NEWSLETTER 29 JULY – 11 AUGUST 2013

Cameroon to Own US-Made Bitumen Plant “Very Soon”

Idaho-built, the big road equipment will leave the United States of America “very soon” to Cameroon, KTVB, an NBC-affiliated television station in Boise, Idaho State reported last Saturday July 27, 2013.

Officials from Cameroon were at the Yanke Machine Shop last Friday morning, and were able to see how the portable bitumen plant would work and said they were very happy, KTVB said quoting one of the officials.

“We have tried some different equipment in our country, equipment coming from different countries, and we’ve realized that the equipment coming from the States has the best quality, and they are reliable. That’s why we’re here today,” Lt. Col. Jackson Kamgain, Regiment Commander, Corps of Engineers, Ministry of Defense of Cameroon said.

Bitumen is a mixture of aggregates, binder and filler, used for constructing and maintaining all kind of roads, parking areas but also play- and -sport areas.

The plant could dramatically reduce road repair and maintenance costs in Cameroon and would add badly needed jobs in the country.

14% of Cameroon’s road network is in good condition, 32% in fair condition and 54% in poor condition, Patrice Amba Salla, country’s Minister of Public Works told the weekly, L’Action in June 2013. And, the country needs XAF 100 billion for road maintenance annually, he noted.

Source: Business in Cameroon www.businessincameroon.com

1-Year T-Bonds Fetch Interest Rate Of 1.948%

In a press release, the Minister of Finance, Alamine Ousmane Mey said treasury bonds worth XAF 10 billion are on sale beginning July 26, 2013 and will be repaid within a year i.e. July 25, 2014.

It is the first issuance in the third quarter of the 2013 calendar of government securities. The money will cover the cash deficit of the state, the government said in the release.

Two other issuance dates were put off to August 28 (XAF 5 billion) and September 11 (XAF 10 billion), this year, totaling XAF 25 billion, and the loan will finance projects in the 2013 budget – the list is still to be determined.

Source: Business in Cameroon www.businessincameroon.com

 

 

Innovations to Accelerate Public Contract Award, Execution

A Presidential Ordinance of August 5 modifies seven of the 31 articles of the March 8, 2012 decree specifying the rules of actors.

The rules of different actors of the public contract award chain have been redefined and the procedures modified. In effect, a Presidential decree of Monday August 5, 2013 modifying seven of the 31 articles of a March 8, 2012 decree beefs up the competences of public award commissions, giving ceiling amounts of contracts each committee has to handle.

What Has Changed?

The modification touches articles 5, 6, 8,10,11,29 and 31 on the competences of the different contract award committees which are technical organs to ensure transparency in the award and execution of public contracts. These are Central Committees, Ministerial Committees, Regional Committees and Local and Internal Committees.

Central Committees

The modified article 5 of the decree no. 2012/074 of March 8, 2012 stipulates that the central committee for the award of public contracts will henceforth deal with projects from government ministries, public administrations, decentralized local collectivities and public and para-public institutions whose amounts range from XAF 100 million to XAF 5 billion. These include XAF 5 billion for roads, XAF 1 billion for other infrastructure, XAF 500 million for public buildings and other equipment and XAF 250 million for general supplies as well as XAF 100 million for services and intellectual works. This is an evolution from the March 8, 2012 decree which gave the central committees for the award of public contracts the power to take care of projects whose amount range from XAF 500 million for roads, XAF 500 million for infrastructure, XAF 200 million for buildings and collective logistics, XAF 100 million for general supplies to XAF 50 million for intellectual consultancy.

Ministerial Committees

Initially, ministerial committees took care of contracts in the ministries whose amounts equal or surpass XAF 5 million but did not attain XAF 50 million. With the modification, especially article 6, the committees now have the right to control contracts whose amount equal XAF 5 million but are below XAF 5 billion for roads and other infrastructure whose amounts are equal to XAF 5 million but do not surpass XAF 1 billion, public buildings and other equipment ranging from XAF 5 million but below XAF 500 million. They also have the competence on general supplies whose amounts are equal to or above XAF 5 million but below XAF 250 million as well as services and intellectual consultancy with amounts equal to or above XAF 5 million but below XAF 100 million.

