Political stability in Cameroon will continue to be undermined by unrest in Anglophone regions and uncertainty surrounding President Paul Biya’s successor. Whilst the economy will experience robust growth in 2018, protests will weigh on cocoa production in the Southwest region. The government will continue to support the agricultural sector, having suspended sugar imports to protect domestic producers.
Cameroon’s Anglophone Northwest and Southwest regions have been affected by protests since late 2016, with activists demanding decentralization and an end to marginalization of English-speaking communities. Protests have recently evolved to include violent attacks by secessionist militants. Attacks are likely to increase in frequency over the coming months, as the government appears unwilling to negotiate and elections approach in October 2018.
Government buildings will be most at risk in low capability incidents using small arms. Foreign companies will face a lower risk, unless they are perceived to be supportive of the government. In June 2018, UK firm New Age African Global Energy reached a USD 2 billion agreement with the government to build a floating liquefied natural gas (FLNG) platform off the Southwest region’s coast. The deal has been criticized by secessionists, and the firm’s employees may face a heightened risk of kidnapping or small arms attack when operating in Cameroon.
Succession risks will continue to undermine political stability in Cameroon in the coming years. 84-year-old Biya maintains a centralized approach to governing, having the power to rule by decree. There are no presidential term limits in Cameroon and, whilst Biya has not yet confirmed that he will run in the 2018 presidential election, he is not expected to step-down. However, Biya's death or incapacitation would likely trigger a power struggle in Cameroon's ruling party, given that he has no clear successor.
Over the coming years, Cameroon's economic performance will be supported by growth in the hydrocarbons sector, as a result of a new FLNG facility. The project, led by Perenco and Golar LNG, began production in March 2018 and will provide a boost to Cameroon's export performance in 2018. Over the coming years, investor interest in Cameroon's offshore hydrocarbon potential is expected to remain robust, further supporting growth. Real GDP growth in 2018 is forecasted at 4.8%.
However, political instability will weigh on non-hydrocarbons sectors. For example, the Southwest region grows around 50% of Cameroon's cocoa, with cocoa accounting for 36.5% of Cameroon's export value in 2016. However, violent protests appear to be negatively affecting production, with many farmers leaving the area to escape violence. As a result, cocoa bean and product exports fell by 9% y-o-y in February 2018.
Sovereign credit risks will moderately decrease in the medium term outlook, as hydrocarbons revenues support the fiscal position. Moreover, Cameroon signed an USD 666 million agreement with the International Monetary Fund (IMF) in June 2017, which will restrict spending as the country is now committed to implementing a number of fiscal reforms. As a result, total government debt is likely to remain fairly stable at between 34-36% of GDP in the period to 2022. Whilst a high proportion of Cameroon's debt is foreign currency denominated, the Central African Franc's peg to the euro will minimize exchange rate risks.
Cameroon’s agricultural sector is expected to perform well in the 12-month outlook, despite the impact of political instability on cocoa production in the Southwest region. Sugar producers will benefit from a suspension on sugar imports, introduced by the government in May 2018. The suspension was designed to protect the monopoly of Societé Sucriére du Cameroon, which was under strain in the face of illegal sugar imports. The agricultural sector will continue to receive significant government support to boost production, and will also benefit from the Economic Partnership Agreement with the European Union, which was signed in 2017, and allows tariff free trade of some agricultural products.
The risk of expropriation is moderate in Cameroon. Land can be seized in the interest of economic or defence policies, and the government has expropriated land for the development of major infrastructure projects in recent years. Whilst full compensation is guaranteed by the constitution, the legal process to obtain compensation can be challenging and subject to delays.
† Pricing would be dependent on location. Due to political unrest, there is little appetite for risks in the Anglophone region.
†† A number of markets are not currently considering Cameroonian risks.
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