to multiple debt securities with the consent of 75% of the aggregate principal amount outstanding of all debt securities being aggregated only, without requiring a particular percentage of the holders in any individual affected debt securities to vote in favour of any proposed modification or action. Any modification or action proposed by the Issuer may, at the option of the Issuer, be made in respect of some debt securities only and, for the avoidance of doubt, the provisions may be used for different groups of two or more debt securities simultaneously. At the time of any proposed modification or action, the Issuer will be obliged, inter alia, to specify which method or methods of aggregation will be used by the Issuer.
There is a risk therefore that the Conditions of the Notes may be amended, modified or waived in circumstances whereby the holders of debt securities voting in favour of an amendment, modification or waiver may be holders of different debt securities and as such, less than 75% of the Noteholders would have voted in favour of such amendment, modification or waiver. In addition, there is a risk that the provisions allowing for aggregation across multiple debt securities may make the Notes less attractive to purchasers in the secondary market on the occurrence of an Event of Default or in a distress situation. Further, any such amendment, modification or waiver in relation to the Notes may adversely affect their trading price.
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The Issuer is not required to effect equal or rateable payment(s) with respect to the Notes or any other External Indebtedness, and is not required to pay other External Indebtedness at the same time or as a condition of paying sums on the Notes and vice versa The Notes will at all times rank at least pari passu with all other unsecured External Indebtedness (as defined in the Conditions) of the Issuer from time to time outstanding. However, the Issuer will have no obligation to effect equal or rateable payment(s) at any time with respect to any other External Indebtedness and, in particular, will have no obligation to pay other External Indebtedness at the same time or as a condition of paying sums due on the Notes and vice versa. See Condition 1(b) (Form, Denomination and Status – Status) of the Conditions for further details.
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TERMS AND CONDITIONS OF THE NOTES
The issue of the Notes (as defined below) was authorised by Decree N° 2015/314 of 20 July 2015 to empower the Minister of Finance of the Republic of Cameroon to issue securities in US dollars up to the amount of 750 billion francs CFA for the financing of development projects for the 2015 financial year dated 20 July 2015 and published in the Cameroon Tribune on 22 July 2015.
The U.S.$750,000,000 9.50 per cent. Amortising Notes due 2025 (the “Notes”, which expression includes any further notes issued pursuant to Condition 14 (Further issues) and forming a single series therewith) of the Republic of Cameroon (the “Issuer”) are constituted by and subject to, and have the benefit of a deed of covenant dated 19 November 2015 (as amended or supplemented from time to time, the “Deed of Covenant”) entered into by the Issuer and are the subject of an agency agreement dated 19 November 2015 (as amended or supplemented from time to time, the “Agency Agreement”) between the Issuer, Citigroup Global Markets Deutschland AG as registrar (the “Registrar”, which expression includes any successor registrar appointed from time to time in connection with the Notes), Citibank, N.A., London Branch as fiscal agent (the “Fiscal Agent”, which expression includes any successor fiscal agent appointed from time to time in connection with the Notes), the transfer agents named therein (the “Transfer Agents”, which expression includes any successor or additional transfer agents appointed from time to time in connection with the Notes) and the other paying agents named therein (together with the Fiscal Agent, the “Paying Agents” which expression includes any successor or additional paying agents appointed from time to time in connection with the Notes). References herein to the “Agents” are to the Registrar, the Fiscal Agent, the Transfer Agents and the Paying Agents and any reference to an “Agent” is to any one of them. Certain provisions of these Conditions are summaries of the Agency Agreement and the Deed of Covenant and subject to their detailed provisions. The Noteholders (as defined below) are bound by, and are deemed to have notice of, all the provisions of the Agency Agreement and the Deed of Covenant applicable to them. Copies of the Agency Agreement and the Deed of Covenant are available for inspection and collection by Noteholders during normal business hours at the Specified Offices (as defined in the Agency Agreement) of each of the Agents, the initial Specified Offices of which are set out below.
1 Form, Denomination and Status
(a) Form and denomination
The Notes are in registered form in the denominations of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof (each, an “Authorised Denomination”).
(b) Status
The Notes constitute direct, general, unconditional and (subject to Condition 3 (Negative Pledge)) unsecured obligations of the Issuer and the full faith and credit of the Issuer is pledged for the due and punctual payment of principal of, and interest on, the Notes and for the performance of all other obligations of the Issuer pursuant to the Notes and the Deed of Covenant. The Notes will at all times rank pari passu without preference among themselves and (subject to Condition 3 (Negative Pledge)) at least pari passu with all other unsecured External Indebtedness (as defined in Condition 3(b) (Negative Pledge)) of the Issuer from time to time outstanding; provided, however, that the Issuer shall have no obligation to effect equal or rateable payment(s) at any time with respect to any other External Indebtedness and, in particular, the Issuer shall have no obligation to pay other External Indebtedness at the same time or as a condition of paying sums due on the Notes and vice versa.
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2 Register, Title and Transfers
(a) Register
The Registrar will maintain outside the United Kingdom a register (the “Register”) in respect of the relevant Notes in accordance with the provisions of the Agency Agreement. In these Conditions, the “Holder” of a Note means the person in whose name such Note is for the time being registered in the Register (or, in the case of a joint holding, the first named thereof) and “Noteholder” shall be construed accordingly. A certificate (each, a “Note Certificate”) will be issued to each Noteholder in respect of its registered holding. Each Note Certificate will be numbered serially with an identifying number which will be recorded in the Register.
(b) Title
The Holder of each Note shall (except as otherwise required by law) be treated as the absolute owner of such Note for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any other interest therein, any writing on the Note Certificate relating thereto (other than the endorsed form of transfer) or any notice of any previous loss or theft of such Note Certificate) and no person shall be liable for so treating such Holder. No person shall have any right to enforce any term or condition of the Notes under the Contracts (Rights of Third Parties) Act 1999.
(c) Transfers
Subject to paragraphs (f) (Closed periods) and (g) (Regulations concerning transfers and registration) below, a Note may be transferred upon surrender of the relevant Note Certificate, with the endorsed form of transfer duly completed, at the Specified Office of the Registrar or any Transfer Agent, together with such evidence as the Registrar or (as the case may be) such Transfer Agent may reasonably require to prove the title of the transferor and the authority of the individuals who have executed the form of transfer; provided, however, that a Note may not be transferred unless the principal amount of Notes transferred and (where not all of the Notes held by a Holder are being transferred) the principal amount of the balance of Notes not transferred are Authorised Denominations. Where not all the Notes represented by the surrendered Note Certificate are the subject of the transfer, a new Note Certificate in respect of the balance of the Notes will be issued to the transferor.
(d) Registration and delivery of Note Certificates
Within five business days of the surrender of a Note Certificate in accordance with paragraph (c) (Transfers) above, the Registrar will register the transfer in question and deliver a new Note Certificate of a like principal amount to the Notes transferred to each relevant Holder at its Specified Office or (as the case may be) the Specified Office of any Transfer Agent or (at the request and risk of any such relevant Holder) by uninsured first class mail (airmail if overseas) to the address specified for the purpose by such relevant Holder. In this paragraph, “business day” means a day on which commercial banks are open for general business (including dealings in foreign currencies) in the city where the Registrar or (as the case may be) the relevant Transfer Agent has its Specified Office.
(e) No charge
The transfer of a Note will be effected without charge by or on behalf of the Issuer, the Registrar or any Transfer Agent but against such indemnity as the Registrar or (as the case may be) such
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Transfer Agent may require in respect of any tax or other duty of whatsoever nature which may be levied or imposed in connection with such transfer.
(f) Closed periods
Noteholders may not require transfers to be registered during the period of 15 days ending on (and including) the due date for redemption of that Note or during the period of seven days ending on (and including) any Record Date (as defined in Condition 6(f)).
(g) Regulations concerning transfers and registration
All transfers of Notes and entries on the Register are subject to the detailed regulations concerning the transfer of Notes scheduled to the Agency Agreement. The regulations may be changed by the Issuer with the prior written approval of the Registrar. A copy of the current regulations will be mailed (free of charge) by the Registrar to any Noteholder who requests in writing a copy of such regulations.
3 Negative Pledge
(a) Negative Pledge
So long as any Note remains outstanding (as defined in the Agency Agreement) the Issuer will not, save for the exceptions set out below in Condition 3(b) (Exceptions), create, incur, assume or permit to subsist any Security upon the whole or any part of its present or future assets, undertakings or revenues to secure:
(i) any of its Public External Indebtedness;
(ii) any Guarantees in respect of Public External Indebtedness; or
(iii) the Public External Indebtedness of any other person,
without at the same time or prior thereto securing the Notes equally and rateably therewith or providing such other arrangement (whether or not comprising Security) as shall be approved by an Extraordinary Resolution or Written Resolution (each as defined in Condition 12 (Meetings of Noteholders; Written Resolutions)). For the avoidance of doubt, any such approval shall not constitute a Reserved Matter (for the purposes of and as defined in Condition 12(e)).
Interpretation:
In these Conditions:
(i) “External Indebtedness” means any Indebtedness expressed or denominated or payable or which, at the option of the relevant creditor may be payable, in any currency other than the lawful currency from time to time of the Republic of Cameroon;
(ii) “Guarantee” means any obligation of a person to pay the Indebtedness of another person including, without limitation: an obligation to pay or purchase such Indebtedness; an obligation to lend money or to purchase or subscribe shares or other securities or to purchase assets or services in order to provide funds for the payment of such Indebtedness; an indemnity against the consequences of a default in the payment of such Indebtedness; or any other agreement to be responsible for such Indebtedness;
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(iii) “Indebtedness” means any obligation (whether present or future) for the payment or repayment of money which has been borrowed or raised (including money raised by acceptances and leasing);
(iv) “person” means any individual, company, corporation, firm, partnership, joint venture, association, organisation, trust or other juridical entity, state or agency of a state or other entity, whether or not having a separate legal personality;
(v) “Project Financing” means any arrangement for the provision of funds which are to be used solely to finance a project for the acquisition, construction, development or exploitation of any property pursuant to which the persons providing such funds agree that the principal source of repayment of such funds will be the project and the revenues (including insurance proceeds) generated by such project;
(vi) “Public External Indebtedness” means any External Indebtedness which is in the form of, or is represented by, bonds, notes or other securities with a stated maturity of more than one year from the date of issue which are, or are capable of being, quoted, listed or ordinarily purchased or sold on any stock exchange, automated trading system, over the counter or other securities market; and
(vii) “Security” means any mortgage, pledge, lien, hypothecation, security interest or other charge or encumbrance including, without limitation, anything analogous to the foregoing under the laws of any jurisdiction.
(b) Exceptions
The following exceptions apply to the Issuer’s obligations under Condition 3(a) (Negative Pledge):
(i) any Security upon property (or property which forms part of a class of assets of a similar nature where the Security is by reference to the constituents of such class from time to time) to secure Public External Indebtedness of the Issuer or any Guarantee by the Issuer of Public External Indebtedness of any other person, in each case incurred for the purpose of financing the acquisition or construction of such property; or
(ii) any Security securing the Public External Indebtedness of the Issuer or any Guarantee by the Issuer of Public External Indebtedness of any other person incurred in connection with any Project Financing provided that such Security applies solely to (A) properties which are the subject of such Project Financing and/or (B) revenues or claims which arise from the insurance proceeds of such Project Financing or the operation, failure to meet specifications, exploitation, sale or loss of, or failure to complete, or damage to, such properties; or
(iii) any Security securing the Public External Indebtedness of the Issuer or any Guarantee by the Issuer of Public External Indebtedness of any other person which was in existence on 19 November 2015; or
(iv) any renewal or extension of any Security described in sub-paragraphs (i), (ii) and (iii) above, provided that the principal amount of the Public External Indebtedness secured thereby is not increased and such renewal or extension is limited to the original property covered thereby.
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4 Interest
The Notes bear interest at their outstanding principal amount (determined in accordance with Condition 5(a) (Redemption by amortisation and final redemption) from and including 19 November 2015 (the “Issue Date”) at the rate of 9.50 per cent. per annum, (the “Rate of Interest”) and such interest will be payable semi-annually in arrear on 19 May and 19 November in each year (each, an “Interest Payment Date”), subject as provided in Condition 6 (Payments).
Each Note will cease to bear interest from the due date for redemption unless, upon due presentation, payment of principal is improperly withheld or refused, in which case it will continue to bear interest at such rate (both before and after judgment) until whichever is the earlier of:
(i) the day on which all sums due in respect of such Note up to that day are received by or on behalf of the relevant Noteholder; and
(ii) the day seven days after the Fiscal Agent has notified the Noteholders in accordance with Condition 15 (Notices) of receipt of all sums due in respect of all the Notes (except to the extent that there is any subsequent default in payment to the relevant Noteholders).
The amount of interest payable on each Interest Payment Date shall be U.S.$9,500 in respect of each Note of U.S.$200,000 denomination and, where Notes are issued in Authorised Denominations in excess thereof, U.S.$47.50 in respect of each Calculation Amount (as defined below). If interest is required to be paid in respect of a Note on any other date, it shall be calculated by applying the Rate of Interest to the Calculation Amount, multiplying the product by the relevant Day Count Fraction, rounding the resulting figure to the nearest cent (half a cent being rounded upwards) and multiplying such rounded figure by a fraction equal to the Authorised Denomination of such Note divided by the Calculation Amount, where “Calculation Amount” means U.S.$1,000 and “Day Count Fraction” means, in respect of any period, the number of days in the relevant period divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30-day months).
5 Redemption and Purchase
(a) Redemption by amortisation and final redemption
Unless previously redeemed or purchased and cancelled as provided in this Condition 5 (Redemption and Purchase), the Notes shall be redeemed on each amortisation date specified in column A below (each an "Amortisation Date") by the related amortisation amount specified in column B below (each an "Amortisation Amount"). The outstanding principal amount of the Notes shall be reduced by each Amortisation Amount for all purposes with effect from the relevant Amortisation Date such that the outstanding principal amount of the Notes following such reduction shall be as specified in column C below, unless the payment of the relevant Amortisation Amount is improperly withheld or refused. In such case, such amount will remain outstanding (after as well as before judgment) until whichever is the earlier of:
(i) the day on which all sums due in respect of such Notes up to that day are received by or on behalf of the relevant Noteholders;
(ii) the day which is seven days after the Fiscal Agent has notified the Noteholders that it has received all sums due in respect of the Notes up to such seventh day (except to the extent that there is any subsequent default in payment) in accordance with Condition 16 (Notices).
The Notes shall be finally redeemed on the Maturity Date at their final Amortisation Amount.
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The following table sets out the dates and amounts for amortisation of the outstanding principal amount of the Notes only. Provisions for the calculation of interest are set out in Condition 4 (Interest).
(A) Amortisation Date (B) Amortisation Amount (C) Outstanding principal amount of Notes Interest Payment Date falling on or nearest to:
19 November 2023 U.S.$250,000,000 U.S.$500,000,000
19 November 2024 U.S.$250,000,000 U.S.$250,000,000
19 November 2025 U.S.$250,000,000 U.S.$0.00
(b) No other redemption
The Issuer shall not be entitled to redeem the Notes otherwise than as provided in Condition 5(a) (Redemption by amortisation and final redemption).
(c) Purchase
The Issuer may at any time purchase or procure others to purchase for its account Notes in the open market or otherwise and at any price, provided that such purchase is made in accordance with the United Sates Securities Act of 1933, as amended (the "Securities Act") and any other applicable securities laws. The Notes so purchased may be held or resold (provided that such resale is made in compliance with the Securities Act and all applicable laws) or surrendered for cancellation at the option of the Issuer, as the case may be in compliance with Condition 5(d) (Cancellation of Notes) below. The Notes so purchased, while held by or on behalf of the Issuer, shall not entitle the holder to vote at any meeting of the Noteholders (or for the purposes of any Written Resolution) and shall not be deemed to be outstanding, all as more particularly set out in Condition 12(a)(i) (Notes controlled by the Issuer).
(d) Cancellation of Notes
All Notes which are submitted for cancellation pursuant to Condition 5(c) (Purchase) will be cancelled and may not be reissued or resold.
6 Payments
(a) Principal
Payments of principal (including any Amortisation Amounts) shall be made by U.S. dollar cheque drawn on, or, upon application by a Holder of a Note to the Specified Office of any Paying Agent not later than the fifteenth day before the due date for any such payment, by transfer to a U.S. dollar account maintained by the payee with, a bank that processes payments in U.S. Dollars and (in the case of redemption) upon surrender (or, in the case of part payment only, endorsement) of the relevant Note Certificates at the Specified Office of any Paying Agent.
(b) Interest
Payments of interest shall be made by U.S. dollar cheque drawn on, or upon application by a Holder of a Note to the Specified Office of any Paying Agent not later than the fifteenth day before the due date for any such payment, by transfer to a U.S. dollar account maintained by the payee with, a bank in New York City and (in the case of interest payable on redemption) upon
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surrender (or, in the case of part payment only, endorsement) of the relevant Note Certificates at the Specified Office of any Paying Agent.
(c) Payments subject to fiscal laws
All payments in respect of the Notes are subject in all cases to any applicable fiscal or other laws and regulations in the place of payment, but without prejudice to the provisions of Condition 7 (Taxation). No commissions or expenses shall be charged to the Noteholders in respect of such payments.
(d) Payments on business days
Where payment is to be made by transfer to a U.S. dollar account, payment instructions (for value the due date, or, if the due date is not a business day, for value the next succeeding business day) will be initiated and, where payment is to be made by U.S. dollar cheque, the cheque will be mailed (i) (in the case of payments of principal and interest payable on redemption) on the later of the due date for payment and the day on which the relevant Note Certificate is surrendered (or, in the case of part payment only, endorsed) at the Specified Office of any Paying Agent and (ii) (in the case of payments of interest payable other than on redemption) on the due date for payment. A Holder of a Note shall not be entitled to any interest or other payment in respect of any delay in payment resulting from (A) the due date for a payment not being a business day, (B) if the Noteholder is late in surrendering its Note Certificate (if required to do so) or (C) a cheque mailed in accordance with this Condition 6 (Payments) arriving after the due date for payment or being lost in the mail. In this paragraph, “business day” means any day on which banks are open for general business (including dealings in foreign currencies) in New York City, London and Yaoundé and, in the case of surrender (or, in the case of part payment only, endorsement) of a Note Certificate, in the place in which the Note Certificate is surrendered (or, as the case may be, endorsed).
(e) Partial payments
If a Paying Agent makes a partial payment in respect of any Note, the Registrar shall procure that the amount and date of such payment are noted on the Register and, in the case of partial payment upon presentation of a Note Certificate, that a statement indicating the amount and the date of such payment is endorsed on the relevant Note Certificate.
(f) Record date
Each payment in respect of a Note will be made to the person shown as the Holder in the Register at the close of business in the place of the Registrar’s Specified Office on the fifteenth day before the due date for such payment (the “Record Date”). Where payment in respect of a Note is to be made by cheque, the cheque will be mailed to the address shown as the address of the Holder in the Register at the opening of business on the relevant Record Date.
7 Taxation
All payments of principal and interest in respect of the Notes by or on behalf of the Issuer shall be made free and clear of, and without withholding or deduction for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of the Relevant Jurisdiction, unless the withholding or deduction of such taxes, duties, assessments or governmental charges is required by law. In that event the Issuer shall pay such additional amounts as will result in receipt by the Noteholders of such amounts after such withholding or
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deduction as would have been received by them had no such withholding or deduction been required, except that no such additional amounts shall be payable in respect of any Note:
(i) held by a Holder which is liable to such taxes, duties, assessments or governmental charges in respect of such Note by reason of its having some connection with the Relevant Jurisdiction other than the mere holding of the Note; or
(ii) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC (as amended from time to time) or any other Directive implementing the conclusions of the ECOFIN Council Meeting of 26-27 November 2000 on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, such Directive; or
(iii) held by a Holder who would have been able to avoid such withholding or deduction by arranging to receive the relevant payment through another Paying Agent in a member state of the European Union; or
(iv) where the relevant Note Certificate is surrendered for payment more than 30 days after the Relevant Date except to the extent that the relevant Holder would have been entitled to such additional amounts if it had surrendered the relevant Note Certificate on the last day of such period of 30 days.
In these Conditions:
(a) “Relevant Date” means whichever is the later of (1) the date on which the payment in question first becomes due and (2) if the full amount payable has not been received by the Paying Agent on or prior to such due date, the date on which (the full amount having been so received) notice to that effect has been duly given to the Noteholders by the Issuer in accordance with Condition 15 (Notices);
(b) Any reference to principal or interest shall be deemed to include any additional amounts in respect of principal or interest (as the case may be) which may be payable under this Condition 7 (Taxation); and
(c) “Relevant Jurisdiction” means The Republic of Cameroon or any political subdivision or any authority thereof or therein having power to tax.
8 Events of Default
If any of the following events (each an “Event of Default”) occurs and is continuing:
(a) Non-payment
the Issuer fails to pay any amount of principal in respect of the Notes within 15 business days of the due date for payment thereof or fails to pay any amount of interest in respect of the Notes within 30 days of the due date for payment thereof; or
(b) Breach of other obligations
the Issuer defaults in the performance or observance of any of its other obligations under or in respect of the Notes or the Deed of Covenant and such default remains unremedied for 45 days after written notice thereof is given to the Issuer at the Specified Office of the Fiscal Agent; or
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(c) Cross-acceleration of Issuer
(i) any Public External Indebtedness of the Issuer is not paid when due or (as the case may be) within any originally applicable grace period;
(ii) any such Public External Indebtedness becomes due and payable prior to its stated maturity by reason of default; or
(iii) the Issuer fails to pay when due and called upon any amount payable by it under any Guarantee of any Public External Indebtedness within any originally applicable grace period;
provided that the amount of Public External Indebtedness referred to in sub-paragraph (i) and/or sub-paragraph (ii) above and/or the amount payable under any Guarantee referred to in sub- paragraph (iii) above, individually or in the aggregate, exceeds U.S.$ 25 million (or its equivalent in any other currency or currencies); or
(d) IMF
the Issuer ceases to be a member of the International Monetary Fund (the “IMF”) or ceases to be eligible to use the general resources of the IMF; or
(e) Moratorium
the Issuer declares a moratorium on the payment of principal of, or interest on, the External Indebtedness of the Issuer; or
(f) Validity
(i) the validity of the Notes shall be contested by the Issuer or any political subdivision thereof or any authority acting on behalf of the Issuer; or
(ii) the Issuer shall deny any of its obligations under the Notes (whether by declaring a general suspension of payments or declaring a moratorium on the payment of External Indebtedness or otherwise); or
(iii) it shall be or become unlawful for the Issuer to perform or comply with all or any of its obligations set out in the Notes, including, without limitation, the payment of interest on the Notes, as a result of any change in law or regulation in the Republic of Cameroon or any ruling of any court in the Republic of Cameroon whose decision is final and unappealable or for any reason such obligations cease to be in full force and effect; or
(g) Consents
if any authorisation, consent of, or filing or registration with, any governmental authority necessary for the performance of any payment obligation of the Issuer under the Notes, when due, ceases to be in full force and effect or remain valid and subsisting; then the holders of at least 25 per cent. in aggregate principal amount of the outstanding Notes may, by notice in writing to the Issuer (with a copy to the Fiscal Agent), declare all the Notes to be immediately due and payable, whereupon they shall become immediately due and payable at their principal amount together with accrued interest without further action or formality. Notice of any such declaration shall promptly be given to all other Noteholders by the Issuer. No delay or omission of any Noteholder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy
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or constitute a waiver of any such Event of Default or other breach of the Issuer’s obligations under the Agency Agreement.
If the Issuer receives notice in writing from holders of at least 50 per cent. in aggregate principal amount of the outstanding Notes (as defined in the Agency Agreement) to the effect that the Event of Default or Events of Default giving rise to any above-mentioned declaration of acceleration is or are cured following any such declaration and that such holders wish the relevant declaration to be withdrawn, the Issuer shall give notice thereof to the Noteholders (with a copy to the Fiscal Agent), whereupon the relevant declaration shall be withdrawn and shall have no further effect but without prejudice to any rights or obligations which may have arisen before the Issuer gives such notice (whether pursuant to these Conditions or otherwise). No such withdrawal shall affect any other or any subsequent Event of Default or any right of any Noteholder in relation thereto.
9 Prescription
Claims for principal and interest on redemption shall be prescribed and become void unless the relevant Note Certificates are surrendered for payment within ten years of the appropriate Relevant Date.
10 Replacement of Note Certificates
If any Note Certificate is lost, stolen, mutilated, defaced or destroyed, it may be replaced at the Specified Office of the Registrar, subject to all applicable laws and stock exchange requirements, upon payment by the claimant of the expenses incurred in connection with such replacement and on such terms as to evidence, security, indemnity and otherwise as the Issuer may reasonably require. Mutilated or defaced Note Certificates must be surrendered before replacements will be issued.
11 Agents
In acting under the Agency Agreement and in connection with the Notes, the Agents act solely as agents of the Issuer and do not assume any obligations towards or relationship of agency or trust for or with any of the Noteholders, save as expressly provided therein.
The initial Agents and their initial Specified Offices are listed below. The Issuer reserves the right at any time to vary or terminate the appointment of any Agent and to appoint a successor registrar, fiscal agent and additional or successor paying agents and transfer agents; provided, however, that the Issuer shall at all times maintain (a) a fiscal agent, a transfer agent and a registrar in any major European city and (b) a paying agent that will not be obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC (as amended from time to time) or any other directive implementing the conclusions of the ECOFIN Council Meeting of 26-27 November 2000 on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, such Directive.
Notice of any change in any of the Agents or in their Specified Offices shall promptly be given to the Noteholders.
12 Meetings of Noteholders; Written Resolutions
(a) Convening Meetings of Noteholders; Conduct of Meetings of Noteholders; Written Resolutions
(i) The Issuer may convene a meeting of the Noteholders at any time in respect of the Notes in accordance with the provisions of the Fiscal Agency Agreement. The Issuer will determine the time and place of the meeting and will notify the Noteholders of the time,
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place and purpose of the meeting not less than 21 and not more than 45 days before the meeting.
(ii) The Issuer or the Fiscal Agent will convene a meeting of Noteholders if the holders of at least 10 per cent. in principal amount of the outstanding Notes (as defined in the Fiscal Agency Agreement and described in Condition 12(i) (Notes controlled by the Issuer) have delivered a written request to the Issuer or the Fiscal Agent (with a copy to the Issuer) setting out the purpose of the meeting. The Fiscal Agent will agree the time and place of the meeting with the Issuer promptly. The Issuer or the Fiscal Agent, as the case may be, will notify the Noteholders within 10 days of receipt of such written request of the time and place of the meeting, which shall take place not less than 21 and not more than 45 days after the date on which such notification is given.
(iii) The Issuer (with the agreement of the Fiscal Agent) will set the procedures governing the conduct of any meeting in accordance with the Fiscal Agency Agreement. If the Fiscal Agency Agreement does not include such procedures, or additional procedures are required, the Issuer and the Fiscal Agent will agree such procedures as are customary in the market and in such a manner as to facilitate any multiple series aggregation, if in relation to a Reserved Matter the Issuer proposes any modification to the terms and conditions of, or action with respect to, two or more series of debt securities issued by it.
(iv) The notice convening any meeting will specify, inter alia:
(A) the date, time and location of the meeting;
(B) the agenda and the text of any Extraordinary Resolution (as defined below) to be proposed for adoption at the meeting;
(C) the record date for the meeting, which shall be no more than five business days before the date of the meeting;
(D) the documentation required to be produced by a Noteholder in order to be entitled to participate at the meeting or to appoint a proxy to act on the Noteholder’s behalf at the meeting;
(E) any time deadline and procedures required by any relevant international and/or domestic clearing systems or similar through which the Notes are traded and/or held by Noteholders;
(F) whether Condition 12(b) (Modification of this Series of Notes only), Condition 12(c) (Multiple Series Aggregation – Single limb voting), or Condition 12(d) (Multiple Series Aggregation – Two limb voting) shall apply and, if relevant, in relation to which other series of debt securities it applies;
(G) if the proposed modification or action relates to two or more series of debt securities issued by it and contemplates such series of debt securities being aggregated in more than one group of debt securities, a description of the proposed treatment of each such group of debt securities;
(H) such information that is required to be provided by the Issuer in accordance with Condition 12(f) (Information);
(I) the identity of the Aggregation Agent (as defined below) and the Calculation Agent, if any, for any proposed modification or action to be voted on at the
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meeting, and the details of any applicable methodology referred to in Condition 12(g) (Claims Valuation); and
(J) any additional procedures which may be necessary and, if applicable, the conditions under which a multiple series aggregation will be deemed to have been satisfied if it is approved as to some but not all of the affected series of debt securities.
(v) In addition, the Fiscal Agency Agreement contains provisions relating to Written Resolutions. All information to be provided pursuant to Condition 12(a)(iv) (Convening Meetings of Noteholders; Conduct of Meetings of Noteholders; Written Resolutions) shall also be provided, mutatis mutandis, in respect of Written Resolutions.
(vi) A “record date” in relation to any proposed modification or action means the date fixed by the Issuer for determining the Noteholders and, in the case of a multiple series aggregation, the holders of debt securities of each other affected series that are entitled to vote on a Multiple Series Single Limb Extraordinary Resolution or a Multiple Series Two Limb Extraordinary Resolution, or to sign a Multiple Series Single Limb Written Resolution or a Multiple Series Two Limb Written Resolution as set out below.
(vii) An “Extraordinary Resolution” means any of a Single Series Extraordinary Resolution, a Multiple Series Single Limb Extraordinary Resolution and/or a Multiple Series Two Limb Extraordinary Resolution, as the case may be.
(viii) A “Written Resolution” means any of a Single Series Written Resolution, a Multiple Series Single Limb Written Resolution and/or a Multiple Series Two Limb Written Resolution, as the case may be.
(ix) Any reference to “debt securities” means any notes (including the Notes), bonds, debentures or other debt securities (which for these purposes shall be deemed to include any sukuk, trust certificates or like instrument or obligation representing the credit of the Republic of Cameroon) issued directly or indirectly by the Issuer in one or more series with an original stated maturity of more than one year.
(x) “Debt Securities Capable of Aggregation” means those debt securities which include or incorporate by reference this Condition 12 (Meetings of Noteholders; Written Resolutions) and Condition 13 (Aggregation Agent; Aggregation Procedures) or provisions substantially in these terms which provide for the debt securities which include such provisions to be capable of being aggregated for voting purposes with other series of debt securities.
(b) Modification of this Series of Notes only
(i) Any modification of any provision of, or any action in respect of, these Conditions or the Fiscal Agency Agreement in respect of the Notes may be made or taken if approved by a Single Series Extraordinary Resolution or a Single Series Written Resolution as set out below.
(ii) A “Single Series Extraordinary Resolution” means a resolution passed at a meeting of Noteholders duly convened and held in accordance with the procedures prescribed by the Issuer and the Fiscal Agent pursuant to Condition 12(a) (Convening Meetings of Noteholders; Conduct of Meetings of Noteholders; Written Resolutions) by a majority of:
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(A) in the case of a Reserved Matter, at least 75 per cent. of the aggregate principal amount of the outstanding Notes; or
(B) in the case of a matter other than a Reserved Matter, more than 50 per cent. of the aggregate principal amount of the outstanding Notes.
(iii) A “Single Series Written Resolution” means a resolution in writing signed or confirmed in writing by or on behalf of the holders of:
(A) in the case of a Reserved Matter, at least 75 per cent. of the aggregate principal amount of the outstanding Notes; or
(B) in the case of a matter other than a Reserved Matter, more than 50 per cent. of the aggregate principal amount of the outstanding Notes.
Any Single Series Written Resolution may be contained in one document or several documents in the same form, each signed or confirmed in writing by or on behalf of one or more Noteholders.
(iv) Any Single Series Extraordinary Resolution duly passed or Single Series Written Resolution approved shall be binding on all Noteholders, whether or not they attended any meeting, whether or not they voted in favour thereof and whether or not they signed or confirmed in writing any such Single Series Written Resolution, as the case may be.
(c) Multiple Series Aggregation – Single limb voting
(i) In relation to a proposal that includes a Reserved Matter, any modification to the terms and conditions of, or any action with respect to, two or more series of Debt Securities Capable of Aggregation may be made or taken if approved by a Multiple Series Single Limb Extraordinary Resolution or by a Multiple Series Single Limb Written Resolution as set out below, provided that the Uniformly Applicable condition is satisfied.
(ii) A “Multiple Series Single Limb Extraordinary Resolution” means a resolution considered at separate meetings of the holders of each affected series of Debt Securities Capable of Aggregation, duly convened and held in accordance with the procedures prescribed by the Issuer and the Fiscal Agent pursuant to Condition 12(a) (Convening Meetings of Noteholders; Conduct of Meetings of Noteholders; Written Resolutions), as supplemented if necessary, which is passed by a majority of at least 75 per cent. of the aggregate principal amount of the outstanding debt securities of all affected series of Debt Securities Capable of Aggregation (taken in aggregate).
(iii) A “Multiple Series Single Limb Written Resolution” means each resolution in writing (with a separate resolution in writing or multiple separate resolutions in writing distributed to the holders of each affected series of Debt Securities Capable of Aggregation, in accordance with the applicable bond documentation) which, when taken together, has been signed or confirmed in writing by or on behalf of the holders of at least 75 per cent. of the aggregate principal amount of the outstanding debt securities of all affected series of Debt Securities Capable of Aggregation (taken in aggregate). Any Multiple Series Single Limb Written Resolution may be contained in one document or several documents in substantially the same form, each signed or confirmed in writing by or on behalf of one or more Noteholders or one or more holders of each affected series of Debt Securities Capable of Aggregation.
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(iv) Any Multiple Series Single Limb Extraordinary Resolution duly passed or Multiple Series Single Limb Written Resolution approved shall be binding on all Noteholders and holders of each other affected series of Debt Securities Capable of Aggregation, whether or not they attended any meeting, whether or not they voted in favour thereof, whether or not any other holder or holders of the same series voted in favour thereof and whether or not they signed or confirmed in writing any such Multiple Series Single Limb Written Resolution, as the case may be.
(v) The “Uniformly Applicable” condition will be satisfied if:
(A) the holders of all affected series of Debt Securities Capable of Aggregation are invited to exchange, convert, or substitute their debt securities, on the same terms, for (1) the same new instrument or other consideration or (2) a new instrument, new instruments or other consideration from an identical menu of instruments or other consideration; or
(B) the amendments proposed to the terms and conditions of each affected series of Debt Securities Capable of Aggregation would, following implementation of such amendments, result in the amended instruments having identical provisions (other than provisions which are necessarily different, having regard to the currency of issuance).
(vi) It is understood that a proposal under paragraph (c)(i) above will not be considered to satisfy the Uniformly Applicable condition if each exchanging, converting, substituting or amending holder of each affected series of Debt Securities Capable of Aggregation is not offered the same amount of consideration per amount of principal, the same amount of consideration per amount of interest accrued but unpaid and the same amount of consideration per amount of past due interest, respectively, as that offered to each other exchanging, converting, substituting or amending holder of each affected series of Debt Securities Capable of Aggregation (or, where a menu of instruments or other consideration is offered, each exchanging, converting, substituting or amending holder of each affected series of Debt Securities Capable of Aggregation is not offered the same amount of consideration per amount of principal, the same amount of consideration per amount of interest accrued but unpaid and the same amount of consideration per amount of past due interest, respectively, as that offered to each other exchanging, converting, substituting or amending holder of each affected series of Debt Securities Capable of Aggregation electing the same option from such menu of instruments).
(vii) Any modification or action proposed under Condition 12(c)(i) (Multiple Series Aggregation – Single Limb Voting) above may be made in respect of some series only of the Debt Securities Capable of Aggregation and, for the avoidance of doubt, the provisions described in this Condition 12(c) (Multiple Series Aggregation – Single Limb Voting) may be used for different groups of two or more series of Debt Securities Capable of Aggregation simultaneously.
(d) Multiple Series Aggregation – Two limb voting
(i) In relation to a proposal that includes a Reserved Matter, any modification to the terms and conditions of, or any action with respect to, two or more series of Debt Securities Capable of Aggregation may be made or taken if approved by a Multiple Series Two Limb Extraordinary Resolution or by a Multiple Series Two Limb Written Resolution as set out below.
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(ii) A “Multiple Series Two Limb Extraordinary Resolution” means a resolution considered at separate meetings of the holders of each affected series of Debt Securities Capable of Aggregation, duly convened and held in accordance with the procedures prescribed by the Issuer and the Fiscal Agent pursuant to Condition 12(a) (Convening Meetings of Noteholders; Conduct of Meetings of Noteholders; Written Resolutions), as supplemented if necessary, which is passed by a majority of:
(A) at least 66⅔ per cent. of the aggregate principal amount of the outstanding debt securities of all the affected series of Debt Securities Capable of Aggregation (taken in aggregate); and
(B) more than 50 per cent. of the aggregate principal amount of the outstanding debt securities in each affected series of Debt Securities Capable of Aggregation (taken individually).
(iii) A “Multiple Series Two Limb Written Resolution” means each resolution in writing (with a separate resolution in writing or multiple separate resolutions in writing distributed to the holders of each affected series of Debt Securities Capable of Aggregation, in accordance with the applicable bond documentation) which, when taken together, has been signed or confirmed in writing by or on behalf of the holders of:
(A) at least 66⅔ per cent. of the aggregate principal amount of the outstanding debt securities of all the affected series of Debt Securities Capable of Aggregation (taken in aggregate); and
(B) more than 50 per cent. of the aggregate principal amount of the outstanding debt securities in each affected series of Debt Securities Capable of Aggregation (taken individually).
Any Multiple Series Two Limb Written Resolution may be contained in one document or several documents in substantially the same form, each signed or confirmed in writing by or on behalf of one or more Noteholders or one or more holders of each affected series of Debt Securities Capable of Aggregation.
(iv) Any Multiple Series Two Limb Extraordinary Resolution duly passed or Multiple Series Two Limb Written Resolution approved shall be binding on all Noteholders and holders of each other affected series of Debt Securities Capable of Aggregation, whether or not they attended any meeting, whether or not they voted in favour thereof, whether or not any other holder or holders of the same series voted in favour thereof and whether or not they signed or confirmed in writing any such Multiple Series Two Limb Written Resolution, as the case may be.
(v) Any modification or action proposed under Condition 12(d)(i) (Multiple Series Aggregation – Two Limb Voting) above may be made in respect of some series only of the Debt Securities Capable of Aggregation and, for the avoidance of doubt, the provisions described in this Condition 12(d) (Multiple Series Aggregation – Two Limb Voting) may be used for different groups of two or more series of Debt Securities Capable of Aggregation simultaneously.
(e) Reserved Matters
In these Conditions, “Reserved Matter” means any proposal:
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(i) to change the date, or the method of determining the date, for payment of principal, interest or any other amount in respect of the Notes, to reduce or cancel the amount of principal, interest or any other amount payable on any date in respect of the Notes or to change the method of calculating the amount of principal, interest or any other amount payable in respect of the Notes on any date;
(ii) to change the currency in which any amount due in respect of the Notes is payable or the place in which any payment is to be made;
(iii) to change the majority required to pass an Extraordinary Resolution, a Written Resolution or any other resolution of Noteholders or the number or percentage of votes required to be cast, or the number or percentage of Notes required to be held, in connection with the taking of any decision or action by or on behalf of the Noteholders or any of them;
(iv) to change this definition, or the definition of “Extraordinary Resolution”, “Single Series Extraordinary Resolution”, “Multiple Series Single Limb Extraordinary Resolution”, “Multiple Series Two Limb Extraordinary Resolution”, “Written Resolution”, “Single Series Written Resolution”, “Multiple Series Single Limb Written Resolution” or “Multiple Series Two Limb Written Resolution”;
(v) to change the definition of “debt securities” or “Debt Securities Capable of Aggregation”;
(vi) to change the definition of “Uniformly Applicable”;
(vii) to change the definition of “outstanding” or to modify the provisions of Condition 12(i) (Notes controlled by the Issuer);
(viii) to change the legal ranking of the Notes;
(ix) to change any provision of the Notes describing circumstances in which Notes may be declared due and payable prior to their scheduled maturity date, set out in Condition 8 (Events of Default);
(x) to change the law governing the Notes, the jurisdiction of the courts and arbitration provisions to which the Issuer has submitted in the Notes, any of the arrangements specified in the Notes to enable proceedings to be taken or the Issuer’s waiver of immunity, in respect of actions or proceedings brought by any Noteholder, set out in Condition 17 (Governing Law; Jurisdiction and Arbitration);
(xi) to impose any condition on or otherwise change the Issuer’s obligation to make payments of principal, interest or any other amount in respect of the Notes, including by way of the addition of a call option;
(xii) to modify the provisions of this Condition 12(e) (Reserved Matters);
(xiii) except as permitted by any related guarantee or security agreement, to release any agreement guaranteeing or securing payments under the Notes or to change the terms of any such guarantee or security; or
(xiv) to exchange or substitute all the Notes for, or convert all the Notes into, other obligations or securities of the Issuer or any other person, or to modify any provision of these Conditions in connection with any exchange or substitution of the Notes for, or the
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conversion of the Notes into, any other obligations or securities of the Issuer or any other person, which would result in the Conditions as so modified being less favourable to the Noteholders which are subject to the Conditions as so modified than:
(A) the provisions of the other obligations or debt securities of the Issuer or any other person resulting from the relevant exchange or substitution or conversion; or
(B) if more than one series of other obligations or debt securities results from the relevant exchange or substitution or conversion, the provisions of the resulting series of debt securities having the largest aggregate principal amount.
(f) Information
Prior to or on the date that the Issuer proposes any Extraordinary Resolution or Written Resolution pursuant to Condition 12(b) (Modification of this Series of Notes only), Condition 12(c) (Multiple Series Aggregation – Single limb voting) or Condition 12(d) (Multiple Series Aggregation – Two limb voting), the Issuer shall publish in accordance with Condition 13 (Aggregation Agent; Aggregation Procedures), and provide the Fiscal Agent with the following information:
(i) a description of the Issuer’s economic and financial circumstances which are, in the Issuer’s opinion, relevant to the request for any potential modification or action, a description of the Issuer’s existing debts and a description of its broad policy reform programme and provisional macroeconomic outlook;
(ii) if the Issuer shall at the time have entered into an arrangement for financial assistance with multilateral and/or other major creditors or creditor groups and/or an agreement with any such creditors regarding debt relief, a description of any such arrangement or agreement and where permitted under the information disclosure policies of the multilateral or such other creditors, as applicable, copies of the arrangement or agreement shall be provided;
(iii) a description of the Issuer’s proposed treatment of external debt securities that fall outside the scope of any multiple series aggregation and its intentions with respect to any other debt securities and its other major creditor groups; and
(iv) if any proposed modification or action contemplates debt securities being aggregated in more than one group of debt securities, a description of the proposed treatment of each such group, as required for a notice convening a meeting of the Noteholders in Condition 12(a)(iv)(G) (Convening Meetings of Noteholders; Conduct of Meetings of Noteholders; Written Resolutions).
(g) Claims Valuation
For the purpose of calculating the par value of the Notes and any affected series of debt securities which are to be aggregated with the Notes in accordance with Condition 12(c) (Multiple Series Aggregation – Single limb voting) and Condition 12(d) (Multiple Series Aggregation – Two limb voting), the Issuer may appoint a Calculation Agent. The Issuer shall, with the approval of the Aggregation Agent and any appointed Calculation Agent, promulgate the methodology in accordance with which the par value of the Notes and such affected series of debt securities will be calculated. In any such case where a Calculation Agent is appointed, the same person will be appointed as the Calculation Agent for the Notes and each other affected series of debt securities
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for these purposes, and the same methodology will be promulgated for each affected series of debt securities.
(h) Manifest error, etc.
The Notes, these Conditions and the provisions of the Fiscal Agency Agreement may be amended without the consent of the Noteholders to correct a manifest error. In addition, the parties to the Fiscal Agency Agreement may agree to modify any provision thereof, but the Issuer shall not agree, without the consent of the Noteholders, to any such modification unless it is of a formal, minor or technical nature or it is not materially prejudicial to the interests of the Noteholders.
(i) Notes controlled by the Issuer
For the purposes of (a) determining the right to attend and vote at any meeting of Noteholders, or the right to sign or confirm in writing, or authorise the signature of, any Written Resolution, (b) this Condition 12 (Meetings of Noteholders; Written Resolutions) and (c) Condition 8 (Events of Default), any Notes which are for the time being held by or on behalf of the Issuer or by or on behalf of any person which is owned or controlled directly or indirectly by the Issuer or by any public sector instrumentality of the Issuer shall be disregarded and be deemed not to remain outstanding; where:
(i) “public sector instrumentality” means the Ministry of Finance of the Republic of Cameroon, any other department, ministry or agency of the Government of the Republic of Cameroon or any corporation, trust, financial institution or other entity owned or controlled by the Government of the Republic of Cameroon or any of the foregoing; and
(ii) “control” means the power, directly or indirectly, through the ownership of voting securities or other ownership interests or through contractual control or otherwise, to direct the management of or elect or appoint a majority of the board of directors or other persons performing similar functions in lieu of, or in addition to, the board of directors of a corporation, trust, financial institution or other entity.
A Note will also be deemed to be not outstanding if the Note has previously been cancelled or delivered for cancellation or held for reissuance but not reissued, or, where relevant, the Note has previously been called for redemption in accordance with its terms or previously become due and payable at maturity or otherwise and the Issuer has previously satisfied its obligations to make all payments due in respect of the Note in accordance with its terms.
In advance of any meeting of Noteholders, or in connection with any Written Resolution, the Issuer shall provide to the Fiscal Agent a copy of the certificate prepared pursuant to Condition 13(d) (Certificate) which includes information on the total number of Notes which are for the time being held by or on behalf of the Issuer or by or on behalf of any person which is owned or controlled directly or indirectly by the Issuer or by any public sector instrumentality of the Issuer and, as such, such Notes shall be disregarded and deemed not to remain outstanding for the purposes of ascertaining the right to attend and vote at any meeting of Noteholders or the right to sign, or authorise the signature of, any Written Resolution in respect of any such meeting. The Fiscal Agent shall make any such certificate available for inspection during normal business hours at its Specified Office and, upon reasonable request, will allow copies of such certificate to be taken.
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(j) Publication
The Issuer shall publish all Extraordinary Resolutions and Written Resolutions which have been determined by the Aggregation Agent to have been duly passed in accordance with Condition 13(g) (Manner of Publication).
(k) Exchange and Conversion
Any Extraordinary Resolutions or Written Resolutions which have been duly passed and which modify any provision of, or action in respect of, the Conditions may be implemented at the Issuer’s option by way of a mandatory exchange or conversion of the Notes and each other affected series of debt securities, as the case may be, into new debt securities containing the modified terms and conditions if the proposed mandatory exchange or conversion of the Notes is notified to Noteholders at the time notification is given to the Noteholders as to the proposed modification or action. Any such exchange or conversion shall be binding on all Noteholders.
13 Aggregation Agent; Aggregation Procedures
(a) Appointment
The Issuer will appoint an Aggregation Agent (the “Aggregation Agent”) to calculate whether a proposed modification or action has been approved by the required principal amount outstanding of Notes and, in the case of a multiple series aggregation, by the required principal amount of outstanding debt securities of each affected series of debt securities. In the case of a multiple series aggregation, the same person will be appointed as the Aggregation Agent for the proposed modification of any provision of, or any action in respect of, these Conditions or the Fiscal Agency Agreement in respect of the Notes and in respect of the terms and conditions or bond documentation in respect of each other affected series of debt securities. The Aggregation Agent shall be independent of the Issuer.
(b) Extraordinary Resolutions
If an Extraordinary Resolution has been proposed at a duly convened meeting of Noteholders to modify any provision of, or action in respect of, these Conditions and other affected series of debt securities, as the case may be, the Aggregation Agent will, as soon as practicable after the time the vote is cast, calculate whether holders of a sufficient portion of the aggregate principal amount of the outstanding Notes and, where relevant, each other affected series of debt securities, have voted in favour of the Extraordinary Resolution such that the Extraordinary Resolution is passed. If so, the Aggregation Agent will determine that the Extraordinary Resolution has been duly passed.
(c) Written Resolutions
If a Written Resolution has been proposed under these Conditions to modify any provision of, or action in respect of, these Conditions and the terms and conditions of other affected series of debt securities, as the case may be, the Aggregation Agent will, as soon as reasonably practicable after the relevant Written Resolution has been signed or confirmed in writing, calculate whether holders of a sufficient portion of the aggregate principal amount of the outstanding Notes and, where relevant, each other affected series of debt securities, have signed or confirmed in writing in favour of the Written Resolution such that the Written Resolution is passed. If so, the Aggregation Agent will determine that the Written Resolution has been duly passed.
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(d) Certificate
For the purposes of Condition 13(b) (Extraordinary Resolutions) and Condition 13(c) (Written Resolutions), the Issuer will provide a certificate to the Aggregation Agent up to three days prior to, and in any case no later than, with respect to an Extraordinary Resolution, the date of the meeting referred to in Condition 12(b) (Modification of this Series of Notes only), Condition 12(c) (Multiple Series Aggregation – Single limb voting) or Condition 12(d) (Multiple Series Aggregation – Two limb voting), as applicable, and, with respect to a Written Resolution, the date arranged for the signing of the Written Resolution.
The certificate shall:
(i) list the total principal amount of Notes and, in the case of a multiple series aggregation, the total principal amount of each other affected series of debt securities outstanding on the record date; and
(ii) clearly indicate the Notes and, in the case of a multiple series aggregation, debt securities of each other affected series of debt securities which shall be disregarded and deemed not to remain outstanding as a consequence of Condition 12(i) (Notes controlled by the Issuer) on the record date identifying the holders of the Notes and, in the case of a multiple series aggregation, debt securities of each other affected series of debt securities.
The Aggregation Agent may rely upon the terms of any certificate, notice, communication or other document believed by it to be genuine.
(e) Notification
The Aggregation Agent will cause each determination made by it for the purposes of this Condition 13 (Aggregation Agent; Aggregation Procedures) to be notified to the Fiscal Agent and the Issuer as soon as practicable after such determination. Notice thereof shall also promptly be given to the Noteholders.
(f) Binding nature of determinations; no liability
All notifications, opinions, determinations, certificates, calculations, quotations and decisions given, expressed, made or obtained for the purposes of this Condition 13 (Aggregation Agent; Aggregation Procedures) by the Aggregation Agent and any appointed Calculation Agent will (in the absence of manifest error) be binding on the Issuer, the Fiscal Agent and the Noteholders and (subject as aforesaid) no liability to any such person will attach to the Aggregation Agent or the Calculation Agent in connection with the exercise or non-exercise by it of its powers, duties and discretions for such purposes.