Regional Committees

They are in charge of projects whose amounts vary from XAF 50 million and below XAF 1 billion for roads, other infrastructural projects to the tune of XAF 50 million but below XAF 500 million and public buildings and equipment amounting to XAF 50 million but below XAF 250 million. General supplies ranging from XAF 50 million and below XAF 100 million as well as services and consultancy works amounting to XAF 15 million but below XAF 50 million are also within the competence of the regional committees.

Who Awards What Contract?

With the modification, on the proposal of different committees, the Minister in charge of Public Contracts launches calls for tenders and awards contracts for projects equal to or above XAF 5 billion for roads and XAF 1 billion for other infrastructure, among others. Ministers are responsible for launching calls for tenders and awarding contracts, for example on road projects, whose amounts are equal to XAF 5 million but below XAF 5 billion. The decree specifies that the Minister of Public Contracts has a seven-day deadline to visa the signing of contracts under his competences. The Minister also has the right to award contracts without tenders (emergency purposes) but which must align with the laws in force. In case any other Minister or vote holder wants to do same for contracts within his competences, the Presidential Ordinance obliges him or her to obtain authorization from the Minister of Public Contracts.

Source: Cameroon Tribune www.cameroon-tribune.cm

Financing SMEs, SMIs: The Strides of Leasing in Cameroon

Government is unwavering on administrative and legal instruments to ensure its proper functioning.

Financing Small and Medium-size Enterprises (SMEs) and Small and Medium-size Industries (SMIs) has been a perennial headache in the country given its vastness and the huge number of actors involved. Given that the sector concerns almost everything and everybody, coupled with its weight in job and wealth creation, government has been intensifying reflection and multiplying strategies to get it out of the doldrums.

The creation of the Ministry for Small and Medium-size Enterprises, Social Economy and Handicrafts on December 8, 2004 and other evolutions thereafter testify to government’s consciousness of the place of the sector in development. Over the years, it has not only been an affair of the ministry to spearhead activities of the sector, but that of the entire government.

In an attempt to solve the difficult financing equation, government has been embracing alternative funding mechanisms one of which is leasing. A joint effort of the Ministries of the Small and Medium-size Enterprises, Social Economy and Handicraft, that of the Economy, Planning and Regional Development as well as of Finance has brought to light leasing which is increasingly gaining visibility in the country.

The innovation is piloted in the country by Cameroon Leasing Association (CAMLEASE). The Minister of the Economy, Planning and Regional Development, Emmanuel Nganou Djoumessi, announced last week that government has already disbursed FCFA 3 billion with which CAMLEASE and its builders would use to develop the initiative in the country. Cameroon Tribune investigates on its way of functioning.

What to Know About Leasing, Its Evolution

What does leasing consist of?

Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax deductible charges. The lessee is the receiver of the services or the assets under the lease contract and the lessor is the owner of the assets. The relationship between the tenant and the landlord is called a tenancy, and can be for a fixed or an indefinite period of time (called the term of the lease).

With leasing, a company or individual who has an idea of his project makes a choice of the equipment he wants. A lessor buys the equipment and puts at the disposal of the lessee against a periodic payment. Once the payment is over, the lessee owns the property (equipment as the case may be). The final price would be 2-5 per cent more than the original cost price.

What Legal Instrument in Cameroon?

In a bid to give enterprises access to equipment, real estate, or other key material resources needed to start or run their business activities, the Head of State, Paul Biya, in line with his 2035 emergence vision, promulgated Law No 2010/020 of December 21, 2010 on the organisation of leasing in Cameroon. Experts say the law is a demonstration of the importance government attaches to the financing of businesses whose activities are needed to generate and boost economic growth.

With the law and government’s continual administrative facilities, companies can now obtain property such as vehicles, construction site engines, power generators, production machines, computer equipment, office furniture and business premises under a lease contract to run their business activities smoothly. This lessens the hitherto burden of business people having to absolutely buy equipment or build their offices from their business capitals.

Its Weight in the Economy

Statistics show that small and medium-size enterprises (SMEs) represent 80 per cent of the country’s economy but access barely 20 per cent of bank loans. The advantage of leasing over buying is that there’s usually no large outlay of cash at the beginning of the lease as there is with an outright purchase. In most, if not all leasing contracts, the replacement of obsolete equipment is taken into consideration. Experts say it is also flexible, increases the lessess’s capacity to borrow et al. It is therefore a veritable alternative funding mechanism for the economy and SMEs in particular.

