CAMEROON Investment Guide
Openness to Foreign Investment
The Cameroonian Government wants to attract investment from international
corporations and individuals to spur Cameroon's economy. The law governing investments in Cameroon is
the 1990 investment code that is attractive on paper. Its incentives are
identical for foreign and domestic investors and provide 14 basic guarantees to
investors, including property ownership, ability to repatriate capital and
income, prior compensation in case of expropriation, freedom of movement within
Cameroon and free egress for personnel. However, the code's application has been
perverted by arbitrary application in the administration and courts as well as
1994 tax changes that have annulled all the tax benefits arising from some
special investment schedules. The 1990 code is being rewritten and will be
renamed the investment charter. The charter may include provisions consecrating
trade preferences aimed at increasing trade flows within the Central African
Economic and Monetary Community (CEMAC) region.
General benefits of the investment code are available to all new and existing
enterprises in Cameroon which process goods for export or use inputs from
the local or regional markets of CEMAC. In addition to these general benefits,
firms may qualify for one of five special investment formulae that offer more
advantages. The five formulae are:
• the basic regime
• the small and medium-size enterprise regime
• the strategic enterprise regime
• the reinvestment regime
• the free zone regime
The code sets out in detail the specific criteria a firm must meet to qualify
for each regime as well as the benefits accorded there under.
Foreign investment is not screened, and foreign equity ownership is subject to
limitation only in the small and medium size enterprise regime. Programs
financed jointly by international financial institutions (IFIs) and the
Government are open to unrestricted competition. Cameroon is privatizing some
state companies which will eliminate public-sector monopolies within the next
two years. Except for the aluminum sector, foreign firms may not invest
directly in ventures defined as "strategic" by the Government of
Cameroon, but they may provide equipment and services to the parastatals that have
jurisdiction over such activity. Buyers of some pritvatized former state
monopolies enjoy concessions that limit the entry of competitors into the
sector for specified periods. The Government has revised exploration codes for
the hydrocarbons and forestry sectors.
Cameroon has a special preference agreement with France, which has only recently
been implemented. The convention, also applicable in the other former French
colonies in Africa, accords several advantages to French companies that
maintain branches or agents in Cameroon. Among the advantages are exemptions from the 15
percent special tax applicable to other enterprises operating in Cameroon and
tax deductions for "technical assistance" costs.
Currency Conversion and Transfer Policies
The Communaute Financiere Africaine (CFA) franc is the common currency Cameroon
shares with fourteen other African member states of the CFA zone. The French
treasury ensures convertibility of the CFA franc into French francs; the CFA
franc is pegged to the French franc. In 1994, the exchange rate parity was
reduced by 50 percent to a fixed parity of 100 CFA francs to one French franc.
Since late 1993, Central African CFA bank notes are no longer accepted in the
eight countries that use the currency of the West African CFA.
The regional central bank (BEAC) no longer allows the purchase of CFA notes
abroad; travelers from Cameroon may carry a maximum of only 20,000 CFA francs (about
US$35) out of the country without prior authorization. Travelers' checks can be
drawn on any available foreign currency, but the ministry of economy and
finance (MINEFI) authorizes such purchases. No ceilings have yet been placed on
how much foreign currency can be purchased per trip. The authorization of
MINEFI is required for foreign exchange business transfers. These
authorizations are routinely granted if they conform to the specified
incentives of the investment and fiscal codes. Dividends, return of capital,
interest and principal on foreign debt, lease payments, royalties and
management fees, returns on liquidation, etc., Can all be remitted abroad. It
takes an average of 12 days to obtain a foreign exchange transfer
authorization.
Expropriation and Compensation
Foreign and domestic investors receive legal guarantees that substantially
comply with international norms, including full and prior compensation, in the
event of expropriation in the public interest. There are no confiscatory tax
regimes or laws that could be considered detrimental to American or other
investments. Undeveloped land is more at risk for local expropriation than
developed property; Cameroonian law does not require local ownership of land.