(g) Manner of publication
The Issuer will publish all notices and other matters required to be published pursuant to the Fiscal Agency Agreement including any matters required to be published pursuant to Condition 8 (Events of Default), Condition 12 (Meetings of Noteholders; Written Resolutions) and this Condition 13 (Aggregation Agent; Aggregation Procedures):
(i) through Euroclear Bank S.A./N.V., Clearstream Banking, société anonyme, and/or any other clearing system in which the Notes are held;
(ii) in such other places and in such other manner as may be required by applicable law or regulation; and
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(iii) in such other places and in such other manner as may be customary.
14 Further Issues
The Issuer may from time to time, without the consent of the Noteholders, create and issue further notes having the same terms and conditions as the Notes in all respects (or in all respects except for the first payment of interest) so as to form a single series with the Notes. References in these Conditions to the Notes include (unless the context requires otherwise) any other securities issued pursuant to this Condition and forming a single series with the Notes.
Noteholders should be aware that additional notes that are treated for non-tax purposes as a single series with the original Notes may be treated as a separate series for U.S. federal income tax purposes. In such a case, for U.S. federal income tax purposes, the new notes may be considered to have been issued with original issue discount, which may affect the market value of the Notes since such additional notes may not be distinguishable from the original Notes.
15 Notices
Notices to the Noteholders will be sent to them by first class mail (or its equivalent) or (if posted to an overseas address) by airmail at their respective addresses on the Register. Any notice shall be deemed to have been given on the fourth business day after the date of mailing.
16 Currency Indemnity
If any sum due from the Issuer in respect of the Notes or any order or judgment given or made in relation thereto has to be converted from the currency (the “first currency”) in which the same is payable under these Conditions or such order or judgment into another currency (the “second currency”) for the purpose of (a) making or filing a claim or proof against the Issuer, (b) obtaining an order or judgment in any court or other tribunal or (c) enforcing any order or judgment given or made in relation to the Notes, the Issuer shall indemnify each Noteholder, on the written demand of such Noteholder addressed to the Issuer and delivered to the Issuer or to the Specified Office of the Fiscal Agent, against any loss suffered as a result of any discrepancy between (i) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (ii) the rate or rates of exchange at which such Noteholder may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof.
This indemnity constitutes a separate and independent obligation of the Issuer and shall give rise to a separate and independent cause of action.
17 Governing Law; Jurisdiction and Arbitration
(a) Governing law
The Notes, including any non-contractual obligations arising out of or in connection with the Agency Agreement, the Deed of Covenant or the Notes, are governed by, and shall be construed in accordance with, the laws of England and Wales.
(b) Arbitration
Subject to Condition 17(c) (Noteholder’s option), any dispute arising from or in connection with the Notes (including a dispute relating to the existence, validity or termination of the Notes or
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any non-contractual obligation arising out of or in connection with the Notes) or the consequences of its nullity (a “Dispute”), shall be referred to and finally settled by arbitration under the Arbitration Rules of the London Court of International Arbitration (the “LCIA Rules”) which LCIA Rules (as amended from time to time) are incorporated by reference into these Conditions (including Article 22 dealing with consolidation of claims provisions). The number of arbitrators shall be three (each party shall nominate an arbitrator and the third arbitrator shall be appointed by the London Court of International Arbitration (the “LCIA”) and the seat of arbitration shall be London, England and the language of arbitration shall be English. Sections 45 and 69 of the Arbitration Act 1996 shall not apply.
(c) Noteholder’s option
At any time before a Noteholder has filed a Request for Arbitration or Response as defined in the LCIA Rules (as the case may be) in relation to a specific Dispute, a Noteholder, at their sole option, may by notice in writing to the Issuer require that Dispute be heard by a court of law. Following any such election, no arbitral tribunal shall have jurisdiction in respect of such Dispute with that Noteholder.
(d) Jurisdiction
In the event that a Noteholder serves a written notice of election in respect of any Dispute(s) pursuant to Condition 17(c) (Noteholder’s option), the Issuer agrees for the benefit of the Noteholder that the courts of England shall have exclusive jurisdiction to hear and determine such Dispute with the Noteholder and, for such purposes, irrevocably submits to the exclusive jurisdiction of such courts. Subject to Condition 17(b) (Arbitration), nothing in this paragraph shall (or shall be construed so as to) limit the right of the Noteholders to bring proceedings (“Proceedings”) for the determination of any Dispute(s) in any other court of competent jurisdiction.
(e) Appropriate forum
For the purposes of Condition 17(d) (Jurisdiction), the Issuer agrees that the courts of England are the most appropriate and convenient courts to settle any Dispute and, accordingly, it will not argue to the contrary.
(f) Service of Process
The Issuer agrees that the process by which any Proceedings are commenced in England pursuant to Condition 17(d) (Jurisdiction) or by which any proceedings are commenced in the English courts in support of, or in connection with, an arbitration commenced pursuant to Condition 17(b) (Arbitration) may be served on it by being delivered to the Ambassador of the Republic of Cameroon in London, United Kingdom at the Embassy of the Republic of Cameroon, 84, Holland Park, London, W1 3SB, United Kingdom. If such person is not or ceases to be effectively appointed to accept service of process on behalf of the Issuer, the Issuer shall, on the written demand of the Noteholders, appoint a further person in England to accept service of process on its behalf and, failing such appointment within 14 days, a Noteholder shall be entitled to appoint such a person by written notice to the Issuer. Nothing in this paragraph shall affect the right of the Noteholders to serve process in any other manner permitted by law.
(g) Consent to enforcement etc.
The Issuer consents generally in respect of any Proceedings to the giving of any relief or the issue of any process in connection with such Proceedings including (without limitation but subject as
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provided in Condition 17(h) (Waiver of immunity) below) the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order or judgment which is made or given in such Proceedings.
(h) Waiver of immunity
To the extent that the Issuer may in any jurisdiction claim for itself or its assets or revenues immunity from suit, execution, attachment (whether in aid of execution, before judgement or otherwise) or other legal process and to the extent that such immunity (whether or not claimed) may be attributed in any such jurisdiction to the Issuer or its assets or revenues, the Issuer agrees not to claim and irrevocably waives such immunity to the full extent permitted by the laws of such jurisdiction (and consents generally for the purposes of the State Immunity Act 1978 to the giving of any relief or the issue of any process in connection with any proceedings). This waiver does not constitute a general waiver and the Issuer does not hereby waive such immunity from execution or attachment, or like process, in respect of (i) present or future “premises of the mission” as such term is defined in the Vienna Convention on Diplomatic Relations signed in 1961, or “consular premises” as such term is defined in the Vienna Convention on Consular Relations signed in 1977 by the Republic of Cameroon, (ii) property of a military character or in use for military purposes and in each case under control of a military authority or defence agency and (iii) property located in the Republic of Cameroon and dedicated to a public or governmental use (as distinguished from commercial use). The Issuer reserves the right to plead sovereign immunity under the Foreign Sovereign Immunities Act of 1976 of the United States with respect to any actions brought against it in any court or in the United States of America under any United States federal or State Securities law.
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THE GLOBAL CERTIFICATES
The Global Certificates contain the following provisions which apply to the Notes in respect of which they are issued whilst they are represented by the Global Certificates, some of which modify the effect of the Conditions. Terms defined in the Conditions have the same meaning in paragraphs 1 to 6 below.
1 Form of the Notes
The Notes sold in reliance on Regulation S under the Securities Act will be represented on issue by the Unrestricted Global Certificate, which will be deposited with the common depositary for Euroclear and Clearstream, Luxembourg, and registered in the name of a nominee for the common depositary for, Euroclear and Clearstream, Luxembourg. Beneficial interests in the Unrestricted Global Certificate may be held only through Euroclear or Clearstream, Luxembourg or their participants at any time. By acquisition of a beneficial interest in the Unrestricted Global Certificate, the purchaser thereof will be deemed to represent, among other things, that it acquired such beneficial interest in accordance with Regulation S. See “Subscription and Sale” and “Transfer Restrictions”.
The Notes sold in reliance on Rule 144A will be represented on issue by one or more Restricted Global Certificates, which will be deposited with a custodian for, and registered in the name of a nominee of, DTC. Beneficial interests in the Restricted Global Certificate may only be held through DTC or its participants at any time.
Beneficial interests in the Restricted Global Certificate may only be held by persons who are QIBs, holding their interests for their own account or for the account of one or more QIBs. By acquisition of a beneficial interest in the Restricted Global Certificate, the purchaser thereof will be deemed to represent, among other things, that it is a QIB and that, if in the future it determines to transfer such beneficial interest, it will transfer such interest in accordance with the procedures and restrictions contained in the Restricted Global Certificate. See “Subscription and Sale” and “Transfer Restrictions”.
Beneficial interests in Global Certificates will be subject to certain restrictions on transfer set out therein and under “Transfer Restrictions” and in the Agency Agreement and such Global Certificates will bear a legend as set out under “Transfer Restrictions”.
No beneficial interest in the Restricted Global Certificate may be transferred to a person who takes delivery in the form of a beneficial interest in the Unrestricted Global Certificate unless the transfer is in an offshore transaction in reliance on Regulation S and the transferor provides the Registrar with a written certification substantially in the form set out in the Agency Agreement to the effect that the transfer is being made in accordance with Regulation S or the transfer is pursant to an exemption from registration provided by Rule 144A under the Securities Act.
Any beneficial interest in the Unrestricted Global Certificate that is transferred to a person who takes delivery in the form of an interest in the Restricted Global Certificate will, upon transfer, cease to be an interest in such Unrestricted Global Certificate and become an interest in the Restricted Global Certificate, and, accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable to beneficial interests in the Restricted Global Certificate for as long as it remains such an interest. Any beneficial interest in the Restricted Global Certificate that is transferred to a person who takes delivery in the form of an interest in the Unrestricted Global Certificate will, upon transfer, cease to be an interest in the Restricted Global Certificate and become an interest in the Unrestricted Global Certificate and, accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable to beneficial interests in the Unrestricted Global Certificate for so long as it remains such an interest. No service charge will be made for any registration of
58 transfer or exchange of Notes, but the Issuer may require payment of a sum sufficient to cover any tax or other Governmental charge payable in connection therewith.
Except in the limited circumstances described below, owners of beneficial interests in the Global Certificates will not be entitled to receive physical delivery of Notes.
2 Accountholders
For so long as any of the Notes are represented by the Global Certificates, each person (other than another clearing system) who is for the time being shown in the records of DTC or Euroclear or Clearstream, Luxembourg (as the case may be) as the holder of a particular aggregate principal amount of such Notes (each an “Accountholder”) (in which regard any certificate or other document issued by DTC or Euroclear or Clearstream, Luxembourg (as the case may be) as to the aggregate principal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes) shall be treated as the holder of such aggregate principal amount of such Notes (and the expression “Noteholders” and references to “holding of Notes” and to “holder of Notes” shall be construed accordingly) for all purposes other than with respect to payments on such Notes, the right to which shall be vested, as against the Issuer solely in the nominee for the relevant clearing system (the “Relevant Nominee”) in accordance with and subject to the terms of the Global Certificates. Each Accountholder must look solely to DTC or Euroclear or Clearstream, Luxembourg, as the case may be, for its share of each payment made to the Relevant Nominee.
3 Cancellation
Cancellation of any Note following its redemption or purchase by the Issuer will be effected by reduction in the aggregate principal amount of the Notes in the Register and by the annotation of the appropriate schedule to the relevant Global Certificate.
4 Payments
Payments of principal and interest in respect of Notes represented by a Global Certificate will be made upon presentation or, if no further payment falls to be made in respect of the Notes, against presentation and surrender of such Global Certificate to or to the order of the Fiscal Agent or such other Agent as shall have been notified to the holders of the Global Certificates for such purpose.
All payments in respect of the Notes represented by a Global Certificate will be made to, or to the order of, the person shown as the Holder in the Register at the close of business on the Clearing System Business Day before the due date for payment, where “Clearing System Business Day” means a day on which each clearing system for which a Global Certificate is being held is open for business.
Distributions of amounts with respect to book-entry interests in the Regulation S Notes held through Euroclear or Clearstream, Luxembourg will be credited, to the extent received by the Fiscal Agent, to the cash accounts of Euroclear or Clearstream, Luxembourg participants in accordance with the relevant system’s rules and procedures.
Holders of book-entry interests in the Rule 144A Notes holding through DTC will receive, to the extent received by the Fiscal Agent, all distribution of amounts with respect to book-entry interests in such Notes from the Fiscal Agent through DTC. Distributions in the United States will be subject to relevant U.S. tax laws and regulations.
A record of each payment made will be entered in the Register by or on behalf of the Fiscal Agent and shall be prima facie evidence that payment has been made.
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5 Notices
So long as the Notes are represented by a Global Certificate and such Global Certificate is held on behalf of a clearing system, notices to Noteholders may be given by delivery of the relevant notice to that clearing system for communication by it to entitled Accountholders in substitution for notification as required by Condition 15 (Notices). Any such notice shall be deemed to have been given to the Noteholders on the day after the day on which such notice is delivered to DTC, Euroclear and/or Clearstream, Luxembourg or any other alternative clearing system (as the case may be) as aforesaid.
Whilst any of the Notes held by a Noteholder are represented by a Global Certificate, notices to be given by such Noteholder may be given by such Noteholder (where applicable) through DTC, Euroclear and/or Clearstream, Luxembourg or any other alternative clearing system (as the case may be) and otherwise in such manner as the Fiscal Agent and DTC, Euroclear and Clearstream, Luxembourg may approve for this purpose.
6 Exchange for Definitive Certificates
(a) Exchange
The Restricted Global Certificate will be exchangeable, free of charge to the holder, in whole but not in part, for Restricted Definitive Certificates and the Unrestricted Global Certificate will be exchangeable, free of charge to the holder, in whole but not in part, for Unrestricted Definitive Certificates upon the occurrence of an Exchange Event.
For these purposes an “Exchange Event” means that:
(i) any of the circumstances described in Condition 8 (Events of Default) has occurred;
(ii) in the case of the Unrestricted Global Certificate only, if Euroclear and/or Clearstream, Luxembourg is closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or announces that it is permanently to cease business or does in fact do so and no successor or alternative clearing system is available; or (iii) in the case of the Restricted Global Certificate only, if DTC notifies the Issuer that it is no longer willing or able to discharge properly its responsibilities as depositary with respect to the Restricted Global Certificate or DTC ceases to be a “clearing agency” as defined in the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), or is at any time no longer eligible to act as such and the Issuer is (in the case of DTC ceasing to be a depository) unable to locate a qualified successor clearing system within 90 days of receiving notice of such ineligibility on the part of DTC,
provided that such Definitive Certificates shall be issued in an aggregate principal amount equal to the principal amount of relevant Global Certificate against the surrender of such Global Certificate at the specified office of the Registrar within 30 business days of delivery to the Registrar by the holder of the information set out in the Agency Agreement.
In exchange for the relevant Global Certificate, as provided in the Agency Agreement, the Registrar will deliver or procure the delivery of an equal aggregate principal amount of duly executed Definitive Certificates in or substantially in the form set out in the Agency Agreement.
(b) Delivery
In such circumstances, the relevant Global Certificate shall be exchanged in full for Definitive Certificates and the Issuer will, at the cost of the Issuer (but against such indemnity as the Registrar may require in respect of any tax or other duty of whatever nature which may be levied or imposed in
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connection with such exchange), cause sufficient Definitive Certificates to be executed and delivered to the Registrar for completion and dispatch to the relevant Noteholders. A person having an interest in a Global Certificate must provide the Registrar with (a) a written order containing instructions and such other information as the Issuer and the Registrar may require to complete, execute and deliver such Definitive Certificates and (b) in the case of the Restricted Global Certificate only, a fully completed, signed certification substantially to the effect that the exchanging holder is not transferring its interest at the time of such exchange or, that the transfer or exchange of such interest has been made in compliance with the transfer restrictions applicable to the Notes and that the person transferring such interest reasonably believes that the person acquiring the interest is a QIB. Definitive Certificates issued in exchange for a beneficial interest in the Restricted Global Certificate shall bear the legend applicable to transfers pursuant to Rule 144A, as set out under “Transfer Restrictions”.
(c) Legends and transfers
The holder of a Definitive Certificate may transfer the Notes represented thereby in whole or in part in the applicable denomination by surrendering it at the specified office of any Transfer Agent, together with the completed form of transfer thereon. Upon the transfer, exchange or replacement of a Definitive Certificate bearing the legend referred to under “Subscription and Sale”, or upon specific request for removal of the legend on a Definitive Certificate, the Issuer will deliver only Definitve Certificates that bear such legend, or will refuse to remove such legend, as the case may be, unless there is delivered to the Issuer and the Registrar such satisfactory evidence, which may include an opinion of counsel reasonably satisfactory to the Issuer, as may reasonably be required by the Issuer that neither the legend nor the restrictions on transfer set out therein are required to ensure compliance with the provisions of the Securities Act. Restricted Definitive Certificates will bear the same legend as the legend for the Restricted Global Certificates set out under “Transfer Restrictions”. The Restricted Definitive Certificates may not at any time be held by or on behalf of U.S. persons that are not QIBs. Before any Unrestricted Definitive Certificate may be offered, resold, pledged or otherwise transferred to a person who takes delivery in the form of the Restricted Definitive Certificate, the transferor and/or transferee, as applicable, will be required to provide the Registrar with a written certification substantially in the form set out in the Agency Agreement to the effect that the transferor reasonably believes that the transfer is (i) to a person that is a QIB and (ii) such transfer is made in reliance on Rule 144A. Unrestricted Definitive Certificates will bear the same legend as the legend for the Unrestricted Definitive Global Certificates set out under “Transfer Restrictions”. Before any Restricted Definitive Certificates may be offered, resold, pledged or otherwise transferred to a person who takes delivery in the form of an Unrestricted Definitive Certificate, the transferor and/or transferee, as applicable, will be required to provide the relevant Registrar with a written certification substantially in the form set out in the Agency Agreement to the effect that the transfer is being made in accordance with Regulation S.
(d) Deed of Covenant
If:
(i) individual Definitive Certificates have not been issued and delivered by 5.00 p.m. (London time) on the thirtieth day after the date on which the same are due to be issued and delivered in accordance with the terms of the relevant Global Certificate; or
(ii) any of the Notes evidenced by the relevant Global Certificate has become due and payable in accordance with the Conditions or the date for final redemption of the Notes has occurred and, in either case, payment in full of the amount of principal falling due with all
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accrued interest thereon has not been made to the Holder of the Global Certificate on the due date for payment in accordance with the terms of the Global Certificate, then, at 5.00 p.m. (London time) on such thirtieth day (in the case of paragraph (i) above) or at 5.00 p.m. (London time) on such due date (in the case of paragraph (ii) above) (in each case, the "Determination Date") each Accountholder shall acquire under the deed of covenant dated 19 November 2015 (the “Deed of Covenant”) rights of enforcement against the Issuer (“Direct Rights”) to compel the Issuer to perform its obligations to the Holder of the relevant Global Certificate in respect of the Notes represented by the relevant Global Certificate, including the obligation of the Issuer to make all payments when due at any time in respect of such Notes in accordance with the Conditions as if such Notes had (where required by the Conditions) been duly presented and surrendered on the due date in accordance with the Conditions, provided that nothing in this paragraph shall require the Issuer to pay any amounts which have already been paid to the Holder of the relevant Global Certificate prior to the Determination Date.
The Direct Rights shall be without prejudice to the rights which the Holder of the relevant Global Certificate may have under such Global Certificate or otherwise. Payment to the Holder of the relevant Global Certificate in respect of any Notes represented by that Global Certificate shall constitute a discharge of the Issuer’s obligations under the Notes and the Deed of Covenant to the extent of any such payment and nothing in the Deed of Covenant shall oblige the Issuer to make any payment under the Notes to or to the order of any person other than the Holder of the relevant Global Certificate.
As a condition of any exercise of Direct Rights by an Accountholder, such Accountholder shall, as soon as practicable, give notice of such exercise to the Noteholders in the manner provided for in the Conditions or the relevant Global Certificate for notices to be given by the Issuer to Noteholders.
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USE OF PROCEEDS
The net proceeds of the issue of the Notes are expected to be approximately U.S.$735,000,000 (after deduction of fees, commissions and certain expenses payable by the Republic of Cameroon).
The Republic of Cameroon intends to use the proceeds of the issue of the Notes for financing development projects and, in particular, the repayment in full of the SONARA Bridge Loan, the partial financing of the Three-Year Emergency Plan and certain long-term investment projects identified in the 2015 budget. See “Risk Factors — Risks Relating to the Cameroonian Economy — Failure to adequately refinance the Société Nationale de Raffinage could have significant economic consequences on the Cameroonian state budget and impair its ability to service the Notes” and “— Cameroon may be unable to meet the objectives of Vision 2035, the Three Year Emergency Plan or its infrastructure goals and therefore may be unable to meet its goals for growing the wider economy” for further details.
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THE REPUBLIC OF CAMEROON
Overview
The Republic of Cameroon (“Cameroon”) is situated in central-west Africa on the Atlantic Ocean. Cameroon has an area of approximately 475,440 square kilometres, stretching from the coasts of the Gulf of Guinea, to the shores of Lake Chad. It shares borders with Chad and the Central African Republic to the East, with Nigeria to the West, Lake Chad to the North, and with Equatorial Guinea, Gabon, the Republic of the Congo and the Atlantic Ocean to the South. Cameroon’s capital city is Yaoundé.
The country is divided into political subdivisions, called regions. The three northern regions are the Far North (Extrême Nord), North (Nord) and Adamawa (Adamaoua). Directly south of them are the Centre (Centre) and East (Est). The South region (Sud) lies on the Gulf of Guinea and the southern border. The west of Cameroon is divided into four smaller regions: the Littoral (Littoral), Southwest (Sud-Ouest) Northwest (Nord-Ouest) and West (Ouest).
The three principal ecosystems in Cameroon are as follows:
the South is forested, with dense vegetation, many rivers, a warm climate and high levels of rainfall. Major agricultural products include cocoa, palm oil, plantains, coffee, rubber, hevea wood and tobacco;
the West has volcanic mountains and high plateaus, with some of the highest peaks in Africa and an
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average altitude of 1,100 metres. The volcanic soil supports vegetable gardens and coffee plantations.
the North has grass-land, savannahs and steppes characteristic of the hot and dry climate of the Sudano-Sahelian zone. The region supports cattle raising and other herding activities. Major agricultural crops include cotton, onions, millet, potatoes, yams and peanuts.
Cameroon is rich in natural resources (such as oil and gas, bauxite, cobalt, iron, gold, nickel, uranium and other ores), fisheries and agricultural products (including coffee, cotton and cocoa). Cameroon’s principal natural resources include oil, timber, cocoa, coffee, bananas, cotton, hevea wood, rubber, palm oil, bauxite, cobalt, nickel, fish products, cattle and poultry.
In 2014, Cameroon had a population of approximately 21.5 million people, with 240 ethnicities. French and English are the official languages, although the population speaks many other languages. The currency in Cameroon is the CFA franc (CFA).
Cameroon is a unitary Republic, led by a President, and governed by a bi-cameral legislature. The President of the Republic is elected by universal, equal and secret ballot, by a majority of votes cast, for a renewable term of seven years. The last presidential election took place on 9 October 2011, and the next will take place in 2018. The President defines national policy, but the Prime Minister is the Head of Government, and is responsible for running the Government and for law enforcement. The Prime Minister implements national policy as established by the President, and leads the Government.
Population
The population of Cameroon was approximately 21.5 million in 2014. The population of Cameroon has increased from 20.1 million in 2011 to 20.6 million in 2012 and 21.1 million in 2013. Population growth is estimated to be approximately 2.5% per year.
There are approximately 230 native linguistic groups belonging to 240 indigenous ethnic groups. Major ethnic groups include: Beti-Fangs (19.6%), the Bamileke-Bamouns (18.5%), the Douala-loumdous-Bassas (14.5%), the Peuls or Fulani (9.6%), the Tikars (7.4%), the Mandaras (5.7%), the Makas (4.9%), the Chambas (2.4%), the Mboums (1.3%) and the Hausa (1.2%). Non-Africans represent less than 1% of the population. The ethnic diversity contributes the rich artistic and cultural heritage of the country. Approximately 40% of the population is Christian, 20% is Muslim (primarily in the north) and the remaining 40% of the population follows indigenous beliefs and animistic religions.
English and French are the official languages. French is spoken by approximately 80% of the population and is the language in which business is often conducted. English is spoken by approximately 20% of the population.
The two largest cities in Cameroon are Yaoundé, the capital, and Douala, with a population of approximately 2.4 million people, each. The next largest cities are Bamenda, Bafoussam and Garoua, which have about 300,000 inhabitants each. As at the date of this Prospectus, approximately 43.8% of the population is under the age of 15 and 53.9 % of the population is between 15 and 64 years old. The Government estimates that approximately 53% of the population lives in urban areas and the rate of urbanisation over the 2010-2015 period was estimated to be approximately 3% per year. According to the CIA World Factbook, net migration rate was negative, at -0.15 migrants per 1,000 people, despite large inflows of refugees from neighbouring states.
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Recent History
In 1960, French Cameroons became independent following a period under French administration and trusteeship, which had been in effect since 1919. In 1961, British Cameroons was dissolved when Southern Cameroons joined the newly independent French Cameroons and Northern Cameroons joined Nigeria.
As a result, Cameroon was renamed the Federal Republic of Cameroon in 1961. In 1972, a national referendum resulted in the unification of the territorial federation and the unified country was renamed the United Republic of Cameroon.
From 1960 to 1982, Ahmadou Ahidjo served as Cameroon’s first president. Under President Ahidjo, Cameroon’s political system was based on a one-party system, with the Cameroon National Union forming the government. In 1982, President Ahidjo resigned and was succeeded by Paul Biya, who had been the Prime Minister, and who, by law, was next in line for the presidency. In 1984, Paul Biya was elected president, and the country was renamed the Republic of Cameroon, following a national referendum.
In 1985, the party led by Paul Biya known as the Cameroon National Union changed its name to the Cameroon People’s Democratic Movement (CPDM). In 1992, the Government introduced multi-party legislative elections and Paul Biya was re-elected president. President Biya has won every presidential election since multi-party legislative elections were introduced.
In 2008, a constitutional amendment, amongst other things, removed presidential term limits and provided for the President of the Republic to be immune from prosecution for official acts (the “2008 Constitutional Amendment”).
Historically, there has been a territorial dispute between Cameroon and Nigeria over Bakassi, a peninsula situated at the extreme eastern end of the Gulf of Guinea with onshore and off-shore oil and gas reserves. Bakassi had been under Nigerian control since the accession of Southern Cameroons to Cameroon in 1961, but conflict in the region led Cameroon to take the dispute to the International Court of Justice in 1994. In 1996, Cameroon and Nigeria accepted U.N. mediation regarding the peninsula.
In 2002, the International Court of Justice ruled that the sovereignty of Bakassi belongs to Cameroon and instructed Nigeria to transfer possession of the peninsula. Nigeria rejected the ruling and deployed troops in Bakassi. In 2006, following U.N. mediation, the Nigerian Government agreed to withdraw troops from the peninsula and hand over the peninsula to Cameroon. Despite a vote in the Nigerian Parliament refusing to withdraw Nigerian troops or grant Cameroon possession of the peninsula, the Nigerian Government handed the final parts of Bakassi over to Cameroon on 14 August 2008.
In 2008, Nigeria and Cameroon began cooperating to protect their land and sea borders jointly against pirates in the Gulf of Guinea and groups of militants. In May 2014, Cameroon sent 1,000 troops to the Nigerian border to combat the militant group Boko Haram.
CEMAC, a customs and trade union between Cameroon, the Central African Republic, Chad, the Republic of the Congo, Equatorial Guinea and Gabon, was founded in 1994 and became operational in 1999.
Cameroon became a member of the United Nations in 1960 and joined the IMF and the World Bank (specifically the International Bank for Reconstruction and Development (“IBRD”)) in 1963.
Government and Political System
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Executive Branch The President
Paul Biya has been the President of the Republic of Cameroon since 1982. He is currently 82 years old. The President of the Republic of Cameroon (the “President”) is elected by direct universal suffrage in a secret ballot, by a majority of votes expressed, for a term of seven years. The last presidential election was held on 9 October 2011 and the next presidential election is expected to be held in 2018. The 2008 Constitutional Amendment removed the limit on the number of terms a President may serve. Although the Prime Minister is described by the Constitution (as amended by the 2008 Constitutional Amendment, the “Constitution”) as the head of Government, the President is the head of state and is responsible for appointing the Prime Minister. The President has the power to appoint and dismiss cabinet members, judges, generals, provincial governors, prefects, sub–prefects and heads of Cameroon’s parastatal firms (as at the date of this Prospectus, there are 21 companies in Cameroon that are entirely state-owned and many other entities that operate public services or are otherwise subject to government control). The President also has the power to commit and disburse funds, approve or veto regulations, declare states of emergency and appropriate and spend profits of parastatal firms.
The Constitution provides that Parliament may empower the President to legislate by way of ordinance for a limited period and for specific purposes on matters normally falling within the reserved legislative domain of Parliament. To be valid, such ordinances must be tabled before the bureau of the National Assembly and the Senate for purposes of ratification within the time limit laid down by the enabling law. While Parliament is not in session, legislative power resides with the President through the mechanism of the executive order. For more information, see “ – Legislative Branch – Legislative Power”.
The Prime Minister
The Prime Minister of Cameroon is appointed by the President and serves as the head of Government. The current Prime Minister, Philemon Yang, was appointed on 30 June 2009. As the head of Government, the Prime Minister is responsible for implementing laws, exercising regulatory power and appointing civil servants (subject to the prerogatives reserved to the President of the Republic under Article 12 of the Constitution). The Government, headed by the Prime Minister, implements national policy as defined by the President and is responsible to the National Assembly.
Local Administrations Cameroon is divided into 10 semi-autonomous regions and 58 divisions (départements). Each region is effectively headed by a presidentially-appointed regional governor, with an elected regional council. These governors are part of the executive branch and are responsible for the administration of the local civil service, including police and other security forces, and the oversight of smaller administrative units. Each division is headed by a presidentially-appointed divisional officer (préfet). Each division is further split into sub- divisions (arrondissements), which are administered by assistant divisional officers (sous-préfets).
There are 360 municipal councils, with one elected “seat” each. In the 2014 election, the Cameroon People’s Democratic Movement party (“CPDM”, the party headed by Paul Biya) won 307 seats out of 360. The other 53 seats were divided among six parties.
Legislative Branch The Parliament consists of two chambers that legislate and control Government action: the National Assembly and the Senate, each as further described below. The two parliamentary chambers meet simultaneously three times a year, with each session lasting approximately one month.
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The National Assembly The National Assembly consists of 180 members, of which fifty-six are women elected by direct universal suffrage in a secret ballot for a term of five years. The most recent elections for the National Assembly took place in 2014 with the results as follows: 148 out of 180 seats for the CPDM, 18 seats for the Social Democratic Front (“SDF”, John Fru Ndi’s party and the main opposition party in Cameroon), the UNDP party holds five seats, and the nine remaining seats are split between four political parties.
The Senate The Senate represents the ten semi-autonomous regions and is composed of one hundred senators including twenty women. Each region is represented in the Senate by ten senators, of whom seven are elected regionally by indirect universal suffrage, and three are appointed by the President. Therefore in total, seventy members are elected, and thirty are appointed by the President. Senators serve five-year terms. In the 2013 elections, 56 senators were elected from the CPDM party and 14 senators were elected from the SDF. President Biya appointed the remaining 30 senators, of which 26 senators were named from the CPDM, and one senator each was named from the UNDP, the MDR, the Front pour le Salut National du Cameroun (“FSNC”) and the Alliance Nationale pour la Democratie et le Progrès (“ANDP”).
Legislative Power The Constitution distinguishes between parliamentary power to legislate (le pouvoir législatif) and the governmental power to issue rules and regulations (le pouvoir réglementaire), which generally resides with the executive branch. The Constitution defines the scope of Parliament’s legislative powers. The executive power to issue rules and regulations is subordinate to the legislative power, except in certain narrowly defined areas, which are reserved exclusively to the executive.
Under the Constitution, the executive is granted rule-making authority under two circumstances. Firstly, matters not reserved to the legislative power shall reside with the executive: the President, the Prime Minister and other Government officials have a general power to issue rules and regulations. Secondly, Parliament may, on matters falling within its reserved legislative domain, “empower the President of the Republic to legislate by way of ordinance for a limited period and for given purposes”. To be valid, such ordinances must be ratified by the National Assembly and the Senate within the time limit laid down by the enabling law.
Judicial Branch
Cameroonian Legal System The judicial branch is composed of the Supreme Court, courts of appeal and tribunal courts, and is independent of the executive branch and the legislature. Cameroon has a dual legal system based on English common law and French civil law. Cameroon is one of the few examples of such a dual legal system in the world. This dual system stems from the country’s colonial history.
Following the unification of English Cameroons with French Cameroons in 1961 and the creation of the “United Republic of Cameroon”, each of these two federal states retained the legal system inherited from their respective colonial rulers. The entire system was placed under the control of a Federal Ministry of Justice in 1972. The constitution in place in 1972 provided for the continued application of the different laws in force from the two legal systems provided that these laws were consistent with any new laws passed and that the two legal systems operate under a unified court structure. The Cameroonian legal system can therefore be described as bi–jural in which French law applies in the eight French-speaking regions and English law substantially applies in the two English–speaking regions.
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OHADA Since 1996, Cameroon has been a member of the Organisation for the Harmonisation of Business Law in Africa (the Organisation pour l’Harmonisation en Afrique du Droit des Affaires, “OHADA”). OHADA is an inter-governmental organisation created by treaty on 17 October 1993 in Port Louis (Mauritius). Since joining OHADA, all business and commercial law matters in Cameroon are governed by uniform laws passed under OHADA and intended to be applied in all signatory states. The main objective of OHADA is the improvement of legal certainty and legal security on the African continent. OHADA currently has 17 member countries, including Cameroon, and any state in Africa is eligible to join.
Under OHADA, there are eight “uniform acts” that apply to commercial matters in Cameroon: general commercial law, commercial company law and the law of economic interest groups, securities law, simplified recovery procedures and enforcement law, insolvency law, arbitration, accounting law and the law of carriage of goods by road. Under Article 10 of the OHADA treaty, the uniform acts automatically and directly repeal all existing legislation and supersede any future legislation on the same subject.
The OHADA system, however, does not take into account the bilingual and bi–jural nature of Cameroon’s legal system. The uniform acts are largely based on French civil law concepts and until recently have only been available in the French language. Therefore, the future application of English common law to business contracts in Cameroon’s dual legal system is not entirely clear. The Notes offered hereby are governed by the laws of England and Wales.
Court System Overview
The judicial branch is composed of the Supreme Court, courts of appeal and tribunal courts, and is independent of the executive branch and the legislature. The current court structure was adopted in 1972. Between 1961 and 1972, the English common law system operated in the English-speaking regions and the French civil law system operated in French-speaking regions.
Two main legislative changes have enabled the creation of a unitary justice system. First, Article 42 of the 1972 Constitution granted a one year period to the President to set up new institutions. Secondly, Judicial Organisation Ordinance No.72/4 was enacted on 26 August 1972, which adopted the civil court structure. Therefore, while English common law concepts (such as precedent and stare decisis) continue to exist alongside the French civil law system (with concepts such as the prosecuting judge and code-based legal interpretation), they are now applied within an essentially civil–style court structure, in terms of hierarchy of courts, appeals system and court-room mechanics.
The Supreme Court is the highest court in the Cameroonian judicial system and the only court specifically mentioned in the Constitution. The organisation and functioning of the Supreme Court is set out in Law No.2006/016 dated 29 December 2006. It consists of four benches: the Judicial bench, the Administrative bench, the Audit bench and the Panel of Joint benches. The functions of these benches are laid down in Part III of the above Law, as follows:
The Judicial Bench primarily examines final decisions of courts and tribunals on civil, commercial, criminal, labour and customary law, as well as final decisions emanating from lower courts in all cases where the administration of law is at issue.
The Administrative Bench primarily hears appeals against decisions handed down in regional and council election disputes, appeals against final decisions handed down by lower courts in administrative litigation, as well as preliminary objections against administrative trespass to property and persons.
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The Audit Bench primarily audits accounts of the State and of public and semi-public enterprises. It also hears appeals against lower audit court decisions, opines on settlement bills submitted to the National Assembly, and publishes annual reports on State accounts submitted to the Prime Minister.
The Panel of Joint Benches hears cases regarding conflicts of jurisdiction, applications to challenge a member of the Supreme Court or a President of a Court of Appeal, matters relating to policy issues where there is risk of conflicting solutions between trial judges or between Benches, requests to transfer a case from one lower court to another and other matters provided by a separate instrument.
Each bench is divided into divisions. The Judicial and Administrative benches generally act as final courts of appeal in civil and administrative matters, respectively. Through the Audit bench, the Supreme Court contributes to the transparent management of the state’s finances and that of decentralised public and local authorities through the auditing of accounts.
Part VII of the 1996 Constitution and Law No 2004/4 of 21 April 2004 lay down the organisation and functioning of the Constitutional Council, which, when formed as discussed below, will have jurisdiction over the following questions of law: the constitutionality of laws, treaties and international agreements; the constitutionality of standing orders of the National Assembly and the Senate prior to their implementation; conflict of powers between State institutions and between the State and the Regions, as well as amongst the Regions. The Council shall also ensure the regularity of referenda and presidential and parliamentary elections, in addition to proclaiming the results thereof. It shall opine on any matter falling within its jurisdiction.
As Cameroon does not yet have a Constitutional Council, the Supreme Court also currently performs the role of the Constitutional Council, pending the establishment of this institution pursuant to, Article 67(4) of the Constitution. This Article states that the Supreme Court shall perform the duties of the Constitutional Council, pending the establishment of this institution. During such time, any matters to be referred to the Constitutional Council under the Constitution shall be transferred to the First President of the Supreme Court.
Since the OHADA treaty entered into force, the Supreme Court shares jurisdiction in commercial matters with the Common Court of Justice and Arbitration (“CCJA”) in Abidjan, Ivory Coast. The OHADA treaty allows final appeals to be submitted directly to the CCJA, either by a party or by referral of the Supreme Court, meaning that the CCJA is now the final court of appeal in commercial matters. The highest regional courts are the Appeals Courts.
The organisation, composition and duties of lower courts are determined by legislation. As is typical in a French–style civil law system, the courts of ordinary jurisdiction and the administrative courts are separated and organised into discrete hierarchies. Since 1966, all of these courts are decentralised and operate on the basis of regional jurisdiction, except for the Supreme Court which has national jurisdiction. Below the Supreme Court, Cameroonian courts are divided into the following jurisdictions:
(i) Courts of ordinary jurisdiction
Courts of ordinary jurisdiction are courts that have jurisdiction to hear and decide actions between private parties, such as contractual disputes and other commercial law matters, tort claims, family law cases and criminal cases. Courts of ordinary jurisdiction include Customary Law Courts where the judge may apply customary law (which, depending on the jurisdiction, may include Sharia law, particularly in the North of the country).
(ii) Administrative courts
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Administrative courts hear disputes where at least one of the litigants is the Government or an emanation of the Government. Administrative courts are also theoretically decentralised, although no law has been enacted to organise a regional administrative court structure.
(iii) Courts with special jurisdiction
The main courts of special jurisdiction are the Court of Impeachment, Military Tribunals, the State Security Court and the Constitutional Council (pending establishment). The Court of Impeachment has jurisdiction to try the President for high treason and to try the Prime Minister, members of Government and high-ranking individuals to whom powers have been delegated under Articles 10 and 12 of the Constitution for conspiracy against the security of the state with respect to any acts committed by them in the discharge of their functions. There is one Military Tribunal for the country with its seat in Yaoundé, but the President or, by special delegation, the Minister Delegate of the Presidency in charge of Defence may authorise that hearings be conducted in any locality. There is one State Security Court with jurisdiction over the entire national territory, which has exclusive jurisdiction to try felonies and misdemeanours against the internal and external security of the state and related offences.
Judicial Officers The Cameroonian Ministry of Justice directs, coordinates and supervises the administration of justice through key actors in the Cameroonian justice system including presiding judges, prosecuting judges, lawyers, notaries and other officers of the court, such as court registrars and judicial police officers. Judicial police officers, who may be either police or gendarme officers, aid the judge in carrying out criminal investigations.
Most appointed judges hold at least a Master’s degree in law and have undergone a two-year training at the National School of Administration and Magistracy (“ENAM”) in Yaoundé. Entry into ENAM is by competitive examination, and upon graduation, an individual may be appointed either to the bench or as a prosecutor. A judge’s career progression depends upon seniority and evaluations by senior judges. Court registrars are also appointed after studying at ENAM and they assist judges by authenticating judicial acts and maintaining court records. The judges who preside over Customary Law Courts are usually appointed by the Minister of Justice from notable persons knowledgeable in the customs and traditions of the area to be served.
Lawyers in the Cameroonian system (which can mean avocats, solicitors or barristers) must have a law degree, complete a certification process and be Cameroonian citizens. The certification, or license to practice, is issued after two years of pupillage and passing a qualifying examination. All lawyers are members of the Cameroon Bar Association, which oversees members of the profession. Judicial police officers, who may be either police or gendarme officers, aid the judge in carrying out criminal investigations.
Sources of Cameroonian Law The legal system as well as the sources of law applicable in Cameroon have been significantly shaped by the dual English–French colonial legal heritage that gave rise to the dual legal system in the country. The main sources of Cameroonian law are the Constitution, legislation, judicial precedents and customary law. Although not explicitly stated, the Constitution is treated as the supreme law of the land. Article 2(1) of the Constitution vests national sovereignty in the people, who exercise this power either through the President of the Republic and members of the Parliament or by way of national referendum.
Legal and Arbitral Proceedings Capital Financial Holdings Luxembourg
On 15 April 2015, Capital Financial Holdings Luxembourg (“CFHL”) filed a claim against Cameroon at ICSID under the Luxembourg-Cameroon bilateral investment treaty (“BIT”). CFHL is claiming over €100 million for the alleged expropriation of its 47% stake in the Commercial Bank of Cameroon following a state-
71 imposed capital restructuring of the bank, which CFHL says was against its will, and that of other shareholders. CFHL claims it also suffered unfair and inequitable treatment and unjustified and discriminatory measures. While the loss of CFHL’s shares occurred in 2014, the alleged act of expropriation by the state dates back to 2009, when the Commercial Bank of Cameroon was placed under a regime of provisional administration. CFHL claims that the shareholders lost control over the management of the bank at that time as the provisional administrator exercised executive powers in place of the bank’s CEO and board of directors and that this provisional administration led to the loss of shares. In accordance with the terms of the BIT, CFHL filed for ICSID arbitration following a formal notice to the Cameroonian Government in 2014, by which it invited the state to resolve the dispute amicably within a six-month period, to which notice CFHL claims that the Government did not respond.
RSM Production Corporation
On 31 May 2001, the Republic of Cameroon signed a concession contract with the company RSM Production Corporation (“RSM”) covering the Logbaba block for oil exploration. After various agreements the company currently known as Gaz du Cameroun (“GDC”) purchased 60% of RSM’s interest in the Logbaba license. Following the discovery of gaseous hydrocarbons on the block, Presidential Decree No. 2011/112 of 29 April 2011 granted an operating license to Logbaba permit holders, setting their holdings as follows: 5% for SNH, 38% for RSM and 57% for Victoria Oil & Gas, the parent company of GDC.
On 8 August 2011, RSM filed a conciliation request before the ICSID Arbitration Centre, making several claims. On 11 June 2013, the ICSID Conciliation Commission issued its decision, concluding that the conciliation had failed. Following the failure of this preliminary conciliation, on 31 May 2013, RSM filed arbitral claims against the Republic of Cameroon before ICSID, on the merits, citing irregularities in the laws applied to set the price of gas and asserting that the Republic of Cameroon wrongfully expropriated the remaining 44 km2 in the Logbaba block.
Following the first hearing held 20 March 2014, RSM requested a two-month adjournment of the arbitration proceedings to allow the parties to reach a private settlement and an amicable solution of the dispute. This adjournment, which does not affect the merits or prejudice any party, was granted by the arbitral tribunal on 15 May 2014 and twice extended on 4 August and 24 September 2014. As at the date of this Prospectus, no settlement solution has been reached. Since 17 November 2014 the adjournment of the arbitration proceedings has been tacitly renewed and RSM, as plaintiff, has made no formal request with ICSID to resume the arbitration.
Political Parties and Political Participation There are currently approximately 300 active political parties in Cameroon, most of which are very small. The major political parties are the CPDM, the SDF, the Cameroon People’s Party, the Cameroonian Democratic Union (Union Democratique du Cameroon, or “UDC”), the Movement for the Defence of the Republic (“MDR”), the Movement for the Liberation and Development of Cameroon (“MLDC”), National Front for the Salvation of Cameroon (Front National pour le Salut du Cameroun “FNSC”), National Alliance for Democracy and Progress (l’Alliance Nationale pour la Démocratie et le Progrès, “ANDP”) the National Union for Democracy and Progress (Union Nationale pour la Democratie et le Progrès, or “UNDP”), the Progressive Movement (Mouvement Progressif, or “MP”) and the Union of Peoples of Cameroon (“UPC”).
A majority of the members of the Government and legislators are from the CPDM, the ruling party. Some members of opposition parties have been included in the current government, mainly from the UNDP, the FNSC and the ANDP.
According to a 2014 report by Freedom House (a U.S.-based non-governmental organisation) (the “2014 Freedom House Report”), there are approximately 5.4 million registered voters in Cameroon out of a
72 population of approximately 21.5 million. In the 2011 presidential election, approximately 65.8% of the registered voters voted. In that election, President Biya won 78% of the vote.
Press, Media and Telecommunications According to the 2014 Freedom House Report, Cameroon has about 400 different newspapers, although most are not published regularly. There are 25 regularly published newspapers in Cameroon including both private and state-owned presses, and there are approximately 50 privately owned regional newspapers. The Cameroon Tribute is a national newspaper that is state-owned and has a circulation of about 20,000. It is published in French and English and there is an online version. The Government is the largest advertiser in the Cameroon Tribute. Since 1990, print media licenses are no longer required, but new publications require Government approval.
According to the 2014 Freedom House Report, there are 375 privately owned radio stations in Cameroon, with approximately 75% located in cities. Since 2007, the Government has granted private broadcast licences. Rural stations do not have to pay the license fee, but they are forbidden from discussing politics. Cameroon Radio and Television is the only state-owned television broadcaster. Since 2001, there has not been any Government monopoly on television and, accordingly, there are approximately 19 independent stations, as at the date of this Prospectus. Foreign broadcasters are permitted to broadcast in Cameroon if they can find a local channel to carry their signal. In 2013, an estimated 6% of the Cameroonian population had access to the internet, and there are no official access restrictions or censorship of the internet. Cameroon has among the highest bandwidth charges of all West and Central African countries. Cameroon has a submarine cable (known as SAT3) that is linked to Europe, and is also currently expanding its backbone fibre-optic cable network. Since 2012, Cameroon has been connected to the West Africa Cable System. CAMTEL, Orange and MTN are the major internet and telephone operators.
Health
Health System in Cameroon According to the Commonwealth of Nations’ 2015 member country report on Cameroon, the Government spent an amount equivalent to approximately 2% of GDP on healthcare in 2011. According to the April 2014 WHO Global Health Observatory report, 5.2% of Cameroon’s GDP was spent on healthcare. In 2011, there were approximately 50 private hospitals, 70 general hospitals, three referral hospitals and several public and private health centres. There are also several hundred unlicensed hospitals or health centres operating in Cameroon at any given time. Further, according to the WHO Global Health Observatory, Cameroon lacks trained personnel in health services.
According to the WHO World Health Statistics for 2011, between 2000 and 2010, Cameroon had an average of 3,124 physicians (density of 1.9 doctors per 10,000 people), an average of 26,042 nurses and midwives (density of 16 per 10,000 people), 147 dentists (density of 0.1 per 10,000 people) and 700 pharmaceutical personnel (density of 0.4 per 10,000 people). Between 2000 and 2009, there were an average of 15 hospital beds per 10,000 people and in 2010 there were 0.2 radiotherapy units per 1,000,000 people.
Approximately 20% of funding in Cameroon’s health sector comes from outside aid, including from the United Nations, the EU, the African Development Bank (“AfDB”), the World Bank, UNITAID and the Islamic Development Bank. Bilateral aid and non-governmental organisations (“NGOs”), such as the Clinton Foundation and the Global Fund to Fight AIDS, Tuberculosis and Malaria, also contribute to Cameroon’s health sector. In 2014, the budget allocated to healthcare was 5% of the state budget, or CFA 165.9 billion, up 2.1% compared to 2013.
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Health Conditions in Cameroon As of 2011, 72% of Cameroonians had access to improved drinking water, which included 95% of the population in urban areas and 52% of the population in rural areas. Also as measured in 2011, 48% of the overall population had access to improved sanitation facilities, which included 58% of the population in urban areas and 35% of the population in rural areas. According to the WHO/UNICEF joint monitoring criteria, an improved drinking-water source is defined as one that, by the nature of its construction or through active intervention, is protected from outside contamination, in particular from contamination with faecal matter and improved sanitation facilities are defined as those that hygienically separate human excreta from human contact. According to the April 2014 report from the WHO Global Health Observatory, 31.7% of children under the age of five suffer from chronic malnutrition, which increases to 44% in the North and Far North regions. Malaria is the leading cause of maternal and neonatal morbidity, as well as mortality for children under five years old.
Mortality and Disease in Cameroon According to an April 2014 report from the WHO’s Global Health Observatory, approximately 43.8% of the population of Cameroon is under the age of 15, and 4.9% of the population is over the age of 60. The average age of the Cameroonian population is approximately 18.3 years old. In 2012, life expectancy at birth was 56 years in the general population. Broken down by gender, life expectancy was 55 years for men and 57 years for women. Cameroon ranked number 150 out of 186 countries on the WHO’s Human Development Index for 2012 and number 137 out of 148 countries on the Gender-Related Human Development Index for 2012.
The following communicable diseases are still present in the population of Cameroon: cholera, malaria, meningococcal cerebrospinal meningitis, yellow fever, measles and tropical diseases such as Buruli ulcer, trypanosomiasis, onchocerciasis, lymphatic filariasis and schistosomiasis. According to the WHO’s Regional Office for Africa Outbreak Bulletin of 13 February 2015, for the year 2014, Cameroon reported two major public health events, including cases of cholera and polio but no cases of Ebola. Cameroon had 3,355 cases of cholera leading to 184 cholera-related deaths for the year 2014. According to the WHO’s 2014 Non- communicable Diseases (“NCD”) Country Profiles, 61% of total deaths in Cameroon were a result of communicable, maternal, perinatal and nutritional conditions, 11% were from cardiovascular diseases, 8% were from injuries, 3% were from cancers, 2% were from chronic respiratory diseases, 2% were from diabetes and approximately 13% were from other NCDs.