However, in a leasing arrangement, the lessee does not get the ownership of the asset as it has only the right to use. As such, the lessee cannot pledge the asset for securing loan from financial institutions. Also, in case the lessee makes a default in rental payment, the lessor can own the asset and the lessee has no right to prevent him from doing so.

Who is Eligible?

To benefit from the innovative funding tool, the SMEs must be built in line with the April 13, 2010 law of small and medium-size enterprises in the country. Its name must figure on the list of SMEs in the country and must be up-to-date with its fiscal and social responsibilities. Much more, nationals must constitute the majority of its shareholders.

Potential beneficiaries must present projects with unquestionable capacities to generate wealth, create jobs and ensure value addition. Priority is in the wood, agriculture, livestock, mining, industrial, transport and public works sectors.

Success Chances

With a vision of inclusive financing, government has been working tooth and nail to ease the conditions for potential beneficiaries, not only for profitability but durability as well. The maximum interest rate has been fixed at 10 per cent and the duration of the contract could unusually go for seven years. Possibilities of micro-leasing are also available with the financing of small equipment. Sources say it has been agreed that 60 per cent of the project’s cost will be financed by the fund, 15 per cent by the beneficiary SME and 25 per cent by the credit (loan) institution. The 15 per cent contribution from the beneficiary is to ensure his/her perfect collaboration for the success of the operation. Where need be, the principle could be altered.

Government’s Commitment

On July 3, 2013, the Minister of the Economy, Planning and Regional Development (MINEPAT), chose members of a control and follow up committee to ensure a sound take off of leasing in the country. Chaired by the President of the Chamber of Commerce, Industries, Mines and Crafts, the committee comprises representatives of different public administrations concerned with private sector projects. The committee is charged to produce periodic reports on the evolution of the funding mechanism.

The Merits of Government-CAMLEASE Agreement

Government, represented by the Ministries of Finance and that of the Economy, Planning and Regional Development on November 15, 2012 signed an accord with CAMLEASE for the putting in place of the funding tool in the country. In line with the long-term development objectives contained in the Growth and Employment Strategy Paper, the accord was to take the innovation off the ground and give a push to SMEs to occupy its pride of place position in the country’s development. Besides its hallmark of wealth and job creation, leasing is a perfect public/private partnership to boost the economy.

Source: Cameroon Tribune www.cameroon-tribune.cm

Cameroon: the Subsoil Yields more than EUR 1 Billion to the State in 2011

The sixth conciliation report published by the Initiative for transparency in the extractive industries in Cameroon notices a gap of XAF 50 million between what mining companies claim to have paid and what the administration claims to have received.

The State of Cameroon has recorded over XAF 677 billion (over EUR 1 billion) income from the exploitation of its subsoil in 2011, according to the sixth report conciliation of the Initiative transparency in the extractive industries (Initiative pour la transparence dans les industries extractives - ITIE) presented on Wednesday, July 31 by the firm Moore Stephens. Up by XAF 123 billion compared to 2010, these revenues accrue from the hydrocarbons sector (97.5%), oil transport sector (2.4%), and the mining sector (0.1%).

A satisfactory gap

The gap between what the mining companies claim to have paid and what the State claims to have received is 0.007%, i.e. XAF 50 million (about EUR 76,000). "This is mainly due to the fact that freight forwarders do not detail what they actually pay to the customs", Robert MOUTHE Ambassa representing the 22 mining companies involved, said. "This gap is satisfactory because it is below the margin of error of 1% retained by the ITIE committee", the Finance Minister, Alamine Ousmane Mey, rejoiced.

The 2011 fiscal year conciliation and the last two ones will be subject to validation on August 13 in London to enable Cameroon, which joined the initiative in 2005, to become fully compliant, hereby wiping off the 2010 failure.

Source: translated from the article “ Cameroun : le sous-sol rapporte plus de 1 milliard d'euros à l'État en 2011", Jeune Afrique Economie www.economie.jeuneafrique.com

Markets as at August 11, 2013

Against XAF (Indicative only)

	XAF
USD	491.52
EUR	655.78

Source: Bloomberg