Dispute Settlement
The Cameroon investment code provides for dispute resolution. At
the time of incorporation or application for investment code benefits, a firm
may opt for one of the various procedures to settle future conflicts. A limited
number of investment disputes have come to the attention of the U.S. Embassy.
These often involve taxation questions and in one instance, local business
partners stole an American investor's equipment.
Foreign investors have found it difficult to obtain enforcement of their legal
rights, including contract and property claims, through the Cameroonian
judicial system. Local business practice includes routinely exerting, or
attempting to exert, pressure on the courts that may sometimes be swayed by a
large bribe or by the high status of a political heavyweight. In addition, many
foreign companies allege that judgments against them were obtained fraudulently
or as the result of frivolous lawsuits. The execution of judgments is slow and
fraught with administrative and legal bottlenecks. The United Nations
development program has developed with the Cameroonian Government a governance
reform program that includes proposed measures to improve performance of Cameroon's
courts. The program received final Government approval in June 2000.
Cameroon's bankruptcy law is an integral part of its commercial law. In case of
bankruptcy, creditors are not covered except by way of negotiable or
enforceable guarantee instruments held by the creditor. Cameroon
accepts binding international arbitration of investment disputes between
foreign investors and the state. Cameroon is a member of the international center for the settlement
of investment disputes (ICSID), and is a signatory to the Convention on the
Recognition and Enforcement of Foreign Arbitrage Awards. In May 1997, the
Council of Business Managers and Professional Associations (GICAM), an
association of 140 enterprises and 15 professional associations representing 70
percent of all formal sector business activity in the country, voted to
constitute its own arbitration center to which business cases can be submitted.
On Jan. 1, 1998, the Treaty for the Organization to harmonize
business laws in Africa (OHADA) between the 15 states of the CFA franc zone
plus Guinea entered into force. The treaty is designed to
promote the development of an African economic community, the institution of a
common business policy and the guarantee of judicial security and compatibility
within that community. Through its regional judiciary in Abidjan,
objectivity should be reinforced as the treaty is implemented with the
assistance of the council of French investors in Africa.
Performance Requirements and Incentives
Cameroon's 1990 investment code establishes requirements for at least 35 percent
Cameroonian equity ownership for enterprises under the small and medium-size
enterprise regime. Even in such instances, foreign investors are not required
to reduce their shares over time. Under the investment code, an industrial free
zone investor can operate virtually outside of the jurisdiction of the
country's established legal and regulatory systems; there are no requirements
for technology transfer, no requirements to locate in specific geographical
areas and foreign exchange privileges are not rationed. Investors can transfer
dividends, return of capital, interest and capital on foreign debt, lease
payments, royalties and management fees, returns on liquidation, etc. The
Ministry of Finance routinely authorizes such business remittances and foreign
investors may seek local financing for investment purposes.
The investment code has general employment requirements relative to the amount
of invested capital. It also links benefits and incentives to the volume of
exported goods and to the use of inputs purchased from the local or CEMAC
markets. Each of the five special regimes of the code has its own specific
eligibility and performance requirements and accompanying benefits. Such
benefits vary in duration from three to 12 years depending on the regime and on
whether the investment is classified "start-up" or
"operational." Quantitative restrictions on imports, non-tariff
protection, and many import licensing requirements were lifted when the new
tariff code was enacted in January 1994 to conform to central African regional
customs regulations. In addition, many other price controls were abolished in
1998 and now remain only on "strategic" goods and services such as
electricity, water, public transportation (road/rail), telecommunications,
cooking gas, pharmaceuticals, schoolbooks, and portside activities
(stevedoring, etc.).
The procedures for enforcement of performance requirements of the investment code
are not clearly defined. The Government has not made any public statements
concerning performance requirements. Foreign participation in Government
financed and/or subsidized research and development programs, is restricted to
programs that are beyond the technical capacity of Cameroonian firms. Visa,
residence and work permit requirements do not particularly inhibit foreign
investors.