Cameroon has a target of 80% vaccination coverage. UNICEF, the EU and private NGOs, among others, support Cameroon’s major vaccination projects, including the Expanded Programme on Immunisation (“EPI”) and pay for childhood vaccines to be administered to the public. Under the EPI programme, three doses of the diphtheria—pertussis—tetanus (DPT) vaccine, three doses of polio, one dose of BCG and one dose of the measles vaccine are administered. The national vaccine coverage rates for selected vaccines for the period 2011-2014 were as follows:
Vaccination Coverage in Cameroon Vaccine Type 2011 2012 2013 1st half 2014 (as a % of the target populations) BCG ...... 80.3 81.5 82.1 75.3 POLIO 3 ...... 80.3 85.0 88.0 79.1 VAR* ...... 76.0 81.8 83.1 78.7 VAT2+ ...... 76.3 72.6 61.7 70.4 VAA ...... 75.4 80.1 82.8 83.7 Penta3 ...... 82.2 85.2 88.6 79.2
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Source: MINSANTE
N.B.: BCG = Bacillus Calmette-Guérin, tuberculosis vaccine; *VAR = measles vaccine; VAT2+ = tetanus vaccine for pregnant women; VAA = yellow fever vaccine
According to the WHO, approximately 4.3% of the population of Cameroon is HIV-positive, although this figure does not reflect regional variation. In 2013, the state set aside CFA 6.8 billion for the fight against AIDS, and another CFA 7.1 billion came from development partners, for a total aid package of CFA 13.9 billion. Only a small portion of the HIV-positive population has access to anti-retroviral treatments in Cameroon. The number of people living with HIV (“PLHIV”) and on anti-retroviral (“ARV”) treatment increased by 7.1% in 2013 compared to 2012, bringing the number of PLHIV on ARV treatment to 131,531, which includes 40,774 men and 90,384 women. The number of people with access to ARV treatment has been increasing, as shown below:
Population Undergoing Antiretroviral Treatment in Cameroon(1)
140,000 131,531
120,000 122,783
105,653 100,000
89,455 80,000 76,228
60,000 59,960
45,605 40,000
28,403 20,000 17,156
0 Dec. 2005 Dec. 2006 Dec. 2007 Dec. 2008 Dec. 2009 Dec. 2010 Dec. 2011 Dec. 2012 Dec. 2013
Note: (1) All figures are as at year end for each year. Source: MINSANTE
Education in Cameroon The population of Cameroon benefits from an above-average education level compared to the rest of Sub- Saharan Africa. The literacy rate for people aged 15-24 is approximately 83%. In 2014, the budget allocated to this sector represented 13.8% of the state budget, or a budget of CFA 456.5 billion, which represents an increase of 3.9% compared to 2013. In Cameroon, the educational system is organised into primary school, secondary school and university level studies or technical training. The school system is overseen by the ministries of basic education, secondary education and higher education, which set national curriculum goals. Public education is free throughout the country. Several priority educational zones (called “zones d’éducation prioritaire” or “ZEP”) have been created, within which schools and students receive public aid in order to increase school access, education levels and results. These ZEP are primarily located in the three northern regions, the underserved areas surrounding urban centres and the areas near the borders with Nigeria and Chad.
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Primary Education in Cameroon For the 2013/2014 academic year, approximately 470,000 children were in pre-school taught by approximately 20,000 teachers, distributed amongst approximately 15,000 classrooms. In primary education, there were approximately 4,000,000 pupils taught by approximately 90,000 teachers, distributed amongst approximately 80,000 classrooms. For each of the 2014 and 2015 academic years, the Government recruited approximately 3,000 additional teachers for these schools.
In 2014, primary education had a budget of CFA 4.6 billion. In 2010, the ratio of primary school students to primary school teachers in Cameroon as a whole was approximately 46:1, but by the 2013/2014 school year, the ratio of students to teachers had improved to 44:1. The ratio of pupils per classroom in primary education also improved from 52:1 to 50:1 during the 2013/2014 academic year. According to the Commonwealth of Nations’ Independent Schools Database, the ratio of females to males enrolled in primary school was estimated in 2010 to be approximately 0.86:1, meaning that there were about 15% fewer girls than boys enrolled in primary school. If perfect parity between boys and girls enrolled in school is measured as 1, female to male parity in Cameroon improved from approximately 0.86 in 2010 to approximately 0.91 in the 2014-2015 academic year as a result of several initiatives to encourage families to send female children to school, including a program in the North to distribute dry rations to families through enrolled school girls.
Primary school in Cameroon is open to all students and is compulsory from age six. Primary school lasts for six or seven years. According to the United Nations Educational, Scientific and Cultural Organisation, the average total number of years that a student can expect to be in school in Cameroon is estimated at approximately 10 years, which has increased by four years since 2001. The proportion of enrolled students who could be expected to graduate from primary school has increased from 53% in 2001, to 66% in 2009 and to approximately 80% in 2011. Due to the nomadic population in the Far North region, primary school enrolment figures are consistently lower in this region. Approximately 97% of students from the most affluent quintile of the Cameroonian population graduate from primary school, whereas approximately 40% of students from the poorest quintile graduate. In 2000, primary school fees for public schools were abolished in an effort to increase enrolment. Between 2013 and 2014, the success rate for official exams was down 11.2% for the Certificate of Primary Education and 6.7% for the First School Leaving Certificate, equalling 75.6% and 80.9% passage, respectively.
Cameroon participated in the Programme d’analyse des systèmes éducatifs run by the Conférence des ministres de l’Education des Etats et gouvernements de la Francophonie measuring the level of performance in French and mathematics in fifth-year primary school students. In 2005, Cameroon scored 55 out of a possible total of 100 points. Cameroon’s scores fell between 1996 and 2005, with verbal scores decreasing from about a score of 65 to 55 and mathematics scores decreasing from just over 50 to just under 50. According to a 2010 study by the Cameroonian Ministry of Primary Education (Ministère de l’Education de base), 49% of third-year primary school students read with difficulty and 27% cannot read at all.
Secondary Education in Cameroon Secondary education in Cameroon is primarily bilingual with classes in French and English. Secondary school lasts for seven years and consists of four or five years of first cycle, or middle school, followed by high school. Many private secondary schools exist, especially in urban areas such as Yaoundé and Douala. Catholic independent schools are also widespread. There are many international independent schools with curriculums in French or English, such as the American School of Yaoundé, the American School of Douala, the Ecole International Le Flamboyant and the Rain Forest International School.
In 2014, the budget for secondary education was CFA 232.6 billion, up 5.7% compared to 2013. During the 2013/2014 academic year, there were approximately 1,600,000 pupils in secondary schools taught by approximately 80,000 teachers, distributed amongst approximately 30,000 classrooms. Technical and
76 vocational secondary education had approximately 420,000 pupils taught by approximately 30,000 teachers, distributed amongst approximately 10,000 classrooms. In secondary education overall, the number of pupils per classroom decreased from 52 to 49 students per classroom during the 2013/2014 academic year, while this ratio for technical and vocation schools decreased from 47 to 45 students per classroom. According to the Commonwealth of Nations’ Independent Schools Database, the ratio of females to males in secondary school in Cameroon was 0.83:1 in 2010, which is slightly lower than the female to male ratio in primary schools.
In the public schools for training teachers, the ratio of pupils per classroom at the Ecole Normale Des Instituteurs de l’Enseignement Général increased from 68 to 74 students per classroom due to a significant number of new teachers having been hired in 2012 and 2013; however, the ratio of pupils to classroom at the Ecole Normal des Instituteurs de l’Enseignement Technique decreased from 43 to 39 students per classroom. Teachers’ training involved 46,482 students distributed amongst 1,043 classrooms and trained by 3,595 teachers.
For the academic year 2013/2014, the success rate in lower secondary school, measured by pass rates for the ordinary brevet d’études du premier cycle du second degré (“BEPC”), was down 10.2% as compared to the previous academic year and stood at 49.2%, whereas pass rates for the bilingual version of the BEPC examination improved by 14.2% as compared to the previous academic year, to 75.3%. During the 2013/2014 academic year, the success rate in high school measured by examinations under the Office of the Baccalaureate of Cameroon was up, except for the technical track of the baccalauréat and the commercial technician certification.
Higher Education in Cameroon In 2014, the budget allocated to higher education was CFA 49.2 billion compared to CFA 48.2 billion in 2013. During the academic year 2013-2014, the number of students in higher and tertiary technical education was estimated at approximately 290,000 compared to approximately 260,000 in the 2012/2013 academic year, which represents an increase of about 10%. At state universities, approximately 240,000 students were taught by approximately 5,000 teachers. The ratio of students to teachers declined from 49 to 48 students per teacher. According to the Commonwealth of Nations statistics, in 2009 the ratio of females to males in higher education was 0.40:1.
There are eight state universities in Cameroon. The cities of Yaoundé, Dschang, Ngaoundéré, Douala and Buéa each have at least one public university. In addition, there are over 100 private schools for higher education. Altogether, the eight state universities placed approximately 40,000 graduates into the labour market in 2013 and approximately 10,000 students graduated from the 117 private institutions of higher education.
Almost all universities in Cameroon are Francophone. The exception is the University of Buéa, which is Anglophone. The University of Yaoundé, which is the largest university in Cameroon, is divided between the University of Yaoundé I and the University of Yaoundé II. It has four main faculties: (i) Arts, Languages and Cultures, (ii) Social, Human and Educational Sciences, (iii) Science, Technology and Geoscience and (iv) Life Sciences, Health and the Environment. There are also two professional schools: the Faculty of Law and Political Science and the School of Economics and Management. Finally, the following institutes operate at the University of Yaoundé: Cameroonian Institute of International Relations, the Institute for Demographic Research and the Pan-African Institute of University Governance.
There are also many schools that focus on technical or professional education. These include the National School of Agriculture, the Military Academy, the School of Administration and Magistracy and the School of Education of the University of Yaoundé, which is the major teacher training college. The Institute of Mining and Oil Industries and new departments at the Universities of Maroua and Bamenda also offer technical
77 education. The Ecole Normale Supérieure began offering technical teacher education at the University of Buéa in October 2014.
Social Security and Pensions
Cameroon has a limited social security system consisting of three main types of benefits provided by employers: (i) workers’ compensation and occupational disease coverage, (ii) family benefits and (iii) invalidity, retirement and life insurance (survivors’ benefits). Other benefits include maternity coverage and unemployment coverage. The financing of the system depends on whether the covered worker is in the formal private sector or in the public sector. General social security coverage is not available to the 90% of the active population working in the informal sector.
The main Cameroonian social security system is managed by the Caisse Nationale de Prévoyance Sociale du Cameroun (“CNPS”), which is a national welfare fund. It also manages certain health and social benefits dispensed in hospitals, schools and community centres. To accomplish its mission, the CNPS administers and manages the employee and employer contributions, which form the bulk of its resources. Only employees whose companies are in compliance with the CNPS contribution system and rules can have access to these benefits. Only salaried employees registered with the CNPS are eligible for CNPS salary benefits and only in relation to their actual period of employment. Unemployed workers, workers in the informal sector and self- employed workers are not covered by this system. Benefits are provided to most workers in the formal sector by their employers, who contribute to the system as mandated under the labour code, but the CNPS is responsible for paying benefits to insured workers and their dependents.
Government spending on pensions increased by 27% over 2013 and 2014. In 2012, technical difficulties in processing pension applications caused pension spending to stagnate. In 2013, upgraded technical equipment allowed for improved processing times of the accumulated backlog. In addition, in November 2012, a reform was implemented which allowed for beneficiaries to receive lump-sum payments; this reform had the short- term effect of inflating the pension bill. The years 2013 and 2014 were therefore impacted by this reform and reflect a strong increase in pension spending.
Over the coming years, the Government expects the volume of current pensioners and other beneficiaries claiming such lump-sum payments to decrease, which should slow the pace of growth in pension spending. This growth rate is expected to decrease further as a result of the current census which should allow the government to stop paying retirement, death and other benefits to beneficiaries who are deceased. Due to improved record-keeping and payment processing, the Government expects pension payments to stabilise at around CFA 180 billion after 2017.
Public sector employees can be divided into two groups: civil servants and those working for state-entities under employment contracts, which are governed by the Labour Code. The retirement fund for public sector workers is administered and managed by the Government. The retirement age is set at between 50 and 65 years, depending on the grade and the contract type of the civil servant/employee. Both classes of workers have access to maternity benefits, but only civil servants are entitled to child-rearing subsidies.
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THE CAMEROONIAN ECONOMY
Overview
Cameroonian economic activity has been on a general growth trend since 2011, with a GDP growth rate, in constant CFA, of approximately 5.9% in 2014, 5.6% in 2013, 4.6% in 2012 and 4.1% in 2011. The petroleum industry accounted for an estimated 7.0% of GDP in 2014, compared to approximately 8.5% of GDP in 2013. Despite a difficult global context marked by lower commodity prices and deteriorating terms of trade, domestic economic activity in Cameroon remained strong throughout 2013 and 2014.
The Government’s initial projections of GDP growth for 2015 equalled 5.8%. However, under revised projections, based on preliminary data from the first half of 2015, the Government forecasts that GDP growth in 2015 should reach 6.4%.
This growth in GDP was driven by major infrastructure projects, development in the service sector and measures to increase industrial production. Growth in the oil sector also accounted for a large portion of growth in overall GDP, as this sector grew by 13.9% in 2014, 8.5% in 2013 and 3.5% in 2012 (but declined by 7.3% in 2011). Exports of crude oil represented approximately 47.5% of exports by value in 2014, 48.9% in 2013, 43.9% in 2012 and 35.6% in 2011. Preliminary Government data estimates that crude oil accounted for approximately 44% of exports by value in the first half of 2015. However, overall GDP performance also reflects the growth of non-oil GDP, which grew by 5.6% in 2014, 5.5% in 2013, 4.6% in 2012 and 4.6% in 2011.
Between 2011 and 2014, inflation in Cameroon remained around the 3% convergence threshold required by CEMAC and, according to Government estimates, stood at 1.9% in 2014, 2.1% in 2013, 2.4% in 2012 and 2.9% in 2011. The Government has projected inflation in 2015 to range from approximately 2.7% to 3.0%, depending on several variables, including price levels on consumer goods such as food. Inflation varies from region to region depending on the local economy. Inflation is closely tied to the rate of increase in the price of basic goods, such as food, clothing and other household expenditures. Price controls on retail sales of gasoline and other Government measures are in place in Cameroon to fight inflation.
Cameroon met all of the CEMAC convergence criteria in 2011, 2012, 2013 and 2014. It was the only state in the CEMAC zone to have satisfied all of the convergence criteria in 2013 and 2014. For more information on the convergence criteria affecting the CEMAC member states, see “Public Finance—Role of CEMAC”.
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Principal Economic Indicators
2011 2012 2013 2014 (in billions CFA, unless otherwise noted)
GDP (in current CFA) ...... 12,546 13,515 14,608 15,846 Non-petroleum-based GDP ...... 11,605 12,440 13,547 14,761 Petroleum-based GDP ...... 941 1,075 1,060 1,086 GDP (in constant CFA)(1) ...... 9,536 9,973 10,528 11,152 Non-petroleum-based GDP ...... 9,194 9,620 10,144 10,715 Petroleum-based GDP ...... 342 354 384 437 Annual growth rates (%) Real GDP Growth Rate...... 4.1 % 4.6 % 5.6 % 5.9 % Non-petroleum-based GDP ...... 4.6 % 4.6 % 5.5 % 5.6 % Petroleum-based GDP ...... (7.3 )% 3.5 % 8.5 % 13.9 % Population (‘000) ...... 19,891 20,387 20,917 21,461 Population growth rate (%) ...... 2.7 % 2.7 % 2.7 % 2.5 % Exports (as a % of GDP) ...... 18.4 % 18.8 % 20.7 % 21.7 % Imports (as a % of GDP) ...... 26.5 % 26.6 % 28.9 % 31.2 % Government budget Government revenues (as a % of GDP) (other than donor funding) ...... 16.9 % 16.8 % 17.2 % 17.6 % Non-petroleum-based revenues ...... 11.8 % 11.9 % 12.4 % 13.4 % Petroleum-based revenues ...... 5.1 % 4.9 % 4.8 % 4.4 % Government expenditures (as a % of GDP excl. debt service)(2) ...... 19.3 % 18.4 % 20.0 % 22.1 % Current(2) ...... 13.8 % 12.9 % 13.1 % 14.4 % Infrastructure and capital investment (FBCF)(2) ...... 5.6 % 5.5 % 6.9 % 7.7 % Budget deficit (global budget) ...... (2.2) % (1.6) % (4.3) %(3) (3.6) %(4)
Source: MINFI; MINEPAT.
Note: (1) Constant figures are based on 2000 price levels. (2) Ratio from MINFI/MINEPAT and MINFI/DAE data. (3) 4.1% according to IMF calculations. (4) 5.7% according to IMF calculations.
Economic Performance and Growth
The Cameroonian GDP growth rate, in constant CFA, in 2014 was 5.9%, compared to 5.6% in 2013, 4.6% in 2012, and 4.1% in 2011. Growth in 2014 is primarily due to growth in the secondary sector, in particular the petroleum sector, and to the tertiary sector (which includes wholesale and retail trade and services). Growth in 2013 and 2012 was largely due to the service and manufacturing sectors, whereas growth in 2011 was due to
80 the service and agricultural sectors, in particular food crops. The Government initially projected real GDP growth to equal 5.8% in 2015. In mid-2015, the Government revised their estimate of real GDP growth for 2015 upwards to 6.4%, based on estimated preliminary results of GDP performance for the first half of 2015 The petroleum-based segments of the economy accounted for approximately 7% to 8.5% of GDP in nominal terms over the 2011-2014 period, but were subject to significant fluctuations in growth rates.
Real GDP Growth Rates 2011-2014 2011 2012 2013 2014 (Annual Growth Rate as a % of GDP)
GDP (in constant CFA*) ...... 4.1 % 4.6 % 5.6 % 5.9 % Non-petroleum-based GDP ...... 4.6 % 4.6 % 5.5 % 5.6 % Petroleum-based GDP ...... (7.3 )% 3.5 % 8.5 % 13.9 % Primary Sector (Agriculture) ...... 3.1 % 2.7 % 3.7 % 4.7 % Secondary Sector (Industry) ...... 1.6 % 4.9 % 5.7 % 6.8 % of which Petroleum ...... (7.3 )% 3.5 % 8.5 % 13.9 % Tertiary Sector (Trade and Services) ...... 5.5 % 5.5 % 6.3 % 5.6 %
Source: MINFI/MINEPAT.
Note: * Constant figures are based on 2000 price levels.
The Cameroonian economy is composed of three main sectors that are affected by different dynamics and therefore have different growth rates. These rates as compiled by the MINFI were:
The primary sector is composed predominantly of agricultural production (including both food crops and cash crops), forestry, fishing and livestock industries. The primary sector accounted for approximately 23.6%, 23.2%, 22.5% and 21.9% of the Cameroonian economy in 2011, 2012, 2013 and 2014, respectively. Growth in this sector over the 2011 to 2014 period has fluctuated as a function of domestic demand, climatic and growing conditions and world commodity prices.
The secondary sector is comprised of extractive industries, such as oil and gas and mining, as well as agro-alimentary production, manufacturing, construction and public utilities, such as electricity. The secondary sector accounted for approximately 29.6%, 30.2%, 28.1% and 27.9% of the Cameroonian economy in 2011, 2012, 2013 and 2014, respectively. Growth in this sector over the 2011 to 2014 period was driven primarily by a growth in oil production, power generation and increased activity in the construction industry due to large infrastructure projects.
The tertiary sector is composed of wholesale and retail trade in goods, the service sector, including tourism, and other services, such as financial services. The tertiary sector accounted for approximately 46.9%, 46.6%, 49.4% and 50.2% of the Cameroonian economy in 2011, 2012, 2013 and 2014, respectively. Growth in this sector has been steady over the 2011 to 2014 period with the financial industry and the business service segment being the largest contributors.
2014 Trends
In 2014, primary sector growth was estimated at 4.7% compared to 3.7% in 2013, which was in line with growth rates for GDP as a whole, driven mainly by the following sub-sectors: (i) agriculture for food
81 products, which grew by 4.2%, (ii) industrial agriculture and export, which grew by 2.9%, and (iii) livestock, which grew by 5.7%.
In 2014, secondary sector growth was estimated at 6.8% compared to 7.2% in 2013 primarily driven by (i) increased oil production and new oil and gas resources for which concession or exploration rights have been granted, (ii) increasing energy production and the impact of increased supply on manufacturing, and (iii) growth in the construction industry. In particular, the strong increase in the growth rate of oil sector between 2013 and 2014, was due to a 13.3% increase in oil production, primarily from increased output in the Dissoni oil fields and new oil wells in Padouk, Inoua-Barombi and Barombi.
In 2014, the tertiary sector (or service sector) experienced stable growth at 5.6% in 2014, compared to 6.3% in 2013, although it should be noted that, given that much of the informal economy involves services, accurate growth rates are difficult to measure. In 2014, the growth of this sector was driven particularly by the financial and business services industry, followed by the outsourcing and transport/telecommunications sectors. The transport and telecommunications industries in particular benefitted from infrastructure investments.
2013 Trends
In 2013, the primary sector grew by 3.7% compared to growth of 2.7% in 2012, and 3.1% in 2011. The acceleration in 2013 growth compared to 2012 resulted from growth in cash crops, food crops and livestock due to favourable weather conditions, technical support in cultivation and supply chain improvements.
In 2013, growth in the secondary sector accelerated to 5.7% compared to growth of 4.9% in 2012. In both 2012 and 2013, growth could be traced to dynamism in the construction and public works sector, which grew by 12.9% in 2013 and 6.7% in 2012, and the electricity, gas and water segment, which grew by 8.7% in 2013. Growth in the construction and public works sector, as well as in the electricity sector, can be attributed to Government efforts to rehabilitate urban roadways, launch civil construction projects and continue various large infrastructure projects.
The tertiary sector grew by 6.3% in 2013. Tertiary sector growth in 2013 was largely due to growth in the banking and financial services sector, which grew by 13.3% in 2013. In addition, the transport sector grew by 7.9% in 2013 and the wholesale and retail trade sub-segment grew by 5.7%.
2012 and 2011 Trends
In 2012 and 2011, growth in the primary sector slowed due to poor conditions in the cash crop sector and lower EU demand for forestry and lumber products, which affected exports. By contrast, subsistence agriculture and livestock/fisheries segments remained strong in 2011 and 2012. Secondary sector growth was accelerated to 4.9% in 2012, compared to only 1.6% growth in 2011. Low growth in 2011 was primarily due to declines in the oil sector (which contracted by 7.3% in 2011) and the continuing effects of the world financial crisis. The tertiary sector grew by 5.5% in 2012 and 5.5% in 2011, which was largely due to growth in the banking and financial services sector, which grew by 6.7% in 2012 and 8.4% in 2011.
Growth Drivers
In the 2011 to 2014 period, growth was driven principally by domestic demand, which equalled 86.9% of demand in 2014, 88.7% in 2013, 88.4% in 2012 and 75.9% in 2011. Consumer spending accounted for 88.7%, 88.4%, and 87.5% of GDP in 2014, 2013, and 2012, respectively, and grew by 5.7%, 5.5%, 5.4% and 5.3% in 2014, 2013, 2012 and 2011, respectively.
This trend was due to a stable, low inflation rate over the period, improved household incomes and lower unemployment. Lower unemployment was due to increased hiring by both the civil service and private companies, in particular for major infrastructure projects (see “-Private Consumption: Consumer Spending”).
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Rural incomes were supported by strong urban demand for agricultural products and high levels of remittances from foreign workers.
In 2014, long-term investment grew by 13.5% as private investment increased 13.6% compared to 2013, due to continued renewal of production equipment and the ramp-up of many large-scale infrastructure projects. In 2013, long-term investment grew by 5.1% after slowing to 1.9% growth in 2012. In 2013, the increased levels of investment had a strong private component due to acquisitions of building materials (up 17.2%), transportation equipment (up 11%), agricultural equipment (up 4.1%) and audio-visual equipment (up 100.3%). The 2012 slowdown in investment followed strong 2011 investment growth (up 11.3%), which was primarily due to changes in private sector investment. Private investment grew by 12.3% in 2011, reflecting increased purchases of basic metals and manufactured metal products (up 29.6% in 2011), audio-visual equipment and related apparatus (up 17.2% in 2011), electrical components (up 15.2% in 2011) and furniture and furnishings (up 13.2% in 2011). At the same time, public investment increased by 10.8% in 2011 as infrastructure, energy and transport projects were launched (see “-Investment”).
Role of Government
The Government plays a significant role in the Cameroonian and regional economy. It does this in two primary ways. First, the Government plans, implements, directs and monitors many large-scale development and infrastructure projects, particularly in the context of its long-term development plan, Vision 2035, as well as its medium-term Growth and Employment Strategy. Such projects create significant employment opportunities and, as the projects are completed, it is expected that they will have a positive impact on the economy in the coming years. Secondly, the Government directly or indirectly owns or controls several private or semi-private companies or other entities that play an important role in the local economy. In this way, it may direct the strategy of such entities or may give financial support to such entities as a way of implementing its economic policies.
Three Year Emergency Plan, Vision 2035 Plan, Growth and Employment Strategy
Three Year Emergency Plan
The Government’s Three Year Emergency Plan is a special programme of immediate measures and projects intended to accelerate growth and improve living conditions in Cameroon and to provide impetus on the implementation of the Vision 2035 Plan and the Growth and Employment Strategy. The plan budgets a total of CFA 925 billion to be spent throughout the national territory over the three year period from 2015 to 2017. The plan covers seven main spending areas:
1. Urban planning: (i) rehabilitating secondary roads and public lighting in the cities of Yaoundé and Douala and (ii) building approximately 100 social housing units in regional capitals.
2. Healthcare: (i) building and equipping referral hospitals in the regional capitals that do not already have general hospitals, (ii) upgrading technical facilities in the general hospitals in Yaoundé and Douala, as well as the university hospital in Yaoundé, and more generally, and (iii) improving and/or providing technical equipment to hospitals.
3. Agriculture and Livestock: (i) creating agropoles and installing hydroponic farming facilities covering approximately 120,000 hectares in the North, (ii) building wholesale market centres to facilitate the flow of agricultural products to urban centres, and (iii) constructing slaughterhouses and refrigerated warehouses for meat distribution.
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4. Roads: building two major roads that connect each of Cameroon’s ten regions to facilitate the transport of products from each region.
5. Energy Supply: (i) building power lines to improve energy supplies to large cities and (ii) completing the Warak Bini hydro-electric dam.
6. Water Supply: (i) extending the delivery network for drinking water and (ii) drilling approximately 4,000 wells throughout the country.
7. Security: (i) building additional police stations in Yaoundé and Douala and (ii) construction of border patrol stations.
The first phase of the Three Year Emergency Plan consists of securing the necessary financial resources from a syndicate of domestic and international financial institutions and the issuance of the Notes to finance the various projects. The Government has already signed financing arrangements with four local commercial banks and one international bank, to fund a portion of the Three Year Emergency Plan. The Government plans to draw on these financing arrangements as projects are implemented.
The second phase will involve attributing public procurement contracts to companies in the private sector, who will be responsible for implementing specific projects. On 4 February 2015, a special commission (Commission Spéciale de Passation des Marchés) was created within the Ministry of Public Finance to administer the public procurement bidding process in relation to projects, verify the progress of such projects and ensure that project milestones are met. During the first half of 2015, two new contracts were signed: for the construction of an electricity tower and the renovation of the central laboratory in Yaoundé general hospital.
A number of the projects included in the Three Year Emergency Plan have recently begun or are expected to begin in the near future including for example:
Certain renovations of the general hospitals of Yaoundé and Douala are slated to begin in November 2015 while the construction of health centers in Ebolowa, Bamenda and Bafoussam is expected to begin in January 2016;
Work on secondary roads Yaoundé began in June 2015 while heavy work on certain roads in need of particularly extensive work is expected to begin in November 2015;
Water works are expected to begin in November 2015;
A number of border outposts are expected to be built for which work has already begun on those located in the north and Adamoua.
Vision 2035 Plan
In 2009, the Government adopted its long-term “Vision 2035 Plan” (“Vision 2035”). The goal of Vision 2035 is to transform Cameroon into an emerging country, with sustainable economic and social development and a strong, diversified and competitive economy and in which manufacturing is the largest sector (in terms of both GDP and exports). Vision 2035 contemplates that, by 2035, Cameroon will be fully integrated into the global economy, with a low poverty rate and the per capita income of a middle-income country. Specific objectives are to:
Reduce the poverty rate below 10% and improve equitable income distribution;
Improve the availability and quality of healthcare, education and infrastructure to levels comparable with other middle-income countries;
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Become a Newly-Industrialized Country by first focusing on areas where Cameroon already possesses a comparative advantage, such as agriculture and extractive industries;
Consolidate the democratic process and strengthen national unity.
Growth and Employment Strategy
In 2009, the Government also developed its 10-year Growth and Employment Strategy, covering 2010-2020, the first ten years of Vision 2035. The Growth and Employment Strategy focuses on accelerating growth, creating jobs in the formal sector and reducing poverty. The primary goals of this plan are to:
• Maintain a growth rate of approximately 5.5% per year during the 2010-2020 period;
• Reduce under-employment rate;
• Reduce the poverty rate.
The Government plans to achieve the goals under the Growth and Employment Strategy by growing industrial and manufacturing output and thereby facilitating the creation of jobs in the formal sector. Specifically, as further described below, the Growth and Employment Strategy provides for the creation and implementation of strategic programmes in five key areas:
1. Infrastructure development;
2. Modernising production equipment and methods;
3. Human capital development;
4. Economic diversification and regional integration; and
5. Financing the economy.
The paragraphs below outline the main initiatives in each of the five key areas described above for the Growth and Employment Strategy.
1. Infrastructure Development
Medium and long-term infrastructure projects are under way and planned in the following sectors:
energy;
roads;
ports, off-shore drilling and rail transport;
telecommunications, internet and postal services;
housing and urban development;
water and sanitation; and
mining.
Energy
The Government plans to expand power production capacity by 3,000 MW by 2020 with the aim of becoming a net exporter of electricity to neighbouring countries. Several projects are underway or have been completed, including the following:
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Hydroelectric Dam Memve’ele: construction began in 2012 on a 211 MW capacity hydroelectric dam in Nyabizan in the Ntem Valley division of the south region of Cameroon. As estimated by the Government, the main dam and the main floodway and the water intake channel are largely complete and work on the feed channel is well underway. The second phase of construction began in June 2014 and foundations for the hydroelectric plant were approximately half complete at the end of 2014. Completion is scheduled for 2017. The China Export-Import Bank has loaned approximately €370 million of the estimated €579 million needed to complete the project.
Lom Pangar Hydroelectric Dam Project: The Lom-Pangar Hydroelectric Project is part of a large regional project to tap the hydroelectric power potential of the Sanaga River. The project includes the construction of an impounding dam to supply the Song-Loulou power plant (335 MW), increase the output of the Edea plant (224 MW) and increase the power of the two plants located downstream from approximately 450 MW in 2010 to an estimated 729 MW in 2015. A 30 MW hydroelectric plant is also planned to be constructed at the foot of the Lom Pangar dam and will be connected to the Bertoua thermal plant. Transmission and distribution systems will also be improved to provide power to about 150 localities in the East region. A partnership between the AfDB, the Central African States Development Bank, the European Investment Bank, the French Development Agency (Agence française de développement, “AFD”) and the Government is funding the CFA 200 billion (approximately €300-335 million) project. The planning phase was launched in 2011 and construction is expected to be completed in 2016.
Mekin Hydroelectric Dam: The 15 MW Mekin hydroelectric dam on the Dja River is expected to reinforce the southern power grid and also supply power to all eight council areas in the Dja and Lobo divisions of Cameroon. The project includes a dam, a 105-million cubic metres reservoir, a 15 MW power plant and a 63kV high-voltage line connected to the southern power grid. The China Export-Import Bank is financing 85% of the cost of this project, and the Government is financing the remaining 15%. The estimated overall costs of the project are approximately CFA 25 billion. The project, which was launched in May 2011, is expected to be operational by the end of 2016.
Kribi Power Station: Construction on this 216-330 MW natural gas-fired thermal power plant began in March 2009 and was completed in June 2013 for an approximate cost of CFA 176.3 billion, financed by Ecobank, the AfDB and other sources.
Warak Bini hydropower plant: The Warak Bini hydropower project on Bini river in Adamaoua province is expected to have capacity of approximately 93 MW of energy. This project will be financed in part by the U.S. Trade and Development Agency and the funds raised under the Three Year Emergency Plan.
In addition to these main projects, the following power projects are being studied or are already underway: the construction of a thermal plant in Yassa, of a wind-power station in the Bamboutos mountains and hydro- power plants at Nachtigal, Song Mbengue, Song Dong, Menchum, Katsina Ala, Mana and Djock. Existing hydro-electric power stations are also being renovated and upgraded in Lagdo, Song Loulou and Edéa, notably with the assistance of the China International Water and Electric Corporation.
Finally, the construction or reinforcement of various power transmission lines is taking place throughout the country in order to support the expansion of the power generation network. For example, new lines were installed to service newly installed power sources and existing lines were reinforced between the following destinations: from Memve’ele to Ebolowa; from Edea to Yaoundé and Bafoussam; and from Song-Loulou to Logbaba and Kumasi. The Warak Bini power plant is slated to provide power to Chad.
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Roads
Improvement of the road network is a priority for the Government. The Government’s goal is to improve the accessibility of the major economic centres of Douala and Yaoundé, improve road access to neighbouring countries in the CEMAC region and provide the road infrastructure that is necessary for the development of secondary industries, such as mining. The main road network projects include :
Second bridge over the Wouri: Construction of a second bridge over the Wouri River in Douala is expected to relieve congestion on the existing bridge, reduce traffic jams in Douala and facilitate rail transport in the south-western part of Cameroon. The bridge will cross the Wouri estuary at Douala, which is the chief port, economic capital and primary industrial city of Cameroon. Work on the bridge began at the end of 2013. The project, which is projected to cost CFA 119.2 billion, is being financed by AFD, C2D and the Government with funds from the BIP.
Several new road or road improvement projects:
Start and Expected Completion Dates on Selected Road Projects Projects Start Date Completion Date Corridor Douala-Ndjaména (section Maroua-Kousseri, Garoua Boulai N’Gaoundéré) ...... 2010 2014 Highway Douala-Yaoundé ...... 2014..... NA* Ring Road Ndop-Kumbo- Nkambé-Wum-Bamenda ...... 2011 2014 Road Bamenda-Enugu (Bamenda- Mamfé-Ekok) ...... 2013.. 2016 Douala East and West Access Roads ...... 2014 2016 * NA – completion date for all phases of the Douala-Yaoundé Highway project are not available.
Through these projects, but also through the construction, rehabilitation and maintenance of other existing roads, the Government plans to increase the proportion of paved roads to more than 15% of roads by 2020 and to more than 30% of roads by 2025.
In addition, in 2014, the Government entered into a cooperation agreement with China to acquire 120 machines and heavy equipment for road work.
Ports, Offshore Drilling and Rail Transport
The Government intends to use the private sector and public-private partnerships to develop Cameroon’s maritime resources. The main projects in this area are:
Kribi deep-water port: This project began in 2011 and includes the construction of a deep-water port in the town of Kribi. In July 2014, the first ships docked in the port. At the end of 2014, deep water dredging and the protective seawall had been completed, handling equipment had been installed for operating the port and construction on a port access road was underway. Operational rights for the port are expected to be sold to a private company upon completion. The port project is being funded in part by the Export-Import Bank of China, while the construction of terminals are benefiting from private funding.
Limbé shipyard: The shipyard is expected to have a capacity to service and repair oil platforms and allow alternative deepwater channels for shipping of petroleum products and expansion of a natural gas. The project, which has been estimated to cost U.S.$200 million is in part financed by AfDB, IDB, Banque Islamique de Développement (“BID”), the Banque Arabe pour le Développement Economique en Afrique (“BADEA”), bi-lateral financing from Dutch authorities, NG Bank, the Central African Development Bank (Banque de Développement des Etats de l'Afrique Centrale
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“BDEAC”), the Cameroon Shipyard and Industrial Engineering Ltd (“CNIC”) and the Korean Group Guemgang.
LNG partnership with GDF Suez (now Engie): In 2008, GDF Suez, in partnership with La Société Nationale des Hydrocarbures du Cameroun (SNH), started to develop liquefied natural gas (“LNG”) resources in Cameroon. This project includes offshore natural gas drilling, an underwater pipeline and a LNG gas centre near the Kribi port. Financing and term sheets for the project, technical feasibility studies and design agreements were completed in 2011 and 2012.
Etinde oil drilling: In 2014, an offshore exploration license and a production sharing agreement was signed between Lukoil, Bowleven PLC, African Global Energy and SNH to develop drilling prospects in the Etinde area of the Gulf of Guinea.
The Government also plans to develop its rail network to promote the transport of cargo and merchandise. The Government plans for 1,000 kilometres of new railroad track to be laid by 2020. Rail projects are being developed to connect Douala, Limbé, Edéa, Kribi and Lolabé to the existing rail network and to improve existing track. Rail connection with Chad is also being studied. In 2013, Cameroon acquired six passenger rail locomotives, five cargo locomotives and 38 passenger wagons.
Telecoms, Internet and Postal Service
By 2020, the Government targets a 45% penetration rate for landline telephones and 65% for mobile telephones. To achieve this goal, it plans to install telephone access in 40,000 villages and install fibre-optic cable networks in major cities. The fibre-optic cable installation in Douala was completed in 2013 and the fibre-optic backbone installation in Yaoundé was completed in 2014. Fibre-optic cable systems are currently being installed or studied in Maroua, Buea and Limbé. By 2020, the Government also plans to increase the postal network, which also offers basic financial services, particularly in rural areas. Post offices will also offer harmonised services, so that all local residents can access the internet and ordinary financial services. In particular, the postal network is being expanded to areas where new social housing projects and industrial projects are being developed, such as Memvélé, Lom Pangar and Limbé. This increased coverage is expected to increase the security of common financial transactions, such as wire transfers and commercial payment services.
Housing and Urban Development
By 2020, the Government aims to add approximately 150 kilometres of new urban streets, build approximately 17,000 new housing units, improve basic city services, such as water and electrical connections, improve the management of property rights and urban planning and increase access to social services and it is taking steps to achieve these goals. For example in 2013, the Government renovated or constructed approximately 50 kilometres of urban streets., The construction of approximately 10,000 social housing units is planned in Douala and Yaoundé in the medium term. By the end of 2013, approximately 700 units had been constructed. Approximately 700 units are planned in Yaoundé for an estimated cost of CFA 33.5 billion, to be financed by China. In order to ensure property rights and to facilitate the legal transfer of land, the Government is also conducting cadastral surveys and preparing approximately 850,000 hectares of land in 33 departments for suburban development, social housing and agricultural use.
Water and Sanitation
By 2020, the Government's goal is for 75% of the Cameroonian population to have access to safe drinking water. In order to reach this goal, the Government plans to improve the existing water system and to extend the network into urban areas that have outgrown the existing infrastructure. The Government plans a major campaign to encourage residents to connect to the new system. The Government's plans include heavy use of
88 public-private partnerships. Renovation of the water treatment station at Mefou, with a capacity of 50,000 cubic meters per day, was completed in 2013, and the Akomnyada treatment facility is currently being upgraded. These two facilities are expected to provide a combined capacity of approximately 200,000 cubic meters per day of drinking water to the city of Yaoundé. In Douala, 36 kilometres of new water distribution pipes were installed between the launch of the plan and the end of 2013, with another 39 kilometres under contract. Over 14 kilometres of primary, secondary and tertiary urban drainage facilities were installed between 2009 and the end of 2013. This is in addition to several other projects to increase the drinking water supply in major cities, including a project to supply four regions with drinking water and sanitation (called the PAEPAR-MRU project). An emergency campaign is also underway to install hydraulic structures in rural areas and 250 hydraulic structures were installed between 2009 and the end of 2013.
Mining
The Government’s plans for mining development relate to exploration, extraction and the refining or transformation of mineral resources. The Government has put in place a special council charged with overseeing mining projects in Cameroon (the “Conseil Stratégique de Négociation et de Suivi des Projets Miniers Structurants”). To a great extent, growth in the mining industry is dependent on prior improvements in infrastructure, such as the energy sector, roadways and rail transport, which are prerequisites for mining development. Nonetheless, nickel cobalt and manganese projects are being developed in Nkamuna by Geovic, a U.S.-based mining company. Jiangxi Rare Metals Tungsten, a Chinese mining company, signed an agreement in 2014 with Geovic and the Government to develop these mines. Cameroon Alumina Limited, a joint-venture owned by Indian, Emirati and U.S. stakeholders, intends to set up a bauxite mining project and aluminum refinery, with a projected capacity of 3 million tonnes per year, based on the bauxite reserves in Minim-Martap and Ngaoundal, located in the Adamawa region in the northern Cameroon. An Australian mining company, Sundance Resources, which is the primary shareholder in the Cameroonian company CamIron, is developing an iron ore project at Mbalam and Afferro Mining Inc, in partnership with the Korean company Posco. The Government has been in negotiations with Sundance to invest CFA 2.3 trillion in the Mbalam project. In terms of gemstones, the Cameroon and Korea Mining Corporation, in partnership with the state is developing diamond mining resources in Mobilong.
2. Modernising Production Equipment and Methods
The Government aims to increase economic activity and employment in the secondary and manufacturing sector and reduce the proportion of workforce employed in, and GDP produced by, the primary sector. It plans to achieve these goals through increased use of intensive farming methods (such as mechanisation and fertiliser use), consolidation of agricultural activity into larger plots of land and encouraging collectivised agricultural production activity.
To help achieve these goals, the Government has implemented a number of initiatives. In 2012, the Government launched the Periz-Mais-Manioc programme, which provides farmers with improved machinery and technology in order to increase the efficiency of rice, corn and manioc production. In addition, a chemical fertiliser plant is planned in Kribi.
In the secondary sector, the construction of a tractor factory in Ebolowa was launched at the end of 2010, with financing from Indian sources. The plant is largely complete at the date of this Prospectus and its delivery is scheduled for the end of 2015. Three new cement plants are under construction in Douala and Limbé and POSCO, a South Korean iron and steel company, signed agreements in 2013 with the Government to jointly construct a state-owned steel factory, in partnership with the Cameroon Industrial and Shipyard Company.
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3. Human Capital Development
The Government aims to increase the primary school completion rate and to increase the proportion of secondary and university students engaged in science, technology, engineering and mathematics training. To this end, the Government has increased access to educational resources. Between 2009 and the end of 2013, 167 general education establishments and 112 technical training schools were opened. The Government has also taken measures to increase enrolment for girls, eliminate school fees, make basic science equipment available to schools and institute new science courses. At university level, educational resources have increased, particularly in the medical and technical fields. In the health sector, the Government has already reached several goals in terms of vaccination rates and the availability of perinatal and maternal care. The Government has also undertaken a campaign to simplify and accelerate the enrolment of employers in the national social security system in order to guarantee coverage for a larger segment of the population. The Government has implemented a number of initiatives since 2012 to improve the living conditions of people living in poverty and other vulnerable groups, such as the provision of grants to rural families in the North to encourage girls’ attendance at primary schools. As a job creation measure, the Government also carries out public works projects, in particular road projects, using high intensity labour methods, as a means to integrate larger portions of the workforce into the formal sector.
4. Economic Diversification and Regional Integration
In May 2015, the CEMAC heads of state agreed to lift visa-based restrictions on the free movement of CEMAC citizens with immediate effect as a means to promote regional integration. In terms of cooperation with Europe, the EU-Central Africa Economic Partnership Agreement ("EPA") for trade and development between the EU and Cameroon entered into force in mid 2014 to provide free access to the European market for any product originating in Cameroon and to foster an increase in trade and the diversification of Cameroon's economic activities.
5. Financing the Economy
Under the 2009 Growth and Employment Strategy and Vision 2035, the government has six major goals to finance development and growth: (i) optimising fiscal policy, (ii) mobilising national savings, (iii) improving the business climate, (iv) improving access to credit, (v) implementing a prudent public debt strategy and (vi) finding new approaches to financing. In terms of fiscal and tariff revenues, the Government has been relatively successful at achieving revenue targets and has improved tax declaration and payment procedures both for importers and for small and medium sized businesses. In terms of accessing national savings to finance economic growth, the Government issued domestic treasury and government bonds. The Notes form a part of the Government's debt strategy to access international capital markets as a means to finance development. In terms of facilitating access to credit within the Cameroonian economy, a high proportion of the population still does not have a bank account, but the Government is developing strategies to improve access to credit, absorb excess liquidity and develop microfinance institutions.
State-Owned Entities
The Cameroonian economy is dominated by several large state-owned or state-controlled entities which intervene in key sectors of the economy, including SNH, SONARA, Actis-SONEL, ALUCAM, CAMTEL, CIMENCAM, Société de Développement du Coton (“SODECOTON”), Cameroon Development Corporation (“CDC”; bananas, rubber and palm oil plantations), the Société Camerounaise des Dépôts Pétroliers (“SCDP”), CAMAIR and the Cameroon Container Transportation Company (“CAMTAINER”). According to a 2014 IMF survey, there are 21 entities that are entirely under state control and 46 entities under partial state control.
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SNH: Oil activities in Cameroon are subject to authorisation or licensing from the Cameroonian Minister of Mines. The SNH (Société Nationale d’Hydrocarbures) was created in 1980 and is the state body in charge of developing petroleum activities in Cameroon, managing the Cameroonian state’s interests in the oil sector and controlling the sale of locally produced crude oil in the domestic and international markets. SNH reports directly to the President and is responsible for promoting the development of the country’s hydrocarbon resources and managing the state’s interests in any discoveries of oil and gas resources. For each concession of drilling rights granted in Cameroon, the relative stakes in the operations are allocated between the drilling or production company and SNH by Government decree and ministerial decision.
SONARA: SONARA (Société Nationale de Raffinage) is the national refining entity, which has a monopoly on refining petroleum products in Cameroon. It is 80.3% owned by the Cameroonian state and 19.7% owned by Total SA. Because it is not equipped to refine the main grade of crude oil produced in Cameroon, SONARA has to purchase its crude oil on the international market, mainly from Nigeria. It sells its refined products to distributors in Cameroon on the basis of a state-mandated pricing structure. For more information on SONARA see “- SONARA” below.
Actis-SONEL: Actis-SONEL is a public-private partnership that is 56% owned by the UK-based fund Actis and 44% owned by Cameroon. This entity controls the generation, transmission and distribution of power in Cameroon. In 2013, Actis-SONEL was estimated to have an installed power generation capacity of 929 MW (732 MW of hydroelectric capacity and 197 MW of thermal capacity) and an extensive transmission and distribution network, serving more than 780,000 customers.
ALUCAM: ALUCAM is the Cameroonian aluminium smelting company in which Cameroon owns a 93.3% stake, while the remaining ownership interest is divided between AFD (5.6%) and its employees (1.1%). ALUCAM engages in aluminium smelting for domestic sale and for export. Most of the raw material is imported, however, as bauxite is not yet mined in quantity in Cameroon. Rio Tinto Alcan owned a 46.7% stake in this company prior to December 2014, at which time it sold its stake to the Government. Rio Tinto Alcan continues to provide technical assistance during a transition period.
CAMTEL: CAMTEL is one of Cameroon’s national telecommunications companies, and although in the past it has been the subject of a privatisation procedure, it remains wholly-owned by Cameroon. It is primarily responsible for landlines in the country and is one of the only internet service providers in Cameroon. There are 47 telephone exchanges in the company's system and approximately 150,000 telephone lines in its cable network and switching network.
CIMENCAM: CIMENCAM is Cameroon’s largest provider of construction materials, and one of the 10 largest companies in the country. It is 55% owned by the international cement group Lafarge, 43% owned by the Cameroonian state and 2% owned by its employees. It has a grinding station at Bonabéri in the Littoral, an integrated cement plant in northern Figuil and a concrete plant in Yaoundé. In 2014, the company had an annual production capacity of approximately 1.5 million tonnes and a network of eight storage facilities.
Privatisation Plans
The Government began a large-scale privatisation plan in the 1990s, which it continues to implement. Approximately 20 companies have been privatised or partially privatised, including the following: Société des Hévéas du Cameroun (“HEVECAM”; rubber plantations), Société Sucrière du Cameroun (sugar cane plantations), Société Camerounaise de Palmeraies (“SCDP”; palm oil plantations), Cameroon Shipping Lines (maritime transport), Regie Nationale des Chemins de Fer (rail shipping), CamTel Mobile (mobile telecommunications), Actis-SONEL and the Société Nationale des Eaux de Cameroun (water utility).
The most recent privatisations took place in 2012, however, the Government retains a portfolio of six companies still ear-marked for privatisation: SODECOTON, CDC, CAMTEL, SCDP, CAMAIR and
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CAMTAINER. Some of these entities have been unsuccessfully put up for auction in the past. Certain of these entities, including notably CAMAIR, are currently or have recently been insolvent, subject to protection from creditors or the object of other bankruptcy-type procedures.
Privatisations are carried out in Cameroon under a 1990 law and a presidential decree authorising the sales. The process includes a financial valuation of the company or stake to be sold, made using recognised valuation methods. This is followed by a public request for bids, competitive bidding and a sale of all or a portion of the shares in the target entity. There is no statutory requirement for bidders to be Cameroonian corporations or entities and the process is open to foreign bidders. Tenders are awarded on the basis of price, financing, technical investment plan, job creation and technology transfers, among other criteria.
Public-Private Partnerships Public private partnerships (“PPPs”) represent a type of contract between a government entity, a private industrial or service operator and various financing partners, which come together for the purpose of administering public services or carrying out large public infrastructure projects. For example, one type of PPP is the “Build Operate Transfer” contract (“BOT”), under which one or more private partners design, construct, finance and operate infrastructure resources over an agreed period, after which the resource will generally be ceded back to the state.
In July 2008, Cameroon updated the legislative framework for PPPs, which had been introduced in 2006. The 2008 reform of the PPP framework defined the accounting requirements and fiscal status of such partnerships. At that time the Government also implemented other reforms to the PPP process, such as allowing the private operators to have more control, responsibility and autonomy, compared to the traditional types of concession and public procurement contracts. The 2008 PPP framework law provides for risks and responsibilities under the contract to be attributed to the party best positioned to mitigate such risk. The Government has also issued a model PPP contract and created the Conseil d’Appui à la Réalisation des Contrats de Partenariat (“CARPA”) to support all parties in negotiating and carrying out such contracts.
In Cameroon, the following projects in the seaport, rail, road, tramway, petroleum, hydroelectric, wind power and housing sectors were the subjects of bids under PPP structures:
Kribi deepwater port; Limbé cement depot; Douala-Limbé rail line (70 km); Edéa-Kribi rail line (100 km); Edéa-Kribi-Lolabé highway(120 km); Tramways in Douala and Yaoundé; Limbé-Yaoundé pipeline construction; Hydroelectric facilities in Warak, Njock and Menchum; Bamboutos wind farm; University housing, including 2,500 bed dormitories in each of the following campuses: Yaoundé 2; Dschang; Bamenda; and Maroua; and Public housing complexes, including 5,000 homes each in Yaoundé and Douala.
