Introduction
In defining its new National Development Strategy 2020-2030 (NDS30), the Cameroonian government set its ambition of achieving double-digit economic growth by 2030. To achieve this, one of the main strategies put in place is to go after markets with high development potential. Among the major markets to be explored, ‘the Nigerian market occupies a prominent place’. This market indeed has several assets in terms of SMEs in the field of industrial production. According to the government, the development of trade with Nigeria has the particularity that it will cover a whole range of products, from primary products (oil), food, and industrial products, to services (energy supply). However, it remains necessary to strengthen the competitiveness of national companies to ensure that companies operating in these high-potential markets do not crush them.
The Cameroonian government has been working since 2021 to implement the import-substitution policy, which entails replacing the nation’s imports with locally produced goods and services, in addition to capturing high-potential markets (Sawyer and Sprinkle, 2009). Unfortunately, these objectives will be impossible to achieve if the business environment remains gloomy.
To provide practical responses to improve the business climate in Cameroon, the Small Business and Entrepreneurship Center (SBEC) at the Denis and Lenora Foretia Foundation organized a working session in Yaoundé on March 17, 2023, with several actors of the Cameroonian entrepreneurial ecosystem. Following its mission to support SMEs across the country and promote business-friendly policies that stimulate innovation and job creation, this meeting aimed to determine how to improve the business environment to strengthen the resilience of SMEs in Cameroon.
We will outline the key proposals made by the various players in the Cameroonian entrepreneurial ecosystem in this policy brief in order to achieve the desired outcomes. First, it is worth recalling the main policy options chosen by the government to improve the business climate in Cameroon. The stake is to convince the authorities of the urgent need to improve the business climate in Cameroon.
Policy Options to Improve the Business Climate in Cameroon.
Since the Growth and Employment Strategy Paper (GESP), the reference framework of government action for the 2010-2020 period, the government has expressed its willingness to improve the business climate in the country. In addition to the many economic opportunities that are associated with it (the continental free trade area, the vulgarization of “Made in Cameroon”, and the development of the manufacturing industry), the government expects to rely more on the development of the private sector to become an emerging economy by 2035. The government, therefore, identified several policy options and highlighted them in the NDS30 to have a direct positive impact on investment and entrepreneurship.
Among the priority options retained to improve the business climate, the government considered:
- The need to fight against all administrative, fiscal, customs, and, judicial obstacles impeding the development of economic activities.
- The need to improve the incentive system for private investment to strengthen economic attractiveness.
- The need to alleviate the costs and procedures related to land availability.
To achieve the expected results, the government planned to set up specialized jurisdictions, which strengthened staff capacities, especially concerning commercial disputes and the promotion of alternative methods of settling commercial disputes. It also intends to improve the business climate by:
- Improving the mobilization of national savings for private-sector financing;
- Removing the main obstacles to the development of public-private partnerships
- Promoting the use of local products, particularly through public procurement and the “Made in Cameroon” label in the production and distribution of goods and services, by granting specific facilities to local producers;
- Implementing reforms in the banking sector to lighten procedures, and conditions and facilitate access to loans;
- Supporting national champions. All of these options are well enshrined in the NDS30.
One of the main actions put in place to improve the business climate and boost the competitiveness of national companies is to set up a framework for dialogue between the public and private sectors. In addition, to allowing us to easily monitor the effectiveness of the implementation of recommendations made, the development of public-private partnerships aims to facilitate access to information for SMEs. It will also contribute to improving access to financing, specifically through the operationalization of a financing mechanism for priority export sectors and SMEs. The government also intends to upgrade the Douala industrial zone; and involve the private sector in economic choices and orientations for better ownership and synergy.
Policy Recommendations
Although the commitments made by the Cameroonian government to improve the business climate in Cameroon are commendable, the main options proposed in the new National Development Strategy 2020-2030 (NDS-30) do not seem to be in line with the realities on the field. Indeed, the nature of the business climate depends on many parameters that the state must take into account to facilitate the creation, development, and expansion of the private sector. Before setting up specialized jurisdictions for the settlement of commercial disputes, for example, it is of course necessary to ensure that the business environment is sufficiently conducive for the creation of companies. During the Stakeholders Meeting organized by the Small Business and Entrepreneurship Center (SBEC) of the Denis and Lenora Foretia Foundation in Yaounde, on March 17, 2023, stakeholders present agreed that improving the business climate in Cameroon relies on key actions.
Decentralization of CFCEs and Free Legalization of Documents Useful for the Formalization of Companies.
The first action is to facilitate the creation of businesses in the country. These stakeholders claim that the actual process of starting a business in Cameroon is far longer than the previously stated three days and therefore much more expensive. One of the factors behind the extension of this period is the non-decentralization of the Centers for Business Creation Formalities (CFCE) in the country. For a business located in Kribi, for example, the only way to formalize its operation is to go to Douala, which entails additional costs that are often not affordable for certain categories of entrepreneurs. The government should consider the decentralization of the CFCE at the communal and departmental levels as a way to get many companies out of the informal sector.