Private Ownership Rights
The Government recognizes the right of private ownership, but a dysfunctional
judiciary, inadequate definitions of property rights and widespread
inconsistencies in Government decision-making can limit property rights in
practice. Foreign and domestic individuals and firms are legally entitled to
establish and own firms, engage in remunerative activities, and establish,
acquire and dispose of interests in business enterprises. The law also permits
investors to dispose of their property via sale, transfer or physical
repatriation of moveable property.
Protection of Property Rights
Secured interests in property are recognized and basically enforced. The
concept of mortgage (or "hypothèque" in French) exists in Cameroonian
law and the title or "titre foncier" is the legal instrument for
registering such security interests. Foreign and domestic investors are
provided with guarantees that substantially comply with international norms.
Cameroonian law does not discriminate between foreign and domestic firms. In
practice, however, Cameroonian courts and administrative agencies often grant
preferential treatment to domestic firms and have sometimes been accused of
corrupt practices.
Cameroon is the headquarters for the 14-nation West African intellectual
property organization, Organisation Africaine de la Propriété Intellectuelle
(OAPI). OAPI is a member of the World Intellectual Property Organization. In
cooperation with member states, OAPI offers registration for patents and
trademarks. Patents in Cameroon have an initial validity of 10 years. They can be
renewed every five years upon submission of proof that the patent was used in
at least one of the 14 member countries of the OAPI. In the absence of use,
compulsory licensing is possible after three years. Trademark protection is
initially valid for 20 years with renewal possibilities every 10 years. Trademark
enforcement in Cameroon is weak due to the small size of the domestic market
and the costs of enforcement.
Cameroon is also a party to the Paris Convention on Industrial Property and the
Universal Copyright Convention. A licensed copyright company, the Societe
Civile Nationale des Droits d'Auteurs (SOCINADA), registers copyrights for all
types of publications, including music, books and periodicals, paintings,
theatrical productions, etc. Officially, SOCINADA cooperates with copyright
protection agencies in other countries. Steps to implement the world trade
organization's TRIPS agreement are being undertaken through an
inter-ministerial technical committee.
Transparency of Regulatory System
While Cameroonian business laws on paper are clear, few foreign investors have
come forward because implementation of those laws is problematic. Under the
current judicial system, local and foreign investors have found it complicated
and costly to enforce contract rights, protect property rights, obtain a fair and
expeditious hearing before the courts or defend themselves against frivolous
lawsuits. However, the recently implemented "Organisation pour
l'Harmonisation du Droit des Affaires en Afrique" (OHADA) Treaty may
foster improvements in the judiciary.
Several American companies, and Cameroonian firms, complained in late 1999 and
early 2000 about onerous new tax audits and harsh Government efforts to compel
companies to agree to compromise on tax assessments, including blocking company
bank accounts for temporary periods.
Political Violence
There have only been a few incidents of politically motivated civil disturbance
or violence during the past few years. Most of these disturbances have been a
direct result of the Government's poor human rights record. There is a small
English-speaking separatist movement but it has not resorted to violence
against foreign interests. There is a border dispute with Nigeria over
the Bakassi peninsula and the armies of both countries remain mobilized in this
region. On rare occasions tensions break out into brief, isolated firefights.
Corruption and Crime
Corruption is endemic in Cameroon. The Government launched several public campaigns in
1998 to combat corruption and promote good governance. A dysfunctional judicial
system severely disrupts development of Cameroon's economy and society. People accused of corruption
by the local press are seldom called to account before the courts. The
Government has not signed the OECD convention on combating bribery.
The Government has taken some steps to address the corruption problem.
Recipients of Government payments are no longer routinely obliged to relinquish
30 percent of the sum to the civil servants who process their vouchers,
although some still attempt to apply the measure. Corruption at customs
reportedly diminished after February 1996 when a private company, Societe
Generale de Surveillance (SGS), was given an exclusive contract to verify and
assess customs duties due for fob imports valued over US$3,333. Senior
officials, including the prime minister, publicly pledged the Government would
step up its anti-corruption efforts.