Most of these projects are currently underway or nearing completion.
Structural and Institutional Reforms In addition to the privatisation plans described above, the Government has outlined several plans for various structural and institutional reforms.
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As part of the National Broadband Network programme, CAMTEL has launched the following initiatives: (i) modernising the wireline access network; (ii) deploying a submarine cable between Kribi and Lagos; (iii) extending the Code Division Multiple Access (CDMA) cellular network; and (iv) deploying an urban video surveillance system. In September 2014, the Government granted a license to CAMTEL to establish and operate a third generation mobile communications network.
In aerospace, the state entity Cameroon Airlines Corporation, CAMAIR, has continued to roll out its network of air-travel destinations in several countries throughout CEMAC and in West Africa. A new management team was appointed at CAMAIR in 2014.
In the electricity sector, the British investment fund, ACTIS, purchased shares in Kribi Power Development Corporation, Dibamba Power Development Corporation and AES-SONEL, which were formerly owned by AES and were subsequently renamed Actis-SONEL. ACTIS has undertaken to provide CFA 120 billion over the 2014-2017 period to fund several projects, including to enlarge Cameroon’s electrical distribution network, to carry out repairs at the Song-Loulou hydro-electric power station and to increase the capacity of the Kribi power plant to 300 MWh by 2016.
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The Current State of the Cameroonian Economy
Demand
Aggregate Demand Aggregate demand (also known as “total spending”) is defined as the total amount of goods and services demanded in the economy at a given overall price level, during a given time period. It is equal to GDP and is calculated using consumer expenditures on goods and services, plus investment spending on capital goods, plus government expenditures on publicly provided goods and services, plus or minus external demand (net exports/imports of goods and services). The components of aggregate demand are each analysed below.
Domestic Demand Domestic demand is equal to aggregate demand before adding or subtracting net external demand. Final consumption consists of expenditures on goods or services that are used for the direct satisfaction of individual or collective needs. Final consumption expenditure may be incurred by households, non-profit institutions serving households or general government.
Domestic demand grew by 7.4% in 2014, 5.5% in 2013, 4.7% in 2012 and 6.5% in 2011. Final consumption served as the main engine for growth every year in the 2011 to 2014 period and its growth rate over the last four years was due in part to high levels of remittances from workers abroad.
In 2014, growth in domestic demand was a result of growth in final consumption and investment. Domestic demand is forecast to grow by an average of 4.6% per year over the period 2015 to 2017.
In 2013, growth in domestic demand was also supported by growth in investment, although final consumption still accounted for 88.7% of GDP and grew by 5.6% in 2013. This is attributable to increases in both private and public consumption, which grew by 5.5% and 6.5%, respectively, in 2013.
In 2012, final consumption and investment each contributed to overall growth in domestic demand with a growth rate of 5.4% each. Both private and public components of final consumption (which grew by 5.4% and 5.5%, respectively) contributed to 2012 growth.
In 2011, final consumption, driven mainly by private consumption, was the main engine of growth in domestic demand.
Private Consumption: Consumer Spending Private consumption, also called consumer spending, is one of the components of final consumption and is defined as the value of the consumption goods and services acquired and consumed by households.
In 2014, private consumption in Cameroon grew by approximately 5.7%. Private consumption growth equalled 5.5% in 2013, 5.4% in 2012 and 5.3% in 2011. Over the 2011 to 2014 period, relatively low inflation and real income growth improved household purchasing power and thus boosted private consumption levels. Nonetheless, the largest portion of household consumption remained food and non-alcoholic beverages, which represented approximately 48.0% of average household expenditure in 2014, compared to 47.9% in 2013, 47.3% in 2012 and 47.7% in 2011. The other main components of household expenditures were the following: home furnishings, equipment and maintenance (9.5% of household spending in 2013); transport (8.8% in 2013); clothing and footwear (8.5% in 2013); housing and utility costs (7.8% in 2013); and spending on restaurants and hotels (6.9% in 2013). The relative proportions of these items in household expenditure remained relatively stable over the 2011 to 2014 period.
In 2013, slowing inflation helped maintain purchasing power and increased demand of both urban and rural households. Lower prices for certain items, such as telecommunication services, contributed to higher
94 consumption in 2013 as compared to 2012, while prices for clothing, leisure activities, healthcare and transport continued to increase. Lower average import prices and Government intervention to reduce prices also caused consumption of certain food stuffs, such as rice and sugar, or crude and refined oils, to increase. Specifically, the Government’s price policy included the following actions: price freezes on petroleum products at the pump, remediation of shortages, repression of unlawful price increases, and the creation of sales caravans and temporary markets. Improvements in household incomes in 2013 were partly due to the Government hiring additional civil servants, as well as private companies increasing recruitment and growth of remittances.
In 2012, low inflation helped maintain the purchasing power of both urban and rural households and private consumption, therefore, increased as a share of GDP to 77% in 2012 (from 75.9% in 2011). Several factors contributed to improving consumer purchasing power. The recruitment of 25,000 young people into the civil service, particularly new teachers, improved income levels, whereas rural households benefited from increased urban demand for food products and both areas benefitted from remittances from workers abroad. The breakdown of items in household consumption was largely the same in 2012 as in 2013, however healthcare expenditures increased from 1.1% of household budgets in 2011 to 1.2% in 2012 and expenditures on imported household items increased from 0.9% of household budgets in 2011 to 1.2% in 2012.
In 2011, private consumption accounted for 75.9% of GDP and increased by 5.3% due to increased household income following significant hiring in the civil service and an increase in pension payments. Aggregate private sector wages are also estimated to have increased by 3.5% according to a Ministry of Finance business survey. Rural households benefited from the good performance of food crops and livestock in 2011. Through transfers and subsidies, the state also directly or indirectly supported certain household expenses such as food, transportation, education and healthcare. Commerce and small trades also contributed to the overall rise in household income, as Government aid contributed to the economic integration of certain workers.
Public Consumption Public consumption is the value of goods and services that individuals receive through the public sector.
In 2014, public consumption increased by 7.2%, primarily as a result of a 5.0% increase in civil servants’ salaries. For the remainder of the 2011 to 2014 period, public consumption increased by 6.5% in 2013 and 5.5% in each of 2012 and 2011. For the 2015 to 2017 period, Government spending is projected to grow at an average rate of 5.2% per year.
In 2013, the increase in Government spending resulted primarily from a 12.2% increase in payroll and a 19.4% increase in spending on Government goods and services.
In both 2011 and 2012, public consumption increased primarily as a result of higher rates of recruitment in the civil service, particularly of teachers. In 2012, Government spending on goods and services increased following efforts to streamline Government procurement in 2011. In real terms, the 2012 increases on staff costs and spending of goods and services were 4.1% and 1.6%, respectively, compared to 2011.
Investment Investment is a component of domestic demand that includes expenditures on equipment and long-term assets, but does not include spending on pre-existing assets. The investment portion of domestic demand includes both private investment and public investment.
The table below presents the amount and percentage of private and public investment from 2011 to 2014:
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Private and Public Investment in CFA and as % of GDP 2011 2012 2013 2014* Private Investment (in CFA billions) ...... 2,284.7 2,283.6 2,498.0 2,884 As a % of GDP for each respective year ...... 18.2 % 16.9% 17.1 % 18.2 % Public Investment (in CFA billions) ...... 298.0 316.4 336.1 367 As a % of GDP for each respective year ...... 2.4 % 2.3% 2.3 % 2.4 % Total Investment (in CFA billions) ...... 2,583.6 2,618.8 2,849.2 3,286 Total Investment (as a % of GDP for each year) ...... 20.6 % 19.4% 19.5 % 20.7 %
Source: INS (*) Estimate
The Government’s target investment rate is approximately 25% of GDP by 2020 and 30% of GDP by 2025. Investment rates have remained below this target. In 2014, the investment rate was approximately 20.7% of GDP compared to 19.5% of GDP in 2013 and 19.4% of GDP in 2012. The Government believes that an investment rate of 25% of GDP should translate into sustainable growth of around 8% per annum for the Cameroonian economy as a whole. In 2014, 30.2% of the Government’s budget was dedicated to investment.
In 2014, there was an estimated 13.5% overall growth in the investment rate. In 2013, the 5.2% growth in the investments rate was due to increased private investment compared with 2012.
Private Investment In 2014, private investment increased by 13.6% from the previous year to represent 18.2% of GDP, as private companies continued to invest in the maintenance and renewal of production equipment. The Cameroon SME Bank (“BC-SME”) was also created in 2014 to aid the financing of such private investment.
In 2013, private investment grew by 5.6% and investment in each of the following sectors increased: industrial agriculture (up by 18.0%), agro-food/food processing (up by 4.1%), manufacturing (up by 1.4%), transport (up by 0.9%) and telecommunications (up by 11.3%). The following types of investment purchases were made in 2013: building materials, transportation equipment, agricultural equipment, audio-visual equipment and furnishings. Foreign direct investment (“FDI”) supported the growth of private investment in 2013, with overall FDI amounting to CFA 348.2 billion in 2013. Approximately 41% of this FDI went into the oil sector (CFA 142.8 billion), with a further 15.5% going into the commerce and hospitality sectors (CFA 53.8 billion) and 12.2% going towards increasing industrial capacity (CFA 42.6 billion). A further 29% of FDI was invested in the transport sector, 1.2% in the agriculture sector and 1.0% in the telecommunications sector.
In 2012, the growth in the overall investment rate slowed to 1.4%, primarily due to a decline in private investment, which only increased by 0.8% compared to 2011. The following types of investment expenditure declined in 2012: transport equipment (down by 11%), basic metal products and metal structures (down by 47%), electrical machinery (down by 4%) and agricultural equipment (down by 4%). These changes were primarily due to declining investment by the transport sector and the manufacturing sector in 2012. These declines were partially offset by large increases in investment in audio-visual equipment (up by 158%) and furnishings (up by 21%), as well as by increased investments by the telecommunications industry (up by 33.6%) due to the arrival of new mobile telephone operators in the Cameroonian market in 2012.
In 2011, private investment grew by 12.3% from the previous year, the largest improvement over the 2011 to 2014 period. This growth was primarily due to increases in purchases of metal products and basic metal ore (up by 29.6%), audio-visual equipment (up by 17.2%), electrical equipment (up by 15.2%) and furnishings
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(up by 13.2%). In addition, the construction of cement production and cement bagging plants near Yaoundé and Douala, respectively, had a positive effect on investment in 2011.
Public Investment To a large extent, public investment in Cameroon consists of large, multi-phase infrastructure projects that involve significant levels of international funding, including donor funding, although much of the public investment comes through the Public Investment Budget (Budget d’Investissment Public, “BIP”). Public investment grew by 7.5% in 2014 due to increased investment in infrastructure, 2.5% in 2013, 5.7% in 2012 and 10.8% in 2011, as compared with the prior year. In 2013, public investment decreased as a result of delays in the implementation of the BIP, which were due to the need to adapt to a newly-adopted budget programme and the creation of the Ministry of Public Contracts (Ministère des Marchés Publics) intended to reform public procurement procedures. The slow-down in public investment in 2013 was in part due to delays in initial approval and implementation of the new programme budgets, which allow for multiyear approvals for certain projects. See “Public Finance—Budgetary Reform”. At the end of November 2013 the implementation rate of the BIP was below 50% and, as a result, the period for implementing the budget, which normally ends on November 30, was extended by one month to December 31, 2013. At the end of the extended period the implementation rate of the BIP was approximately 89%.
See “—Three Year Emergency Plan, Vision 2035 and the Growth and Employment Strategy” above for a description of the large, multi-phase development projects that are part of the Government’s Vision 2035 development plan and were the focus of considerable investment between 2011 and 2014.
Net External Demand Net external demand describes the contribution of net exports of goods and services to real GDP. It is calculated by netting total exports against total imports in goods and services, and does not include transfer payments and remittances from workers abroad.
The Cameroonian balance of trade is in deficit with negative net external demand meaning that imports are higher than exports. In 2014, exports of goods accounted for an estimated 16.1% of GDP while imports accounted for 23.5% of GDP. In 2013, exports of goods accounted for 15.3% of GDP while imports accounted for 22.5% of GDP. In 2012, exports of goods accounted for 16.1% of GDP while imports accounted for 24.6% of GDP. In 2011, exports of goods accounted for 17% of GDP while imports accounted for 25.6% of GDP. See “Foreign Trade and Balance of Payments—Commercial Trade Balance”.
Principal Industries in Cameroon
The following table sets out the approximate proportions that various industries and sectors account for within the Cameroonian economy:
Economic Activity Sectors as a % of GDP 2011 2012 2013 2014* Agriculture, forestry, fishing, livestock ...... 23.6 % 23.2 % 22.5 % 21.9 % Extractive Industries ...... 8.3 % 8.8 % 7.3 % 7.0 % of which petroleum ...... 8.1 % 8.6 % 7.1 % 7.0 % Manufacturing ...... 7.9 % 8.3 % 9.6 % 9.6 % Wholesale and retail trade, hotels and restaurants ...... 19.5 % 19.5 % 20.4 % 20.4 % Finance, real estate and business services ...... 11.6 % 11.2 % 11.2 % 11.4 %
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Economic Activity Sectors as a % of GDP 2011 2012 2013 2014* Public administration, education, health and social work, community, social and personal services ...... 8.2 % 8.3 % 8.1 % 8.2 % Transport, storage and communication ...... 7.1 % 6.9 % 8.3 % 8.6 % Construction ...... 5.5 % 5.7 % 5.9 % 6.4 % Electricity, gas and water ...... 1.0 % 1.0 % 0.9 % 1.0 % Other services ...... 1.2 % 1.2 % 1.2 % 1.2 % Other industries 6.1 % 5.9 % 4.6 % 4.3 % Gross domestic product ...... 100 % 100 % 100 % 100 %
Source: Data from Government of Cameroon (*) Estimates
The top five industries in the Cameroonian economy in 2014 were the following: agriculture (including forestry, fishing and livestock), wholesale and retail trade, manufacturing, financial and business services and extractive industries, including petroleum. The agricultural sector includes the production of food crops for domestic consumption and the production of cash crops, in particular cocoa, coffee and cotton. These five industries combined accounted for 22% of GDP in 2014.
Primary Sector: Agriculture, Forestry, Fishing and Livestock
Agriculture The primary sector in Cameroon, which includes agriculture for food production, as well as cash crops, forestry, fisheries and livestock, accounted for approximately 21.9% of Cameroonian gross domestic product in 2014. The agricultural sector grew by 4.2% in 2014, 3.7% in 2013, 2.7% in 2012 and 3.1% in 2011. This growth was mainly driven by food crops and increases in cash crops for export, in part as a result of the Government having implemented financing measures and direct support for producers. Food production increased by 4.1% in 2014, 3.9% in 2013, and 3.8% in both 2012 and 2011, and production of cash crops for export increased by 4.8% in 2014 and 6.9% in 2013, but declined by 3.7% in 2012 and by 1.6% in 2011. Primary sector growth is projected to be 4.2% in 2015 and 4.7% on average for the period from 2016 to 2018.
Cameroon’s farming sector is supported by strong demand from countries in the Central African sub-region. Cotton production has benefited from public investments by SODECOTON, the Cameroonian national cotton company, and by increased acreage under cotton cultivation. The production of crude palm oil has also increased partly resulting from the increased acreage and improved pesticide treatments. The cocoa and coffee sectors have benefited from measures taken by the Government to improve their productivity and competitiveness (thorough increased support for producers and distribution of seeds and seedlings, as described in more detail below). The livestock industry benefits from increased production units, the renewal of genetic material in herds and infrastructure renovation. The forestry and logging sector observed a modest recovery in 2012 and 2013 compared to 2011, as export demand from trading partners increased and local processing strategies improved. The development and expansion of “traceability” techniques has been necessary to comply with European directives on sustainable forestry. Without such techniques in place, many Cameroonian noble woods cannot enter or be sold on European markets.
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Production of Cash Crops
Cameroon’s main cash crops are cocoa, coffee, rubber, cotton seed, cotton fibre, banana, and palm oil. The following table shows the amounts of these crops exported, in tonnes, as well as the average global price for such products for each of the corresponding periods.
2011 2012 2013 2014 Cocoa Production (tonnes) ...... 246,120 250,000 268,941 242,315 Exports (tonnes) ...... 190,214 173,794 223,700 192,836 Global price (in CFA/Kg) ...... 1,695 1,356 1,386 1,448 Coffee Arabica Production (tonnes) ...... 8,563 10,000 7,000 7,644 Exports (tonnes) ...... 2,441 5,148 2,228 2,000 Global price (in CFA/Kg) ...... 3,993 2,748 2,070 2,250 Coffee Robusta Production (tonnes) ...... 38,256 42,000 31,127 46,348 Exports (tonnes) ...... 28,383 36,436 19,280 28,701 Global price (in CFA/Kg) ...... 1,702 1,622 1,483 938 Rubber Production (tonnes) ...... 50,983 46,318 49,013 50,715 Exports (tonnes) ...... 36,792 42,851 54,068 57,000 Global price (in CFA/Kg) ...... 2,125 1,479 1,216 798 Cotton Seed Production (tonnes) ...... 185,000 227,000 237,665 246,695 Cotton fibre Production (tonnes) ...... 61,392 82,124 88,854 92,230 Exports (tonnes) ...... 55,742 76,173 91,532 90,854 Global price (in CFA/Kg) ...... 1,528 878 868 875 Banana Production (tonnes) ...... 296,110 256,789 280,000 293,700 Exports (tonnes) ...... 237,278 231,802 261,808 265,000 Global price (in CFA/Kg) ...... 539 553 569 542 Crude palm oil Industrial production (tonnes) ...... 135,215 99,238 121,534 131,985
Sources: MINADER, MINFI/DAE, WEO.
Government estimates, based on preliminary data for the first half of 2015, indicate that, during the first half of 2015 and compared to exports for the same period in 2014, banana production for export grew by approximately 6.5%, rubber production declined by approximately 13.6%, Arabica coffee exports grew by
99 approximately 12.2% whereas those of Robusta coffee exports grew by 19.9%. Similarly, the Government estimates that seed cotton production increased by approximately 5% and palm oil production increased by approximately 16% in the first half of 2015, compared to the same period in 2014.
Whereas production levels for most cash crops can be linked to climatic or phytosanitary conditions, including the ability of producers to react to such conditions, export levels are often influenced by world price levels. Therefore, changes in export levels may or may not be related to production levels. This is especially true for cash crops that can be stored or that must undergo lengthy post-harvest processing. The main exception to this principle is the production of sweet bananas, which are highly perishable and must be brought to market quickly or lost.
Cocoa More than half of the world’s cocoa is grown in West and Central Africa, with the Ivory Coast, Ghana, Nigeria and Cameroon being the most important producers. Cameroon is typically ranked as the fourth or fifth largest producer of cocoa in the world depending on the size of the harvest and the organization compiling the ranking. Statistics from Cameroon’s Ministry of Agriculture show that cocoa accounted for almost half the country’s primary sector exports in 2013.
In 2014, cocoa production decreased by 9.9% compared to 2013 to stand at 242,315 tonnes. During 2013, despite severe weather conditions, cocoa production increased by 7.6% compared to 2012 to approximately 268,941 tonnes. Cocoa production levels increased by 1.6% in 2012 to approximately 250,000 tonnes, compared to approximately 246,120 tonnes in 2011.
In 2014, exports of cocoa decreased by 3.4% compared to 2013, and increased by 28.7% during 2013 compared to the previous year. According to the Cameroonian National Office for Cocoa and Coffee, the changes in 2014 export levels were due primarily to industrial exporters postponing the date of export as prices fluctuated and some manufacturers preferring to process the cocoa locally rather than exporting the raw cocoa. Similarly, exports of cocoa declined by 8.6% in 2012 compared to the levels seen in 2011, as a result of a 20% decline in world cocoa prices in 2012.
In general, increases in production are, among other reasons, due to generally favourable climatic conditions in certain years, the entry into production of new farms and Government action to support local producers, including maintenance and rehabilitation of old plantations and Government support for more resistant seedlings and the development of plant nurseries. Decreases in production can be due to phytosanitary issues in the cocoa industry in Cameroon, including black pod disease and other fungal and insect infestations. Initiatives continued in 2014 to increase production, including the following: (i) the acquisition and distribution of 1.4 million doses of fungicide and 147,941 litres of insecticides to treat 207,137 hectares of land; (ii) capacity building of 480 village teams to undertake remedial phytosanitary measures; and (iii) the distribution of 5 million cocoa seedlings necessary to plant 4,500 new hectares of cocoa plantations.
Coffee Cameroon produces both arabica and robusta coffees. According to the International Coffee Organisation, Cameroon was the 24th largest producer of coffee globally in 2014. The production of arabica coffee in Cameroon has risen and fallen over the 2011 to 2014 period. Production of arabica increased by 9.2% in 2014 after declining 30% in 2013, following an increase in production of 16.8% in 2012, which followed a decline of 31.8% in 2011. Production of robusta increased by 48.9% in 2014 after declining 25.9% in 2013, following an increase in production of 9.8% in 2012 and a decline of 15.4% in 2011.
In 2014, arabica exports fell by 10.2% but robusta exports increased by 48.9%, in each case compared to 2013. In 2013, the quantities of arabica coffee exported fell by 56.7% and exports of robusta fell by 47.1% compared to 2012, reflecting falling commodity prices. Specifically, robusta prices fell by 8.6% and arabica
100 prices fell by 17.8% in 2013. In contrast, 2012 was a strong year for coffee exports, which grew by 110.9% for arabica beans and by 28.4% for robusta beans, following a very weak year for exports in 2011, during which world prices fell by 31.2%.
The decline in production in 2013 was related to aging plantations and decreasing profit margins for planters due to falling commodity prices. In 2014, the Government undertook actions to stem the 2013 decline in production by improving cultivation and training techniques, by encouraging young people to participate in coffee production and by creating new production areas.
Rubber Production of natural rubber increased by 3.5% in 2014 compared to the prior year, and totalled 50,715 tonnes. In 2013, rubber production totalled 49,013 tonnes, an increase of 5.8% compared to 2012. In 2012, production decreased by 9.2% to 46,318 tonnes compared to 2011 (50,983 tonnes) and, in 2011, production increased by only 1.5% compared to 2010.
In 2014, export quantities of rubber increased by 5.4% compared to the same period in 2013. In 2013, exports increased by 26.2% compared to 2012 as a result of increased demand due to a 17.8% drop in international prices. Rubber prices decreased by 30.4% in 2012, which resulted in an increase in exports.
The increase in production over the 2011-2014 period, except in 2012, resulted from new plantations, favourable weather conditions and investments by the HEVECAM company to increase efficiency, expand plantations, replant seeds and improve safety. Similar to coffee, production levels of natural rubber can be linked to climatic or phytosanitary issues, whereas export levels are often influenced by world price levels.
Cotton Cameroon produces both cotton seed (for oil and lubricants) and cotton fibre for the clothing industry. Cameroon does not export cotton seed to any significant degree. It exports much of its cotton fibre production to China, however.
In 2014, cotton seed production increased by approximately 3.8%. In 2013, cotton seed production increased by 4.7% compared to 2012 to reach 237,665 tonnes. In 2012, cotton seed production grew by 22.7% and, in 2011, production grew by 15.9%.
Cotton fibre production grew by 3.8% in 2014, 8.2% in 2013, and 33.8% in 2012 compared to the respective preceding years. Exports of cotton fibre went down, however by 0.7%, despite slight increases in world price levels for this commodity, but rose by 20.2% in 2013, 36.6% in 2012 and 4.0% in 2011. This resulted from lower world price levels, which fell by 1.1% in 2013 and 42.5% in 2012, although prices increased by 49.4% in 2011.
The increase in cotton seed and fibre production is partly explained by the financing campaign for equipment, fertiliser and other inputs sponsored by the Government, the establishment of subsidised prices for the inputs in cotton cultivation, encouraging efficient fertiliser use and measures to combat smuggling. Such policies have been in place since 2010. Cotton production has also been boosted by investments by SODECOTON, the Cameroonian national cotton company, and increased acreage for cotton cultivation.
Banana In 2014, production of sweet bananas increased by 4.9% compared to the prior year and also increased by 12.8% in 2013 compared to 2012, but fell by 3.5% in 2012 and 2.2% in 2011. Compared to other cash crops and commodities, world banana prices remained relatively stable over the 2011 to 2014 period. However, because bananas are a highly perishable crop that cannot be stored from season to season, as may be the case with coffee, cotton fibre or palm oil, changes in banana exports are more closely linked to changes in production levels than may be the case for other commodities. In 2014, banana exports rose by 1.2% in terms
101 of volumes, but fell by 7.3% in terms of revenue. In 2013, banana exports increased by 22.2% compared to 2012, but fell by 2.4% in 2012 compared to 2011, in line with the fall in production.
The 2014 and, particularly, the 2013 increases in production were mainly due to the entry into production of new plantations and yield improvements at major producers. The 2012 and 2011 decreases in production were due primarily to the adverse effects of a fungal disease affecting plants (which led to early harvests), unfavourable wind conditions and arable land being lain fallow.
Crude palm oil The production of palm oil increased by 8.6% in 2014, after increasing by 22.5% in 2013 following a decline of 26.6% in 2012 and an increase of 16.4% in 2011.
The 2014 and 2013 increases in production were mainly due to favourable weather conditions, the entry into production of new plots, as well as increased acreage and pesticide usage. The decline in 2012 was due to unfavourable weather conditions that affected many palm oil producers in West and Central Africa, as well as the destruction of older trees. Increases in production in 2011 were primarily due to positive climatic conditions and improvements in cultivation techniques.
Exports of palm oil declined by 19.3% in 2014. In 2013, exports of palm oil fell by 38.5% compared to 2012 as a result of a glut of world markets.
Throughout the 2011 to 2014 period, several programmes and initiatives were undertaken to improve equipment training and resources of growers and introduce young growers to palm oil cultivation.
Primary Food Crops in Cameroon Cameroon grows a variety of food crops, primarily for domestic consumption. The staple crops grow in Cameroon include corn (maize), millet (sorghum), rice, cassava, macabo (taro) root, yam, potato, sweet potato, plantains, sweet banana, beans and peanuts (groundnuts), tomato, onion and pineapple. It can be difficult to collect accurate statistics for food crop production, as this type of activity is often hidden in the informal sector. The following table shows estimated production volumes for these crops in thousands of tonnes for the years 2011 to 2014:
2011 2012 2013 2014 * (In thousands of tonnes)
Cereals Corn (maize) ...... 1,572.1 1,810.3 2,048.5 N/A Millet/sorghum ...... 1,241.0 1,425.9 1,521.1 N/A Rice ...... 174.1 187.8 205.5 N/A Roots and tubers Cassava ...... 4,082.9 4,287.2 4,503.9 N/A Macabo/taro ...... 1,568.8 1,614.1 1,659.4 N/A Yam ...... 517.1 537.8 558.5 N/A Potato ...... 196.7 210.0 223.3 N/A Sweet Potato ...... 308.0 338.1 348.6 N/A Legumes and others Plantain banana ...... 3,425.8 3,569.3 3,712.9 N/A Sweet banana ...... 1,394.7 1,471.0 1,547.3 N/A
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2011 2012 2013 2014 * (In thousands of tonnes)
Beans/ground nuts ...... 930.7 1,297.2 1,364.8 N/A Tomato ...... 853.1 889.8 926.5 N/A Onion ...... 184.0 198.0 212.0 N/A Pineapple ...... 165.0 167.9 170.2 N/A
Source: MINADER,MINFI/DAE (*) 2014 data is not available.
Corn Corn (or maize) production was estimated to be approximately 2,048,500 tonnes in 2013, up 2% from 2012. The increased production between 2013 and 2012 was in part due to an additional 4,929 acres under production, the use of multiplier seeds to improve mass production, the acquisition of two mobile seed calibration and conditioning stations and the distribution of planting supplies and other resources to growers.
In 2012, corn production was 1,810,300 tonnes, up 15.2% compared to 2011. 2012 had the highest growth of the four year period. This growth was primarily due to mentoring of growers, distribution of improved inputs and research in high yield varieties. In 2011, corn production was 1,572,100 tonnes, down by 5.9% compared to 2010.
Rice Rice production stood at 205,500 tonnes in 2013, up 6.8% from 2012. Approximately 8.5 tonnes of lowland rice seeds were produced and distributed after the floods of 2012, and reinforcement of the Maga dam and the acquisition of new ploughing equipment allowed 18,500 additional hectares to be placed under cultivation. In addition, various projects such as the “Project for the Development of Rainfed Rice” have improved the productivity and sustainability of rice production in Cameroon. This programme is also responsible for training 2,411 producers in rice production techniques.
In 2012, rice production stood at 187,800 tonnes, up 4.4% compared to 2011. In 2011, rice production stood at 174,089 tonnes, up 13.7% compared to 2010.
Roots and tubers Roots and tuber production includes cassava, yam, macabo, taro, potato and sweet potato farming. In 2013, 13 cassava fields were dedicated to maintaining improved and selected varieties of roots crops and tubers in order to multiply the plant material to be used for the establishment of seed fields. In addition, in 2013, 6.9 million cassava cuttings were planted in 690 hectares of plantations and distributed among farmers in the different agro-ecological zones pre-disposed for cultivation of this plant.
In 2012, production of roots and tubers increased. The increases in root and tuber production in 2012 consisted of the following growth rates compared to prior years: potatoes (up by 6.8%), cassava (up by 5%), yam (up by 4%) and macabo/taro (up by 2.9%).
In 2011, the production of roots and tubers also increased overall. The changes in 2011 production compared to the prior year were as follows: potatoes (up by 6.6%), cassava (up by 7.2%) and yam (up by 3.5%). The production of macabo/taro declined by 3.9%.
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Fruits and vegetables Fruit and vegetable production for local consumption in Cameroon includes cultivation of plantain bananas, sweet bananas, various types of beans, peanuts (groundnuts), tomatoes, onions, pepper, okok and pineapple.
In 2013, production of plantain bananas and sweet bananas increased by 3.4% and 4.6%, respectively. Both types of plants receive support from the Plantain Sector Recovery Programme, which helped produce and distribute 830,000 plantain seedlings.
In 2012, plantain production increased by approximately 4.2% and sweet banana production increased by approximately 5.5%. In 2012, the Plantain Sector Recovery Programme signed an agreement with the International Institute of Agricultural Techniques to promote production.
In 2011, plantain production increased by 7.7% and sweet banana production increased by 4.6% compared to the prior year. The Plantain Sector Recovery Programme created eight seed fields and produced about 1.7 million plants in 2011, which resulted in 33,282 plantain offshoots used as inputs in production.
Production of fruits and vegetables, other than plantains and bananas, over the period included notably peppers, tomatoes and onions. In 2013, the production of peppers stood at 41,548 tonnes, up 11.4% from 2012. Tomato production increased by 7.3% and onion production increased by 7.1% in 2013 compared to 2012. In 2012, tomato production increased by approximately 4.3% compared to 2011 and pineapple production increased by approximately 1.4%. To promote the cultivation of okok, a jungle vine used for cooking throughout West and Central Africa, the Government supported the production and distribution of 18,000 plants and the creation of a two hectare seed field in Nkolossannanga in 2013.
Forestry Cameroon has an estimated 22 million hectares of forest area, which accounts for 46% of the national territory. The exploitable forests (representing 89.5% of that area) cover approximately 19.7 million hectares, of which 6.2 million are allocated as “Forest Management Units” and 5.4 million hectares are under development. The forestry industry in Cameroon produces raw logs, milled logs, cut timber, noble woods in various forms and veneers of both noble and non-noble tropical wood. Forestry products may be used locally, particularly in the production of furniture, or may be exported to Europe, China or other developed countries, such as the United States.
In 2015, the Government estimates that, based on preliminary data for the first half of 2015, forestry exports increased by approximately 16.4% compared to exports in the first half of 2014, primarily due the acquisition of new equipment that permitted over stock accumulated in 2014 to be exported by the beginning of 2015. In the first half of 2014, production of logs increased by 29.7%, milled lumber by 1.9% and plywood decreased by 1.9%. Forestry and logging revenues increased by 33.9% during 2013, compared to 2012 production levels.
In 2013, the area under forest management increased by 20.8% compared to 2012 due to the reclassification of certain areas as well as improved monitoring and management. Forestry and logging revenues decreased by approximately 1.8% in 2013, despite the volume of log production in kilogrammes increasing by 1.6% in 2013. Revenues remained flat in 2012.
The quantities of harvested noble woods, such as ebony, pygeum, yohimbe and voacanga, grew by 25.2% in 2013 and 76.9% in 2012. The quantities of exported special products, such as ebony, pygeum, yohimbe and voacanga increased significantly from 872,000 kilogrammes in 2011 to 1,543,000 kilogrammes in 2012. This change was related to improved traceability procedures and certifications in the sector, which allowed for increased exports to Europe and other developed nations.
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In 2012, overall forest production slowed down slightly despite strong growth in high-margin noble woods. This slowdown is explained by lower demand from major foreign partners. Felled timber volume for 2012 was estimated at 2,316,000 cubic metres, down 1.7% compared to 2011. Exports of logs and veneers fell by 14.3% and 15.9% in 2012 and 2011, respectively.
Fishing The following tables show production levels in tonnes of various fishing production methods from 2011 to 2013 : 2011 2012 2013 2014* (in tonnes)
Industrial fishing ...... 15,021 13,013 45,720 N/A Fish ...... 10,340 12,052 36,385 N/A Shrimp ...... 4,681 961 9,335 N/A Artisanal sea fishing ...... 30,805 48,645 32,735 N/A
Artisanal inland fishing ...... 1,965 3,082 16,263 N/A
Total ...... 47,791 64,741 94,718 N/A
Source: MINEPIA (*) 2014 data is not available..
In 2014, fishing production increased by 3% compared to 2013 levels. In 2013, fishing production increased by 46.3% compared to 2012 primarily as a result of improved data collection and improved maritime surveillance. In 2013, Cameroonian fishing production was estimated to be equal to 94,718 tonnes of seafood of which 48.3% was from industrial fishing, 34.5% was from artisanal sea fishing and 17.2% was from inland fisheries.
In 2012, fishing production increased by 35.5% compared to 2011. For 2012, fishing production was estimated to be 64,741 tonnes, of which 75.1% was from artisanal sea fishing, 20.1% was from industrial fishing and 4.8% was from inland fisheries. In 2011, the production of industrial, craft and inland fisheries grew by 9.7% compared to 2010.
The consolidation of fishing activities in Cameroon since 2010 is attributable to the positive effects of the Project for the Development of Artisanal Marine Fisheries (the “ADPMA Project”) whose objective is to increase fish production through training and youth facilities. The second phase of the ADPMA Project, started in 2011, has helped to provide support in the form of hardware (outboard motors, fishing equipment and safety canoes) and training. Ongoing Government activities to rehabilitate the fishing industry in Cameroon include: (i) rehabilitation of infrastructure; (ii) support for the production of fingerlings, fish, fishing equipment and aquaculture; (iii) increased activity of the monitoring and control of fishing activities; and (iv) the implementation of the national development of commercial aquaculture, especially in areas benefiting from development of hydro-electric dams where new fisheries can be developed.
Livestock
The following table shows the major livestock animals raised in Cameroon for the corresponding years: 2011 2012 2013 2014 (in thousands of head)
Type Cattle ...... 5,085.8 5,527.1 5,805.3 6,310.4 Sheep ...... 2,879.3 2,974.3 2,952.6 3,050.1
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2011 2012 2013 2014 (in thousands of head)
Goats ...... 6,053.7 5,950.7 6,298.1 6,191.0 Pigs ...... 2,806.5 2,896.3 3,113.0 3,212.6
Source: MINEPIA.
Livestock production in Cameroon includes sales on the hoof, meat from slaughter and derived products. The main livestock animals in Cameroon are cattle, sheep, goats, pigs and chickens.
In 2014, beef production increased by 34.3% compared to 2013 in terms of tonnes of meat produced. The domestic herd of cattle increased by 8.7% in 2014 compared to 2013, while cattle herd sizes increased by 5.0% in 2013 and 8.7% in 2012. The number of goats decreased by 1.7% in 2014, but grew by 5.8% in 2013 after relatively remaining stable between 2012 and 2011. Sheep herds grew slightly in 2014, after decreasing slightly in 2013 and growing by 3.3% between 2012 and 2011. Pastoral livestock activities have been notably affected by attacks from Boko Haram, particularly in the North of the country.
Increased livestock vaccinations and training in livestock management techniques contributed to the 2014 improvement and the size of herds. For example, the pig population rebounded in 2014 and 2013 following an outbreak of African swine fever which affected livestock in 2012. Improvements were also due to the renewal of genetic material with the acquisition of 73 breeding pigs in 2013. Poultry populations also increased in 2013 and 2014 due to Government intervention to increase breeding stock, furnish equipment and provide training to poultry farmers.
In 2012, the livestock population was estimated at 5.5 million cattle, 8.9 million small ruminants (which included sheep and goat), 2.9 million pigs and 66.5 million poultry. In 2012, livestock production increased by 2.6% compared to 2011.
In 2011, the livestock population in Cameroon was estimated at 5 million cattle, 7.3 million small ruminants (such as goats), 1.7 million pigs and 65.4 million poultry. In 2011, livestock production grew by 4.1% compared to 2010.
Government actions to promote livestock, meat and dairy production include: (i) intensifying the supervision, promotion and improvement of production of short-cycle livestock (pigs, small ruminants, unconventional species); (ii) the implementation of health protection groups among farmers and strengthening the capacities of producer organisations; (iii) improving the quality of foodstuffs made of animal and fish ingredients; (iv) the prevention and treatment of animal diseases; and (v) capacity building for farmers and management of veterinary services.
The Secondary Sector: Manufacturing and Extractive Industries The Secondary sector is composed of extractive industries, manufacturing industries, construction and the utilities sector. The following table show the relative size of these respective sectors in terms of sales revenue for the corresponding years:
2011 2012 2013 2014* At constant 2000 prices (in CFA billions)
Extractive industries ...... 357.1 370.3 402.6 457.7 of which the extraction of hydrocarbons ...... 341.5 353.6 383.6 436.7 Manufacturing industries ...... 1,560.1 1,639.0 1,698.0 1,769.7 of which food processing ...... 570.6 601.1 623.1 655.7
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2011 2012 2013 2014* At constant 2000 prices (in CFA billions)
Electricity, gas and water ...... 72.0 71.9 78.2 86.5 Construction ...... 264.8 282.5 319.0 353.6 Total Secondary Sector ...... 2,254.0 2,363.7 2,497.7 2,667.5
Sources: INS, MINFI/DAE.
* Estimates..
In 2014, the GDP of the secondary sector grew by 6.8%, at constant prices, driven by extractive industries including oil, which grew by 13.3% compared to 2013. In addition, electricity, gas and water distribution grew by 10.6% compared to 2013, primarily as a result of increased demand for electricity and water for other manufacturing businesses. In addition, the agro-food and food processing industry, which accounts for approximately one quarter of the secondary sector, grew by 7.5% in real terms compared to 2013.
In 2013 and 2012, the secondary sector grew by 5.7% and 4.9%, respectively. The development of the secondary sector in 2013 was driven by the construction and public works industry as well as extractive industries where oil production increased by 8.5% in 2013 compared to 2012. The electricity, gas and water sub-sector also grew by 8.8% in 2013 compared to slight shrinkage in 2012, due in part to the completion of large-scale infrastructure projects.
In 2012, the growth of the secondary sector was 4.9% compared to 2011, which is primarily due to the consolidation of activities in the other manufacturing and agro-food and food processing sub-sectors. After several years of decline, oil production was up 3.5% in 2012. The growth rate of industrial production also improved, increasing to a growth of 2.6% in 2012.
In 2011, the growth of the secondary sector was 1.6% compared 2010, which was primarily attributable to growth in the following sub-sectors: construction (up by 9.6%), food crops (up by 4.2%), electricity, gas and water (up by 3.6%) and other manufacturing (up by 1.2%). Mining production declined by 7.3% compared to 2010, although this decline was exacerbated by the unusually high production levels seen in 2010.
Extractive Industries In 2014, the Government suspended the grant of new permits, modified the government percentage in certain licenses and increased regulation applicable to extractive industries in the country. In 2014, oil production was estimated at 27.5 million barrels, representing an increase of approximately 13.3% as compared to the prior year. The strong increase in the growth rate of the oil sector between 2013 and 2014, was due primarily to increased output in the Dissoni oil fields and new oil wells in Padouk, Inoua-Barombi and Barombi. In 2013, the petroleum industry grew by 8.5% compared to 2012 levels and, in 2012, they grew by 3.5% compared to 2011 levels. The Government estimates, based on preliminary data from the first half of 2015, that oil production increased by approximately 22.9% and gas production increased by approximately 26.0% in the first half of 2015, compared to production in the first half of 2014.
Oil and Gas Industry Cameroon is the sixth largest oil producer in Sub-Saharan Africa and a nascent gas producer. Cameroon produces two grades of crude: Kole, a light crude (34 degrees API), and Lokele, a heavier crude (20 degrees API). However, the SONARA refining unit currently in operation only refines light crude. As a result, Cameroon imports, primarily from Nigeria, a significant percentage of the oil refined at SONARA facilities. In 2009, a plan was launched to modernize and expand SONARA’s refining capacity to include the grades of crude produced in Cameroon. For further information see “- SONARA” below.
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Cameroon’s oil reserves were estimated to be approximately 325 million barrels in 2015. In particular, the country’s offshore basins present production potential. Cameroon’s oil reserves are located both offshore and onshore throughout the territory: offshore in the Rio del Rey Basin of the Niger Delta, offshore and onshore in the Douala/Kribi-Camp basins on Cameroon’s western coast and onshore in the Logone-Birni basin in the northern part of the country. Ongoing exploration may lead to an increase in Cameroon’s known oil reserves, but Cameroon currently lacks a developed deepwater oil industry that can exploit deepwater acreage for drilling, with the first deepwater well having been completed in 2014. The Chad to Cameroon oil pipeline, which was completed in 2003, in cooperation with the U.S. Export Import Bank amongst others, and the export terminal at Kribi, give Cameroon the potential to become an important regional oil transport centre.
The country’s natural gas reserves were estimated at 5.4 trillion cubic feet in 2015 and, while increasingly being exploited, the natural gas industry remains small in Cameroon. Cameroon’s gas production is expected to remain modest, compared to other producers in the region, for the foreseeable future. However, projects such as GDF Suez’s proposed LNG terminal have significant production potential. See “- Contemplated projects” In addition, Victoria Oil and Gas announced that two new gas-fired power plants have come online: a 20MW plant in Bassa in March 2015, and a 30MW plant in Logbaba in April 2015. The new wells coming into operation in 2014 increased gas production levels, as did the rise in production at the Dissoni oil field and the Sanaga gas field. The use of improved extraction techniques has also helped to increase production.
Preliminary Government estimates of gas drilling reflect production of approximately 7.07 billion standard cubic feet of natural gas for the first half of 2015. In 2014, natural gas production in Cameroon was estimated to equal approximately 10.8 billion standard cubic feet. Imports of natural gas in 2014 totalled 66,445 metric tonnes, up 6.4% compared to 2013. Quantities of natural gas released for consumption increased by 10.8% in 2014. In 2013, natural gas production in Cameroon was estimated to equal 13,413 metric tonnes, representing an increase of 40.5% due to the renewal of the production unit.
According to Article 3 of Cameroon’s Petroleum Code, ownership of all deposits or natural accumulations of hydrocarbons located within the territory of Cameroon are the exclusive property of the Cameroonian state. Oil activities are therefore subject to authorisation or licensing from the Cameroonian Minister of Mines. SNH was created in 1980 and is the state body in charge of developing and monitoring petroleum activities in Cameroon, managing the state’s interests in the oil sector and controlling the sale of locally-produced crude oil in the domestic and international markets. SNH reports directly to the President and is responsible for promoting the development of the country’s hydrocarbon resources and managing the state’s interests in any discoveries of oil and gas resources.
Crude Oil Production The strong increase in the growth rate of oil sector in 2013 and 2014, was due to a 13.3% increase in oil production, primarily due to increased production in the Dissoni fields and from new oil wells in Padouk, Inoua-Barombi and Barombi. The Government estimates, based on preliminary data, that oil production from the first half of 2015 increased by approximately 22.9% compared to the same period in 2014. The table below reflects Government figures on crude oil production for the years shown:
Crude Oil Production(1) 2011 2012 2013 2014 2015 (1)
Total Quantity (Millions of Barrels) ...... 21.6 22.4 24.3 27.5 33.6
Total Value (CFA billion) ...... 780,135.0 785,342.0 834,413.0 757,987.0 549,372.0
Source: Société Nationale des Hydrocarbures Notes:
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(1) For fields currently under exploitation or for which exploitation is expected to start in 2015. (2) Estimates.
In 2014, crude oil production in Cameroon equalled approximately 27.5 million barrels for the full year due to increased production at the Dissoni field, as well as the 2014 launch of production at the Padouk and Mvia fields. In 2013, production totalled 24.3 million barrels, which was up from 22.4 million barrels in 2012, representing an increase of 8%. In 2012, oil production totalled 22.4 million barrels against 21.6 million barrels in 2011, representing an increase of 3.5%. The value of oil revenues may not bear a linear relationship to production levels, as a result of the prevailing world oil prices, export destinations and other market-based factors. For example, 2015 projection for oil revenues reflect an overall decrease based on low world oil prices prevailing through the first half of 2015.
Mining Mining in Cameroon concerns the extraction of precious and semi-precious stones, as well as the extraction of minerals and other building materials, such as sand and clay, used in various industries. Pozzolana (siliceous volcanic ash used to produce hydraulic cement) is produced in significant quantities in Cameroon and is one of its major mining products, although most production is consumed locally. The other commodities mined are gold, diamonds, sapphire (mostly through artisanal mining operations), quartzite, kyanite, rutile, limestone and marble.
As at August 2014, 1,152.5 carats of rough diamonds had been certified and exported for the year, with a value of approximately CFA 127.5 million. In 2013, 2,420.3 carats of rough diamonds were certified and exported for a value of approximately CFA 285.2 million. In 2014, the Cameroonian national agency for supporting artisanal mining reported the transfer of 31.8 kilograms of molten gold to the Cameroonian Ministry of Finance as well as the channelling of approximately 7.9 kilograms of sapphires, 3,950 cubic metres of quartzite, 220.4 tonnes of kyanite and 0.4 tonnes of rutile into official sales structures. In addition, a smelting unit for refining gold, with a capacity of five kilograms, was erected in Betare-Oya in 2013.
Cobalt, iron ore, nickel and bauxite are some of the key mineral resources that remain largely unexplored or unexploited to a great extent in Cameroon. There is an estimated 1 billion tonnes of unexploited bauxite reserves in Cameroon. Aluminium is produced as a metal through smelting in Cameroon, while the majority of raw material for aluminium production (bauxite) is currently imported from Guinea. Plans are currently underway to better exploit the country’s bauxite reserves. According to Business Monitor International, Cameroon is expected to become a significant centre for iron ore production as several mining projects are expected to come online over the coming years. The abundance of iron ore reserves is expected to attract foreign investments especially from Chinese investors interested in securing a stable and long-term supply of iron ore. The development of these projects would also help diversify Cameroon’s economy and exports beyond oil production.
Mineral exploration and mining operations take place in Cameroon in both industrial and artisanal forms, although industrial mining in Cameroon is a relatively recent development. The Ministry of Industry, Mines and Technological Development (“MINMIDT”) is responsible for issuing mineral exploration licenses. The Institute for Geological and Mining Research under MINMIDT is the agency responsible for all geologic and mining activities in the country (including conducting geologic exploration programmes, mechanised drilling operations, overseeing the mining of mineral deposits and preventing unauthorised exploitation of mines and quarries). The Government has also appointed a special counsel charged with overseeing mining projects in Cameroon (the “Conseil Stratégique de Négociation et de Suivi des Projets Miniers Structurants”). In addition, the Capacity Building Project in the Mining Sector continues a programme entitled “Access to
109 mineral resources and governance of mining operations”, which has conducted aerial geophysical surveys and is currently studying the resulting data.
A renewable operating permit may be granted by MINMIDT for a duration of up to 25 years whereby mining companies sign an agreement stipulating social and economic development plans in the region that hosts the development and/or exploration. These plans include local employment commitments, environmental considerations and tax agreements, if applicable, and companies must also stipulate the share of operational revenues that will accrue to the state.
The Government recently announced privately financed initiatives to exploit diamonds in Mobilon, nickel and cobalt in Lomié, iron ore in Mbalam and bauxite in Minimartap. In the first half of 2014, the Government awarded 20 industrial quarry licenses and 17 industrial exploration licenses and renewed 11 industrial exploration licenses, in addition to issuing 2,500 artisanal mining permits and renewing nine others. However, in May 2014, the Government suspended all new issuances, renewals and transactions regarding artisanal mining permits in order to better regulate the artisanal mining sector and to remediate abuses. In August 2014, a decree was signed modifying the official shares allowed to various actors in the mechanised artisanal mining exploitation sector.
In 2013, nine quarry permits were granted and seven exploration licenses were renewed for industrial operations. For artisanal mining operations, 3,676 operating licenses were awarded in 2013.
Manufacturing Industries The manufacturing sector grew by 4.8% in 2014 as compared to 2013. Growth was 3.6% in 2013 compared to 2012, 5.1% in 2012 as compared to 2011 and 5.4% in 2011 as compared to 2010. The slowing growth between 2012 and 2013 was due to lower activity in the oil refining industry. In the food processing sector, growth also slowed from 5.4% in 2012 to 3.7% in 2013 and growth in other manufacturing sectors also slowed from 4.9% in 2012 to 3.6% in 2013. Other segments that experienced slowing growth in 2013 as compared to 2012 were the oil refining and chemical industries (down by 0.4%), other mineral products (down by 0.4%), processed wood products (excluding furniture manufacturing) (down by 0.6%) and the manufacture of transport equipment (down by 0.9%).
Growth in 2012 can be attributed to growth in the food industry (up by 5.4%) and other manufacturing (up by 4.9%). Manufacturing production increased by 4.1% overall in 2012 compared to 2011, with increases of 4.6% in the food industry and 3.6% in other manufacturing industries.
In 2011, the production of agro-food and food processing increased by 4.2% and other manufacturing categories increased by 1.2% as a whole.
Oil Refining industry and Consumption of Refined Petroleum Products, by Product type The following table give information, in terms of cubic metres of product, on the various types of refined petroleum products sold in Cameroon for each corresponding year:
Consumption of Downstream Petroleum Products 2011 2012 2013 2014 (in cubic metres)
Super ...... 507,202 571,381 612,683 613,908 Diesel (Gasoil) ...... 700,120 771,308 856,459 829,012 Jet A1 ...... 105,517 86,690 103,084 123,632 Fuel 1500 ...... 66,684 62,453 51,155 39,845 Fuel 3500 ...... 36,737 119,998 74,356 37,589
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Consumption of Downstream Petroleum Products 2011 2012 2013 2014 (in cubic metres)
Kerosene ...... 119,957 125,059 113,578 103,676 Liquefied Petroleum Gas* ...... 66,993 72,031 79,817 87,471
Source: SCDP.