In addition, the costs associated with registering a business increased since the fiscal stamp is now 1500 CFA, which is an increase of 50% compared to previous years. If we consider all the papers to certify by a young entrepreneur to formalize his business, and the number of fiscal stamps required (Registration with the ministry of commerce, Credit Mobilier or the tax authorities to mention only these three steps, etc.), it is becoming more and more expensive to create or formalize a business in Cameroon. The recommendation that emerges here is for the government to legalize the documents required for the formalization of a business, without requiring them to be stamped. Such a decision, combined with the other tax exemptions available for many start-up businesses in several sectors, would facilitate the transition of a large number of businesses from the informal to the formal sector.
Improving Access to Information for Young Entrepreneurs
Improving the business climate in Cameroon also requires access to information. This information must be available and shared with all young entrepreneurs who approach the various business formalization centers. Many young entrepreneurs report that they do not have sufficient information to move to the next stage of the formalization process when they approach the CFCEs, which are authorized agencies. This is not necessarily due to the unwillingness of the staff at these centers, but rather to the fact that they are sometimes not fully equipped to provide young entrepreneurs with the information they need. Consequently, there is a need for continuous capacity building of CFCE staff in the country.
For instance, rather than telling a young entrepreneur to go to his tax center without giving him details on what s/he is supposed to do there, information should be provided on the location of the tax center, the tax benefits associated with the business, the importance of fulfilling tax obligations, and the possible consequences of clandestine behavior. Such an approach would encourage many entrepreneurs to go through the process of formalizing their businesses and thus facilitate the creation of businesses in the country. The public and private media should also consider regularly disseminating information on business creation, the promotion of “Made in Cameroon” and the progress made in improving the business climate through commercials, special programs, news articles, etc.
Improving Access to Electricity
Improving the business climate in Cameroon also means improving access to electricity. Recently, the government announced an increase in the electricity tariff under the pretext that it only affects households and not businesses. The tax-free electricity tariff for medium-voltage (MV) customers and the minimum thresholds for negotiating tariffs for “large accounts” were raised from 50 to 95 CFA francs between 11 p.m. and 6 p.m. Between 6 p.m. and 11 p.m., the tariff increased from 50 to 125 CFA francs (ARSEL, 2022).
However, for businesses mostly engaged in the informal sector very often connected to electricity from home to ensure the development of their activity, this situation is naturally counterproductive for their growth. The Government should improve electricity connections, not only the costs involved, but also the time it takes a company to obtain a permanent electricity connection for a newly built warehouse.
Develop public-private partnerships
Without the development of public-private partnerships, the government of Cameroon will not be able to improve the business climate in the country. Indeed, according to the World Bank (2020), ten indicators are useful to capture the ease of doing business in a country. These indicators relate to the ability to: Start a business, get a building permit, get electricity, registering property, get credit, protecting minority investors, pay taxes, trade across borders, enforce contracts, and resolve insolvency problems. To improve its performance in these areas, the government needs to build strong partnerships with the private sector that can provide sufficient resources.
The advantage of this financing system is that it allows the State, as well as citizens, to benefit from innovations designed by private companies. By facilitating economic growth, effective public-private partnerships will also promote business development and sustainability (SBEC, 2023).
According to UNCTAD (2013)[1], strong public-private partnerships would boost the participation of SMEs in value chains through, among other things, building productive and value-adding capacities. They can also easily contribute to corporate social responsibility (CSR) and the integration of women into sustainable global value chains.
Conclusion
Given the above, it is obvious that: the decentralization of the Centers for Business Creation Formalities (CFCE) to the level of departments and districts; the free legalization of documents useful for the formalization of businesses; the improvement of access to information for young entrepreneurs; the improvement of access to electricity; as well as the development of public-private partnerships, are the key actions that the Cameroonian government should consider beforehand to improve the business climate over the next few years.
[1] UNCTAD (2013), “Public-Private Partnerships and the Participation of Small and Medium-Sized Enterprises in Global Value Chains,” Expert Meeting on Assessing the Trade and Development Impacts of Public-Private Partnerships in Developing Countries Geneva, 26-28 March 2013, https://bit.ly/3kNkZt3
Jean Cedric Kouam is the Senior Policy Analyst, Deputy Director-Economics Affairs Division and the Head of Fiscal and Monetary Policy Sub-section at the Nkafu policy Institute. He holds a doctorate in economic policy and analysis (monetary and financial macroeconomics) from the University of Dschang in Cameroon. Since obtaining the Diploma of Advanced Studies in Mathematical Economics and Econometrics at the University of Yaoundé II in 2012, he has provided courses in economics, finance, and macroeconomic modeling in several private higher schools in Cameroon.