Note: * Data in metric tonnes.
The downstream oil industry in Cameroon is also an important sector of the country’s economy. Cameroonian consumption of liquid fuel products is estimated to equal approximately 900,000 tonnes per year, excluding smuggling from Nigeria, which has been estimated to equal approximately 30% of this figure.
In 2014, production of “Super”, “Jet A1” and liquefied petroleum gas all increased slightly, primarily due to growth in the transport industry. Production of other refined oil products decreased in 2014, although domestic gas consumption rose by 31.1%. Retail prices have remained relatively stable since 2008, due to Government regulation. In July 2014, however, the prices of some petroleum products were revised upwards. For example, the price of “Super”, increased from CFA 569 to CFA 650 per litre, the price of diesel increased from CFA 520 to CFA 600 per litre and the price of a 12.5 kilogram bottle of gas increased from CFA 6,000 to CFA 6,500. The price of kerosene remained unchanged at CFA 350 per litre.
In 2013, the production of refined oil products decreased by 29.2% overall. This decline in production is due to the closure of the SONARA refineries in 2013 for maintenance and equipment renewal. However, consumption of super, diesel and Jet A1 was up in 2013 compared to 2012 due to growth in the construction, transport and forestry sectors. A decrease in 2013 consumption of Fuel 1500 and Fuel 3500 was due to the closure of certain thermal power plants due to the non-payment of distributors.
In 2012, all production quantities of petroleum products released for consumption increased due to the start of major projects, except Jet A1 and Fuel 1500. Increasing consumption of Fuel 3500 was attributable to the commissioning of several power stations. Retail prices remained stable under state support.
In 2011, consumption on the domestic market of super, kerosene and diesel increased by 7.8%, 10.2% and 12.7%, respectively. These increases were due to increased demand for transport and increased activity in the construction industry. There was a decrease of 4.5% in consumption of fuel, and a 14.1% decrease in butane consumption, in 2011.
SONARA SONARA is the national refining entity, which has a monopoly on the refining of petroleum products on Cameroonian markets. It is 80.3% owned by the Government and 19.7% owned by Total SA. Given it is not equipped to refine the main grade of crude oil produced in Cameroon, SONARA has to purchase its crude oil on the international market, mainly from Nigeria, but also from Equatorial Guinea and Angola. It sells its refined products, including to distributors in Cameroon, on the basis of a state-mandated pricing structure. The state compensates SONARA for the difference between its production costs and the mandated prices through a subsidy. The state has incurred significant arrears in the payment of this subsidy to SONARA, which created significant funding difficulties for SONARA, in particular with respect to its debts owed to its crude oil suppliers. The financial difficulties of SONARA were compounded by a change in tax law in 2012, which resulted in SONARA being required to pay the 10% custom duties on imported crude oil (and on other
111 oil products imported by SONARA), having previously been exempted from such taxes, which were paid by the distributors on the refined products sold by SONARA.
As at 31 December 2014, the accumulated subsidy arrears owed to SONARA by the state amounted to approximately CFA 401.9 billion including 207.1 billion for 2013 and 194.8 billion for 2014. In addition, in December 2011, May 2012 and December 2012, the state and SONARA agreed to convert a certain amount of pre-existing subsidy arrears into interest-bearing, unsecured bonds governed by Cameroonian law. As of 31 December 2014, the amount of principal and accrued interest outstanding under those bonds was CFA 150.7 billion. As at 31 December 2014, the amount owed by SONARA to its suppliers of crude oil equalled approximately CFA 552.7 billion, including CFA 352.9 billion due as at 31 December 2013.
On 10 February 2015, a consortium of banks extended a CFA 143.5 billion Bridge Loan to the Government (the “SONARA Bridge Loan”) of which CFA 135.9 billion was remitted to SONARA to enable funding of the subsidy arrears and allow the payment of SONARA’s outstanding invoices with respect to certain suppliers of crude oil. On 28 February 2015, the Government paid SONARA approximately CFA 103.7 billion of the 2013 subsidy arrears. As at 30 June 2015, following advances to SONARA by the Government, the subsidy payments remaining in arrears amounted to approximately CFA 154.7 billion. In addition, following payments made by the state, the amount of principal and accrued interest outstanding under the bonds issued by the state to SONARA was CFA 137.9 billion. The amount owed by SONARA to its crude oil suppliers amounted to CFA 383.5 billion after receiving payments under the SONARA Bridge Loan, including CFA 217.0 billion already in arrears as at 31 December 2013.
A portion of the proceeds under the Notes will be used to repay the SONARA Bridge Loan in full, in accordance with the terms of the SONARA Bridge Loan. See “Use of Proceeds”
In 2009, Cameroon embarked on a two-phase plan to modernise SONARA, expand its refining capacity and equip it to be able to refine more of Cameroon’s crude oil. Phase one, which is expected to be completed in the second half of 2015, is to increase the capacity of the SONARA refinery from 2.1 million tonnes per year to 3.5 million tonnes per year. This phase will also allow Cameroon to refine more Cameroonian oil and to export more refined products. Phase two is designed to improve the refining process through the installation of a hydrocracker which will allow for refining of lower value, lower quality fuels into higher value, higher quality fuels which will help ensure the economic viability of the refinery. Feasibility studies on phase 2 have been undertaken and financing of this phase is in the process of being negotiated. This addition is expected to cost approximately CFA 397 billion. See “ Risk Factors – Cameroon is in significant arrears with respect to subsidy payments to SONARA, the national refining entity. Failure adequately to refinance SONARA could have significant economic consequences on the Cameroonian state budget” and “ – Cameroon’s economy is dependent on oil production and global prices of oil”
Agro-Food Industry and Food Processing In 2014, the agro-food and food processing sector was estimated to have grown by 4.8%.
In 2013, the rate of growth in food processing plants declined to 3.7% in 2013 from a growth rate of 5.4% in 2012. Nonetheless, most sub-sectors in the agro-food industry grew during 2013. The food processing sub- sectors that suffered from declines in 2013 are the following: cereal processing, which declined by 0.5% in 2013 compared to 2012, and the fresh produce and milk preparation industries, which declined by 0.1% in 2013 compared to 2012.
In 2011, the production of agro-food and food processing increased by 4.2%, reflecting gains in the production of refined oils (up by 10.6%), beverages (up by 7%) and mixed grains products (up by 28.1%). This growth in the food processing industry has been made possible through improved electricity supply, increased demand and a renewal of production equipment.
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Electricity, Water and Gas Distribution
The following table shows production of electricity and water in each of the respective years:
2011 2012 2013 2014 (est.) Production of Electricity and Water Electricity (in ‘000 MWh) ...... 4,983 4,963 5,442 6,138 Water (in ‘000 of cubic metres) ...... 122,999 123,931 126,186 132,389
Water To improve access to safe drinking water in rural areas, several projects were underway in 2014 including: 20 drinking water supply projects and 363 drilling projects using BIP financing, 73 water supply projects using funding from the AfDB and 251 drilling projects using Japanese grants.
The Government estimates that, based on preliminary data, water production for the first half of 2015 increased by 11.0% compared to production levels during the first half of 2014, primarily as a result of new capacity coming on line. Water production increased in 2014 with the rehabilitation of water plants at Yato in Douala and Mefou in Yaoundé. In 2013, water production was 126.2 million cubic metres, up by 1.8% from 2012. Similarly, the water treatment centres in Mefou and Akomyada strengthened their treatment capacity during the year. By the end of 2014, treated water production increased by 4.9% compared to 2013. In 2012, water production was 123.9 million cubic metres, up by 0.7% compared to 2011. In 2011, water production was 123 million cubic metres, down by 1.5% compared to 2010. This decrease resulted from both the decay and saturation of production equipment and from unmanageable levels of rainfall.
Industrial Gas In 2014, industrial gas production increased by 10.3% compared to 2013 and 2013 production was 2.1% higher than 2012. This increase in 2013 is attributable to an increasing number of industrial players using gas as their main power source, due primarily to two new gas-fired plants in Bassa and Logbaba, as well as increased demand from Chad.
Electricity Actis-SONEL controls the generation, transmission and distribution of power in Cameroon. In 2013, it was estimated to have an installed power generation capacity of 929 MW (732 MW of hydroelectric capacity and 197 MW of thermal capacity) and managed an extensive transmission and distribution network in the country, serving more than 780,000 customers. Power resources are allocated in priority to major electricity consumers (such as the aluminium smelting operations of ALUCAM), as well as household consumers.
The country relies heavily on hydro-electric power, with about 79% of total installed power generation capacity coming from hydropower. According to INTPOW, a Norwegian renewable energy forum, Cameroon has the third highest level of hydropower potential on the African continent, with gross theoretical hydropower potential of 294,000 gigawatts per year. However, Cameroon’s reliance on hydroelectricity makes its electricity sector highly vulnerable to droughts during the dry season, which runs from November to June. Actis-SONEL is taking steps to improve this situation by installing more thermal based power generation units. Actis-SONEL commissioned the 85MW heavy-fuel-oil-fired Limbe thermal power plant in 2004. This was its first power project as a combined entity and was aimed at catering to the projected electricity shortfall in the southern region of Cameroon during the dry season. Construction of another project, the Kribi power station, was completed in December 2012 and commissioning was completed in June 2013. The Kribi power station is scheduled to complete a project to increase its power output by 2016. The Government has also integrated plans for increased catchment areas in the construction plans for major hydro- electric dam projects.
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The Government plans to expand power production capacity by 3,000 MW by 2020 with the aim of becoming a net exporter of electricity to neighbouring countries. An estimated U.S.$13.7 billion is to be spent to increase electricity output through the construction of hydroelectric dams and thermal power plants. Among the international organisations investing in Cameroon’s energy sector are the World Bank, AFD, AfDB, and the European Investment Bank. With their investments and with assistance from the Government, the Lom Pangar hydropower project is being built on the River Lom in Cameroon’s Eastern region at a cost of CFA 200 billion (approximately U.S.$386 million). This project is expected to support the country’s economic development and significantly improve the supply of electricity in the country.
The following table shows sales of electricity for the years 2011 to 2014, broken down by the required voltage of the purchaser:
2011 2012 2013 2014 Sales of Electricity (by voltage)
Low Voltage (in ‘000 MWh) ...... 383 401 394 396 Medium Voltage (in ‘000 MWh) ...... 245 252 272 268 High Voltage (in ‘000 MWh) ...... 404 415 418 430
Source: ENEO. CDE.
The Government estimates, based on preliminary data, that electrical production for the first half of 2015 increased by 3.9% compared to production levels during the first half of 2014. This increase is estimated to come as a result of increased production in the power plants at Kribi, Logbaba and Dibamba.
In 2014, electrical production in Cameroon was up by 12.8% compared to 2013. The electricity sub-sector grew an estimated 11.4% in 2014 compared to 2013 and 8.7% in 2013 compared to 2012. The 2013 and 2014 growth was due to the completion of the Kribi gas power plant. The construction of dams at Lom Pangar, Memve’ele, Mekin, Menchum and other sites were still are ongoing at the end of 2014. At the end of 2014, 80 towns and localities in rural areas were being wired for electrical power using BIP funding. The state and the Islamic Development Bank are jointly funding an additional 120 rural electrification projects that are currently underway. The construction of six mini-hydroelectric power stations is also underway, as is the electrification of 100 localities using solar energy.
In 2012, electricity production was 4,963 thousand kilowatt-hour, down by 0.4% compared to 2011. This decrease was attributable to outdated equipment, poor weather conditions and the shutting down of operations at the emergency thermal power plants. In 2012, 70 rural communities were connected to the national grid.
In 2011, electricity production was 4,983 thousand kilowatt-hour, up by 3.3% compared to 2010. This increase was due to investments in network rehabilitation and maintenance of hydroelectric and thermal power plants.
Buildings and Public Works (“BTP”) The Government estimates, based on preliminary data, that the buildings and public works sector grew by 7.2% for the first half of 2015 compared to the same period of 2014. In 2014, the BTP sector grew by 7.9% compared to 2013 and 12.9% in 2013 compared to 2012. Production in this sub-sector resulted from the construction, rehabilitation and maintenance of road infrastructure, as well as construction of public buildings.
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Road and Infrastructure Construction The economic development of Cameroon depends on the development of key infrastructure sectors, in particular, transport. Road transport accounts for about 70% of the country’s transport network and is currently constrained by the poor state of the roads. Less than one seventh of Cameroon’s roads are currently paved or tarred. Cameroon is an important transit country among the landlocked countries in Central Africa, but the state of its transport infrastructure leads to an increase in transport costs and unusually long transport time. The Government is investing heavily in road development. For example, the Nigeria – Cameroon Multinational Highway and Transport Facilitation Project is being constructed with funds from the AfDB, the World Bank and Japan’s Agency for International Development. China First Highway Engineering Company is building a six-lane highway between Douala and Yaoundé that is expected to promote trade particularly between Cameroon, the Central African Republic and Chad.
As at 31 December 2014, various road infrastructure projects were partially or mostly completed, as follows:
tarring of the road between Ngaoundere and Garoua Boulai was completed;
construction of the road Bamenda- Batibo- Numba- Bachuo Akagbe- Mamfe- Ekok was partially completed;
construction of the Foumban-Tibati, Zoétélé-Nkolyop and Nkolessong-Magba roads was partially completed;
sections of the roads between Sangmélima and Bikoula and between Djoum and Mintom were paved;
construction of the Ndop-Kumbo section of the Ring Road was mostly completed; and
construction the second bridge over the Wouri estuary was partially completed.
In addition, in 2014, a significant part of the Maroua-Kousseri road had been renovated and most of the construction on the Yaoundé-Bafoussam-Bamenda road had also been completed. Accident-prone areas of the Yaoundé-Mbalmayo-Ebolowa and the Ngaoundere-Garoua roads received improved signalling and navigation infrastructure in 2014. Nonetheless, road construction and renovation was hindered or slowed in the North and Eastern region, due to terrorist activity related to the Boko Haram group.
As at 31 December 2013, selected road infrastructure projects were completed or underway, as follows:
construction of the Figuil-Magada, Nandeké-Mbere, Bamenda-Mamfe-Ekok and Djoum-Mintom roads;
renovation of the Mora-Dabanga, and Dabanga-Kousseri-Kousseri Bypass roads;
grading of the Numba-Bachouo-Akagbe, Ngaoundere-Mbe-Garoua and Garoua Boulaï-Nandeke roads; and
tarring of the Foumban-Tibati road (Manki bridge sections of the Mapé and Foumban-Manki roads).
In 2013, planned maintenance projects on the national road network covered almost 83% of the 9,500 kilometres of dirt roads, 94% of the 3,000 kilometres of paved roads and 65% of 3,408 kilometres of rural roads. In the context of decentralisation and in an effort to lower the regional unemployment rates, 2,000 kilometres of roads were maintained through high intensity labour in 2013. This method implies minimal use of machinery or automation for grading, tarring and ditch-digging work.
Protection of road assets continued with densification and modernisation of weighing stations, the systematic control of axle loads on paved roads and the rehabilitation and improved management of rain barriers on dirt roads.
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In 2012, national network maintenance work focused on 9,400 kilometres of dirt roads, 3,286 kilometres of paved roads and 3,500 kilometres of rural roads. The work involved mechanised maintenance of paved roads, dirt roads, bridges and ferries. The work to connect rural areas continued. Roadside maintenance became a municipal responsibility.
In 2011, BTP accounted for 5.5% of GDP and value added increased by 9.6%. Actions remained focused on the improvement of the national road network.
Public Buildings Construction and Inspection In 2014, construction work continued on school infrastructure including university buildings in Douala, Maroua and Bamenda, hospitals (including Cameroon’s first gynaecological hospital), sports stadiums and sports complexes, and housing.
In addition, the Government has undertaken to improve building inspections and increase site visits to construction sites of buildings and public structures in accordance with established standards. Such efforts are also aimed at promoting the use of local materials in construction sites.
In 2014, the building sub-sector and public works accounted for approximately 3.9% of GDP in Cameroon. In 2013, the building sub-sector and public works accounted for 3.7% of GDP in Cameroon. In 2012, the building sub-sector and public works accounted for 5.7% of GDP.
Tertiary Sector: Services The tertiary sector, or service sector, includes wholesale and retail trade, as well as the tourism and hospitality, transport and shipping industries. The table below provides a breakdown of the tertiary sector by its major industries:
Tertiary Sector Industries (as a % of GDP)
2011 2012 2013 2014* Commerce, restaurants and hotels ...... 19.5 % 19.5 % 19.9 % 19.4 % Transport, warehousing, communications ...... 7.1 % 6.9 % 7.1 % 7.2 % Banking and financial services ...... 1.1 % 1.0 % 1.1 % 1.2 % Other commercial services ...... 10.5 % 10.2 % 10.1 % 10.2 % Non-commercial public services ...... 8.2 % 8.3 % 8.4 % 8.3 % Other non-commercial services ...... 1.2 % 1.2 % 1.1 % 1.2 % Tertiary Sector ...... 47.6 % 47.1 % 47.7 % 47.5 % Sources: INS, MINFI/DAE
Note: * Estimates.
The tertiary sector represented approximately 50.2% of GDP in 2014, 49.4% of GDP in 2013, 46.6% in 2012 and 46.9% in 2011. It also includes the financial services sector, which accounted for approximately 1.2% of GDP in 2014. The services sector grew overall by 5.4% in real terms in 2014 compared to 2013, by 6.1% in 2013 compared to 2012 and by 5.5% in both 2012 and 2011 compared to the preceding years. The tertiary sector covers a broad variety of economy activities, but the sub-sectors that contributed most to the growth in 2013 were wholesale and retail trade, tourism, transport and telecommunications.
In 2012, the growth of the service sector was 5.5%. This growth was attributable to the following sub-sectors: warehousing and transportation, telecommunications and banking and financial institutions.
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In 2011, the service sector grew by 5.5%. Industry growth was observed in the following subsectors: banks and financial organisations, transport, storage and communication and trade, restaurants and hotels.
Wholesale and Retail Trade This category includes both domestic trade and export. The Government organised fairs and promotional days in 2013 to promote export of cocoa, coffee and textiles and participated in international trade fairs in Algeria, the Democratic Republic of the Congo (“DRC”) and Nigeria. A significant portion of wholesale and retail trade remains hidden in the informal sector, making it difficult to track, promote and tax.
Financial Services Under Government statistical methods, the financial sector includes the financial services, real estate and business services sector. These activities together accounted for approximately 10% of the Cameroonian economy in 2014.
In particular, the banking and financial sector in Cameroon is characterised in the 2011 to 2014 period by: (i) an increase in bank accounts through the opening of new branches by banks and micro-finance institutions; (ii) an increase in loans and deposits; (iii) a reduction in nonperforming loans; and (iv) a decrease in interbank transactions.
The financial services sector in Cameroon is composed of 14 active retail banks with a network of 231 agencies and branches, a postal savings network CAMPOST, approximately 418 micro-finance institutions, 25 insurance companies and The Douala Stock Exchange. For more information on the financial services sector in Cameroon, see “Monetary System”.
Tourism Tourism accounted for 1.7% of GDP in 2014, compared to 1.5% of GDP in 2013, 1.2% in 2012 and 1.1% in 2011. In 2014, number of tourists visiting Cameroon grew by 11.6% in 2013, 35.3% in 2012 and 5.5% in 2011. In 2014, Cameroon offered approximately 556 hotels with a capacity of approximately 15,349 rooms, 338 suites and 304 apartments, in addition to 102 leisure facilities, approximately 385 restaurants, 225 travel agents and 110 licensed tour guides.
In 2014, the average room occupancy equalled 58.0% for the full year, compared to approximately 64.0% for the first half of 2015, according to preliminary Government estimates. According to a survey conducted by the Cameroonian Finance Ministry, in the first half of 2014, the number of overnight stays in Cameroonian accommodations increased by 1.4% compared to the same period in 2013. However, violence, epidemics and other sources of insecurity in 2014 and 2015 have had a negative impact on tourism in 2014 and 2015, especially in border areas and in the extreme North of the country. In 2014, the National Technical Commission of Tourism Establishments (Commission technique nationale des établissements de tourisme) authorised the construction of 37 hotels and granted 43 operating permits to hotels, travel agencies and restaurants and certified three tour operators. The construction of a three star hotel in Ebolowa was completed in 2014 and the Meyomessala Tourist Centre, a three-star resort, began upgrading its equipment as did 15 other hotels in Cameroon.
In 2013, the number of tourist arrivals increased by 11.6% compared to the number of arrivals in 2012. The number of registered visitors at the entrance to national parks and hunting areas was 129,592 in 2013 compared to 100,000 in 2012. According to the business survey conducted by the Cameroonian Finance Ministry, the average rate of room occupancy in 2013 remained stable at 58.3% and the number of nights spent in hotels increased by 4.6% compared to 2012.
In 2012, 817,226 tourists entered Cameroon compared to 604,052 the previous year, for an increase of 35.3%. The private sector invested CFA 457.6 billion in the industry, of which CFA 292 billion was invested into
117 hotels and CFA 163.3 billion went to travel agencies. According to the business survey conducted by the MINFI in 2012, the number of overnight stays increased by 6.1% and average room occupancy increased 2.7%. The increase is attributable to improvements in hotel infrastructure and quality of service.
The private sector invested about CFA 26 billion for the construction of tourism facilities in 2011. The results of a survey conducted by the MINFI show that the number of overnight stays increased by 6.4% in 2011 with an average occupancy rate of rooms at 54.3%. Regarding the supply of accommodation, in 2011, the country had 468 hotels, with a capacity of 13,363 rooms, 298 suites and 264 apartments and approximately 167 hotels complied with the international norms and standards of the hospitality industry.
Transport The different modes of transport available in Cameroon are road, rail, sea and air, but transportation remains an obstacle to economic development. In 2010, the Logistics Performance Index, a worldwide survey of global freight forwarders and express carriers, ranked Cameroon 105 out of 155 in ease of moving goods and connecting to markets, citing the main problems as clearance delays at the Douala port and the poor conditions of roads and railways. The port of Douala serves as a major point of entry and exit for goods and people from the entire CEMAC region, in particular the landlocked countries of Chad and the Central African Republic. According to the World Bank, in 2011, 452,000 tonnes of trade flowed from Cameroon to Chad and 57,000 tonnes of trade flowed from Chad to Cameroon; while 252,000 tonnes of trade flowed from the Central African Republic to Cameroon, and 126,000 tonnes of trade flowed in the other direction.
Transport by road accounts for approximately 85% of transportation and goods shipping in Cameroon. Cameroon has approximately 50,000 kilometres of roads, of which approximately 15% were paved in 2014. Modernisation of the road network is major Government priority for development.
Road transport Transportation in Cameroon’s roads is considered to be part of the services industry. This segment is, however, notoriously difficult to track as much of the transport of persons and goods takes place as part of the informal sector.
Road accidents are a major concern in Cameroon. The actions undertaken by the Government in 2014 to improve road safety include:
control of travel agencies and technical inspection centres;
dissemination of road safety messages in the media;
awareness campaigns in communities along the main roads and in schools and universities;
removal of abandoned vehicles and illegally parked vehicles along the roads;
intensifying the use of radar-monitored speed zones on the Yaoundé-Douala-Bafoussam network where accidents are frequent; and
identifying and eliminating hazards causing traffic accidents.
In 2013, the number of traffic accidents rose by 3.3% from 2,728 in 2012 to 2,820 in 2013. To reduce the number of accidents and combat dangerous behaviour, such as speeding, overloading vehicles, telephoning while driving and drunk-driving, on-going check-points have been implemented along with awareness campaigns and law enforcement. Inspections revealed more than 100,000 offences in 2013, and resulted in several suspended driving licenses as well as five revoked operating licences issued to travel agencies. Other remediation actions in 2014 were: (i) compliance checks of 300 travel agencies and 450 driving schools and (ii) the computerisation of driving licenses.
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Rail Transport Cameroon disposes of 1,100 kilometres of railway track, running northeast from Douala. CAMRAIL is a private operator, which was granted a 20-year concession to run the Cameroonian railroad system in 1999. Comazar, a subsidiary of a French investment group Bolloré, owns the rolling stock, while the Government owns the track. CAMRAIL accounts for about 60% of non-mineral traffic traveling from Douala to the borders of Chad and the Central African Republic.
According to preliminary Government estimates, Cameroonian rail traffic growth was estimated to include an 18.4% increase in rail passenger traffic during the first half of 2015, compared to the same period in 2014. In 2014, Cameroonian rail traffic was estimated to include a 3.1% increase in freight traffic, a 9.3% increase in rail passenger traffic and a 4.7% increase in overall rail revenues compared to 2013. In 2013 passenger rail traffic declined by 8.5% compared to 2012 and freight traffic declined by 0.6% in 2013 compared to 2012. The 2013 and 2014 decreases in quantities transported were related to the decrease in shipments of oil (down by 9.6%) and building materials (down by 8.2%).
In 2013 and 2014, the purchase and commissioning of 11 locomotives and 40 passenger cars, and the commissioning of an “Inter-City” train were intended to increase the supply of rolling stock.
In 2012, rail transport increased cargo traffic by 7.8% and decreased passenger traffic by 2.6%. This resulted in a 6.1% increase in revenue. The cargo increase is attributable to cargo oil (up by 11.4%), building materials (up by 12.8%) and containers (up by 4.6%). The decline in rail passenger traffic is attributable to the paving of road sections of the Yaoundé to Bertoua road and the Yaoundé to Nanga-Eboko road.
In 2011, rail transport recorded a 6.9% increase in passenger traffic and a 6.5% decrease in freight traffic, causing revenues to fall by 5.5% compared to 2010. The decrease in freight traffic is due to a decrease in transport demand for cotton, fertilisers, insecticides, flours and grains.
Sea and Inland Shipping For the first half of 2014, maritime transport experienced an increase of 2.7% in terms of tonnes shipped compared to the same period in 2013. This resulted from a 4% increase in tonnage of imports, which was not entirely offset by the 1% decrease in export tonnage over the same period. Revenues from maritime transport are estimated to have increased by 7.3% for the full year 2014.
In 2013, maritime traffic was up by 15.9% compared to 2012 reflecting increases in tonnage of goods for import (up by 14.3%) and export (up by 20.4%) causing shipping revenues to increase by 6.1% in 2013.
In 2012, global maritime traffic increased by 7.3%. The increase was attributable to changes in the tonnage for goods equal to a 7.8% increase in tonnage for shipments of imports and an increase of 5.9% in tonnage for exports.
In 2011, the volume of goods transported increased by 14.4% compared to 2010. The increase was attributable to increases in the tonnage for goods by 14.8% for imports and by 13.2% for exports.
Air transport Cameroon has 6 airlines: Air Leasing Cameroon, Camair Co, Cargo Airways International, CHC Cameroon, Elysian Airlines and Jet Fly and an additional 20 airlines have service to Cameroon (including KLM-Air France and Royal Air Maroc). The two major airports in Cameroon are Douala and Yaoundé. In total, including military airports, Cameroon has 22 airports that service domestic, international and intercontinental flights. According to a 1999 Africa Infrastructure Country Diagnostic paper, flights within Cameroon carried 105,742 passengers annually on domestic flights, 472,089 passengers on international flights within Africa, and 398,034 passengers annually on intercontinental flights. Between 1993-2008, seven airports in Cameroon were managed under public-private partnership contracts.
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The number of air passengers rose steadily over the 2011-2014 period from approximately 943,798 in 2011 to 1.1 million in 2012 to 1.2 million in 2013 and an estimated 1.3 million in 2014. During the first six months of 2014, travel by air passengers, air freight and airline revenues, were up by 13.1%, 18% and 11.1%, respectively, compared to the same period of 2013. The air freight and airline revenues increased by 5% and 5.7%, respectively, in 2013 compared to 2012.
These 2014 and 2013 changes were due to increased regularity of flights, adherence to schedules and the opening of routes to new destinations. Operators in the sector, including the state-owned CAMAIR, have estimated increases of 8.7%, 7.3% and 5.1% in passenger traffic, freight shipments and revenues, respectively, for the full year 2014. In 2012, overall passenger traffic increased by 19.4% to CFA 1.1 million while air freight was up by 24% for the year. In 2011, the total number of passengers carried by national and international companies rose to 905,035, an increase of 25.6%. Air freight rose 7.6% to 19,119 tonnes in 2011. This growth is explained by the opening of new routes.
Telecommunications Cameroon’s third mobile network provider, NextTel Cameroon, a subsidiary of the Vietnamese company Viettel, was approved in June 2013 and introduced the country’s first 3G network. In 2015, a fourth mobile provider contract was awarded to CamTel. The other two mobile operators competing in Cameroon are MTN (South Africa) and Orange (France). Telecommunication services are still relatively expensive, although average revenues per user have receded as the market has developed over recent years.
Due to the large degree of poverty, Cameroon has a relatively low, but growing, mobile penetration rate. Figures from the International Telecommunication Union (ITU) indicate a mobile penetration rate of approximately 64% in 2012, up from 52.4% in 2011. At the end of 2012, MTN had a 54.1% market share, with Orange covering the remaining 45.9% of the market. In 2013, IHS, a major mobile infrastructure operator in Africa, signed contracts with Orange and with MTN to operate the towers in the country, which is expected to improve the mobile network situation.
The fixed-line monopoly operator CamTel has been slated for privatisation. Until recently, CamTel had exclusive access to the SAT-3/WASC international fibre optic submarine cable, which kept prices high and led to a ‘grey’ market where unlicensed operators offered internet services. However, two new international cables arrived on the market in 2012 and 3,200km of fibre optic cables from Chinese company Huawei were installed in May 2013. This brought the total network of fibre optic cables in Cameroon to 6,000 kilometres, with the Government aiming for 10,000 kilometres of cable by 2020.
The number of telephone subscribers in Cameroon at the end of 2014 was approximately 17 million. In the first half of 2014, the number of telephone subscribers grew by 16.4% and sales in the industry grew by approximately 1.7%.
Based on preliminary data for the first half of 2015, the Government estimates that the telecommunications sector grew by approximately 16.3% in the first half of 2015, compared to the same period in 2014. This is explained by greater diversification of services and the entry of a fourth operator in the market at the end of 2014.
For the full year 2014, the telecommunications market in Cameroon was estimated to have grown by 8.2% in terms of the number of subscribers and 4.7% in terms of revenue. In 2013 and 2014, significant investments were made to expand coverage areas and a third mobile operator, NexTel Cameroon, entered the market.
In 2013, the number of telephone subscribers in Cameroon in 2013 was approximately 15.2 million, an increase of 13% compared to 2012. This increase is due to 13% growth in mobile subscribers and 13.9% growth in landline subscribers.
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In 2012, the number of all telecommunications subscribers, taken together, increased by 28.6% to 13.9 million as compared to 10.8 million in 2011. This increase is attributable to an increase of 29.1% of mobile phone subscribers and 20.1% of landline phone subscribers. Revenues rose by 8.7% as compared to 2011.
In 2011, the number of mobile phone subscribers increased by 21.2% and the number of fixed subscribers increased by 22%. Revenues were up 4.2% as compared to 2010. There was a densification of the network of increased access capabilities via submarine fibre optic cable, the diversification of commercial offers and the organisation of large promotional campaigns.
Telecoms Subscribers 2011 2012 2013 * 2014 * Total Number of Subscribers ...... 10,808,863 13,898,465 15,212,937 17,001,664
Landline ...... 658,263 790,472 895,809 895,809
Mobile ...... 10,150,600 13,107,993 14,317,129 16,105,855
Total Revenue (en CFA millions) ...... 457,131 496,924 526,564 514,078
Landline revenue ...... 72,757 73,379 83,157 82,562
Mobile revenue ...... 384,374 423,545 443,407 431,516
Source: CAMTEL, ORANGE, MTN.
Note: * Estimates.
With regard to rural telecommunications, 42 new community tele-centres were under construction as at the end of 2014. These will be added to 179 existing centres with connections via satellite and fibre optics.
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FOREIGN TRADE AND BALANCE OF PAYMENTS
Foreign Trade
Foreign Trade Policy
Cameroon’s trade and investment policy focuses on the need to increase its exports and increase its foreign direct investment inflows. Cameroon’s laws provide equal treatment and identical incentives to domestic and foreign investors. In particular, they protect property rights, allow for income and capital repatriation and allow for compensation in case of expropriation. Cameroon also accepts binding international arbitration of investment disputes.
Cameroon is a signatory to several treaties and is a member of several organisations that promote trade and protect property or investors’ rights. For example:
it is a signatory to the Lomé Convention and has been a member of the World Trade Organisation (the “WTO”) since 1995;
it is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958;
it is a signatory to the OECD Convention on Mutual Administrative Assistance in Tax Matters which the Senate has ratified and awaits the President’s signature to finalize ratification;
it is a member of the Multilateral Investment Guarantee Agency, which protects investment from non- commercial risk; and
it is a member of the World Intellectual Property Organisation.
Cameroon’s largest trading partner is the EU, followed by China and Nigeria. Its major exports include oil and agricultural products, including cash crops such as cocoa and coffee. For more information, see “The Cameroonian Economy—Agriculture”. Cameroon’s primary imports include oil and manufactured goods, such as automobiles, pharmaceutical products and textiles.
International and Trade Relations
Africa Cameroon is a member of the African Union’s New Partnership for Africa’s Development. It is a signatory to the Treaty on the Harmonisation of Business Law which formed the OHADA to harmonise business laws across 17 West and Central African states. It is a member of, and serves as the headquarters to, the Organisation Africaine de la Propriété Intellectuelle, or the African Intellectual Property Organisation.
Cameroon is a member of the Economic Community of Central African States. It signed a bilateral commercial accord with Nigeria in 1963, which was revised in 2014, in order to increase investment and cross-border commercial cooperation between the two countries and is being reviewed for ratification. Also in 2014, Cameroon and Nigeria took further steps to coordinate their efforts against Boko Haram.
Cameroon is a member of the six-country CEMAC.Membership in the CEMAC zone unifies Cameroon with the other signatory countries (Congo, Gabon, Equatorial Guinea, Central African Republic and Chad) through a common external tariff and through the trade union that guarantees free movement of goods, services and people within signatories’ territories.
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Historically, people and goods coming from or going to other CEMAC states have transited through Cameroon by way of the region’s only deep-water port at Douala. Another deep-sea port is being built and put into operation in Kribi which is expected to increase the flow of goods to and from Cameroon. The ongoing conflict with Boko Haram has weakened the economic exchanges along the borders with Nigeria and Chad. Tourism in parts of the Far North has ceased and trade routes have been closed on occasion in the past, preventing much trade from Chad from accessing the port of Douala. The ongoing civil conflict in the Central African Republic has also impacted trade with that country, as well as the flow of goods through Douala. See “Risk Factors—Risks relating to the Republic of Cameroon—Cameroon has experienced large inflows of refugees” and “Risk Factors—Risk Relating to the Republic of Cameroon—Cameroon may be subject to terrorist attacks from Boko Haram”. For more information on the role of CEMAC in Cameroon, see “Monetary System”.
European Union Cameroon enjoys special trading advantages with the EU. The EU is Cameroon’s leading trade partner and accounted for an estimated 35% of Cameroon’s imports and 46% of the country’s exports in 2013. In August 2014, Cameroon signed and ratified the framework Economic Partnership Agreement to address issues concerning barriers to trade and supply constraints in African, Caribbean and Pacific States (“ACP”) States. This agreement addresses the compatibility of EU-ACP trade relations with the rules adopted by the WTO. As at the date of this Prospectus, not all EU Member States have yet ratified this agreement.
China China and Cameroon have had a diplomatic relationship since March 1971 and China is currently one of Cameroon’s main economic and technical partners. From 2009 to 2014, China’s investment in Cameroon grew significantly. In 2014, China’s investment of CFA 3,000 billion made it the largest investor in Cameroon. The two countries have signed more than 20 bi-lateral agreements, including agreements and treaties relating to economic development, technical assistance, cultural exchange, medical supplies and training, commercial expansion and tourism. In 2014, Cameroon ratified one agreement aimed at promoting and protecting reciprocal investment and another agreement regarding political consultation between the two countries on issues of mutual interest. In 2012, exports to China accounted for over 15% of Cameroon’s exports as measured by volume. Furthermore, China is Cameroon’s main financial and technical partner for constructing and financing many large-scale development and infrastructure projects, such as the following: the industrial port complex of Kribi, the fibre-optic “backbone” network, the Lom Pangar reservoir dam, the Memve’ele dam, the Mekin hydroelectric plant and the highways in Douala-Yaoundé-Bafoussam and in Nsimalen.
India Cameroon and India have had diplomatic relations since 1960. There are several agreements under negotiation between Cameroon and India, including commercial agreements, agreements to promote and protect reciprocal investment and develop small and medium-sized businesses and a framework agreement on general cooperation between the two countries. India has financed several agricultural projects in Cameroon, including a tractor factory in Ebolowa the structure of which is substantially complete and is expected to be completed by the end of 2015, a manioc project and a rice-corn project. Furthermore, Indian financing has also contributed to the connection of the Memve’ele water system with the national system.
United States of America Since May 2000, the United States’ African Growth and Opportunity Act (the “AGOA”) has covered trade with Cameroon. This act seeks to improve trade between the U.S. and Sub-Saharan Africa. In 2013, under the AGOA, the level of Cameroon’s exports to the U.S. totalled $367 million (approximately CFA 183.5 billion), which was up from $308.3 million in 2012. Taking advantage of the AGOA, Cameroon’s exports to the U.S.
123 increased by 61.4% between 2001 and 2007. Barriers still limit economic opportunities, including strenuous technical regulations for entry into the U.S. market, high sanitary standards and precise packaging requirements. Various products are exported to the United States free of customs duties such as clothing, artisanal products, agri-food and food products.
Other Bilateral Relationships Cameroon is party to several bilateral international agreements, notably with South Africa, the Organisation of Islamic Cooperation, Tunisia and Libya. Commercial agreements with the Ivory Coast and Nigeria are also being negotiated. Several other bilateral agreements are being finalised, notably with Brazil, Turkey and Morocco.
Trade Balance and Trade Deficit
Cameroon imports more goods and services than it exports. In particular, Cameroon imports many higher- margin finished goods for final consumption, whereas its exports consist of raw materials and low-margin commodities. Import substitution, i.e. the replacement of imported goods with locally produced finished products, particularly in the area of consumer goods, is necessary to reverse this imbalance.
The following table sets forth Cameroon’s trade balance for the periods indicated:
2011 2012 2013 2014 (CFA billions, except percentages)
Exports ...... 2,136.2 2,182.5 2,230.7 2,557.9 Exports, excluding oil ...... 1,372.4 1,245.8 1,213.0 1,334.2 Crude oil ...... 761.2 936.3 1,088.4 1,223.7 Imports ...... 3,209.8 3,325.2 3,285.1 3,747.3 Imports, excluding petroleum products...... 2,373.8 2,315.8 2,512.5 2,695.3 Petroleum products(1) ...... 836.2 1,009.4 772.6 1,052.0 Trade balance (deficit) ...... (1,073.6 ) (1,142.7 ) (1,054.4 ) (1,189.4 ) Import coverage rate(2) (%) ...... 66.5 % 65.6 % 67.9 % 68.3 % Source:DAE/MINFI
Notes: (1) Petroleum products include crude oil, in the amount of CFA 761 billion in 2011, CFA 664 billion in 2012, CFA 493 billion in 2013 and CFA 708 billion in 2014. (2) The import coverage rate is the value of exports for a given period divided by the value of imports for that period, shown as a percentage. Changes in the coverage rate from year to year show whether the trade deficit is widening or narrowing.
In 2014, the trade deficit increased from CFA 1,054.4 billion in 2013 to CFA 1,189.4 billion, despite the fact that both imports and exports increased in 2014 compared to 2013. Nevertheless, the import coverage rate improved slightly to 68.3%, showing that the deficit remained proportional to the overall growth in imports and exports. Notably, the 2014 annual foreign trade figures show an increase in imports of petroleum products in 2014, which recovered to their 2012 levels. The 2013 drop in imports of petroleum products was primarily due to the temporary closure of the SONARA refinery in 2013.
In 2013, the trade deficit was reduced to CFA 1,054.4 billion, primarily due to a 2.2% increase in exports and a 1.2% decrease in imports. The import coverage rate increased to 67.9% compared to 2012 as crude oil exports increased by approximately 16.2% and the imports of petroleum products decreased by 23.5%. In
124 particular, Cameroon increased its trade surplus with the EU from CFA 81.8 billion in 2012 to CFA 411.8 billion in 2013 particularly due to an increased surplus with Portugal and Spain largely due to exports of oil. At the same time, Cameroon reduced its trade deficit with Nigeria from whom Cameroon imports oil, from CFA 447.2 billion in 2012 to CFA 348.3 billion in 2013. The non-oil trade deficit increased to CFA 1,648.7 billion in 2013 and the non-oil import coverage rate decreased from 46.8% in 2012 to 40.9% in 2013 as a result of lower prices on global markets for raw materials exported by Cameroon.
In 2012, the trade deficit increased to CFA 1,143.1 billion from CFA 1,076.4 billion in 2011 as imports of petroleum products and exports of crude oil increased by 20.7% and 23.0%, respectively, compared to the prior year. Exports of non-oil goods decreased slightly partly as a result of poor weather and black pod disease affecting cocoa exports in 2012. The import coverage rate dropped to 65.6% in 2012 compared to the prior year. The non-oil trade deficit was reduced by CFA 266.4 billion to CFA 1,415.1 billion, however, the non-oil import coverage rate decreased from 56.2% in 2011 to 46.8% in 2012.
In 2011, the trade deficit worsened by CFA 459.5 billion to CFA 1,076.4 billion. The import coverage rate dropped from 76.9% in 2010 to 66.5% in 2011. This is primarily attributable to increases in imports, notably crude oil (imports up by 49.0% compared to 2010), imports of transportation equipment (up by 41.9%), imports of cereals (up by 59.1%) and imports of frozen fish (up by 59.1%). The trade deficit was also exacerbated by lower exports of raw cocoa beans, which were down by 19.8%, and lower exports of un- milled timber, which were down by 6.2%, in each case compared to 2010.
Exports In addition to crude oil, Cameroon primarily exports raw materials and cash crops, many of which have suffered from volatile prices in recent years. The following table sets forth the value of Cameroonian export products in CFA billions for the periods indicated:
12 months ended 31 December 2011 2012 2013 2014 (CFA billions) Petroleum Sector Crude oil ...... 761.2 936.4 1,087.5 1,223.7
Primary Sector Raw cocoa beans ...... 241.6 201.6 223.7 279.4 Raw cotton ...... 53.7 73.4 85.7 79.6 Raw rubber ...... 61.9 62.0 60.3 45.5 Bananas...... 41.8 38.2 41.2 38.2 Cocoa paste ...... 23.2 14.8 27.2 31.5 Coffee (robusto) ...... 28.3 34.9 17.0 27.2 Cocoa butter ...... 14.4 13.8 16.0 17.4 Coffee (Arabica) ...... 5.8 9.3 2.7 4.4 Palm oil ...... 4.9 3.9 2.4 2.3
Wood and Building Products Sectors Wood and wood products ...... 229.9 231.0 234.7 254.9 of which Wooden logs ...... 66.8 62.2 72.0 87.6
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12 months ended 31 December 2011 2012 2013 2014 (CFA billions) of which Milled wood ...... 135.9 142.8 135.5 149.0 of which Wood veneer ...... N/A 16.5 17.7 15.9 Lubricants and fuels ...... 345.9 269.3 127.4 159.1 Soap ...... 17.3 20.2 32.3 23.7 Raw aluminium ...... 44.5 26.9 31.8 73.3 Iron bars or non-alloyed steel ...... N/A 16.7 13.8 13.0 Jars, jugs, and bottles ...... N/A 7.9 10.0 5.2 Wood and cardboard boxes ...... 10.1 9.7 6.7 0.6 Aluminium sheets (rolls) ...... N/A 5.1 5.6 5.9 Cement ...... 5.0 5.7 4.8 2.0 Other ...... 246.7 201.7 199.9 271.0 Total Exports (FOB) ...... 2,136.2 2,182.5 2,230.7 2,557.9 Source: MINFI/DGD, DAE
Despite lower oil and commodity prices and slow growth of the Eurozone, the total value of exports for the year ended 31 December 2014 was CFA 2,557.9 billion, which represents an increase of 14.6% from 2013 levels. This increase was in particular due to the increase in exports of oil which increased 12.5%, exports of raw cocoa which increased 24.9%, exports of lubricants and fuels which increased by 24.9%, and exports of raw aluminium which increased by 130.1%. This was partially offset by decreases in certain exports such as raw rubber which decreased by 32.5%.
In 2013, exports increased by 2.2% compared to 2012 to reach CFA 2,230.7 billion. Exports increased for two of Cameroon’s top five export categories. Notably, crude oil exports increased by 16.1%, exports of raw cocoa beans increased by 11.0% and exports of raw cotton, Cameroon’s sixth largest export category, increased by 16.8%. These increases were partially offset, however, by lower exports by value of fuel and lubricants, which declined by 52.7% due in part to a lower volume of exports and decreased prices. In addition, exports of robusto and arabica coffee declined by 55.4% compared to the previous year, due in part to diseases such as coffee berry disease and coffee rust. Exports of milled wood were down by 5.1% as a result of lower demand. Crude oil exports in 2013 reached CFA 1,087 billion, representing an increase of 16.1% compared to the preceding year, whereas non-oil exports fell by 8.3% to CFA 1,143.2 billion. Crude oil and related products were the main exports in 2013, accounting for 48.8% of exports by value, followed by wood and wood products at 10.5% of exports, raw cocoa beans at 10.0% of exports, milled wood at 6.1% of exports and fuels and lubricants at 5.7% of exports by value.
In 2012, exports increased by 2.2% compared to 2011 and amounted to CFA 2,182.5 billion. This growth is attributable to the sale of crude oil, which grew by 23.0% to CFA 936.3 billion and accounted for approximately 42.9% of exports in 2012. Conversely, non-oil exports fell by 9.4% to CFA 1,246.1 billion in 2012. This was due to lower exports of fuels and lubricants, which were down by 22.1% compared to the previous year and lower exports of raw cocoa beans which were down by 16.6% compared to the previous year. This decrease was offset by higher exports of milled wood, which were up by 5.1% and exports of coffee, which were up by 29.8% compared to the previous year. In 2012, crude oil was still the main export product representing 42.9% of total export value, followed by fuels and lubricants, which accounted for 12.3% of total exports, wood and wood products which accounted for 10.6% of total exports and raw cocoa beans which represented 9.2% of total exports.
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In 2011, exports increased by 12.9% compared to 2010 and amounted to CFA 2,136.2 billion. Oil exports accounted for CFA 761.2 billion or 30.1% of total exports, which represents a 14.4% increase compared to 2010 exports. Non-oil 2011 exports increased by 12.0% to CFA 1,372.4 billion in 2011. Compared to 2010, exports of the following products increased in value: milled wood exports increased by 10.5%, fuels and lubricants exports increased by 39.9%, raw cotton exports increased by 33.9%, raw rubber exports increased by 31.1%, fresh banana exports increased by 3.2% and coffee exports increased by 4.1%. Compared to 2010, exports of the following products declined by value: raw cocoa bean exports decreased by 19.8%, raw aluminium exports decreased by 8.1% and log exports decreased by 6.2%.
Imports Cameroon has a structural imbalance in imports, which is due to exporting largely raw materials, commodities and cash crops, while importing manufactured goods and crude oil. This imbalance is expected to continue as Cameroon develops its infrastructure and imports the equipment and materials needed to complete such projects. For more information on infrastructure projects, see “The Cameroonian Economy — Public Investment”. Cameroon must import most of the oil that is sold on retail markets within the country due to the fact that SONARA, the national refining company, is not equipped to refine the main grade of crude oil that is produced in Cameroon. Thus, the crude oil produced in Cameroon is largely exported to be refined, in particular to Spain and Portugal. Cameroon’s manufacturing sector is not sufficiently developed to replace imported products with locally competitive ones for many items, especially consumer products and household appliances. For many products, such as rubber and wood, Cameroon exports raw materials and imports finished goods made from those materials. Other industries in Cameroon remain underdeveloped, leading Cameroon to import additional quantities of goods that it currently produces but which are not sufficient to meet domestic needs, such as fish.
The following table sets forth total Cameroonian imports in CFA billions for the periods indicated:
12 months ended 31 December 2011 2012 2013 2014 (CFA billions)
Mineral products ...... 912.2 1,097.5 877.0 1,170.1 of which hydrocarbons ...... 836.0 1,009.4 772.7 1052.0 of which crude oil ...... 764.4 664.0 493.2 708.3 of which fuels and lubricants ...... 28.2 288.4 219.8 275.6 of which clinkers ...... 30.9 43.1 37.3 45.8 of which cement ...... — 26.8 49.4 52.6 Chemical industry products ...... 315.2 306.3 315.6 353.3 of which inorganic chemical products ...... 55.2 47.6 52.7 52.5 of which fertiliser ...... 39.0 37.2 36.4 32.0 Mechanical machines and appliances ...... 269.2 272.8 299.6 338.8 Vegetable products ...... 270.8 315.2 369.1 288.5 of which grains ...... 222.9 264.3 314.5 241.7 of which rice ...... 135.0 156.6 212.6 140.0 Electrical machines and appliances ...... 201.3 181.2 214.1 266.6 Common metal and metal products ...... 183.2 186.2 208.2 226.9 of which cast iron, iron and steel ...... 50.7 61.5 62.1 84.4
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12 months ended 31 December 2011 2012 2013 2014 (CFA billions)
Transport material ...... 312.3 218.4 199.5 295.6 of which cars and tractors ...... 216.7 194.8 186.0 213.7 Animals and animal products...... 178.9 157.0 181.9 180.9 of which frozen fish ...... 148.0 122.2 142.7 145.1 Industrial food products ...... 148.5 154.9 167.0 154.7 Plastic and rubber products ...... 108.1 117.2 130.4 139.3 Textiles and textile materials ...... 98.3 80.1 75.8 77.2 Building materials ...... 34.8 40.8 40.0 40.9 of which ceramic products ...... 23.4 27.5 28.6 28.5 Other ...... 177.0 197.6 206.9 214.5 Total imports (CIF) ...... 3,209.8 3,325.2 3,285.1 3,747.3 Source: MINEPAT for 2011-2013 MINFI/DGD, DAE for 2014
In 2014, the structural imbalance of imports to exports continued as imports for the year grew to CFA 3,747.3 billion, an increase of 14.1% compared to 2013. This change is attributable to the increase in imports of oil by 36.1%, an increase in imports of chemical products by 11.9% and an increase in imports of transportation equipment, including automobiles, by 48.2% in 2014.
In 2013, imports decreased by 1.2% compared to 2012 levels to total CFA 3,285.1 billion. This was due to the 20.1% decrease in imports of mineral products (including oil) which declined from 33.0% of the total imports in 2012 to 26.7% of the total in 2013. Specifically, crude oil imports decreased by 25.7% between 2012 and 2013, due to SONARA refining facilities having closed during that year for maintenance and other projects. Nevertheless in 2013, non-oil imports increased by 4.9% overall. There was a 17.1% increase in imports of vegetable products largely due to an increase of imports of rice by 40.4%, a 13.2% increase in imports of machinery and mechanical or electrical appliances, an 11.8% increase in imports of metals and metal products, a 15.9% increase in imports of animals and animal products and a 3% increase in imports of chemical products.
In 2012, imports increased to CFA 3,252.2 billion from CFA 3,209.8 billion in 2011, representing an increase of 3.6% against the previous year’s imports. The growth of imports was due to imports of mineral products increasing by 20.6%, despite a decrease of 13.2% in crude oil imports due to SONARA’s production. The overall increase in mineral products imports was primarily due to the recovery of fuels and lubricants to their normalised levels after a sharp 2011 decline. In addition, imports of vegetable products increased by 16.4% and imports of industrial food products increased by 4.3%. However, this was partially offset by the decrease in imports of frozen fish by 17.5%, the decrease in imports of chemical products by 2.8%, the decrease in imports of mechanical and electrical equipment by 3.5% and the decrease in imports of transport equipment by 30.1%.
In 2011, imports increased by 22.9% to CFA 3,209.8 billion compared to 2010 levels. Imports of capital goods, which accounted for 31% of total imports, rose by 32% in 2011, in part due to the launch or acceleration of several major infrastructure and development projects. Crude oil purchases increased by 49% from 2010 levels to account for 23.8% of total imports. Imports of cereals increased 38.1%, imports of frozen fish increased by 59.1%, imports of pharmaceuticals increased by 22.7% and imports of fertilisers increased by 45.2% compared to 2010 levels.
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Major Trade Partners
As noted above, the EU has traditionally been Cameroon’s largest trading partner, in particular France, Portugal, Spain, the Netherlands and Italy. In 2014, exports to the European Union fell as the effects of the financial crisis continued to impact demand. China has also established itself as a major trading partner, by both importing commodities and exporting its finished goods; exports to China consist mainly of crude oil and wood. Trade with India has been growing in recent years due to growing imports of products such as pharmaceuticals as well as exports of crude oil and wood. In 2014, exports to China and India expanded. In Africa, Nigeria is Cameroon’s largest trading partner, due to the fact that Cameroon imports most of the oil refined by SONARA from Nigeria. Trade with the U.S. is significant given that Cameroon exports products such as rubber to, and imports products such as electronics and appliances from, the U.S. In most years, Cameroon’s largest trade deficit is with Nigeria and its largest trade surplus tends to be with the EU.
The following table sets forth the imports and exports of Cameroon with its major trading partners in 2012 and 2013:
2012 2013 2014 Imports Exports Net Imports Exports Net Imports Exports Net (CFA billions) EU 1,107.3 1,189.2 81.9 1,024.1 1,435.9 411.8 1,001.9 1,304.9 303.0 China 346.2 333.4 (12.8) 467.4 128.5 (338.9) 672.9 375.8 (297.1) Nigeria 590.9 76.4 (514.5) 452.0 39.5 (412.5) 669.9 53.1 (616.8) India 131.6 54.4 (77.2) 163.2 126.7 (36.5) 109.3 249.9 140.6 United States 116.7 91.1 (25.6) 127.5 65.7 (61.8) 130,6 82.0 (48.6) Other Asia 332.8 67.8 (265) 320.9 88.0 (232.9) 412.8 164,9 (247.9) Other Africa 403.1 315.0 (88.1) 391.5 255.0 (136.5) 474.8 278.0 (196.8) Rest of World 294.4 55.2 (239.5) 338.5 91.4 (247.1) 273.1 49.3 (223.8)
TOTAL 3,325.2 2,182.5 (1,142.7) 3,285.1 2,230.7 (1,054.4) 3,745.3 2,557.9 (1,187.4)
Source: MINFI/DAE,
Trade Analysis by Region Cameroon ranked major trading partners by region in 2014, 2013 and 2012 and by continent in 2011. In analysing its trade for 2012 and 2013 with different regions, Cameroon distinguishes between three different Asian regions: East Asia (which includes China and Japan), South Asia (which includes India) and South East Asia (which includes Thailand). Within Africa, Cameroon analyses trade with West Africa and CEMAC as sub-regions. West Africa most notably includes Nigeria, but also includes other states such as Senegal and the Ivory Coast. CEMAC includes the other CEMAC member states: Equatorial Guinea, Gabon, Chad, the Central African Republic and the Republic of the Congo. In 2013 and 2012, Cameroon analysed its trade data for North America as a whole, although trade with this region is almost entirely composed of trade with the U.S. In contrast, 2011 data includes all of the Americas, including South and Central America, along with the U.S. and Canada.
Trade with the EU As at the date of this Prospectus the European Union was Cameroon’s largest trading partner in 2015. In 2014, the EU remained Cameroon’s largest trading partner, accounting for 37.6% of trade, including 27.6% of Cameroonian imports and 52.2% of Cameroonian exports. The main products exported to the EU in 2014 were: crude oil (Spain, Great Britain, Italy, Netherlands, Portugal), raw cocoa bean (Netherlands, Belgium,
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France), raw aluminium (Italy, France, Netherlands, Spain), fresh bananas (France, Belgium and Italy), rubber (Belgium, France, Spain, Germany), raw wood (Italy, Belgium, Great Britain, Spain, France), aluminium oxide (France), cocoa butter (France), and coffee (Italy, France, Portugal, Spain, Belgium).
The main imports from the EU in 2014 were: wheat (France), cement (Spain, Greece, Portugal), pharmaceuticals (France, Germany, Spain, Belgium, Italy), second-hand clothing (Belgium, Netherlands, Germany, Great Britain, Italy), malt beverages and inputs (France, Netherlands), reception of images and data devices (Netherlands, France, Estonia, Hungary, Sweden), “Super” grade fuel (Belgium, Spain, Latvia, Netherlands, Portugal) and vehicles, including cars and tractors (Germany, France).
In 2013, the EU was Cameroon’s largest trading partner and the destination for an estimated 46% of Cameroon’s exports and the source of an estimated 35% of Cameroon’s imports. In 2013, the EU maintained its position as Cameroon’s largest trading partner, with 31.2% of imports and 64.4% of exports by value. The main products exported to the EU in 2013 were crude oil (in particular to Portugal and Spain), wood logs and milled timber (in particular to Belgium and Italy), cocoa beans and cocoa butter (in particular to France and the Netherlands), raw aluminium and aluminium oxide (in particular to Italy and France), cotton, rubber (in particular to Spain), fresh bananas and coffee (in particular to Italy, Portugal and Germany). The main 2013 imports were the following: vehicles, automobiles and tractors (in particular from France and Germany), electrical and mechanical devices (in particular from Italy), wheat (in particular from France), food, pharmaceuticals (in particular from France), as well as clothing and beverages.
In 2012, the EU was Cameroon’s largest trading partner, with 33.3% of imports and 54.5% of exports by value. The main products exported to this area were crude oil (in particular to Spain and Portugal), cocoa beans and cocoa butter (in particular to France and the Netherlands), wood, raw aluminium (mainly to France and Italy), cotton, rubber (to Spain), bananas and coffee (primarily to Italy, Germany and Portugal). The main 2012 imports were automobiles (from France and Germany), construction products, electrical and mechanical equipment (in particular from Italy), wheat (primarily from France), food and pharmaceuticals (from France).
In 2011, the EU accounted for 38% of Cameroon’s total external trade by value, versus 43% of trade by value in 2010. The main products exported to this area were crude oil (in particular to Spain and Portugal), cocoa beans and cocoa butter (in particular to France and the Netherlands), wood, aluminium, cotton, rubber, bananas and coffee. The main imports were automobiles (in particular from France and Germany), construction equipment, electrical and mechanical equipment, wheat and cereals (in particular from France), other food products, pharmaceuticals (in particular from France), clothing and beverages.
Trade with East Asia, South Asia and South East Asia As at the date of this Prospectus, East Asia was Cameroon’s second largest region for trade in 2015 and China was Cameroon’s largest bilateral trading partner in 2015. In 2014, the East Asian region remained Cameroon’s second largest source of trade, accounting for 32.2% of trade, including 32.9% of Cameroonian imports and 31.2% of exports. Exports to this region consist mainly of crude oil, raw cotton, raw wood and cocoa. Cameroon exports crude oil to China and India.
Raw cotton is exported to China, Bangladesh, Indonesia, Vietnam, India, Malaysia, Taiwan and India. Within these regions, wood and wood products are exported primarily to China. Cocoa is exported primarily to Malaysia, Singapore, Thailand, Indonesia and China. These countries provided different food and industrial goods to Cameroon in 2014, including: rice, audio-visual equipment and devices, dredging equipment, cement, medicines, cranes, new tires, ceramic tiles, and cars. China is Cameroon’s largest trading partner in Asia, and in 2014 provided cement, dredging boats, gantry cranes, ceramic tiles, herbicides, and tires. Imports from India provide primarily pharmaceuticals, while Japanese imports include mainly cars and Malaysia and Indonesia supply palm oil.
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In 2013, the second largest region for trade was East Asia, which as noted above includes China. Exports to this region consisted of commodities such as crude oil and aluminium, as well as raw materials such as unmilled timber, rubber, cotton, raw cocoa beans and coffee. China was a particularly important destination for wood logs and cotton. These countries provided a variety of products to Cameroon including rice, palm oil, fish, cement, lubricants, soaps, various food products, tyres, paper and cardboard, textiles and clothing, iron and steel works, medicines, and machines and electronics. China is a particularly important source for machines and electronic equipment.
South and South East Asia, notably including India and Thailand, constituted the fourth largest region for trade with Cameroon in 2013. The main products exported to this region were raw cocoa beans, crude oil, natural rubber, wood, raw cotton and aluminium. The imports from South and South East Asia were mainly composed of grain products and manufactured goods, including pharmaceutical products. In 2013, rice imports increased from Thailand, Pakistan and Vietnam while India was a particularly important source of pharmaceutical products.
In 2012, East Asia was Cameroon’s third largest trading partner. Exports to this region were comprised of crude oil, raw cotton, raw cocoa beans, coffee, wood and wood works and raw aluminium. Imports were composed of rice, medicines, motor vehicles, motorcycles, frozen fish, mechanical and electronic appliances (especially from China), flooring, wooden structures, textiles and building materials. In particular, Japan was an important source of motor vehicles and China constituted an important source for mechanical and electrical appliances in 2012.
In 2011, Cameroon tracked trade by continent as a whole without breaking down trade with prime countries such as China and India. Asia as a whole constituted Cameroon’s third largest trading partner. Exports to Asia, including China and India, were composed mainly of crude oil, raw cotton, raw cocoa beans, coffee, wood and wood works and of raw aluminium. Imports consisted mainly of the following: rice, pharmaceutical products, motor vehicles, frozen fish, mechanical devices, electrical appliances and electronic devices, flooring, textiles and construction materials.
Trade with Africa, including Nigeria and CEMAC countries In 2014, African countries were the third largest source of external trade for Cameroon, together representing 24.1% of trade. The countries represented 31.6% of Cameroonian imports and 31.2% of exports. The main products sold to African countries in 2014 were gas oils, aviation and jet fuel, household soaps, heavy fuels, oils and tar distillation products, iron bars and beauty products.
In 2014, petroleum products from Cameroon were exported to the DRC, Ivory Coast, Benin, Nigeria, Congo, Angola, Ghana, and Equatorial Guinea. Household soaps from Cameroon were exported to Chad, Nigeria, Gabon, and Congo. Cameroonian beauty products were sold in the DRC, Gabon, Nigeria, and Senegal. In terms of imports, Nigeria remained Cameroon’s largest trading partner in 2014, due primarily to crude oil imports. Seafood products were also imported from Mauritania and Senegal in 2014.
In 2013, West Africa, including Nigeria, was Cameroon’s third largest regional trading partner. The main exports to this region were rice, soap, fuel and lubricants, sawn wood, cosmetics, aluminium (in particular to Nigeria) and iron bars and steel. Imports from this region included crude oil, textiles, footwear, vehicles and food products. Nigeria is an important trade partner in that Cameroon receives a large portion of its imported oil from that country and exports significant amounts of aluminium to it. The CEMAC trade union represented the fifth largest region for Cameroonian trade in 2013, as Cameroon primarily imported crude oil, live animals, liquefied butane, sugar and fuel. The main export products to the CEMAC partners were food products, soap, matches, mineral water, meat, palm oil, iron, steel and fruit juices.
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In 2012, West Africa, including Nigeria, was the second largest trading partner after the EU. The main exports to this region were liquor, salt, cosmetics and iron and steel bars. Imports from West Africa were crude oil (in particular from Nigeria), textiles, jewellery, packing materials, vehicles, milk, sugar and cigarettes. In 2012, taken alone, the CEMAC region was the fourth largest trading partner, following East Asia. The main export products were food products, household soap, matches, mineral water, meat, palm oil, iron, steel and fruit juices. Major imports from CEMAC countries were crude oil, cigarettes and liquefied butane.
In 2011, Africa taken as a whole was the second largest region for trade. This is largely because of important trading links with West Africa, and in particular Nigeria, which was the destination for 2.5% of Cameroon’s exports and the origin of 23% of Cameroon’s imports. Imports from West Africa included primarily crude oil, textiles, jewellery, packing materials, vehicles, milk, sugar and cigarettes in 2011, whereas exports included primarily liqueurs, salt, cosmetics, soap, iron and steel bars and surveying instruments and equipment. For the CEMAC countries, the main exports were food, mineral water, meat, palm oil, iron and steel and fruit juices, whereas major imports included crude oil, cigarettes and liquefied butane.
Trade with the Americas, including the United States In 2014, the Americas region represented Cameroon’s fourth largest source of external trade, accounting for 6.1 % of Cameroon’s trade, including 7.9% of imports and 3.4% of our exports. The United States remains the main partner of Cameroon in the Americas. In 2014, Cameroon’s main exports to the U.S. included tar distillation products, cocoa products, heavy fuel oil, wood and rubber. In terms of 2014 imports, Cameroon imported aluminium oxide from Brazil, wheat from Canada and the United States, frozen fish from Argentina and Uruguay, the soybean meal from Argentina and Brazil and sugar from Brazil and Guatemala.
In 2013, North America was the sixth largest region for trade with Cameroon, of which trade was almost entirely with the U.S. Exports to North America consisted of fuels and lubricants, cocoa paste, rubber, tobacco, coffee and sawn timber. The main imported products were wheat, used clothing and mechanical and electrical devices. Despite Cameroon benefiting from the U.S.’s African Growth Opportunity Act, which is intended to develop trade relations between the U.S. and Africa, in practice trade with the U.S. is made difficult by strict product, packaging and safety standards demanded in the U.S. market.
In 2012, North America was Cameroon’s fifth largest trading partner. Exports consisted of fuels and lubricants, cocoa paste, natural rubber, tobacco, coffee and sawn timber and the main imported products were wheat, used clothing, mechanical and electronic devices (in particular from the U.S.).
In 2011, trade was measured for the whole of the Americas, which was the fourth largest trading partner. Exports to North America consisted mainly of fuels and lubricants, cocoa paste, natural rubber, tobacco, coffee and sawn timber. The main imported products were other wheat and other grains such as meslin, second hand clothing and mechanical and electrical devices. The main exports to Latin America were rubber, wood and cocoa and its derivatives. Imports from Latin America included frozen sea fish, milk, baby food, salt, machinery and electronic and mechanical devices.
Balance of Payments
The balance of payments is a statistical statement that summarises transactions between residents and non- residents of a country during a one-year period. It consists of the country’s current account, the capital account and the financial account. Cameroon’s balance of payments accounts are compiled and disseminated by the BEAC. The BEAC validates the figures and runs consistency checks against the guidelines adopted for all the CEMAC member countries.
The following table sets forth Cameroon’s balance of payments for the periods indicated:
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Balance of Payments 2011 2012 2013 2014* (CFA billions)
Current Account (including public transfers)(1) ...... (353.1 ) (488.1 ) (557.2 ) (653.8) Current Account (Excluding public transfers) ...... (414.7 ) (531.9 ) (602.6 ) (692.5 ) Balance of Goods(2) ...... (273.5 ) (139.9 ) (97.5 ) (141.9 ) Balance of Services(3) ...... (58.3 ) (255.5 ) (306.2 ) (360.9 ) Primary Income account(4) ...... (142.9 ) (227.1 ) (303.9 ) (313.1 ) Secondary income account(5) ...... 121.6 134.4 150.4 162.1 Financial and Capital Account ...... 235.2 617.3 586.2 650.1 Financial Account(6) ...... 173.7 557.6 538.1 593.3 Foreign Direct Investment(7) ...... 219.7 413.4 348.2 366.8 Portfolio Investment(8) ...... (26.8 ) 9.7 (24.0 ) (32.7 ) Other Investments ...... (159.0 ) (164.1 ) (111.6 ) (28.1 ) Capital Account(9) ...... 61.5 59.8 48.1 56.8 Of which Investment Grants (including C2D)(10) ...... 60.2 56 46.3 55 Net Errors and Omissions(11)...... (45.6 ) (81.6 ) (72.9 ) 32.5 Overall Balance ...... (163.5 ) 47.6 (43.9 ) 28.9 Source: MINFI/DAE, * Estimates.
Notes: (1) The current account includes the trade balance, plus services (net), plus the primary account (net balance of revenues) plus the secondary account (net current transfers). The current account is used to mark the inflow and outflow of goods and services into a country. Earnings on investments, both public and private, are also put into the current account. (2) The balance of goods includes both imports and exports; it shows credits and debits on the trade of merchandise, which includes goods such as raw materials and manufactured goods. (3) Services refers to receipts from tourism, transportation, engineering contracts, business services, as well as fees and royalties from patents and copyrights. This includes, for example, tourism or transportation of goods through Cameroon to CEMAC countries. (4) Primary Income Account shows amounts payable and receivable in return for providing temporary use to another entity of labour, financial resources or non-produced non-financial assets. It includes loans and investments and includes all primary revenues received by the state. (5) Secondary Income Account shows redistribution of income, without consideration, such as workers’ remittances and current international assistance. (6) The financial account shows net acquisition and disposal of financial assets and liabilities. (7) Foreign Direct Investment is a category of cross-border investment associated with a resident in one economy having control or a significant degree of influence on the management of an enterprise that is resident in another economy. (8) Portfolio Investment is defined as cross-border transactions and positions involving debt or equity securities, other than those included in foreign direct investment. (9) The Capital Account is where all international capital transfers are recorded. (10) Investment grants consist of capital transfers in cash or in kind made by governments or international organisations to other institutional units to finance all or part of the costs of their fixed assets. C2Ds are French Debt-Reduction and Development Contracts. The purpose of C2Ds is to alleviate debt that has been incurred by Cameroon toward France within the framework of France’s official development aid programme.
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(11) Although the balance of payments accounts are, in principle, balanced, imbalances result in practice from imperfections in source data and compilation.
For the six months ended 30 June 2015 the balance of payments showed an estimated deficit of CFA 232.8 billion. In 2014, the balance of payments showed an estimated surplus of CFA 28.9 billion compared to a deficit of CFA 43.9 billion in 2013. This was the result of increases in the financial and capital accounts, as described below.
For 2013, the balance of payments showed a deficit of CFA 43.9 billion resulting from a decline in the financial and capital accounts and an increase in the current account deficit, due to an increase in the deficit of goods and services.
For 2012, the balance of payments showed a surplus of CFA 47.6 billion. This surplus resulted from an increase in the financial and capital accounts, which together were CFA 355.8 billion higher than the current account deficit.
For 2011, the balance of payments showed a deficit of CFA 163.5 billion as a result of lower capital inflows and the current account deficit remaining at a similar level. During this period, long-term foreign direct investment and other capital inflows remained insufficient to balance Cameroon’s financing needs.
Balance of Goods
The balance of goods includes both imports and exports of merchandise, which includes goods such as raw materials and manufactured goods which are bought or sold. For the six months ended 30 June 2015, the balance of goods showed an estimated deficit of CFA 61.7 billion largely due to lower oil prices. In 2014, the balance of goods is estimated to have shown a deficit of CFA 141.9 billion as a result of an increase in imports of 14.1%. In 2013, the balance of goods showed a deficit of CFA 97.5 billion, which is an improvement compared to 2012 and resulted from an increase in oil revenues and intra-regional transactions with Gabon, Chad and Equatorial Guinea, among others. In 2012, the balance of goods showed a deficit of CFA 139.9 billion, representing an improvement on 2011, due in part to exports growing at almost twice the rate of imports. In 2011, the balance of goods showed a deficit of CFA 273.5 billion, which was more than double the deficit in 2010. This was due in part to an increase in imports of oil by volume (up by 9%) and by value (up by 48.9%) compared to 2010.
Balance of Services
Services refers to receipts from tourism, transportation, engineering, business services, fees and royalties from patents and copyrights. Cameroon’s balance of services has four categories: transport (passenger, freight and other transport), insurance, travel and other services (which include technical assistance and engineering). This figure includes, for example, Cameroon’s receipts from tourism or services provided in transportation of goods through Cameroon to other CEMAC countries. Cameroon generally has a structural deficit in services because the services it requires (such as shipping) are largely not carried out by Cameroonian people or companies.
For the six months ended 30 June 2015, the balance of services showed an estimated deficit of CFA 344.5 billion in particular due to increased transportation expenses and an increased deficit in the travel services category. In 2014, the balance of services estimate shows a deficit of CFA 360.9 billion, largely due to the decrease in revenues from the travel services category, which declined by CFA 45.0 billion compared to 2013.
In 2013, the deficit in the balance of services increased by CFA 50.7 billion to CFA 306.2 billion. This was due to the increase in the deficit in transport services by CFA 23.9 billion and other services by
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CFA 100.5 billion, compared to 2012. This was partially offset by improvement in travel services by CFA 67.9 billion, compared to 2012.
In 2012, the deficit in the balance of services increased by CFA 197.2 billion to CFA 255.5 billion (1.9% of GDP) compared to 2011. This increase in the deficit was mainly due to an increase in the deficit of transport services (meaning Cameroon received more transport services from non-Cameroonian sources than Cameroonian sources provided); notably, sea freight services experienced a deficit of CFA 361.1 billion. In 2012, the travel services category had a deficit of CFA 85.8 billion, the insurance category experienced a deficit of CFA 34.7 billion and the other services category had a deficit of CFA 32.4 billion.
In 2011, the deficit of the balance of services decreased by 78.5% to CFA 58.3 billion. The improvement mainly resulted from an increase of receipts in other business services category.
Primary Income Account
This account shows amounts payable and receivable in return for providing temporary use to another entity of labour, financial resources or non-produced non-financial assets. It includes loans and investments and includes outlays such as wages, principal repayments to investors and interest on public debt. It also includes the balance of all primary revenues received by the state.
For the six months ended 30 June 2015, the primary income account showed an estimated deficit of CFA 1.7 billion due to returns on foreign direct investment and payments of interest on the public debt. In 2014, the primary income account showed an estimated deficit of CFA 313.1 billion due to an increase in wages paid in 2014. The primary income account deficit went from CFA 227.1 billion in 2012 to CFA 303.9 in 2013 due to a 115.9% increase in payments to investors and the payment of interest on external public debt.
In 2012, the primary income account showed a deficit of CFA 227.1 billion. The deficit is explained by the payment of dividends to foreign direct investors of CFA 115.4 billion and the payment of interest on external public debt of CFA 38 billion. In 2011, the primary income account deficit increased to CFA 142.9 billion from CFA 130.5 billion in 2010 due to increased payments to investors.
Secondary Income Account
Cameroon has a significant population living and working outside of Cameroon, which results in significant inflows from abroad. These transfers make up the secondary income account and are also known as net current transfers. These inflows primarily come from workers’ remittances, mainly from the EU, but also from the U.S.
For the six months ended 30 June 2015 net current transfers were CFA 49.6 billion due in particular to improved conditions in the Eurozone. In 2014, net current transfers totalled an estimated CFA 162.1 billion due to an increase in private transfers to Cameroon which included workers’ remittances. In 2013, net current transfers equalled CFA 150.4 billion as a result of increases in other gifts and transfers and workers’ remittances, which were CFA 142.7 billion and CFA 75.9 billion, respectively. In 2012, net current transfers increased to CFA 134.4 billion from the previous year, as a result of increases in workers’ remittances. The Eurozone accounted for 46.7% of fund transfers. In 2011, net current transfers were CFA 121.6 billion and consisted largely of workers’ remittances.
Foreign Direct Investment
Foreign Direct Investment or FDI is defined as the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor. The FDI “stock” measures the
135 total amount of existing investments in Cameroon at any one time, while FDI “inflows” measure the net incoming investment per year. Cameroon has made efforts to increase FDI through privatisation. See, “The Cameroonian Economy—Role of Government—Privatisation Plans” for more information.
In 2013, the total FDI “stock” in Cameroon was CFA 2,725.9 billion compared to CFA 2,365.1 billion in 2012 and CFA 2,084.9 billion in 2011. The amount of incoming foreign direct investment was estimated to be approximately CFA 366.8 billion in 2014 and was CFA 348.2 billion in 2013, CFA 413.2 billion in 2012 and CFA 219.7 billion in 2011.
The Government’s Vision 2035 stresses the importance of large-scale infrastructure development and foreign direct investment in Cameroon. According to the U.S. State Department’s 2014 report on the Cameroonian investment climate, Cameroon has no deliberate or direct economic or industrial strategies that have discriminatory effects on foreign investors or foreign-owned investments. In April 2013, Cameroon enacted an Investment Promotion Incentives Law to reform the existing 1990 Investment Code. This 2013 law does not discriminate between foreign and local investors and is intended to incentivise foreign investors to bring capital into the local economy by offering exemptions from certain taxes and duties, as well as offering other non-tax related benefits. Non-tax benefits include, under certain conditions, assisting investors in obtaining visas, work permits, environmental compliance certificates, land titles and long term leases. Under the 2013 law, such benefits are not available for investments in certain sectors such as oil, mining and natural gas, which are subject to special regulations and have sector specific incentives.
In 2002, Cameroon passed its Investment Charter, which is primarily intended to fight corruption in government administration; the Investment Promotion Agency (“API”) was created under this Charter to promote investment in Cameroon and assist potential investors in obtaining investment licenses. The API also coordinates the pro-investment activities of various sector-specific ministries.
Under the 1990 Investment Code, exemptions from VAT and customs duties are available for periods of three to five years: three years for firms that export more than 25% of their annual turnover and five years for firms that export over 50% of their annual turnover, subject to certain other conditions. In addition, since 1990, Industrial Free Zones (“IFZ”) can be created covering single-factory zones or industrial parks in any location in Cameroon. Firms covered by the IFZ regime benefit from broad exemptions from certain taxes and regulations, so long as 80% of production within such zones is exported and the product or service does not have detrimental effects on the environment. Companies operating within an IFZ receive a ten-year tax exemption and are subject to a 15% flat tax on corporate profits beginning in the eleventh year. Such firms may repatriate all funds tax-free and are exempt from foreign exchange regulations and existing and future customs duties. A number of Cameroonian companies benefit from the IFZ regime in the Douala-Bonaberi industrial zone, although IFZs may be set up anywhere within Cameroon and may include agro-business enterprises that need to be located near the source of raw materials. The IFZ regime is applicable to a broad range of activities, including industrial assembly, call centres, information technology or financial services.
The National Agency for Industrial Free Zones is a non-profit group which oversees and administers Cameroon’s IFZ programme. Its exists primarily to promote IFZ in three ways: (i) it receives and reviews applications for the status of developer of an IFZ zone, IFZ company, or special IFZ, (ii) it issues all permits licenses or other authorizations to companies and developers who have obtained the IFZ status and (iii) in collaboration with the investment promotion centre, it assists investors at all stages of the creation and establishment of business activities. Developers and companies that have received such permits, licenses or authorisations are entitled to the fiscal, regulatory and tariff advantages described above.
The primary objectives of the IFZ legislation are to attract new productive investments to Cameroon, increase exports and accelerate job creation. Twenty years after its inauguration, the IFZ policy has not met the development targets set at the time of its implementation. As at the date of this Prospectus, approximately 40
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IFZs have been set up, of which only 25 are currently operational and account for approximately 3,645 permanent and seasonal jobs. A 2013 law (law n°2013/011 dated 16 December 2013) allows for IFZ companies to request a change in status to take advantage of other investment incentives.
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PUBLIC FINANCE
Role of CEMAC
Created in March 1994, the CEMAC is a customs and monetary union among the French-speaking Central African countries and includes Cameroon, the Central African Republic, Chad, the Republic of the Congo, Equatorial Guinea and Gabon. The CEMAC Executive Secretariat is charged with monitoring the implementation of economic policies and managing a system of macroeconomic surveillance.
Since the ratification of the CEMAC treaty in 1999, the CEMAC states have been moving towards fuller economic and monetary integration. For further information, see “Monetary System”. CEMAC has implemented fiscal and non-fiscal convergence criteria based on the model of the EU with the goal of achieving macroeconomic convergence in terms of growth and inflation rates and increased economic integration in terms of trade, capital flows and the movement of goods and people between the economies in the region.
CEMAC Convergence Criteria The following table shows the CEMAC convergence criteria, as well as Cameroon’s compliance levels for the periods indicated:
CEMAC Cameroon Performance Goal/Limit 2011 2012 2013 2014 (1) Criteria(2) Deficit Spending (% of GDP) ...... ≥0.0 % 0.4 % 2.2 % 1.3 % 4.5 % Average Annual Inflation Rate (%) ...... ≤3.0 % 2.9 % 2.4 % 2.1 % 2.6 % Public Debt (% of GDP) ...... ≤70.0 % 17.8 % 18.3 % 20.6 % 19.3 % Domestic Arrears(3) ...... 0.0 0.0 0.0 0.0 0.0 External Arrears ...... 0.0 0.0 0.0 0.0 0.0 Source: BEAC
Notes: (1) Estimates (2) The BEAC measures these criteria, including Debt to GDP and deficit spending differently than the Government. (3) The BEAC measures domestic arrears differently than the Government. The Government includes domestic arrears in the expenditures item “service of the public debt”, whereas for BEAC’s purposes this item does not include arrears owed to SONARA. See “The Cameroonian Economy—SONARA”. In many cases arrears are owed by one public entity to another or are old debts. See “—2015 Budget—Budgetary Arrears”.
Given that Cameroon’s monetary policy is entirely controlled by the BEAC, fiscal management and State spending are Cameroon’s main tools of economic management.
Fiscal Policy In 2010, as part of its Growth and Employment Strategy Paper (the “GESP”), the Government launched a ten-year development plan that prioritised infrastructure development. Cameroon’s public investment programme includes 12 large infrastructure projects, such as the deep water port at Kribi, several bridges, thermal and hydroelectric power plants and road systems. For more information, see “The Cameroonian Economy — Demand — Public investment”. In addition, major projects are underway to develop the telecommunications sector, including the development of infrastructure to increase internet access.
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In line with the GESP, budgets in recent years reflect Cameroon’s plan to increase public investment in order to increase sustainable growth and employment. The Government’s objective is to increase the Public Investment Budget (“BIP”), which is composed of long-term investment projects, to at least 30% of the total budget, with the wider goal being that 25% of GDP should be applied towards investment. The goal of increasing BIP to at least 30% was achieved in fiscal year 2014. The share of BIP in the budget rose from 17.4% in 2008 to 30.2% in 2014. As part of its inclusive growth policy, the Government implemented a system of social programmes in 2013 and 2012 to improve the living conditions of groups living in chronic poverty. These programmes include targeted grants and public works projects using high intensity labour methods in an effort to reduce unemployment rates, particularly in the north of the country.
Legal Framework and Budgetary Process Within Cameroon, the principal actors in the budgetary process are the executive and legislative branches of the Government.
The Role of the Executive Branch The executive branch of the Government serves three main purposes in the budgeting process in Cameroon: initial drafting and proposal, technical coordination and implementation, as described below.
Initial drafting and proposal: The President, the Prime Minister and an interdepartmental programme review committee identify priorities, validate programmes and create frameworks for medium-term expenditure. They coordinate with the ministries and institutions to send the draft budget to the Parliament for a debate and vote.
Technical coordination: The Ministry of Finance and the Ministry of Economy, Planning and Regional Development have the primary responsibility for creating the proposed budget as they are charged with consolidating the data from the previous year, reviewing the strategies, programmes and projects, setting bench-marks for the achievement of programme objectives and goals and drafting the budget law.
Implementation: Implementation of the budget is driven by the various ministries, and involves creating execution plans for each of the programmes, updating the preliminary draft Government budget in line with amendments from the Parliament, updating strategy and action plans and monitoring programmes.
The Role of the Legislative Branch The two chambers of Parliament, through their respective finance and plenary commissions, examine the draft budget submitted by the Government and then debate, amend and eventually adopt the draft budget law. The Parliament involves officials from the various ministries in the development of the final budget law.
The Republic’s accounts are audited by the Audit Bench (Chambre des Comptes), which is part of the Supreme Court of Cameroon.
Recent Budgetary Reforms In 2013, Cameroon moved from an annualised budget system (which required annual reauthorisation of funds allocated to multi-year projects) to a programme-based budget system (which eliminated the need for ministries to reauthorise allocated funds each calendar year). This reform was enacted with the intention of improving transparency; reducing implementation delays for large-scale infrastructure projects; and improving the ability of the Government to target funds at high-priority projects. This reform is also intended to improve accountability for the use of public resources, by improving public financial reporting and introducing results-based management into government and public service, notably by adopting international standards of public financial management.
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Components of Government Revenues and Expenditures As shown below, the main revenue sources of Cameroon are consumption taxes, personal and corporate income taxes and customs duties. There are also various non-fiscal revenue sources that are significant in terms of financing the Cameroonian budget, such as royalties paid on oil and gas concessions to the SNH. The most important consumption tax in terms of raising revenue is the value-added tax (“VAT”), which is levied on goods and services. The standard VAT rate is 19.25%. There is no VAT on exports. Customs duties are levied on the customs value of most imported goods ranging between 5% and 30%. CEMAC countries benefit from free movement of goods. The personal income tax rate is 0% for incomes between zero and CFA 2,000,000, 15% for incomes between CFA 2,000,000 and CFA 3,000,000, 25% for incomes between CFA 3,000,000 and 5,000,000, and 35% for incomes above CFA 5,000,000. For the 2015 fiscal year, the standard corporate tax rate is 33%. Cameroon has tax treaties with Canada, France and Tunisia, amongst others.
The main expenditures of Cameroon are investments in capital expenditure, such as infrastructure projects. In addition, the Government spends significant amounts on subsidies and transfers, such as the subsidies paid to SONARA in compensation for compliance with the country’s price-control policy affecting retail process of petroleum products. Another important destination for State spending is wages and salaries for civil servants, salaried employees and contract workers. These amounts are included in current expenditures. Finally, the smallest area of expenditures is debt service.
Budgetary Revenues Cameroon has two major sources of revenue: internal revenue, and loans and grants.
Internal revenue is divided into oil revenue and non-oil revenue. Oil revenue most notably includes royalties paid to the SNH (such as concessions) and a corporate tax on companies in the oil and gas industry. This component also includes fees such as those charged for the use of pipelines.
Non-oil revenue primarily consists of fiscal revenue and non-fiscal revenue. Fiscal revenue has two components: tax revenue and customs revenue. Tax revenue includes personal and corporate income tax, VAT, excise duties, stamp duties, a special tax on petroleum products (certain petroleum products are excluded from the VAT) and forestry taxes. Customs revenue includes import rights, a VAT on imports, excise taxes on imports and exit rights. The major component of non-fiscal revenue is revenue from services provided by the government.
Loans and grants primarily consist of project loans (such as those taken out for specific infrastructure projects) and grants, but also issuances of public debt and net receipts from the banking sector. Grants consist of items such as C2D which are debt reduction and development contracts with the French Government. Loans and grants also include loans from the IMF and the AfDB.
The following table sets forth the executed revenues of Cameroon for 2011 to 2014 and the budgeted revenues for 2015:
Executed Budgeted
2011 2012 2013 2014 2015
(CFA billions) A-Internal Revenue (I+II) ...... 2,260.4 2,435.8 2,625.7 2,919.0 2,963.4 I-Oil revenue ...... 637.9 693.0 700.0 678.8 751.2 of which – SNH Royalties ...... 541.2 532.4 530.3 571.1 549.9 of which – Corporate oil tax ...... 96.7 160.6 169.7 161.7 201.3
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Executed Budgeted
2011 2012 2013 2014 2015
(CFA billions) II-Non-oil revenue (1+2) ...... 1,622.5 1,742.8 1,925.7 2,240.2 2,212.2 1- Fiscal revenue (a+b) ...... 1,535.6 1,648.8 1,828.9 2,087.2 2,096.5 a-Tax revenue ...... 990.3 1,053.2 1,231.6 1,387.1 1,403.8 of which-Personal Income Tax ...... N/A(1) 180.8 231.9 282.9 280.5 of which-VAT ...... 342.3 330.5 424.3 457.9 470.0 of which-Corporate tax (non-oil) ...... 214.4 261.3 258.4 298.0 307.0 of which-Excise duty ...... 81.6 84.1 95.6 106.4 114.0 of which-Fees and stamp duties ...... 62.4 56.7 73.8 76.9 79.4 of which-TSPP(2) ...... 84.6 97.4 109.6 118.5 107.0 b-Customs revenue ...... 545.3 595.6 597.3 700.1 692.7 of which-Customs/import rights ...... 258.6 278.0 268.3 329.8 306.7 of which-VAT imports ...... 271.7 285.5 292.8 328.7 350.0 of which-Excise tax/import rights(3) .. N/A 15.6 14.8 14.8 15.0 of which-Exit rights ...... 7.5 7.5 11.3 15.1 14.0 2-Non-fiscal revenue(4) ...... 88.0 94.0 96.8 153.0 115.7 B-Loans and Grants (I+II+III)(5) ...... 370.2 292.5 682.0 779.0 783.2 I-Project loans ...... N/A 177.5 487.0 482.8 405.0 II-Grants(6) ...... N/A 55.0 46.0 43.2 58.2 III-Issuing public securities ...... N/A 60.0 149.0 253.0 320.0
Total budget receipts (A+B) ...... 2,630.6 2,728.3 3,307.7 3,698.0 3,746.6 Source: MINFI/DAE
Notes: (1) N/A is used here to mean not available. (2) Taxe Special sur les Produits Petroliers (TSPP). Tax on petroleum products. (3) Included in VAT imports total. (4) This includes income from state properties, education, health, transportation of fuel via the Chadian pipeline, dividends, and the retirement savings of civil servants. (5) This includes Debt Reduction and Development Contract (C2D). See “—Non-discretionary spending” and “Public Debt”. (6) This item also includes the net stake and commercial bank deposits at the BEAC.
Results for 2014 Compared to 2013, total budgeted revenues were CFA 76 billion higher in 2014. This increase is attributable to both budgeted increases in internal revenue of CFA 41 billion and to budgeted increases in loans and grants of CFA 35 billion. In 2014, the Government expected to receive approximately CFA 3,312 billion as set out in the initial 2014 budget, however, total revenues were revised upwards to approximately CFA 3,698.0 billion.
The revised revenues in 2014 were higher than the budgeted revenues primarily due to higher tax receipts which increased by CFA 155.5 billion compared to 2013 and increased receipts from loans and grants, which increased by CFA 97 billion compared to 2013.
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Results for 2013 Compared to 2012, total budgeted revenues were CFA 436 billion higher in 2013 due to an increase of CFA 148 billion in non-petroleum receipts and a CFA 54 billion increase in budgeted loans and grants. In 2013, revised total revenues were CFA 3,307.7 billion compared to CFA 3,236.0 billion in the 2013 budget. The higher-than-budgeted revenues were due to an additional CFA 229 billion in project loans compared to the budget. The increase in project loans was offset by declines in customs revenues that were CFA 40.7 billion lower than budgeted and receipts from the issuance of public debt, which were CFA 101 billion lower than budgeted.
Results for 2012 Compared to 2011, overall budgeted revenues were CFA 229 billion higher in 2012 due to a CFA 142 billion increase in budgeted petroleum receipts and a CFA 74 billion increase in budgeted non-petroleum revenues. In 2012, total revised revenues were slightly below budget at CFA 2,728.3 billion compared to CFA 2,800.0 billion in the 2012 budget. The lower-than-budgeted revenues were due to grants and loans that were CFA 227.5 billion lower than budgeted. These lower revenues were partially offset by increased petroleum revenues that were CFA 136 billion higher than budgeted.
Results for 2011 Compared to 2010, overall budgeted revenues were CFA 50.4 billion higher in 2011 due to a CFA 94 billion increase in budgeted tax receipts and a CFA 51 billion increase in budgeted customs revenues. In 2011, revised revenues were CFA 2,630.6 billion compared to CFA 2,571.0 billion in the 2011 budget.
Budgetary Expenditures Budgetary expenditures in order of size consist of (i) current expenses, (ii) investment expenses and (iii) servicing the public debts.
Current expenditures include personnel costs, goods and services and transfers and pensions. The personnel costs category consists of, for example, salaries for employees of the Government, the military, teachers and other public servants. Goods and services include not only goods and services bought in the ordinary course but also spending on poverty relief and development such as that directed through HIPC and the C2D programme. Transfers and pensions include subsidies, such as to SONARA. Pensions usually make up approximately a third of this category.
Investment expenditures include those made in infrastructure and other projects. This category is divided into externally financed investment and internally financed investment. Externally financed investment is the proportion of the PIB that is externally financed and can for example include infrastructure projects. Internally financed investment includes investment spending of domestic resources, including that which is directed by HIPC and spending that is directed by the C2D programme. Externally financed investment spending includes investment expenses finances by bilateral and multilateral partners of Cameroon.
Expenditures to service the public debt include the payment of interest and principal on external debt and payments made to service domestic debt. Service of domestic debt includes payments of interest, amortization of principal, reimbursement of VAT credits, payments of domestic arrears and reimbursement of mandatory borrowing.
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The following table sets forth the executed expenditures for 2011 to 2014, and the budgeted expenditures for 2015.
Executed Budgeted
2011 2012 2013 2014 2015
(CFA billions) A-Current Expenses ...... 1,730.8 1,749.4 1,918.2 2,283.5 2,159.9 I– Personnel costs ...... 684.6 706.1 790.1 851.6 900.0 II– Costs of Goods and Services ...... 533.9 567.3 625.4 765.6 715.6 of which – C2D(1) ...... 5.4 5.6 7.1 25.2 N/A(2) III– Transfers and pensions ...... 512.3 476.0 502.7 597.2 544.3 B-Investment Expenses ...... 696.8 741.0 1,006.5 1,224.3 1,150.0 I– On external financing(3) ...... 163.3 189.1 492.7 560.8 425.0 II– On domestic financing(4) ...... 498.4 490.4 458.0 614.1 650.0 of which – C2D ...... 20.3 18.3 26.3 36.9 N/A III– Restructuration costs ...... 35.1 61.5 55.8 49.4 75.0 C-Servicing the Public Debt ...... 320.0 341.4 289.5 299.1 436.7 I– Foreign debt ...... 88.6 101.4 107.6 125.9 109.5 II– Domestic debt ...... 231.4 240.0 181.9 173.2 327.2 of which – interest ...... N/A N/A N/A 12.8 14.6 of which – amortisation of principal ..... 46.6 50.7 36.3 33.3 26.6 of which – reimbursement of VAT credit ...... 71.6 66.0 64.0 60.5 100.0 of which – domestic arrears ...... 99.3 60.0 21.0 16.5 116.1 of which – reimbursement of mandatory borrowing(5) ...... 0 50.0 50.0 50.0 70.0
Total Budget Expenditures ...... 2,748.9 2,831.8 3,214.2 3,806.9 3,746.6 Source: MINFI/DAE
Notes: (1) Debt Reduction and Development Contract (C2D). See “—Non-discretionary spending” and “Public Debt”. (2) N/A is used here to mean not available. (3) Includes investments financed by bilateral and multilateral partners of Cameroon. (4) Investment expenses financed by internal resources (5) Payments on the principal of Cameroonian bonds issued in 2010.
Results for 2014 In 2014, total budgeted expenditures were CFA 76 billion higher than in 2013. The increase in budgeted expenditures is attributable to a budgeted increase in personnel expenditures of CFA 32 billion and a budgeted increase in investment expenditures of CFA 43 billion.
In 2014, expenditures were approximately CFA 3,806.9 billion compared to CFA 3,312.0 billion in the budget due in part to investment expenditures which were significantly higher than budgeted. In 2014, overall expenditures increased by CFA 592.7 billion compared to 2013. Compared to revised expenditures in 2013,
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2014 expenditures increased in particular due to increased investment, issues of border insecurity and measures taken to prevent the outbreak of Ebola in Cameroon. In 2014, the hiring of numerous high school teachers as well as a 5% increase in base salary for civil servants, contributed to an increase in overall payroll expenditures for the year 2014, although the growth in payroll expenditure slowed in the second half of 2014. This is reflected in a CFA 61.5 billion increase in personnel related expenditures, compared to 2013. Spending on pensions increased by CFA 94.5 billion in 2014.
In 2014, investment expenditures increased by CFA 217.8 billion compared to 2013. The second half of 2014 saw the implementation of a plan to increase Government-controlled retail prices of petroleum products in an attempt to decrease future subsidy payments to SONARA.
Results for 2013 In 2013, total budgeted expenditures were CFA 436 billion higher than in 2012. In 2013, the budgeted increase in expenditures was in part attributable to an increase of CFA 164.8 billion in investment, a CFA 68 billion increase in personnel expenditures and a budgeted increase in goods and services expenditures of CFA 67.8 billion.
In 2013, revised expenditures equalled approximately CFA 3,214.2 billion compared to CFA 3,326.0 billion in the 2013 budget. Revised expenditures to service the public debt decreased by CFA 24.5 billion compared to the budget and expenditures for current expenses (which include personnel costs and pensions) were CFA 46.8 billion lower than budgeted. In contrast, investment expenditure was higher than budgeted by CFA 49.5 billion.
In terms of personnel expenditures, large numbers of new graduates were hired by the civil service in 2013, primarily as secondary school teachers, and a freeze on retirement departures within the police force, beginning in November 2012, contributed to an increase in the wage bill in 2013. Spending on pensions increased by CFA 26.7 billion in 2013, in part due to the fact that, in November 2012, a reform was implemented to allow pensioners to receive a lump-sum payment. The years 2013 and 2014 were therefore impacted by this reform and reflect a sharp increase in pension spending.
In 2013, overall revised expenditures were CFA 382.4 billion higher compared to revised expenditures in 2012 due to a CFA 84.0 billion increase in expenditure for personnel, a CFA 58.1 billion increase in expenditures for goods and services and a CFA 265.5 billion increase in investment expenditures.
Results for 2012 In 2012, total budgeted expenditures increased by CFA 229 billion from 2011, which was in part attributable to a budgeted increase in investment expense equal to CFA 115 billion, a budgeted increase in personnel expenditures of CFA 70 billion and a budgeted increase in goods and services expenditures of CFA 89 billion. In terms of personnel expense, 25,000 new civil servants, who were recruited in 2011, were added to the government payroll in 2012 although some start-dates were deferred to 2013. The overall wage bill for public sector employees increased by 3% between 2011 and 2012 due to a slowdown in public service recruitment between 2010 and 2011. Government spending on pensions and similar benefits in 2012 was flat due to slower than expected processing of pension applications and converting pensioners into the programme. In 2013, upgraded technical equipment allowed for improved processing times of the accumulated backlog.
In 2012, revised expenditures were CFA 2,831.8 billion compared to CFA 2,800 billion in the 2012 budget due to an increase in transfers and pension expenditures above the budgeted figure. In 2012, revised expenditures increased by CFA 82.9 billion compared to revised expenditures in 2011. This was due to an increase of CFA 44.2 billion in investment expenditures and an increase of CFA 21.4 billion in expenditures to service the public debt.
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Results for 2011 In 2011, total budgeted expenditures were CFA 8.8 billion higher than in 2010 due to a CFA 25.8 billion increase in budgeted transfers and pensions. In 2011, revised expenditures were CFA 2,748.9 billion compared to CFA 2,571.0 billion in the 2011 budget. Between 2009 and 2011, a new policy enabled temporary workers to transition to permanent contracts. The increase in the number of people with permanent contracts, along with routine recruitment, accounted for increases in personnel costs.
Non-discretionary spending
The C2D contracts with the French Government are structured as a quid pro quo agreement pursuant to which aid is granted to Cameroon by France in amounts equivalent to and on the dates of the relevant debt maturities covered by the agreements. The aid is subject to the condition that Cameroon has met the sustainable development goals stipulated in the relevant C2D contract. For this reason, there is a certain amount of non- discretionary spending and investments in the Cameroonian budget that are overseen or mandated by the French Government.
Preparation for the first C2D contract began in 2000 and was administered within the framework of the HIPC initiative led by the IMF and the World Bank. The C2D programme concerns debt owed to France. The purpose of C2D contracts is to alleviate debt that has been incurred by Cameroon towards France within the framework of France’s official development aid program. Through the C2D mechanism, Cameroon continues to pay its debts to France, but when a repayment is made, France offers Cameroon a non-refundable grant in an equivalent amount. The grant is allocated to finance poverty reduction programmes that have been selected by joint agreement between France and Cameroon. The intended effect of this programme is that Cameroon’s resources previously allocated to debt repayment go to finance development projects and poverty reduction programmes in Cameroon instead. This debt reduction programme is long-term. The original loan maturities are often spread over a period of 20 years so several consecutive C2D contracts may be concluded, for a period of three to five years each.
The stated goal of the C2D programme, under the partnership framework agreement signed in 2006, is to reduce the poverty rate in Cameroon from 40% in 2001 to 25% in 2015. As at the date of this Prospectus, the poverty rate in Cameroon is approximately 39%. The funds are ear-marked in part to fund education programmes, specifically the hiring of new teachers, and environmental goals, such as developing sustainable forestry management programmes. Other funds are intended for development of infrastructure, such as improving roads and improving health service coverage, as well as supporting rural development and sustainable agriculture. Decisions on spending under the programmes are made by (i) the steering and monitoring committee, which is co-chaired by the French Ambassador to Cameroon and the Cameroonian Ministers of Economy and Finance; (ii) the bilateral technical committee, which includes representatives from the French embassy, the AFD and the Government and (iii) the Technical Secretariat for project implementation.
2015 Budget
The 2015 preliminary budget is based on the following key macroeconomic assumptions: (i) a real GDP growth of 5.8%, including 5.8 % growth for non-oil GDP, (ii) a projected inflation rate of 3%, (iii) the price of oil at U.S.$89.6 dollars a barrel and a production level of 31.1 million barrels, (iv) an exchange rate of CFA 500.7 = U.S.$1.00 and (v) a current account deficit at approximately 3.5% of GDP.
The 2015 preliminary budget is balanced in terms of revenue and expenditures at CFA 3,746.6 billion, an increase of revenues of 13.1% from CFA 3,312 billion in the 2014 budget. The 2015 budget projects an increase in loans and grants to CFA 783.2 billion from CFA 693.0 billion in the 2014 budget. Compared to the
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2014 budget, the 2015 budget projects expenditures for personnel costs to increase by CFA 65 billion to CFA 90 billion, in part due to efforts to combat Boko Haram and increased hiring of new teachers. Compared to 2014, the 2015 budget projects expenditures for investment to increase by CFA 150 billion to CFA 1,150 billion.
Since announcing the 2015 preliminary budget, the Government’s estimates have been adjusted to account for the strengthening of the U.S. Dollar against the FCFA, the downward revision of global growth forecasts in both advanced and emerging economies and the fall of oil prices to approximately $59 per barrel, among other things. The Government now expects that petroleum receipts will fall by CFA 314 billion as compared to the projections of the budget for 2015. This fall in receipts is expected to be accompanied by a reduction of the cost of gas subsidies of CFA 201 billion, leaving a net decrease in revenues of CFA 113 billion due to the lower price of oil. As a result, the fiscal deficit for 2015 is expected to grow from 3.6% of GDP recorded in 2014 (or 5.7% of GDP, according to IMF calculations). This expected effect has thus far been offset during the six months ended 30 June, 2015 by non-petroleum revenues from customs and tax sources which have amounted to CFA 1,233.6 billion compared to budgeted non-petroleum revenues of CFA 2,212.2 billion for the year 2015.
The 2015 budget estimated tax revenues for the six months ended 30 June 2015, would be CFA 807 billion of which CFA 67.1 billion would come from taxes on oil companies. Tax revenues for the six months ended 30 June, 2015 were CFA 82.8 billion higher than budgeted at CFA 889.8 billion of which CFA 61.7 billion came from taxes on oil companies.
Total budgetary outlays for the six months ended 30 June 2015 were CFA 1,488.4 billion compared to CFA 1,588.2 billion for the six months ended 30 June, 2014 due to lower outlays for investment in the first half of 2015 as compared to the first half of 2014.
Draft 2016 Budget
The draft budget for 2016 is expected to be discussed and approved by Cameroon’s parliament in November 2015 and based on the following macroeconomic assumptions: (i) a real GDP growth of approximately 6%, (ii) a projected inflation rate of 2.8%, (iii) an oil production of 34.6 million barrels, (iv) a price of oil at U.S.$40.40 per barrel, (v) an exchange rate of CFA 586.40 per U.S.$1, (vi) a budgetary deficit excluding grants of 4.5% and (vii) a current account deficit at approximately 4.3% of GDP. The 2016 budget is expected to focus on economic development.
Deficit
Cameroon’s fiscal deficit has been increasing in recent years, from 2.2% of GDP in 2011, to 1.6% in 2012, 4.3% in 2013 and 3.6% in 2014. According to IMF calculations, Cameroon’s deficit was 4.1% of GDP in 2013 and 5.7% of GDP in 2014 — a higher figure than according to Government calculations. For 2014, the difference between the two figures reflects the fact that the figures are based on estimates, which are themselves based in part on different macroeconomic assumptions. Cameroon estimates that its fiscal deficit will further increase in 2015. This increase in the fiscal deficit is due to several factors, that continue to affect Government spending and revenues and whose impact is likely to continue in the near future and in the medium term. See the risk factor “The Cameroonian fiscal deficit has increased in recent years and the state’s budget is subject to increasing pressures that could lead to a widening deficit, which could impair Cameroon’s ability to service its debt, including the Notes”.
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Budgetary Arrears Cameroon pays for and accounts for arrears as part of its public debt. The arrears line item within the Cameroonian budget accounts for variations from year to year of the stock of arrears. Unsettled payment orders are payment requests which have yet to be audited and paid. If audited within that budget year but not paid within that budget year they will become part of the audited arrears. Obligations to oil importers are included within the internal public debt stock if they were not paid that budget year. In 2013, according to the IMF in their Article IV Consultation report of July 2014, the stock of arrears and other payment obligations rose to 4.6% of GDP or CFA 668.8 billion.
The table below shows the amount of Government arrears and other payment obligations as measured by the IMF:
2010 2011 2012 2013 Annual End-year Annual End-year Annual End-year Annual End-year change stocks change stocks change stocks change stocks (CFA billions) (unless otherwise indicated) A. Audited arrears(1)...... (34.7 ) 178.3 (15.2 ) 163.1 (23.7 ) 146.4 (18.3 ) 128.0 (% of GDP)...... 1.5 1.3 1.1 0.9 B. Unsettled payment orders (UPOs) ...... 10.6 270.6 (141.3 ) 129.3 48.7 178.0 77.1 255.1 (% of GDP)...... 2.3 % 1.0 % 1.3 % 1.8 % C. Obligations to SONARA ...... 37.9 136.2 36.0 172.2 37.2 209.5 (3.5 ) 206.0 (% of GDP)...... 1.2 % 1.4 % 1.6 % 1.4 % D. Obligations to oil importers ...... 0.0 0.0 64.4 64.4 15.3 79.7 (% of GDP)...... 0.0 % 0.0 % 0.5 % 0.6 % E. Total arrears and other payment obligations (A+B+C+D) ...... 13.7 585.1 (120.5 ) 464.6 126.6 59.2 70.6 668.8 (% of GDP)...... 5.0 % 3.7 % 4.4 % 4.6 % Sources: Cameroonian authorities; IMF staff estimates.
Notes: (1) Partial audits conducted in 2012 revealed additional arrears of CFA 7 billion. These are included in the end 2012 stocks of audited arrears; this may create discrepancies in flow figures in certain years. The auditing of arrears began in 2004. The repayment of these arrears is scheduled to continue until 2026. For the year ended 31 December 2014 the stock of arrears was CFA 126 billion.
Cameroon budgets for the payment of arrears as part of servicing the public debt (which includes debt to public and quasi-entities) and budgeted for the reduction of the stock of arrears of CFA 116.1 billion of internal audited arrears and the repayment of CFA 100 billion of other arrears in 2015. It budgeted for the reduction of the overall stock of arrears of CFA 20.1 billion of internal audited arrears in 2014, CFA 26.1 billion in 2013 and CFA 26.0 billion in 2012.
Cameroon has undertaken a programme to update its accounting methods and payment of budgetary arrears, much of which is composed of debt owed between public entities. Some of these debts date back to the 1980s, for which the Government has implemented a repayment programme. Measures taken by the Government to analyse and resolve possible budgetary arrears include:
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auditing (beginning in 2004) and monitoring of domestic and external arrears by an international independent auditing firm. This exercise focuses on various categories of arrears, including commercial, rental debts (contracted housing) and compensation. Similarly, there is a budgetary section dedicated to budget carry-overs.
addressing inter-enterprise arrears through the following:
When a state-owned company cannot pay its debts to another state-owned company, the Government can proceed with the development of a subrogation agreement through which the Government ensures the settlement of the debt and can take measures to recover on the debt.
When two state-owned companies are indebted to one another, mutual debt compensation, or set-off mechanisms, may be established and the balance is adjusted according to a schedule.
Transparency and Anti-corruption In 2014, Cameroon was ranked 136 out of 175 countries surveyed in Transparency International’s Corruption Perceptions Index, with a raw score of 25 (on a scale of 1 to 100, with 1 being the most corrupt). This compares to its 2013 rank of 144 out of 177 ranked countries in the same survey.
The Government has demonstrated that it is committed to fighting corruption. At the international level, Cameroon has signed and ratified the U.N. Convention Against Corruption and the African Union Convention on Combatting and Preventing Corruption. At the regional level, together with the other CEMAC countries, Cameroon is a member of the Groupe d’Action contre le Blanchiment d’argent en Afrique Centrale (“GABAC”). Within OHADA, accounting standards are also being standardised in order to improve transparency.
Cameroon is taking measures to address fiscal corruption that has led to the misallocation of resources and poor execution of projects. Cameroon is also reforming wealth disclosure requirements for certain public figures and offices. As of 2013, increased oversight now applies to all parts of the state’s financial management process. To reduce corruption, the Government monitors the performance of budgeted programmes and reviews procurement prices for goods and services to ensure that they are in line with market prices. It has also added additional financial oversight through independent specialised agencies, who monitor the management of public projects, including the National Agency for Financial Investigation (Agence Nationale d’Investigation Financière—ANIF) and the National Anti-Corruption Commission (Commission Nationale Anti-Corruption—CONAC).
In addition, tribunals that specialise in economic and financial crimes have been created, such as the Special Criminal Court (“SCC”) created in 2011. This court has jurisdiction nationwide to hear issues of embezzlement and misappropriation of public property and is dedicated to ensuring speedy proceedings and allowing for the prompt restitution of public property. The SCC is competent to hear misappropriation cases and related offences, where the value of the loss is at least CFA 50 million.
The SCC held its inaugural hearing on 15 October 2012. It inherited 119 cases from the regular courts (tribunaux de grande instance) of which 39 cases were docketed immediately and 52 cases have been ruled upon, including 36 on the merits and 16 as interlocutory rulings. In total, 51 defendants have been convicted, 26 defendants have been acquitted, 19 defendants received dismissals and 107 are facing trial before the Special Criminal Court. In addition, 16 indictees benefited from a stay requested by the Attorney General, after restitution of ill-gotten gains, under a new provision of a Cameroonian statute that allows the Attorney General to terminate proceedings at the request of the accused, following such restitution, and upon authorization of the Minister of Justice. With respect to the amounts returned to state coffers, the treasury has collected approximately CFA 2.4 billion as at the date of this Prospectus. Special procedures are in place to collect damages once decisions become final and the SCC has found defendants liable for approximately CFA
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12.2 billion in damages, as at the date of this Prospectus. Fines and court costs, which may only be calculated after a procedure is closed, are, to date, estimated to equal approximately CFA 1.0 million in fines and approximately CFA 602.3 million in legal fees and court costs.
Certain former public figures have been investigated and punished for corruption, including high ranking officials. In 2004, the Government launched a wide-ranging judicial operation, “Operation Hawk” (“Opération Epervier”) to eradicate corruption at the highest levels of government and industry, which resulted in the arrest, indictment and conviction of several former ministers and heads of public enterprises, primarily in 2006. In December 2007, the former Minister Alphonse Siyam Siwe was sentenced to 30 years in prison for embezzlement. In March 2008, the former Minister of Economy and Finance, Polycarpe Abah Abah, and the former Health Minister, Urbain Olanguena Awono, were arrested for embezzlement. In the context of Operation Hawk, some directors and officers of certain public enterprises challenged charges brought under the Cameroonian Penal Code on the basis that such corporations are governed by OHADA, which provides less severe punishments for misappropriation of company funds. The creation of the SCC settled the jurisdictional dispute and allowed continued litigation of corruption and misappropriation charges. Given that the emphasis in such proceedings is placed on the restitution of misappropriated property to the State, in 2013 a decree formulated procedures for the restitution of such property and a specialised corps of judicial police officers, attached to the SCC, was created. Other proceedings relating to corruption and/or misuse of public funds are underway. See “Risk Factors— Failure to adequately address actual and perceived risks of corruption may adversely affect Cameroon’s economy and its ability to attract foreign direct investment” for further details.
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PUBLIC DEBT
Legal Framework
Under Article 43 of the Constitution of Cameroon the President has the power to negotiate and ratify international agreements, conventions and treaties. This power includes the negotiation and issuance of public debt. Pursuant to Article 10(2) of the Constitution, the President may delegate these powers to “the Prime Minister, other members of Government and any other senior administrative officials of the State, within the framework of their respective duties”.
Law No. 2007/006 of 26 December 2007 of the State Financial Plan describes the powers of the various authorities and public administrations with regards to public debt and sets rules for the auditing and managing of funds raised through public debt. Under this law, the Parliament sets the terms of borrowing and must be informed of developments in the national economy and the status of public finances. It should also be provided with, amongst other documents, the annexes relating to financial operations of the state and details on public debt. Under this law, the Parliament must vote to finance and ratify the presidential order fixing or modifying debt ceilings.
Finance Strategy
Pursuant to Regulation No. 12/07-CAEU-186-CM-15 of 19 March 2007 regulating public debt policy and public debt management in the CEMAC member states, each member state must develop and maintain a debt strategy. In accordance with CEMAC regulations, the Comité Nationale de la Dette Publique (National Public Debt Committee) implements national strategy on the sustainability of public debt and public finances.
As part of its budget process and ongoing debt management strategy the Government updated its debt strategy for 2013-2017. For the 2013 to 2017 period, it has two objectives: (i) provide for its financing needs in the medium term by reducing costs and risks, and (ii) promote the development of the domestic debt market. The desired composition of the debt portfolio in 2017 is 66% of external debt and 34% domestic debt. As at 31 December 2014 Cameroon’s total debt stock stood at CFA 3,487 billion of which CFA 2,560 billion was external and CFA 927 billion was internal which equating to 73.4% external and 26.6%, respectively of the country’s total debt.
In addition to debt composition, the strategy defines the type of instruments to be used to achieve the above goals. Preference will be given to long-maturity loans, loans contracted at fixed rates and loans denominated in foreign currencies with a fixed parity to the CFA franc such as the Euro.
The goal is to extend the maturities of issued securities by 2017 as well as to increase the share of these securities in the debt portfolio in order to mitigate exchange rate risks.
Debt Ratios As part of its debt management strategy, the Government also sets out certain debt ratios that it seeks to meet. These ratios provide a way of understanding Cameroon’s debt in relation to its economy and provide a way to understand Cameroon’s ability to service its debt.
Net present value (“NPV”) captures, in compact form, the time value of a stream of debt-service payments. NPV to GDP measures the net present value of the total debt against gross domestic product and is a useful comparison of the total debt in its present value against the present size of the economy. NPV to exports, goods and services is useful to show the size of the debt as compared with Cameroon’s trade with the world. NPV to budgetary receipts illustrates the size of the debt as compared to the revenues of the state. The
150 liquidity ratios show Cameroon’s ability to service its debt as it becomes due. Debt service to budgetary receipts shows the percentage of the budgetary receipts needed to service the debt in a given year. Debt service to exports shows the debt service as a percentage of exports which helps measure the debt service against Cameroon’s trade with the world. Lastly, debt to GDP shows the nominal value of the debt as compared to the size of Cameroon’s economy.
The following table shows Cameroon’s debt ratios as a percentage at the dates indicated:
Criteria(1) 2011 2012 2013 2014 Ratio NPV/GDP < Net Present Value (NPV)/GDP ...... 30 % 8.0 9.1 11.2 12.0 NPV/EGS < NPV/Exports Goods and Services ...... 100 % 43.7 49.7 62.6 52.3 NPV/BR < NPV/Budgetary receipts ...... 200 % 45.2 51.7 64.5 72.7 Liquidity Ratios Debt Service/Budgetary receipts ...... DS/BR < 25 % 9.5 9.6 8.3 13.9 DS/EGS < Debt service /Exports Goods and Services ...... 15 % 9.2 9.2 8.0 10.0 CEMAC Criteria Debt Stock Debt/GDP(2) ...... /GDP < 70 % 16.2 16.6 18.8 22.0 Source: CAA
Note: (1) These measurements are used by a number of different institutions, including the IMF to measure debt sustainability. For example, the NPV measurements have been used in the context of the HIPC initiative. For the HIPC initiative the threshold is 150% for the NPV of debt-to-exports of goods and services and 250% for the ratio of NPV to fiscal revenue. By way of example Cameroon’s NPV of debt to exports goods and services was 165% when it qualified for the HIPC initiative. For more information see “—Debt Record”. (2) Ratio from CAA and MINFI/MINEPAT data.
Cameroon’s overall debt has grown in recent years. However, the growth in total debt has remained in line with Cameroon’s ability to service the debt.
Overall Public Debt
Historically, Cameroon used statutory advances from the BEAC to manage its finance needs. However, since 2007, the CEMAC countries have undertaken major reforms regarding debt management. These reforms include the phasing out of statutory advances from BEAC and prioritising funding though both domestic and international capital markets and lending from international financial institutions. In line with this reform, Cameroon has prioritised using domestic capital markets, and in addition expects to prioritise using international capital markets, to finance its budget deficits and cash-flow needs. Since 2010, Cameroon has regularly issued debt on the domestic capital markets.
While the use of statutory advances is still possible, Cameroon has chosen no longer to use this resource.
Cameroon’s public debt has increased in recent years due to large investment projects undertaken by the Government. For more information, see “The Cameroonian Economy—Demand—Public investment”.
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The following table shows Cameroon’s overall public debt stock at the dates indicated:
Year 2011 2012 2013 2014 (in CFA billions)
External debt Stock ...... 1,280.0 1,495.0 1,920.0 2,560.0 Multilateral ...... 561.0 632.0 725.0 964.0 Bilateral ...... 676.0 773.0 1,071.0 1,483.0 Commercial ...... 43.0 90.0 125.0 113.0 Internal debt stock ...... 750.0 748.0 826.0 927.0 Public Issuances ...... 208.0 179.0 288.0 393.0 Structured Debt(1) ...... 379.0 426.0 403.0 408.0 Non Structured ...... 163.0 144.0 136.0 126.0 Total public debt ...... 2,030.0 2,243.0 2,747.0 3,487.0 Source: CAA
Note: (1) Structured debt includes bank debt and non bank debt. Non bank debt includes securitised debt as well as non securitised debt such as to public and quasi-public entities, notably including SONARA. Some of the debt owed to SONARA was securitised with the total securitised debt of SONARA amounting to CFA 165 billion.
In 2014, total public debt was estimated at CFA 3,487 billion consisting of 73.4% external debt and 26.6% internal debt and including debt guaranteed by the state, total public debt was estimated to be CFA 3,634 billion.
The Government estimated in 2015 that total public debt stood at CFA 3,811 as of 30 June 2015 and the debt to GDP ratio stood at 23.4%. Cameroon’s total external debt stood at CFA 2,783 billion or 73% of total debt and total internal debt stood at CFA 1,028 billion or 27% of total debt. The increase in public debt compared to December 2014 levels is due in part to changes in exchange rates (primarily between the CFA/euro and the U.S. dollar) and disbursements for projects. For 2015 the debt ceiling was increased by CFA 1,700 billion in order support Cameroon’s investment program.
Further, as of 30 June, 2015, amounts available but undrawn under currently available or future credit facilities or financing agreements amounted to CFA 925 billion for those earmarked for the Three Year Emergency Plan CFA 2,805.0 billion for other projects and uses.
Overall Debt Service Debt service shows the amount of payments on the Government’s debt falling due in a given year.
The following table shows the service of the public debt by total and by creditor:
Service of the public debt
2012 2013 2014
(in CFA billions) Total ...... 238.6 193.6 227.0 Principal Interest Principal Interest Principal Interest External Debt ...... 74.8 39 57.3 36.4 70.0 50.9
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Service of the public debt
2012 2013 2014
(in CFA billions) IMF ...... 0 0 0 0 0 0 IDA ...... 1.7 1.7 1.8 2.4 2.1 2.4 AfDB and ADF ...... 0.9 2.5 0.9 2.6 3.2 2.5 IBRD ...... 2.7 0.4 2.7 0.27 2.6 0.3 Other Creditors ...... 69.5 34.4 51.9 31.2 64.3 45.8 Internal Debt ...... 109 15.8 90.8 9.1 85.6 20.4 Public issuances ...... 39.5 8.8 39.5 4.4 39.5 14.5 Structured debt ...... 50 7 33 4.7 32.2 5.9 Non Structured ...... 19.5 — 18.3 — 13.9 — Source: CAA
In the first quarter of 2015 CFA 200 billion was reimbursed and in the second quarter of 2015 CFA 101 billion was reimbursed. In 2014, total debt service was CFA 227.0 billion, compared to CFA 193.6 billion in 2013 and CFA 238.6 billion in 2012.
Internal Debt
Since 2010 Cameroon has increased the percentage of its internal debt coming from public issuances.
The table below shows the breakdown of Cameroon’s internal debt stock for the period 2011 to 2014.
Year 2011 2012 2013 2014 (in CFA billions)
Internal Debt Stock ...... 750.0 748.0 826.0 927.0 Public Issuances ...... 208.0 179.0 288.0 393.0 Structured Debt(1) ...... 379.0 426.0 403.0 408.0 Non Structured ...... 163.0 144.0 136.0 126.0 Source: CAA
Note: (1) Structured debt includes bank debt and non bank debt. Non bank debt includes securitised debt as well as non securitised debt such as to public and quasi-public entities notably including SONARA. Some of the debt owed to SONARA was securitised in 2012.
External debt
Historically Cameroon has looked to multilateral and bilateral sources of funding, but has increasingly also turned to bank lending and capital markets.
The following table shows the breakdown of the external debt of Cameroon by creditor for the period 2011 to 2014:
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Year 2011 2012 2013 2014* (in CFA billions)
Creditors Multilateral...... 560.9 632.2 724.8 964.0 IMF ...... 85.7 83.4 77.9 80.3 IDA ...... 220.4 264.7 327.5 419.0 AfDB ...... 136.5 173.3 177.6 282.6 IBRD(1) ...... 9.7 6.6 4.2 0.8 IsDB(2) ...... 31.3 32.8 51.7 52.3 FIDA(3) ...... 19.2 20.5 29.6 39.5 OPEC ...... 10.6 11.2 18.2 21.2 BADEA(4) ...... 14.6 13.4 12.4 14.3 EU ...... 32.7 26.3 25.6 54.1 BDEAC(5) ...... 0.4 0.03 0.03 0.03 Bilateral ...... 676.6 772.7 1,070.6 1,483.3 Bilateral Paris Club ...... 462.2 438.2 435.4 433.2 Belgium ...... 20.7 15.0 15.0 15.0 France ...... 389.5 370.7 359.6 355.4 Germany ...... 27.1 26.5 35.8 29.6 Netherlands...... 5.4 4.4 3.4 2.4 Spain ...... 11.3 11.5 10.2 9.1 Switzerland ...... 2.8 2.6 2.0 1.9 Japan ...... 5.6 7.5 9.3 13.3 U.S.A...... — — — 6.4 Bilateral non Paris Club ...... 214.3 334.5 635.2 1,050.1 China ...... 175.5 288.1 596.4 1,012.3 Kuwait ...... 17.1 15.5 14.3 15.3 Saudi Arabia ...... 2.6 3.8 3.0 2.6 India ...... 18.3 17.5 17.2 18.3 South Korea ...... 0.8 9.6 4.3 1.6 Commercial and Bonds ...... 42.6 89.7 125.0 113.2 Bank ...... 0.2 57.9 103.7 102.6 Non Bank ...... 0.4 0.4 0.4 0.0 ECMR Bond 5.6% – 2010-2015 ...... 42.0 31.5 21.0 10.5 Total External Debt ...... 1,280 1,495 1,920 2,560 Source: CAA
*estimates
Note: (1) International Bank for Reconstruction and Development
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(2) Islamic Development Bank (3) International Fund for Agricultural Development (4) Banque Arabe pour le Développement Economique en Afrique (5) Banque de Développement des Etats de l'Afrique Centrale
As at 31 December 2014, Cameroon’s estimated external debt consisted primarily of multilateral debt of CFA 964.0 billion and bilateral debt of CFA 1,483.3 billion. Its commercial debt stood at CFA 113.2 billion. In 2014, multilateral debt accounted for 37.7% of total external debt, bilateral debt accounted for 57.9% and commercial debt accounted for 4.4%.
External debt by Currency Cameroon has sought to prioritise debt denominated in Euros or CFA franc, which can be seen in the table below.
The following table shows the breakdown of external public debt by currency for the period 2011 to 2014:
External Public Debt by Currency
As at 31 December
2011 2012 2013 2014
(in CFA billions) U.S. Dollar ...... 355.2 444.9 672.2 1,006.2 Japanese Yen ...... 56.0 68.0 78.7 105.0 Chinese Yuan ...... 99.8 116.6 149.8 235.6 Euro ...... 729.4 803.9 941.0 1182.9 Other ...... 39.6 61.3 78.7 30.7 Total ...... 1,280 1,495 1,920 2,560 Source: CAA
In 2014, Euro denominated debt accounted for 46.2% of Cameroon’s total external public debt, U.S. Dollar denominated debt accounted for 39.3%, Chinese Yuan denominated debt accounted for 9.2% and Japanese Yen denominated debt accounted for 4.1%.
Debt Record
External debt increased sharply between 1985 and 2004, mainly reflecting severe terms of trade shocks in the mid-1980s, a long economic depression due to drought, international economic conditions and financial mismanagement, and a fiscal crisis in the early 1990s. As a result, Cameroon had six rescheduling agreements with the Paris Club between 1989 and 2001. The Paris Club treatments concerned debt service flows only. In 1996, the World Bank and IMF launched the Highly Indebted Poor Country Initiative (HIPC) to create a framework in which all creditors, including multilateral creditors, can provide debt relief to the world's poorest and most heavily indebted countries, and thereby reduce the constraints on economic growth and poverty reduction imposed by the debt service burdens in these countries. HIPC was modified in 1999 to provide three key enhancements: deeper and broader relief, faster relief and a stronger link between debt relief and poverty reduction.
Cameroon’s debt stock exceeded the relevant enhanced HIPC thresholds and, in December 2000, Cameroon reached its HIPC decision point as determined by the IMF and the World Bank. As a result, Cameroon
155 became eligible for significant debt relief. At the end of 1999, the nominal stock of public external debt was U.S.$7.6 billion (about 85% of GDP) and debt service accounted for approximately 27% of the budget. Under the HIPC in 1999, the net present value of total relief was U.S.$1.267 billion.
In 2002, Cameroon completed negotiations with commercial creditors through the London Club. The negotiations with the commercial creditors (primarily banks) led, in May 2002, to an agreement on a buy- back operation for both bank and non-bank commercial debt that represented a discount of 85.5% of nominal principal and the forgiveness of all arrears payments. This operation was completed in August 2003 with the financial assistance of France, Norway, and the International Development Agency (IDA) (under the enhanced HIPC), as well as through Cameroon's own budget resources. This agreement with commercial creditors through the London Club had an estimated 80% participation rate. The remaining commercial debt (about U.S.$200 million) was in arrears and owed to creditors who did not participate in 2002-2003. Although Cameroonian authorities achieved settlements with most of these creditors, two creditors pursued court claims against Cameroon. One of these creditors obtained judgments and seized approximately €38 million of SNH assets, while the Government reached a settlement with the other hold-out creditor.
In 2004 despite debt relief, Cameroon’s debt remained unsustainable with debt to GDP at 61.6%. In September 2004, Cameroon missed a payment and defaulted on CFA 40 billion of local law, local currency bonds. This default was followed by a distressed exchange of bonds in 2005 with a total value of approximately U.S.$1.0 billion, which accounted for 10.5% of its total debt at that time and amounted to approximately 6.5% of GDP. Twelve months after the initial default, the relevant creditors agreed to extend the maturity of the defaulted bonds. This extension to the maturity was not accompanied by a reduction in the principal or coupon amounts due to the creditors. Cameroon’s ratio of debt to GDP was reduced from 61.6% of GDP before the distressed exchange, to 51.6% of GDP immediately following the distressed exchange.
In 2006, the IMF and the IDA agreed that Cameroon had made sufficient progress and had taken the necessary steps to reach its completion point under the enhanced HIPC. In order to reach its completion point Cameroon had to meet a number of criteria. These included (i) creating a plan to reduce poverty, (ii) maintaining a stable macroeconomic framework, (iii) using the budgetary savings from the interim debt service relief in a satisfactory manner, (iv) satisfactory implementation and conclusion of structural reforms, (v) satisfactory implementation of governance and anti-corruption measures, including in the areas of judicial and procurement reforms, budget execution and the creation of regulatory agencies; and (vi) satisfactory implementation of key social reforms, including combating HIV/AIDS. Cameroon became the 19th country to reach the completion point under HIPC.
Debt relief to Cameroon under HIPC was approximately U.S.$1.267 billion in 1999 NPV terms, equivalent to a 27% NPV reduction of Cameroon's debt after traditional debt relief. This reduced Cameroon's future debt service payments by about U.S.$4.9 billion in nominal terms.
The U.S.$1.267 billion in reduced debt is attributable to multilateral, bilateral and commercial creditors. The breakdown of the enhanced HIPC assistance is as follows (in NPV terms):
U.S.$176 million from the World Bank Group;
U.S.$37 million from the IMF;
U.S.$79 million from the African Development Bank Group;
U.S.$31 million from other multilateral creditors;
U.S.$879 million from bilateral creditors; and
U.S.$65 million from commercial creditors.
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In reaching the HIPC completion point, Cameroon also became eligible for further debt relief from the IMF, IDA and the African Development Fund under the Multilateral Debt Relief Initiative, amounting in aggregate to U.S.$1.13 billion at the then current exchange rate.
For information on budgetary arrears, see “Public Finance—Budgetary Arrears”.
Relationship with Creditors
Considerable financing from official bilateral and other multilateral sources, as well as debt rescheduling, have supported Cameroon’s public finances and financial strategy in particular since 2000 when Cameroon became eligible for HIPC.
IMF Cameroon has been a member of the IMF since 10 July 1963. Cameroon’s economic development has been supported in recent years by Extended Credit Facilities arranged in 2009, 2000 and 1997. In 2000, Cameroon entered the HIPC programme and disbursement under the HIPC programme was completed in April 2006. Cameroon also received debt relief through the Multilateral Debt Relief Initiative in April 2006. In 2014, Cameroon was CFA 80.3 billion in debt to the IMF, compared to CFA 77.9 billion in 2013, CFA 83.4 billion in 2012 and CFA 85.7 billion in 2011. Cameroon regularly consults with the IMF. The IMF produces Article IV reports on Cameroon which discuss the macroeconomic outlook for Cameroon and the risks to the Cameroonian economy. IMF Article IV consultations usually take place once a year. An IMF delegation visits the member country to gather information and hold discussions with government and central bank officials. In addition, they often consult with private investors, labour representatives, members of parliament and civil society organisations. The delegation submits a report to the IMF’s Executive Board for discussion whose views are subsequently summarised and transmitted to the country’s authorities. The IMF published its last Article IV report in July 2014.
In September 2015, an IMF delegation visited Cameroon for the purpose of gathering data in preparation for its next Article IV report on Cameroon. The IMF September 2015 Press Release, which sets out the delegation's preliminary findings from the mission, noted that global and regional economic environment has significantly deteriorated since the last IMF consultations in Cameroon in May 2014. The decline in world oil prices has impacted government revenue and terrorist attacks in the far north, displaced persons within the country and refugees from the Central African Republic have generated additional government expenditure. In addition, the IMF noted that overall fiscal deficit has deteriorated significantly (4.1 per cent. of GDP in 2013 compared to 5.7 per cent. of GDP in 2014) and that it has triggered an upturn in financing requirements, leading to an increase in public debt. The IMF further noted that the level of public debt is growing rapidly and has been contracted on increasingly onerous terms. It recommended that the public investment programme be rationalised and consolidated with other investment plans, such as the Three-Year Emergency Plan. The IMF also noted the weak financial performance of public enterprises.
The IMF has indicated that it will publish its next full Article IV report in November 2015. The Republic expects the 2015 Article IV Report to be in line with the IMF September 2015 Press Release. See "Risk Factors – Risks Relating to the Cameroonian Economy – The publication of the pending IMF Article IV report may have an adverse impact on the price, volume and yield on the Notes" for a discussion of the risks related to the publication of the report.
World Bank and the International Development Association The IDA is the part of the World Bank that helps the world’s poorest countries. As at December 2014, Cameroon had CFA 419.0 billion in loans outstanding from the IDA, compared to CFA 327.5 billion in 2013, CFA 264.7 billion in 2012, and CFA 220.4 billion 2011. The Bank’s Country Assistance Strategy for
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Cameroon is aligned with the Growth and Employment Strategy Paper. As of April 30, 2014, the World Bank portfolio in Cameroon included 23 active projects, 12 of which are national, six are regional, and five were derived from trust funds. The projects represent a commitment of US$1.17 billion. These projects are funded by the International Development Association (IDA), the Global Environment Facility (GEF) and trust funds. These projects include infrastructure projects such as the Lom Pangar hydropower project and the Kribi Gas power plant. Between April 30, 2014 and September 29, 2015 according to the World Bank approvals of commitments of US$261 million have been made.
AfDB and ADF The African Development Fund and African Development Bank are major multilateral creditors of Cameroon. As at December 2014, Cameroon had CFA 282.6 billion in debt to the AfDB compared to CFA 177.6 billion in 2013, CFA 173.3 billion in 2012 and CFA 136.5 billion in 2011. This lending has supported infrastructure projects such as the Numba-Bachuo Akagbe Road Development Project in the south-west province of the country.
France France is Cameroon’s largest bilateral Paris club lender. As at September 2014, Cameroon was CFA 355.4 billion in debt to France compared to CFA 359.6 billion in 2013, CFA 370.7 billion in 2012 and CFA 389.5 billion in 2011. While a major creditor, France also provides debt relief and development funds. Investments are provided for the Government under the French Debt-Reduction and Development Contracts. The purpose of C2Ds is to alleviate debt that has been incurred by Cameroon toward France within the framework of France’s official development aid programme. Using the C2D mechanism, Cameroon continues to honour its debts to France, but when a repayment is made, France offers Cameroon a non-refundable grant in an equivalent amount. The grant is then allocated to finance poverty reduction programmes that have been selected by joint agreement between France and Cameroon. In this way, the country is able to use resources previously allocated to debt repayment to finance development projects. The first C2D contract between Cameroon and France was signed in June 2006 for CFA 352.7 billion (€537 million) over five years. Three quarters of the total C2D funding was committed in the first year, and the rest was committed in the following year. The C2D contract was in line with a contract signed between France and Cameroon in 2006, the Partnership Framework Document (DCP), to reduce the poverty rate from 40% in 2001 to 25% in 2015. According to the French Ministry of Foreign Affairs and International Development in 2015, the success of the first C2D led to the signing of a second C2D, worth CFA 213.8 billion (€326 million) over the period 2011-2016. There is the possibility therefore, of more debt in the future falling under a C2D programme as 90% of Cameroon’s multilateral debt to France is C2D eligible. See also “Public Finance—Non- Discretionary Spending”.
China China is Cameroon’s largest bilateral Non-Paris Club lender. As at September 2014, Cameroon was CFA 1,012.3 billion in debt to China compared to CFA 596.4 billion in 2013, CFA 288.1 billion in 2012 and CFA 175.5 billion in 2011. China’s role as a creditor has largely been to finance major investment projects. For more information on the projects that China has funded, see “Foreign Trade and Balance of Payments— International and Trade Relations—China”.
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MONETARY SYSTEM
Monetary Policy and the BEAC
Cameroon’s monetary policy is managed by the BEAC. The BEAC, established in 1972 and based in Yaoundé, acts as the central bank for the six members (Cameroon, Gabon, the Central African Republic, the Republic of the Congo and Equatorial Guinea) of Central African Economic and Monetary Union (“CEMAC”). Lucas Abaga Nchama was appointed as the governor of the BEAC in January 2010, replacing Jean–Philibert Andzembe, who was dismissed following alleged mismanagement of funds. The board of directors of the BEAC comprises a governor and five members appointed by the member countries of the CEMAC.
The BEAC has the powers of currency issuance, stabilisation, valuation and free convertibility. It can also define and conduct the monetary policy applicable to CEMAC members, conduct foreign exchange operations, hold and maintain CEMAC members’ reserves and promote an effective banking system within CEMAC member states. The BEAC accounts of each CEMAC member state are maintained separately. The BEAC also provides liquidity to the banks located in its member States by offering collateral–backed treasury lines. Deposits collected by those banks may also be centralised with the BEAC. The BEAC serves to manage the following goals of the monetary union:
a single monetary currency, the CFA franc, created in 1945;
central holding of monetary reserves;
free circulation of capital and freedom of monetary transfers within the union;
free convertibility of the currency, without limit, into Euros on the basis of a fixed parity of 1 Euro to CFA 655.957; and
harmonisation of monetary, banking and foreign exchange legislation.
The CFA franc’s stability is based on tight monetary and fiscal discipline. For example, the BEAC must keep 20% of deposits that are repayable on demand in foreign currency and the member Governments are not allowed to draw amounts from the BEAC’s funds that are greater than 20% of that country’s previous year’s budget receipts.
The main policy objectives of the BEAC are to create a fully functional and effective customs union, ensure a system of macroeconomic surveillance and promote sector policies that help create a common market for goods, capital and services.
As part of a number of initiatives to strengthen the monetary union, throughout the CEMAC zone, central bank financing of national treasuries has been gradually phased out and Cameroon has largely stopped using these instruments since 2010 although in December 2014 it took out an advance of CFA 165 billion, CFA 105 billion of which has already been repaid. Statutory advances to governments were consolidated with repayments to the central banks starting in 2003. As a result, national treasuries have turned to market financing of budget deficits, thereby stimulating the CFA franc zone debt market. Cameroon for example has increasingly turned to capital markets since 2010. In addition, the member countries adopted a regional Convergence, Stability, Growth and Solidarity Pact in December 1999 to encourage the harmonisation and coordination of fiscal policies necessary to sustain credibility and stability in the monetary union. They also introduced a fully-fledged customs union, liberalised intra-regional trade and harmonised tax rates.
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The BEAC influences credit expansion within member states by granting rediscounting facilities and direct advances to commercial banks. Commercial banks are required to provide the BEAC with regular reports on the amount of their advances to clients.
Despite a common currency, a central bank and a supervisory and legal framework, only partial progress has been made regarding integration of the banking markets in the region. This is due to the limited effectiveness of the measures taken so far, inadequate infrastructure and underdeveloped markets, as well as the negative effects that integration may have on reputation and consumer preferences. Effects on reputation and consumer preferences arise from language barriers, cultural differences, geographical considerations and availability of information, which means that banks suffer from the lack of information on borrowers and other banks and consumers may not be willing to change banks.
Overview of Recent Developments Cameroon’s monetary policy is conducted by the Monetary Policy Committee (“MPC”) of the BEAC. The MPC’s national responsibilities in Cameroon are exercised by the Monetary and Financial Committee of Cameroon. The BEAC’s monetary policy has sought to stabilise prices and the real effective exchange rate and to prevent public spending from limiting private investment. Although, the BEAC pursued a rather restrictive monetary policy in the period from 2010 to 2012, the BEAC has since 2013 moved to an expansionary monetary policy implemented through two instruments: refinancing and reserves.
In particular, on 31 October 2013, the MPC reduced the advance rate (intervention rate) for banks from 3.5% to 3.25% and from 3.25% to 2.95% in 2014, where it has remained in 2015. The required reserve ratio for Cameroon’s banks has been fixed at 11.75% for current accounts and 9.25% for savings accounts. As a result, money supply grew by 10.1% in 2013 from CFA 3.23 trillion to CFA 3.55 trillion compared to a growth of 1.5% in 2012. Credit to the economy (domestic credit) also increased by 30.3% between 2011 and 2013, which, in conjunction with the financing of major infrastructure projects, encouraged growth in the private sector.
Inflation in Cameroon, which is strongly correlated with food prices, remained below CEMAC’s 3.0% convergence threshold in 2013 and 2014 despite the expansionary fiscal and monetary policy. For more information, see, “Monetary System—Inflation”.
Due to the nature of goods exported to countries in the Eurozone and the weak link between local banks and those of their parent institutions in Europe, Cameroon was only marginally affected by the Eurozone crisis, primarily through the changes in European demand for exported raw materials.
Foreign Reserves Each BEAC member country’s international reserves are pooled in the BEAC’s operations account, which is held at the French treasury. Each member’s account is allowed to be in deficit, in order to guarantee the convertibility of the CFA franc (though only for physical transactions). In return, the BEAC countries are required to maintain 50% of their foreign assets in their BEAC operations account, which is denominated in Euros, with the remainder free to be converted into other currencies.
The table below sets out certain information regarding Cameroon’s foreign reserves as at the dates indicated:
31 December
Foreign Reserves 2011 2012 2013 2014 (in CFA millions)
Gold ...... 23,211 25,074 17,195 19,527
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31 December
Foreign Reserves 2011 2012 2013 2014 (in CFA millions)
Bills and Currencies ...... 2,602 1,964 975 12,570 French Treasury Bills ...... 1,289,848 1,333,984 939,735 768,402 IMF Reserve ...... 45,377 43,884 41,944 44,798 Other ...... 315,883 332,455 698,906 918,121 Total ...... 1,676,883 1,737,322 1,698,755 1,763,419
Cameroon, the largest economy of the CEMAC, reported an increase in foreign reserves of CFA 64.7 billion as at 31 December 2014 as compared to 2013. The foreign reserves of the CEMAC countries have recently demonstrated a significant decline from CFA 4,974.0 billion as at 31 December 2013 to CFA 3,847.0 billion as at 31 December 2014. Given that five out of six CEMAC members, including Cameroon, are oil producing countries, this significant decline in the foreign reserves is attributed to a decline in world crude oil prices.
As at 31 December 2014 Cameroon’s foreign exchange reserves held with the BEAC were CFA 1,447.1 billion or the equivalent of five months of imports.
Money Supply The following table sets out certain information regarding Cameroon’s money supply as at 31 December 2011, 2012 and 2013 and as at 30 November 2014:
30 31 December November
Monetary Supply 2011 2012 2013 2014 (in CFA billions)
Components of the Money Supply ...... 3,068.2 3,227.3 3,553.5 3,825.0 Net external assets ...... 1,627.3 1,527.8 1,551.2 1,616.9 Net external assets with the BEAC ...... 1,418.2 1,462.1 1,418.2 1,329.4 Of which: the operations account ...... 1,289.8 1,334.0 939.7 706.0 Net external assets with banks ...... 209.1 65.7 133.0 287.5 Domestic credit ...... 1,440.9 1,699.5 2,002.3 2,208.1 Net claims to on central Government ...... (502.3 ) (288.4 ) (271.5 ) (220.5 ) Net Government position ...... (346.0 ) (244.6 ) (185.7 ) (116.6 ) Credit to the economy ...... 1,943.3 1,988.0 2,273.8 2,428.6 Credit to the private sector ...... 1,743.1 1,843.6 2,072.7 2,260.8 Credit to non-financial public companies 120.7 120.7 114.8 131.0 Resources ...... 3,068.2 3,227.3 3,553.5 3,825.0 Broad money (M2) ...... 2,897.2 2,939.5 3,280.8 3,425.9 Notes and coins in circulation ...... 525.5 554.8 560.1 568.0 Bank money ...... 1,272.1 1,249.5 1,477.0 1,542.5
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30 31 December November
Monetary Supply 2011 2012 2013 2014 (in CFA billions)
Quasi-money ...... 1,099.6 1,135.2 1,243.6 1,315.5 Other items (net) ...... 171.0 287.8 272.7 399.1 Source: BEAC
In November 2014, the net external assets increased to CFA 1,616.9 billion, from CFA 1,551.2 billion in 2013 and CFA 1,527.8 billion in 2012. However, in 2012, net external assets decreased from CFA 1,627.3 billion in 2011. This slight increase from 2012 to 2014 is attributable to a favourable international and national context, monetary policy measures adopted by the MPC and domestic growth. At the same time, the net external assets of Cameroon with the BEAC decreased stood at CFA 1,418.2 billion as at 31 December 2013 and at CFA 1,447.1 billion as at 31 December 2014.
The operations account balance of Cameroon was CFA 706.0 billion as at 30 November 2014, a 24.9% decline from CFA 939.7 billion as at 31 December 2013, which in turn was a 29.6% decline from CFA 1,334.0 billion as at 31 December 2012. This decline was due to funds in its operations account being used by Cameroon for various acquisitions of equipment necessary for large infrastructure projects. Domestic credit increased by 10.3% and 17.8% as at 30 November 2014 and 31 December 2013, respectively, to reach CFA 2,428.6 billion as at 30 November 2014 and CFA 2,002.3 billion as at 31 December 2013. Over this period, credit available in the economy demonstrated growth of 6.8% and 14.4% as at 30 November 2014 and 31 December 2013, respectively, due to an increase in credit available to the non-financial sector of 4.1% and 12.4%, respectively, which was prompted by increasing demand for operating loans to enterprises, particularly in the energy, telecommunication and the trade and services sectors.
As at 30 November 2014, the M2 money supply had increased by 4.4% and stood at CFA 3,425.9 billion as a result of a decrease in the notes and coins in circulation component of the M2 money supply. M2 money supply is a measure of money supply that includes cash and checking deposits (M1) as well as quasi-money. (“Quasi-Money”) in M2 includes savings deposits, money market mutual funds and other time deposits, which are less liquid and not as suitable as exchange mediums but can be quickly converted into cash or checking deposits. The M2 money supply increased by 11.6% in 2013 to reach CFA 3,280.8 billion as at 31 December 2013, and in 2012 increased by 1.5% and stood at CFA 2,939.5 billion as at 31 December 2012. This increase in 2013, reflected a gradual increase in all M2 money supply components, in particular, an 18.2% increase in bank money, a 1.0% increase in notes and coins in circulation and a 9.5% increase in quasi- money as at 31 December 2013. The strong growth in the bank money component resulted from an increase in banking activities due to more the regular use of cheques, banking cards and, to a lesser extent, on-line payments.
Inflation Controlling inflation and maintaining the CFA franc’s peg to the Euro are the BEAC’s main priorities. The CFA franc was devalued in 1994 for the first time since 1948. The devaluation of the CFA franc in 1994 caused a significant rise in domestic price levels in 1994-1995. Since then, inflation in Cameroon and other member countries of the CEMAC has been low, aided by the peg to the Euro and the BEAC’s policies.
The following table sets out certain information regarding inflation in Cameroon for the periods indicated:
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2011 2012 2013 2014
Inflation (Consumer Price Index) Yearly Average……………… ...... 2.9 % 2.4% 2.1% 1.9% Sources: MINEPAT INS
For the six months ended 30 June 2015 inflation was estimated at 3.4% for local goods and 1.6 % for imported goods compared to the same period in 2014. Inflation in the first half of 2015 was due in particular to increases in transportation prices and increases in the prices of certain petroleum products coming into force. The government preliminary estimate is that inflation will be around 2.8% for 2016.
In 2014 inflation was at 1.9% compared to 2.1% in 2013, 2.4% in 2012, 2.9% in 2011 and 1.3% in 2010. These levels comply with the target set by the BEAC, which requires inflation in each CEMAC member country to be at or below 3.0%. The Finance Law (Loi de Finances) for 2015 projects that the inflation rate in Cameroon 2015 will be 3.0%.
In 2013 and 2014, the Government of Cameroon maintained certain price control measures on key consumption items, such as retail prices of gasoline and diesel. In order to manage inflation the Government imposed measures such as price controls on certain consumer goods and the removal of VAT on certain categories of necessities.
Banking Regulation and Supervision
Banking Regulatory Authority The Commission Bancaire de l’Afrique Centrale (the “COBAC”) supervises and regulates the banking sector of the six CEMAC member states. The COBAC was created on 16 October 1990 and its members officially took office on 22 January 1993. The COBAC’s objective is to improve the effectiveness of the monetary and financial sector by supervising all financial intermediaries in the CEMAC region, such as banks and finance companies, leasing companies, consumer credit companies and savings banks, as well as ensuring banks’ compliance with prudential norms and issuing and withdrawing banking licences.
The COBAC depends on the BEAC for financial and human resources and the governor of the BEAC chairs the board of the COBAC. The board of the COBAC consists of 12 members: the chairman, seven members representing the CEMAC member states, three auditors from the BEAC and one member of the French Prudential Control Authority (Autorité de Controle Prudentiel).
The COBAC has introduced a more rigorous classification system for loans, and supervision has strengthened in recent years. Under COBAC supervision, there is substantial compliance with the Basel Core Principles, which set out capital adequacy requirements for banks. Nevertheless, for COBAC–regulated banks, the proportion of non–performing loans has decreased, from 10.93% in 2013 to 10.36% as at 31 December 2014.
Currency transactions valued at more than CFA 5 million require the use of commercial banks. Banks carrying out the actual exchanges must assess the economic reality of the transaction. Investments in a CEMAC member country of more than CFA 100 million must be declared and, in some cases, must be authorised through a review process which lasts 30 days. This procedure enables the investment and income relating to it to be more easily traceable.
Mandatory Reserves and Minimum Liquidity Ratio Unlike a public limited liability company, a bank is subject to two types of mandatory reserves: “bank” legal reserves and “ordinary” legal reserves.
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The bank legal reserve means the obligation of financial institutions to deposit a fraction of the deposits they receive from their customers in an account with the BEAC. Under this requirement, a variable portion of the bank’s resources is frozen and the volumes of distributed loans are indirectly handled. Within the CEMAC zone, the mandatory reserve is governed by the Regulation for the Application of Mandatory Reserves of 8 August 2001 and Decision No 02/CPM/2009 of 23 March 2009 relating to the Reorganisation of Mandatory Reserves of Banks. Under these regulations, the coefficients for mandatory reserves are a function of the liquidity situation of each country. In Cameroon, whose situation is classified as satisfactory, the coefficients are 11.75% for sight deposits and 9.25% for term deposits. Thus, each Cameroonian bank is expected to maintain permanently in its BEAC account 11.75% of its sight deposits and 9.25% of its term deposits. These mandatory reserves are remunerated up to 0.05% by the BEAC.
Under the OHADA Uniform Act on Commercial Companies and Economic Interest Groups, as a commercial company, each bank is also obliged to set aside a mandatory reserve equal to 10% of its net annual profits, until such accumulated reserves equal 20% of the registered capital of the bank. This legal reserve constitutes a security in the event of liquidation, in addition to the bank’s own equity capital and other paid-in capital. This legal reserve cannot be distributed to the shareholders during the life of the bank for any reason, but future net losses may be charged against this reserve, when such deficits cannot be charged on the other accounting reserves
Minimum Liquidity Ratio The COBAC has adopted a set of prudential standards for credit establishments. The Liquidity Ratio is governed by the Regulation COBAC R-93/06 dated 19th April 1993 related to the Liquidity of Financial Institutions as modified by Regulation COBAC R-94/01 and R-2013/04. This Regulation requires financial institutions to comply with a minimum ratio between the available debt and the payable debt within one month, known as the “rapport de liquidité” (Liquidity Ratio). This Regulation provides that financial institutions shall at all times have a Liquidity Ratio of at least 100%. Failure to observe this requirement may result in penalties including the closure of the financial institutions.
Capital Adequacy Ratios and Minimum Capital Requirements Cameroonian banks are subject to the regulations introduced by the BEAC and the COBAC which have almost fully implemented the Basel II regime. However, Cameroonian banks do not fully comply with the Basel II requirements which should be ensured before the move towards Basel III is to be considered. In addition a move to Basel III would require coordination and readiness to make a such a transition across the states of the sub-region.
Full compliance with the Basel II, and eventually Basel III, regime will require significant investment by the banking sector and is unlikely to be achieved in the short term. Nevertheless, many aspects of Basel II, which have been implemented or are in the process of implementation, aim to consolidate the stability of the banking system in terms of the level and quality of core funds as well as risk management. Recent reforms include COBAC R-2009/01 which increased minimum capital requirements, the creation of a deposit guarantee fund, COBAC R-2010 which regulated risk management, and COBAC R-2014/01 which regulates classification and accounting of loans.
In particular, banks in Cameroon are required to maintain a capital adequacy ratio (CAR), which was set as 8% as at 31 December 2014. Most banks within the banking system of Cameroon meet this capital adequacy ratio nevertheless three banks carry negative equity and one bank has positive equity but remains below the required capital adequacy ratio. These distressed banks, whilst not posing a systemic risk because of their relatively small size, need to be re-capitalised. Cameroon has participated in the recapitalisation of one of these banks, has agreed to participate in the recapitalisation of the second and anticipates participating in the recapitalisation of the third. Cameroon plans on making reforms to prevent/deter such situations in the future.
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See “Risk Factors— The Cameroonian banking sector is dominated by retail banks, microfinance and other quasi-banking institutions, which may be under-regulated, under-supervised or suffer from under- capitalisation” for further details.
Regulation COBAC R-2009/01 introduced a minimum capital requirement for banks of CFA10 billion in order to improve the resilience of the banking system, which came into force on 1 June 2009. This Regulation sets different capital requirements for banks and financial institutions: for banks, the required minimum capital is CFA 10 billion and for financial institutions it is CFA 2 billion. A transitional period under the Regulation allowed banks and financial institutions until June 2014 to achieve their respective capital requirements. In addition to the above mentioned capital requirement, under Cameroonian law, the banks are required to reserve 10% of the annual profit until they accumulate 20% of total registered capital and to keep a certain percentage of their deposits on account with the BEAC.
Loan Classification Pursuant to Regulation COBAC R-96/01 dated 24 July 1996 on the structure of the loan portfolio of credit institutions and Regulation COBAC R-93/13 relating to conflicts of interest with directors and officers, as amended by Regulation COBAC R-2001/2005, credit institutions are required to classify loans into three categories: Short-term, Medium-term and Long-term loans. According to COBAC R-1993/07 Short-term loans have a term of less than two years, Medium-term loans have a term of between two and five years and long-term loans have a term longer than five years. Generally, the requirements for loss provisions are applicable to non-performing loans.
Non-Performing Loans The banking sector in Cameroon has historically experienced relatively high levels of Non Performing Loans (“NPLs”). NPLs are measured in accordance with COBAC R-98/03 on Accounting for and Provisioning Non-Performing Loans (in addition to COBAC R-2003/053 and COBAC R-2014/01), which prescribe rules for the classification of different categories of loans.
The Government estimates that as of 30 June 2015 NPLs stood at 12.8% compared to 12.7% as of 30 June, 2014 due in particular to an increase of NPLs at two banks. The Issuer estimates the level of NPLs across the banking sector to be approximately 10.36% of total banking sector loans as at 31 December 2014, as compared to 10.93% as at 31 December 2013. In addition, the Issuer estimates that the provisioning ratio of all Cameroonian banks for NPLs was approximately 9.05% of total banking sector loans as at 31 December 2013 and 8.44% of total banking sector loans as at 31 December 2014.
The Republic has passed regulations to improve the accounting of and provisioning for NPLs and has been actively encouraging Cameroonian banks to find ways to further reduce the level of NPLs and further increase provisioning levels. The high level of NPLs, however, remains an issue and there can be no assurance that the Cameroonian banking sector will not need further support in the future. See “Risk Factors— The Cameroonian banking sector is dominated by retail banks, microfinance and other quasi-banking institutions, which may be under-regulated, under-supervised or suffer from under-capitalisation” for further details.
Banking Financial Soundness Indicators, 2011 ̶ 13
The following table sets out certain information regarding banking financial soundness in Cameroon for the periods indicated
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31 December
2011 2012 2013 (in % unless otherwise indicated)
Capital Adequacy Capital to Risk-Weighted Assets ...... 11.4 14.4 11.9 Regulatory Capital to Risk-Weighted Assets ...... 5.5 6.3 7.9 Regulatory Tier 1 Capital to Risk-Weighted Assets ...... 5.3 5.7 6.3 Capital to Assets ...... 2.9 2.5 3.6
Asset Quality and Composition Non-Performing Loans Net of Provisions to Capital ...... 6.4 26.4 n.a. Non-Performing Loans to Total Gross Loans...... 11.4 11.6 10.3 Large Exposures to Capital ...... 582.9 506.3 354.3 Sectoral Distribution of Total Loans: Residents ...... 91.5 93.6 90.4 Deposit-takers...... 1.0 0.6 0.5 Central Bank ...... 6.5 4.8 4.0 Other Financial Corporations ...... 0.9 1.0 2.1 General Government ...... 0.1 1.9 1.4 Non-financial Corporations 64.5 63.4 63.3 Other Domestic Sectors ...... 18.5 21.9 19.2 Sectoral Distribution of Total Loans: Non-residents ...... 8.5 6.4 9.6
Earnings and Profitability Return on Assets ...... 0.5 0.6 1.5 Return on Equity ...... 18.9 25.0 55.0 Interest Margin to Gross Income ...... 37.7 16.2 14.2 Non-Interest Expenses to Gross Income ...... 77.5 86.3 86.6 Trading Income to Total Income ...... 7.9 4.2 4.0 Personnel Expenses to Non-Interest Expenses ...... 25.0 9.5 8.4
Liquidity Liquid Assets to Total Assets (Liquid Asset Ratio) ...... 13.1 10.2 9.4 Liquid Assets to Short-Term Liabilities ...... 164.1 161.8 127.6 Customer Deposits to Total (Non-Interbank) Loans ...... 126.4 118.7 114.6
Source: IMF’s Financial Soundness Indicators (FSI) Database.
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Reporting and Periodic Examinations All banks, including foreign bank agents and branches operating in Cameroon, are required to comply with accounting principles and standards set by the COBAC. They are required to prepare periodic financial statements which include yearly and quarterly statements, and include a balance sheet, results, a profit and loss statement, and a table of the sources and expenditures of funds. Such financial statements must be submitted to their respective shareholders not later than six months after year-end as well as to the COBAC and the national monetary authority.
Reforms in the banking sector are affected by both the COBAC and BEAC on a regular basis through the continual review of the applicable enacted regulations governing the banking sector in the CEMAC zone.
Cameroonian Financial Institutions
According to the IMF Country Report No. 14/213 dated July 2014, Cameroon’s financial system was the largest in the CEMAC area, accounting for about half of the region’s financial assets.
In 2014, the banking and financial sector in Cameroon was characterised by: (i) an increase in bank accounts through the opening of new branches by banks and micro-finance institutions; (ii) an increase in loans and deposits; (iii) a reduction in NPLs; and (iv) a decrease in interbank transactions.
The financial services sector in Cameroon is composed of 14 active retail banks with a network of 231 agencies and branches, a postal savings network CAMPOST, approximately 418 micro-finance institutions, 25 insurance companies and The Douala Stock Exchange.
Banking As at December 2013, three banks dominated the Cameroonian market with 52% of deposits and 51.9% of loans between them: Afriland First Bank, Banque Internationale du Cameroun pour l’Epargne et le Crédit and SGBC, which became General-Cameroon Company. The Cameroon Small and Medium Enterprise Bank (BC-SME) began operations in 2015, bringing the total number of banks to 14.
CAMPOST also provides banking and savings services. It offers postal checking accounts, postal savings accounts and postal money orders.
Deposits Deposits are the main source of financing for banks. According to the IMF, as at December 2013, deposits represented 78% of the banking system’s balance sheet. Nearly 50% of deposits were short-term, although they tended to remain in the banks for relatively long periods.
In Cameroonian retail banks, individuals’ deposits accounted for 38.9% of total deposits, private companies’ deposits represented 24.4% of total deposits, state-owned or state-controlled companies’ deposits made up 8.3% of total deposits and the central public administrations’ deposits accounted for 7.6% of total deposits, in each case as a 31 December 2014.
The following table shows the balance of deposits in the Cameroonian banking system, broken down by type of client as at 31 December in each of the years from 2011 to 2014:
31 December
2011 2012 2013 2014
Type of client: (in CFA billions) Individuals ...... 1,035.9 1,076.2 1,174.3 1,298.7
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31 December
2011 2012 2013 2014
Type of client: (in CFA billions) Private companies ...... 627.1 583.1 787.9 896.5 State-owned/controlled companies ...... 296.7 203.1 202.6 245.9 Central public administration ...... 212.7 185.5 216.1 234.5 Public bodies...... 107.1 136.8 141.7 156.6 Insurance and finance companies ...... 83.3 96.6 160.6 116.6 Private administrations ...... 86.9 90.6 100.3 119.3 Small businesses ...... 81.2 85.1 76.1 72.3 Local public administration ...... 18.6 22.9 26 26.1 Other ...... 133.1 171.4 169.5 162.7 Total ...... 2,682.9 2,651.4 3,055.6 3,329.2
Source: BEAC
As of 30 June 2015 total deposits amounted to an estimated CFA 3,333 billion. In 2014, deposits increased by 9.0% compared to 2013 and amounted to CFA 3,329.2 billion. This increase in deposits was in part due to an increase in deposits by private companies of CFA 108.6 billion and by state-owned/controlled companies of CFA 43.3 billion.
In 2013, deposits increased by 13.2% compared to 2012 and amounted to CFA 3,055.6 billion. This increase in deposits was in part due to an increase in deposits by individuals of CFA 98.1 billion and an increase of deposits by private companies of CFA 204.8 billion.
In 2012, deposits decreased by 1.2% compared to 2011 and amounted to CFA 2,651.4 billion. The decrease in deposits was primarily due to a CFA 44.0 billion decrease in deposits by private companies and a CFA 93.6 billion decrease in deposits by state-owned/state-controlled companies. This was partially offset by an increase in deposits by individuals, private administrations, small businesses and local public administration.
Loans The following table shows a breakdown of total loans in the Cameroonian banking system by type of client for the years 2011 to 2014:
31 December
2011 2012 2013 2014
Type of client (in CFA billions) Private companies ...... 1,270.3 1,241.6 1,484.2 1,626.0 Individuals ...... 262.4 309.8 340.5 379.8 State-owned/controlled companies ...... 121.0 113.0 214.9 140.9 Small businesses ...... 89.3 129.3 138.0 200.7 Insurance and finance companies ...... 22.6 39.8 54.8 58.2 Private administrations ...... 30.4 17.4 27.2 50.7 Central public administration ...... 0.2 18.7 18.7 98.1
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31 December
2011 2012 2013 2014
Type of client (in CFA billions) Local public administration ...... 2.1 20.4 15.0 10.0 Public bodies...... 0.4 0.9 0.7 0.5 Other ...... 12.4 13.3 20.7 16.6 Total ...... 1,811.1 1,904.1 2,315.2 2,581.5
Source: BEAC
In 2014, total loans increased by 11.5% to CFA 2,581.5 compared to the level as at 31 December 2013. This change is attributable in part to an increase in loans to private companies of CFA 141.8 billion, an increase in loans to the central public administration of CFA 79.4 billion and an increase of loans to small businesses by CFA 62.7 billion. In 2014, approximately 63.0% of loans were granted to private companies, 5.4% to public enterprises, 14.7% to private individuals and 2.3% to insurance companies.
In 2013, total loans increased by 21.6 % to CFA 2,315.2, billion compared to CFA 1,904.1 billion as at 31 December 2012, mainly due to an additional CFA 242.6 billion in loans extended to private companies. In 2013, approximately 62.7% of loans were granted to private companies, 6.4% to public enterprises, 14.1% to private individuals and 4.3% to insurance companies.
In 2012, total loans increased 5.1% to CFA 1,904.1 billion compared to CFA 1,811.1 billion as at 31 December 2011. In 2012, approximately 65.2% of loans were granted to private companies, 5.9% to public enterprises, 16.3% to individuals and 2.1% to insurance companies.
Microfinance The microfinance sector plays a vital role in Cameroon by providing credit to the poor. This sector is regulated and monitored by the COBAC in coordination with the national authorities.
Because of low capitalisation, high operating costs and low profit margins, microfinance institutions have little room for expansion and remain vulnerable to insolvency.
Cameroon has the largest microfinance network of any CEMAC country, with about 418 microfinance institutions (“MFIs”) and 1,087 accredited microfinance agencies. MFIs account for approximately 64% of deposits and 72% of loans in the CEMAC region. 10 microfinance institutions together account for approximately 75% of market share in terms of deposits and loans, namely: CAMCCUL, CCA, ACEP- Cameroon, Comeci, Union Express SA, First Saving Trust and Loans, Credit Sahel, Advans, the Regional and Crédit Mutuel. MFIs are poorly deployed in the northern part of the country and in the regions of the east and south, but coastal regions and the central region have the largest number of branches due to higher urban density.
As at 31 December 2013, the microfinance sector employed approximately 10,000 people and had approximately 1.5 million customers. MFI deposits equalled approximately CFA 490 billion, and more than CFA 252 billion in loans had been distributed as at 31 December 2013.
Insurance The insurance market in Cameroon is made up of 25 companies, including 16 non-life insurance companies and nine life insurance companies. Two insurance companies went into administration between 2012-2013.
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One new company was authorized to provide life insurance in 2013, and one new company was authorized to provide life insurance in 2014.
The insurance sector is regulated by the Inter-African Conference on Insurance Markets (CIMA), which is the central insurance supervisory authority in French-speaking sub-Saharan African countries. The Regional Insurance Control Commission licences insurance companies and imposes penalties. Moreover, the National Director of Insurance can withhold licenses approved by the Regional Insurance Control Commission.
In 2013, revenue in the insurance industry CFA 160.8 billion, an increase of 6.8% compared to 2012. The property-casualty segment represented CFA 119.7 billion of the total and life insurance CFA 41 billion or 74.5% and 25.5% respectively.
State Run Pension Fund The state-run pension fund (the Caisse Nationale de Prévoyance Sociale, or “CNPS”) now run by the Treasury provides pension services to employees in the private sector and in public enterprises. Cameroon also manages pension services for civil servants. Some private insurance companies have started offering pension products as well. Employers typically contribute 4.2% and employees contribute 2.8% of the employee’s salary to pay for coverage.
In 2014, the employee base benefiting from pension services was nearly 1 million and the total assets of the CNPS stood at an estimated CFA 455.9 billion. The collected contributions were deemed insufficient by the CNPS to cover its pension obligations. In addition, the state has long-standing financial obligations in relation to the CNPS in the amount of approximately CFA 173.1 billion as at June 12, 2015.
Mortgage Finance The Crédit Foncier du Cameroon (“CFC”) is the only mortgage finance institution in Cameroon with the purpose of promoting housing. The Government owns 75% of its capital and the rest is held by the CNPS (20%) and CAMPOST (5%). The CFC is funded by its employees, who contribute 2.5% of their salary. It also collects deposits from the public. In 2014 it collected an estimated CFA 22.8 billion and in 2013 it collected CFA 21.8 billion.
In 2014, CFC’s total assets were estimated at CFA 263.6 billion and in 2013 were CFA 264.5 billion. Its financial situation has been affected by its high level of NPLs, which were estimated to be CFA 51.5 billion in 2014 and were CFA 45.2 billion in 2013.
Deposit Insurance A regional framework for a deposit insurance fund (“FOGADAC”) was launched in 2004. Banks contribute 0.2% of their outstanding deposit liabilities into this fund with deposits collected by FOGADAC being held at the central bank.
Stock Exchanges
Regional Stock Exchange In June 2003, the six CEMAC member states created a regional stock exchange, the Bourse des valeurs mobilières d’Afrique centrale (the “BVMAC”). The BVMAC became operational in August 2008 and is headquartered in Libreville, Gabon. The objectives of the BVMAC are to facilitate regional economic integration, increase access to financing for companies, improve good governance and transparency and attract foreign investment. The Commission for the Surveillance of the Financial Market, created in 2001, is the statutory body which regulates the BVMAC.
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As at 25 November 2014, there was one company with stock listed on the BVMAC with a total market capitalisation of CFA 113.1 billion. As at 3 September 2014, six institutions had issued bonds on BVMAC, with a face value totalling CFA 364 billion namely:
The African Guarantee Fund for Economic Cooperation (“FAGACE”): CFA 40 billion 5.25% bonds due 2019;
Alios Finance Gabon: CFA 10 billion 6.25% bonds due 2020;
The Central African Development Bank (BDEAC): CFA 35 billion 4.5% bonds due 2021;
The state of Chad: 1- CFA 107 billion 6% bonds due 2016;
The state of Chad: 2- CFA 85 billion 6% bonds due 2018;
The Banque Gabonaise et Française Internationale Holding Corporation: CFA 80 billion 5% bond due 2020 for CFA 80 billion; and
Petro Gabon SA: CFA 7 billion 6% bonds due 2017.
Cameroonian Stock Exchange In 2001, Cameroon set up a stock exchange in Douala. The Douala Stock Exchange (“DSX”) started operations in 2006 with one listed company. There are currently three companies with shares listed on the DSX. The development of the DSX market is constrained by the high listing costs and administrative hurdles.
As at 31 December 2013, the market capitalisation of shares listed on the DSX market was CFA 133.7 billion which represents an increase of 20.3% compared to the market capitalisation of shares as at 31 December 2012. The number of shares traded, however, decreased by 11.6 % from 7,931 shares in 2012 to 7,008 shares in 2013. In 2013, SOCAPALM had the most active market and accounted for approximately 70% of the DSX trading volume and 47% of the DSX turnover.
As at 31 December 2014, the total market capitalisation of shares listed on the DSX was CFA 356.7 billion. The total capitalisation of shares was CFA 158.6 billion with SEMC having a capitalisation of CFA 11.9 billion, SAFACAM having a capitalisation of CFA 62.1 billion and SOCAPALM having a capitalisation of CFA 84.6 billion. SOCAPALM was the most actively traded security.
As at 31 December 2013, three bonds were listed on the DSX: Cameroonian state bonds (“ECMR 5.6% net 2010-2015”), the International Finance Corporation’s (“IFC”) Moabi bond to fund small business growth (“Moabi-IFC 4.25% net 2009-2014”) and an issuance by the Central African Development Bank (“BDEAC net 5.5% 2010-2017”). The valuation of the bond market of the DSX stood at CFA 116.9 billion as at 31 December 2013 as compared to CFA 168.1 billion as at 31 December 2012. This decrease was due to the repayment of the bonds issued by Cameroon in the amount of CFA 50 billion and by the BDEAC in the amount of CFA 1.2 billion.
As at 31 December 2014, five bonds were listed on the DSX: “ECMR 5.9% net 2013-2018”, “Etat du Tchad 6% net 2013-2018” and “ECMR 5.5% net 2014-2019”, “BDEAC 5.5% net 2010-2015”, and “FAGACE 5.25% net 2014-2019”. As at 31 December 2014, the capitalisation of the bond market of the DSX stood at CFA 188.4 billion.
In the first quarter of 2015, “ECMR 5.5% net 2014-2019” was listed.
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TAXATION
The following is a general description of certain tax considerations relating to the Notes. It does not purport to be a complete analysis of all tax considerations relating to the Notes. Prospective purchasers of Notes should consult their tax advisers as to the consequences under the tax laws of the country of which they are resident for tax purposes and the tax laws of the Republic of acquiring, holding and disposing of Notes and receiving payments of interest, principal and/or other amounts under the Notes. This summary is based upon the law in effect on the date of this Prospectus and is subject to any change in law that may take effect after such date.
The Republic of Cameroon
Under Cameroonian law, the Notes are considered as state bonds. As such and based on the provisions of section 111(2) of the Cameroonian General Tax Code, payments by the Issuer under the Notes may be made free and clear of, and without withholding or deduction for, any taxes, duties, assessments or Governmental charges of whatsoever nature imposed, levied, collected, withheld or assessed by the Republic of Cameroon or any political subdivision or authority thereof or therein having power to tax.
United States
Certain U.S. Federal Income Tax Considerations The following is a summary of certain U.S. federal income tax consequences of the acquisition, ownership and disposition of the Notes by a U.S. Holder (as defined below). This summary deals only with initial purchasers of Notes at the issue price that are U.S. Holders and that will hold the Notes as capital assets. The discussion does not cover all aspects of U.S. federal income taxation that may be relevant to, or the actual tax effect that any of the matters described herein will have on, the acquisition, ownership or disposition of Notes by particular investors (including consequences under the alternative minimum tax or net investment income tax), and does not address state, local, non-U.S. or other tax laws. This summary also does not discuss all of the tax considerations that may be relevant to certain types of investors subject to special treatment under the U.S. federal income tax laws (such as financial institutions, insurance companies, individual retirement accounts and other tax-deferred accounts, tax-exempt organisations, dealers in securities or currencies, investors that will hold the Notes as part of straddles, hedging transactions or conversion transactions for U.S. federal income tax purposes, persons that have ceased to be U.S. citizens or lawful permanent residents of the United States, investors holding the Notes in connection with a trade or business conducted outside of the United States, U.S. citizens or lawful permanent residents living abroad or investors whose functional currency is not the U.S. dollar).
As used herein, the term “U.S. Holder” means a beneficial owner of the Notes that is for U.S. federal income tax purposes, (a) an individual citizen or resident of the United States, (b) a corporation created or organised under the laws of the United States, any state thereof or the District of Columbia, (c) an estate, the income of which is subject to U.S. federal income taxation regardless of its source or (d) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or the trust has validly elected to be treated as a domestic trust for U.S. federal income tax purposes. The U.S. federal income tax treatment of a partner in an entity treated as a partnership for U.S. federal income tax purposes that holds Notes will depend on the status of the partner and the activities of the partnership. Prospective purchasers that are entities treated as partnerships for U.S. federal income tax purposes should consult their tax advisers concerning the U.S.
172 federal income tax consequences to them and their partners of the acquisition, ownership and disposition of Notes by the partnership.
This summary is based on the tax laws of the United States, including the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations thereunder, published rulings and court decisions, all as at the date hereof and all subject to change at any time, possibly with retroactive effect.
THE SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES SET OUT BELOW IS FOR GENERAL INFORMATION ONLY. IT IS NOT INTENDED TO BE RELIED UPON BY PURCHASERS FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER THE U.S. INTERNAL REVENUE CODE. ALL PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR TAX ADVISERS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING, AND DISPOSING OF THE NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, NON-U.S. AND OTHER TAX LAWS AND POSSIBLE CHANGES IN TAX LAW.
Payments of interest Interest on a Note will be taxable to a U.S. Holder as ordinary income at the time it is received or accrued, depending on such holder’s mention of accounting for U.S. federal income tax purposes. Interest paid by the issuer on the Notes constitutes income from sources outside the United States.
Sale and Retirement of the Notes A U.S. Holder generally will recognise gain or loss on the sale or retirement of a Note equal to the difference between the amount realised on the sale or retirement and the U.S. Holder’s adjusted tax basis of the Note. A U.S. Holder’s adjusted tax basis in a Note generally will be its cost. The amount realised does not include the amount attributable to accrued but unpaid interest, which will be taxable as interest income to the extent not previously included in income. Gain or loss recognised by a U.S. Holder on the sale or retirement of a Note will be capital gain or loss and will be long-term capital gain or loss if the Note was held by the U.S. Holder for more than one year. Gain or loss realised by a U.S. Holder on the sale or retirement of a Note generally will be U.S. source.
Backup withholding and information reporting Payments of principal and interest on, and the proceeds of sale or other disposition of Notes by a U.S. paying agent or other U.S. intermediary will be reported to the IRS and to the U.S. Holder as may be required under applicable regulations. Backup withholding may apply to these payments if the U.S. Holder fails to provide an accurate taxpayer identification number or certification of exempt status or fails to comply with applicable certification requirements. Certain U.S. Holders are not subject to backup withholding. U.S. Holders should consult their tax advisers about these rules and any other reporting obligations that may apply to the ownership or disposition of Notes, including requirements related to the holding of certain foreign financial assets.
EU Directive on the Taxation of Savings Income Under the EU Savings Directive, EU Member States are required to provide to the tax authorities of another EU Member State details of payments of interest (or similar income) paid by a paying agent established within its jurisdiction to (or for the benefit of) an individual resident, or certain types of entity established, in that other EU Member State. However, for a transitional period, Austria will (unless during that period it elects otherwise) instead operate a withholding system in relation to such payments. The current rate of withholding under the EU Savings Directive is 35%. The transitional period is to terminate at the end of the first full fiscal year following agreement by certain non-EU countries to exchange information procedures relating to interest and other similar income.
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According to the Luxembourg law dated 25 November 2014, the Luxembourg government has abolished the withholding tax system with effect from 1 January 2015 in favour of automatic information exchange under the EU Savings Directive.
A number of non-EU countries and certain dependent or associated territories of certain EU Member States have adopted similar measures to the EU Savings Directive.
On 24 March 2014, the Council of the EU has adopted the Amending Directive 2014/48/EU which will, when implemented, amend and broaden the scope of the requirements of the EU Savings Directive described above. The Amending Directive will expand the range of payments covered by the EU Savings Directive, in particular to include additional types of income payable on securities, and the circumstances in which payments must be reported or paid subject to withholding. For example, payments made to (or for the benefit of) (i) an entity or legal arrangement effectively managed in an EU Member State that is not subject to effective taxation, or (ii) a person, entity or legal arrangement established or effectively managed outside of the EU (and outside any third country or territory that has adopted similar measures to the EU Savings Directive) which indirectly benefit an individual resident in an EU Member State, may fall within the scope of the EU Savings Directive, as amended. The Amending Directive requires EU Member States to adopt national legislation necessary to comply with it by 1 January 2016, which legislation must apply from 1 January 2017.
According to a Communication of the European Commission on tax transparency to fight tax evasion and avoidance dated 18 March 2015, the EU Savings Directive may, however, be repealed in due course in order to avoid overlap with the amended Council Directive 2011/16/EU on administrative cooperation in the field of taxation, pursuant to which EU Member States other than Austria will be required to apply other new measures on mandatory automatic exchange of information from 1 January 2016. Austria has an additional year before being required to implement the new measures but it has announced that it will implement them from 1 January 2016.
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CLEARING AND SETTLEMENT ARRANGEMENTS
The information set out below is subject to any change in or reinterpretation of the rules, regulations and procedures of DTC, Euroclear or Clearstream, Luxembourg (together, the “Clearing Systems”) currently in effect. The information in this section concerning the Clearing Systems has been obtained from sources that the Issuer believes to be reliable, but neither the Issuer nor the Joint Lead Managers takes any responsibility for the accuracy of this section. Investors wishing to use the facilities of any of the Clearing Systems are advised to confirm the continued applicability of the rules, regulations and procedures of the relevant Clearing System. None of the Issuer and any other party to the Agency Agreement will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the Notes held through the facilities of any Clearing System or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
Clearing Systems
Euroclear and Clearstream, Luxembourg Euroclear and Clearstream, Luxembourg each hold securities for their customers and facilitate the clearance and settlement of securities transactions by electronic book-entry transfer between their respective account holders. Euroclear and Clearstream, Luxembourg provide various services including safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Euroclear and Clearstream, Luxembourg also deal with domestic securities markets in several countries through established depositary and custodial relationships. Euroclear and Clearstream, Luxembourg have established an electronic bridge between their two systems across which their respective participants may settle trades with each other.
Euroclear and Clearstream, Luxembourg customers are worldwide financial institutions, including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations. Indirect access to Euroclear and Clearstream, Luxembourg is available to other institutions that clear through or maintain a custodial relationship with an account holder of either system.
DTC DTC has advised the Issuer that it is a limited purpose trust company organised under the New York Banking Law, a member of the Federal Reserve System, a “banking organisation” within the meaning of the New York Banking Law, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to Section 17A of the Exchange Act. DTC holds securities that its participants (“Direct Participants”) deposit with DTC. DTC also facilitates the settlement among Direct Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerised book-entry changes in Direct Participants’ accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organisations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants” and, together with Direct Participants, “Participants”). More information about DTC can be found at www.dtcc.com and www.dtc.org.
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Under the rules, regulations and procedures creating and affecting DTC and its operations (the “DTC Rules”), DTC makes book entry transfers of Registered Notes among Direct Participants on whose behalf it acts with respect to Notes accepted into DTC’s book entry settlement system (“DTC Notes”) as described below and receives and transmits distributions of principal and interest on DTC Notes.
The DTC Rules are on file with the Securities and Exchange Commission. Direct Participants and Indirect Participants with which beneficial owners of DTC Notes (“Owners”) have accounts with respect to the DTC Notes similarly are required to make book entry transfers and receive and transmit such payments on behalf of their respective Owners. Accordingly, although Owners who hold DTC Notes through Direct Participants or Indirect Participants will not possess Registered Notes, the DTC Rules, by virtue of the requirements described above, provide a mechanism by which Direct Participants will receive payments and will be able to transfer their interest in respect of the DTC Notes.
Purchases of DTC Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the DTC Notes on DTC’s records. The ownership interest of each actual purchaser of each DTC Note (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participant’s records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the DTC Notes are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in DTC Notes, except in the event that use of the book entry system for the DTC Notes is discontinued.
To facilitate subsequent transfers, all DTC Notes deposited by Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorised representative of DTC. The deposit of DTC Notes with DTC and their registration in the name of Cede & Co. or such other DTC nominee effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the DTC Notes; DTC’s records reflect only the identity of the Direct Participants to whose accounts such DTC Notes are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to DTC. If less than all of the DTC Notes within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to DTC Notes unless authorised by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the DTC Notes are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the DTC Notes will be made to Cede & Co., or such other nominee as may be requested by an authorised representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Issuer or the relevant agent (or such other nominee as may be requested by an authorised representative of DTC), on the relevant payment
176 date in accordance with their respective holdings shown in DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name”, and will be the responsibility of such Participant and not of DTC, relevant agents or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the Issuer, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants.
Under certain circumstances, including if there is an Event of Default under the Notes, DTC will exchange the DTC Notes for definitive Registered Notes, which it will distribute to its Participants in accordance with their proportionate entitlements and which, if representing interests in the Restricted Global Certificate, will be legended as set forth under “Subscription and Sale” and “Transfer Restrictions”.
A Beneficial Owner shall give notice to elect to have its DTC Notes purchased or tendered, through its Participant, to the relevant agent, and shall effect delivery of such DTC Notes by causing the Direct Participant to transfer the Participant’s interest in the DTC Notes, on DTC’s records, to the relevant agent. The requirement for physical delivery of DTC Notes in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the DTC Notes are transferred by Direct Participants on DTC’s records and followed by a book entry credit of tendered DTC Notes to the relevant agent’s DTC account.
DTC may discontinue providing its services as depository with respect to the DTC Notes at any time by giving reasonable notice to the Issuer or the relevant agent. Under such circumstances, in the event that a successor depository is not obtained, DTC Note certificates are required to be printed and delivered.
The Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, DTC Note certificates will be printed and delivered to DTC.
Since DTC may only act on behalf of Direct Participants, who in turn act on behalf of Indirect Participants, any Owner desiring to pledge DTC Notes to persons or entities that do not participate in DTC, or otherwise take actions with respect to such DTC Notes, will be required to withdraw its Registered Notes from DTC.
The information in this section concerning DTC and DTC’s book entry system has been obtained from sources that the Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.
Registration and Form Book entry interests in the Notes held through Euroclear and Clearstream, Luxembourg will be represented by the Unrestricted Global Certificate registered in the name of a nominee of, and held by, a common depositary for Euroclear and Clearstream, Luxembourg. Book entry interests in the Notes held through DTC will be represented by the Restricted Global Certificate registered in the name of Cede & Co., as nominee for DTC, and held by a custodian for DTC. As necessary, the Registrar will adjust the amounts of Notes on the Register for the accounts of Euroclear, Clearstream, Luxembourg and DTC to reflect the amounts of Notes held through Euroclear, Clearstream, Luxembourg and DTC, respectively. Beneficial ownership of book entry interests in Notes will be held through financial institutions as direct and indirect participants in Euroclear, Clearstream, Luxembourg and DTC.
The aggregate holdings of book entry interests in the Notes in Euroclear, Clearstream, Luxembourg and DTC will be reflected in the book entry accounts of each such institution. Euroclear, Clearstream, Luxembourg or DTC, as the case may be, and every other intermediate holder in the chain to the beneficial owner of book entry interests in the Notes will be responsible for establishing and maintaining accounts for their participants and customers having interests in the book entry interests in the Notes. The Registrar will be responsible for
177 maintaining a record of the aggregate holdings of Notes registered in the name of a common nominee for Euroclear and Clearstream, Luxembourg, a nominee for DTC and/or, if individual Certificates are issued in the limited circumstances described under “The Global Certificates—Registration of Title”, holders of Notes represented by those individual Certificates. The Paying Agent will be responsible for ensuring that payments received by it from the Issuer for holders of book entry interests in the Notes holding through Euroclear and Clearstream, Luxembourg are credited to Euroclear or Clearstream, Luxembourg, as the case may be, and the Paying Agent will also be responsible for ensuring that payments received by the Paying Agent from the Issuer for holders of book entry interests in the Notes holding through DTC are credited to DTC.
The Issuer will not impose any fees in respect of holding the Notes; however, holders of book entry interests in the Notes may incur fees normally payable in respect of the maintenance and operation of accounts in Euroclear, Clearstream, Luxembourg or DTC.
Clearing and Settlement Procedures
Initial Settlement Upon their original issue, the Notes will be in global form represented by the two Global Certificates. Interests in the Notes will be in uncertified book entry form. Purchasers electing to hold book entry interests in the Notes through Euroclear and Clearstream, Luxembourg accounts will follow the settlement procedures applicable to conventional Eurobonds. Book entry interests in the Notes will be credited to Euroclear and Clearstream, Luxembourg participants’ securities clearance accounts on the business day following the Issue Date against payment (value the Issue Date). DTC participants acting on behalf of purchasers electing to hold book entry interests in the Notes through DTC will follow the delivery practices applicable to securities eligible for DTC’s Same Day Funds Settlement system. DTC participants’ securities accounts will be credited with book entry interests in the Notes following confirmation of receipt of payment to the Issuer on the Issue Date.
Settlement of Pre-issue Trades It is expected that delivery of Notes will be made against payment therefor on the Issue Date, which could be more than three business days following the date of pricing. Under Rule 15c6-l under the Exchange Act, trades in the United States secondary market generally are required to settle within five business days (T+5), unless the parties to any such trade expressly agree otherwise.
Accordingly, purchasers who wish to trade Notes in the United States on the date of pricing or the next succeeding business days until five business days prior to the Issue Date will be required, by virtue of the fact the Notes initially may settle beyond T+5, to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement. Settlement procedures in other countries will vary.
Purchasers of Notes may be affected by such local settlement practices and purchasers of Notes between the relevant date of pricing and the Issue Date should consult their own advisers.
Secondary Market Trading Secondary market trades in the Notes will be settled by transfer of title to book entry interests in the Clearing Systems. Title to such book entry interests will pass by registration of the transfer within the records of Euroclear, Clearstream, Luxembourg or DTC, as the case may be, in accordance with their respective procedures. Book entry interests in the Notes may be transferred within Euroclear and within Clearstream, Luxembourg and between Euroclear and Clearstream, Luxembourg in accordance with procedures established for these purposes by Euroclear and Clearstream, Luxembourg. Book entry interests in the Notes may be transferred within DTC in accordance with procedures established for this purpose by DTC. Transfer of book
178 entry interests in the Notes between Euroclear or Clearstream, Luxembourg and DTC may be effected in accordance with procedures established for this purpose by Euroclear, Clearstream, Luxembourg and DTC.
General None of Euroclear, Clearstream, Luxembourg or DTC is under any obligation to perform or continue to perform the procedures referred to above, and such procedures may be discontinued at any time.
None of the Issuer or any of its agents will have any responsibility for the performance by Euroclear, Clearstream, Luxembourg or DTC or their respective participants of their respective obligations under the rules and procedures governing their operations or the arrangements referred to above.
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SUBSCRIPTION AND SALE
Société Générale and Standard Chartered Bank as the Joint Lead Managers (the “Joint Lead Managers”) have in a subscription agreement dated 13 November 2015 (the “Subscription Agreement”) and made between the Issuer and the Joint Lead Managers, upon the terms and subject to the conditions contained therein, each severally and not jointly agreed to subscribe and pay for the principal amount of the Notes set out opposite its name in the table below at an issue price of 98.426% of their principal amount less (i) a combined management and underwriting commission and (ii) other expenses incurred in connection with the issue of the Notes.
Joint Lead Managers Principal Amount (U.S.$)
Société Générale ...... 375,000,000
Standard Chartered Bank ...... 375,000,000
Total ...... 750,000,000
The Joint Lead Managers are entitled in certain circumstances to be released and discharged from their obligations under the Subscription Agreement prior to the closing of the issue of the Notes.
United States of America The Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable state securities laws. Accordingly, the Notes are being offered, sold or delivered only: (a) outside the United States in offshore transactions in reliance on Regulation S and (b) in the United States only to QIBs in connection with resales by the Joint Lead Managers, in reliance on, and in compliance with, Rule 144A.
United Kingdom Each Joint Lead Manager has represented, warranted and agreed that:
(a) Financial promotion: it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received by it in connection with the issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer; and
(b) General compliance: it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom.
Cameroon The Notes have not been and will not be registered with, submitted to or approved by the relevant authorities of Cameroon and may not be issued, offered or sold within Cameroon even if a Cameroonian investor under the conditions described in the Notes is not prevented from acquiring such Notes.
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CEMAC The Notes have not been and will not be registered with, submitted to or approved by the relevant authorities of the CEMAC region (including Cameroon) and may not be issued, offered or sold in the CEMAC region (including Cameroon) even if a CEMAC investor under the conditions described in the Notes is not prevented from acquiring such Notes.
General No action has been taken by the Issuer or any of the Joint Lead Managers that would, or is intended to, permit a public offer of the Notes in any country or jurisdiction where any such action for that purpose is required.
Accordingly, each Joint Lead Manager has undertaken that it will not, directly or indirectly offer or sell any Notes or distribute or publish any offering circular, prospectus, form of application, advertisement or other document or information in any country or jurisdiction except under circumstances that will, to the best of its knowledge and belief, result in compliance with any applicable laws and regulations and all offers and sales of Notes by it will be made on the same terms.
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TRANSFER RESTRICTIONS
Due to the following significant transfer restrictions applicable to the Notes, investors are advised to consult legal counsel prior to making any reoffer, resale, pledge, transfer or disposal of the Notes.
The Notes have not been registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States, and may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable state securities laws. Accordingly, the Notes are being offered and sold (1) in the United States only to persons reasonably believed to be QIBs in reliance on, and in compliance with, Rule 144A or pursuant to another exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and (2) outside the United States in offshore transactions in reliance on Regulation S.
Rule 144A Notes Each purchaser of Rule 144A Notes, by accepting delivery of this Prospectus and the Rule 144A Notes, will be deemed to have represented, agreed and acknowledged that:
(i) the purchaser (a) is a QIB, (b) is acquiring the 144A Notes for its own account or for the account of one or more QIBs and (c) is aware, and each beneficial owner of such Notes has been advised that the sale of the Notes to it is being made in reliance on Rule 144A;
(ii) the Rule 144A Notes have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered, sold, pledged or otherwise transferred except (a) in accordance with Rule 144A to a person that it, and any person acting on its behalf, reasonably believes is a QIB purchasing for its own account or for the account of one or more QIBs, (b) in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S under the Securities Act, (c) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available), (d) to the Issuer or an affiliate thereof, or (e) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States and it will, and each subsequent holder of the Rule 144A Notes is required to, notify any purchaser of the Rule 144A Notes from it of the resale restrictions on the Rule 144A Notes;
(iii) the purchaser understands that the Rule 144A Notes (to the extent they are in certificated form) will bear a legend to the following effect, unless the Issuer determines otherwise in accordance with applicable law:
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) IN ACCORDANCE WITH RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”) TO A PERSON THAT THE HOLDER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A (A “QIB”) THAT IS ACQUIRING THIS NOTE FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ONE OR MORE QIBS, (B) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (C) PURSUANT TO AN
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EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (“RULE 144”), IF AVAILABLE, (D) TO THE ISSUER OR AN AFFILIATE THEREOF, OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 FOR RESALES OF THE NOTES.
(iv) it understands that the Issuer, the Joint Lead Managers, their respective affiliates and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements and agrees that, if any of the acknowledgements, representations or agreements deemed to have been made by it by its purchase of Rule 144A Notes is no longer accurate, it shall promptly notify the Issuer and the Joint Lead Managers; and
(v) if it is acquiring any Notes for the account of one or more QIBs, the purchaser represents that it has sole investment discretion with respect to each such account and that it has full power to make the foregoing acknowledgements, representations and agreements on behalf of each such account.
Prospective purchasers are hereby notified that sellers of the Notes may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A.
Regulation S Notes Each purchaser of Regulation S Notes, by accepting delivery of this Prospectus and the Regulation S Notes, will be deemed to have represented, agreed and acknowledged that:
(vi) it is, or at the time the Regulation S Notes are purchased will be, the beneficial owner of such Notes and it is located outside the United States (within the meaning of Regulation S); and it is not an affiliate of the Issuer or a person acting on behalf of such an affiliate;
(vii) the Regulation S Notes have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and that it will not offer, sell, pledge or otherwise transfer Regulation S Notes except in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S, or pursuant to another exemption from the registration requirement of the Securities Act. in each case in accordance with any applicable securities laws of any State of the United States; and
(viii) it understands that the Issuer, the Joint Lead Managers, their respective affiliates and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements and agrees that, if any of the acknowledgements, representations or agreements deemed to have been made by it by its purchase of Regulation S Notes is no longer accurate, it shall promptly notify the Issuer and the Joint Lead Managers.
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GENERAL INFORMATION
1 Authorisation
The creation and issue of the Notes has been authorised by (i) Law N°2014/026 of 23 December 2014 on the finance law of the Republic of Cameroon for the 2015 financial year; (ii) Ordinance N°2015/1 of 6 February 2015 to modify and complete certain provisions of law n° 2014/026 of 23 December 2014 on the finance law of the Republic of Cameroon for the 2015 financial year; (iii) Law N°2015/003 of 20 April 2015 to ratify ordinance n°2015/1 of 6 February 2015 to amend and supplement certain provisions of law n° 2014/26 of 23 December 2014 on the finance law of the Republic of Cameroon for the 2015 financial year; and (iv) Decree N° 2015/314 of 20 July 2015 to empower the Minister of Finance to issue securities in US dollars up to the amount of 750 billion francs CFA for the financing of development projects for the 2015 financial year.
2 Listing and Admission to Trading
Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and trading on its Main Securities Market. It is expected that admission of the Notes to trading will be granted on or before the next working day after the Issue Date.
Arthur Cox Listing Services Limited is acting solely in its capacity as listing agent for the Issuer in relation to the Notes and is not itself seeking admission of the Notes to the Official List of the Irish Stock Exchange or to trading on the Main Securities Market of the Irish Stock Exchange.
The total expenses related to the admission to trading of the Notes are expected to be approximately € 7,000.
3 Legal and Arbitration Proceedings
Save as disclosed in this Prospectus in the section entitled “Legal and Arbitral Proceedings” on page 71, the Issuer is not involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer is aware) during the period covering the previous 12 months which may have or have had in the recent past significant effects on the Issuer’s financial position.
4 Significant/Material Change
Since the end of the last fiscal year being 31 December 2014, there has been no significant change in the Issuer’s (a) tax and budgetary systems, (b) gross public debt or the maturity structure or currency of its outstanding debt and debt payment record, (c) foreign trade and balance of payment figures, (d) foreign exchange reserves including any potential encumbrances to such foreign exchange reserves as forward contracts or derivatives, (e) financial position and resources including liquid deposits available in domestic currency and (f) income and expenditure figures.
5 Documents on Display
For so long as any Notes shall be outstanding, copies of the following documents may be inspected during normal business hours at the offices of the Fiscal Agent:
(a) physical copies of the Republic’s budget for the current and previous two fiscal years;
(b) electronic copy of the Agency Agreement; and
(c) electronic copy of the Deed of Covenant.
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6 Yield
On the basis of the issue price of the Notes of 98.426% of their principal amount, the initial gross real yield of the Notes is 9.75% calculated on a semi-annual basis on the Issue Date. It is not an indication of future yield.
7 ISIN and Common Code
The Notes have been accepted for clearance through DTC, Euroclear and Clearstream, Luxembourg. The ISIN for the Unrestricted Global Certificate is XS1313779081 and the Common Code for the Unrestricted Global Certificate is 131377908. The ISIN for the Restricted Global Certificate is US133653AA31, the Common Code for the Restricted Global Certificate is 131654189 and the CUSIP for the Restricted Global Certificate is 133653 AA3.
8 Third Party Information
The Issuer confirms that where information included in the Prospectus has been sourced from a third party the source is identified, and that information has been accurately reproduced and that as far as the Issuer is aware and is able to ascertain from information published by that third party, no facts have been omitted which would render the reproduced information inaccurate or misleading.
9 Interested Persons
Save as described in “Subscription and Sale” and paragraph 10 below, so far as the Issuer is aware, no person involved in the offering has any interest in the offering which is material to the offering.
10 Joint Lead Managers Transacting with the Issuer
Certain of the Joint Lead Managers and their affiliates have engaged, and may in the future engage, in investment banking and/or commercial banking transactions with, and may perform services to the Issuer and its affiliates in the ordinary course of business for which they have received, and for which they may in the future receive, fees. Certain affiliates of Société Générale are part of the consortium of banks who have extended the SONARA Bridge Loan, which is expected to be repaid in full with a portion of the proceeds of this Offering.
In addition, in the ordinary course of their business activities, the Joint Lead Managers and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of the Issuer. Certain of the Joint Lead Managers or their affiliates that have a lending relationship with the Issuer routinely hedge their credit exposure to the Issuer consistent with their customary risk management policies. Typically, such Joint Lead Managers and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in securities, including potentially the Notes. Any such short positions could adversely affect future trading prices of the Notes. The Joint Lead Managers and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
The Republic of Cameroon owns a 25.6% stake in Société Générale Cameroun, the local Cameroon affiliate of Société Générale.
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Certain Definitions and Terminology
“ACP” means the African Caribbean and Pacific Group of States;
“AFD” means the Agence Française de Développement the French development agency;
“AfDB” means the African Development Bank;
“BEAC” means the Banque des Etats de l’Afrique Centrale, the CFA zone central bank;
(“BID”) means the Banque Islamique de Développement, the Islamic Development Bank;
(“BADEA”) means the Banque Arabe pour le Développement Economique en Afrique, the Arab Bank for Economic Development in Africa;
“BC-PME” stands for Banque Camerounaise des Petites et Moyennes Entreprises, or “BC-SME” a bank specialized in small business lending;
“BTP” stands for Bâtiments et Travaux Publics, which means public works and building, particularly road construction;
“CAA” stands for the Caisse Autonome d’Amortissement which is the agency tasked with monitoring and managing Cameroon’s public debt;
“CEMAC” stands for the Communauté Economique et Monétaire de l’Afrique Centrale (Economic and Monetary Community of Central Africa);
“CPDM” stands for the Cameroon People’s Democratic Movement;
“DAE” stands for Economic Affairs Directorate (Direction des affaires économiques) which is part of the Cameroonian administration;
“DSX” means the Douala Stock Exchange;
“DGTCFM” stands for Direction Générale du Trésor, de la Coopération Financière et Monétaire or Directorate General of the Treasury;
“ECMR” is a type of Cameroonian sovereign debt;
“FDI” means Foreign Direct Investment;
“FBCF” stands for Formation Brute de Capital Fixe, or Gross Fixed Capital Formation, which refers to long- term investments generally in equipment and infrastructure;
“CFA” stands for Franc de la Coopération Financière en Afrique Centrale, which is the currency that Cameroon uses and which is also used in neighbouring countries;
“GDP” stands for Gross Domestic Product, a standard measure of national productivity;
“GDDS” stands for the General Data Dissemination System of the IMF;
“GNI” stands for Gross National Income, a standard measure of national productivity:
“HIPC” means Heavily Indebted Poor Countries Initiative;
“IFC” means the International Finance Corporation;
“INS” means the National Statistical Insitiute (Institut National de la Statistique) ;
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“IMF” means the International Monetary Fund;
“MFI” means Microfinance Institutions;
“MINEPAT” stand for the Ministère de l’Economie, de la Planification et de l’Aménagement du Territoire, the Cameroonian Ministry of Economics and Planning;
“MINFI” stands for Ministère des Finances, the Cameroonian Finance Ministry;
“MINREX” stands for the Ministère des Relations Extérieures, the Cameroonian foreign office;
“OECD” stands for Organisation for Economic Co-operation and Development, an international organization dedicated to studying international economics and trade between member states;
“OHADA” means the L’Organisation pour l’Harmonisation en Afrique du Droit des Affaires, a major African customs and trade union;
“PPP” means public-private partnerships;
“SCDP” stands for Société Camerounaise de Dépot Petroliers, the state oil stocking and bottling company;
“SNH” stands for Société Nationale des Hydrocarbures, the Cameroonian state oil company;
“SONARA” stands for Société Nationale de Raffinage, the Cameroonian state refining company;
“UNDP” means the National Union for Democracy and Progress party (Union Nationale pour la Democratie et le Progrès);
“VAT” means Value Added Tax;
“WHO” means the World Health Organisation; and
“WTO” means the World Trade Organisation.
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ISSUER
The Republic of Cameroon Ministry of Finance/ Ministère des Finances, Building B, 5th floor / Bâtiment B, Cinquième étage Administrative Quarter / Quartier Administratif Yaoundé/Cameroun
JOINT LEAD MANAGERS
Société Générale Standard Chartered Bank 29 Boulevard Haussmann One Basinghall Avenue 75009 Paris London EC2V 5DD France United Kingdom
FISCAL AGENT, PAYING AGENT AND TRANSFER AGENT
Citibank N.A., London Branch Citigroup Centre Canada Square London E14 5LB United Kingdom
REGISTRAR
Citigroup Global Markets Deutschland AG Reuterweg 16 60323 Frankfurt am Main Germany
IRISH LISTING AGENT
Arthur Cox Listing Services Limited Earlsfort Centre Earlsfort Terrace Dublin 2 Ireland
LEGAL ADVISERS
To the Issuer as to English and U.S. law:
Linklaters LLP Linklaters LLP One Silk Street 25 rue de Marignan London EC2Y 8HQ 75008 Paris United Kingdom France
To the Joint Lead Managers as to English and U.S. law: To the Joint Lead Managers as to Cameroonian law:
Clifford Chance LLP Zangue and Partners 10 Upper Bank Street Rue Prince Bell Bali (Douala - Cameroon) Canary Wharf P.O. Box 39 22 Douala London E14 5JJ Cameroon United Kingdom