Labor
Cameroon's labor-management relations are governed by the labor code enacted in
1992. The code restores collective bargaining and employee-employer primacy in
the negotiation of wages; eliminates fixed zonal wage scales; abolishes
employment by level of education; eliminates Government control over layoffs
and firings; and reduces Government involvement in the management of labor
unions. The code, however, does not apply to civil servants, employees of the
penal system, or workers responsible for national security. Its implementing
decrees were completed in 1993, but remain open to legal interpretation. Labor
disputes are still common. Cameroon is a party to the ILO Convention on the
Protection of Labor Rights, but Government adherence to some of its provisions
was seriously questioned in April 1994 when the administration interfered in
the functioning of the confederation of Cameroon trade unions (in French, CSTC)
through the ousting of its elected leader. After the democratically elected
leader was restored to his post by an extraordinary CSTC congress, the
Government supported establishment of a competing confederation of free
Cameroonian trade unions (in French, USLC), headed by a former CSTC vice
president. The ILO notes that the Government has failed since 1991 to recognize
the national union of teachers of higher education. The CSTC is a member of the
Organization of African Trade Union Unity (OATUU) and the International
Confederation of Free Trade Unions (ICFTU).
American companies note that under Cameroonian labor law, an individual who
wants to raise a case of unfair discrimination may bring the case in the town
where he resides, not where he works. In practice this can compel the company
to dispatch officials to sometimes-distant locales where the individual may
have better local contacts than the company.
The 1992 code provides a legal framework for the emergence of a flexible and
efficient labor market, in theory, but such a market has not yet been allowed
to operate. Cameroon has a high literacy rate and offers a relatively
well-educated labor force, yet unemployment has been estimated at between 30
and 35 percent in the two major cities of Douala and Yaounde. There is a large
surplus of unskilled and non-technical labor. Many Cameroonians speak both
French and English. However, due to inadequate mechanical and technical
training, some industries have experienced difficulties in recruiting skilled
labor on the domestic market.
International Investment Agreements
Cameroon has bilateral investment and/or commercial agreements with the
following countries: Austria, Belgium, Canada, China, Denmark, France, Germany,
Greece, Italy, Japan, Russia, South Korea, Spain, Switzerland, the United
Kingdom, and the United States. Similar agreements also exist with other
countries in Africa, Asia, Latin America, and Eastern Europe. The bilateral
investment agreement between Cameroon and the United States was ratified in
1986 and entered into force in 1989. While the original time frame for the
agreement was 10 years, tacitly it was renewed. The U.S. invoked the bit in one
case in 1997 and Cameroon has ostensibly acquiesced in the case through
non-implementation of legislation contrary to the treaty.
Foreign Trade Zones
Cameroon has no foreign trade zones or free ports at this time but it has an
industrial free zone (IFZ) regime that is applicable to all locations through
"industrial park" or "single-factory" zones. This was
created in 1990 to promote internationally competitive export industries. It
creates conditions for the IFZ investor to operate virtually outside of the
jurisdiction of the country's established legal and regulatory systems. The only
eligibility requirements to qualify for IFZ status are production of goods or
services at least 80 percent of which are export- bound and which do not have
deleterious effects on the environment. The National Office for Industrial Free
Zones (NOFIZ) is the non-profit regulatory body established to oversee and
administer Cameroon's IFZ program.
The licensing process was suspended in 1996, pending an audit of past
operations. Faced with possible lawsuits by enterprises previously granted free
zone status, the Government of Cameroon released the suspension for those
companies only in late 1999. While awaiting the publication of the new
investment charter, the actual status of the industrial free zone is unclear.
Foreign Investment Statistics
Direct foreign investment (DFI) plays a key role in the Cameroonian economy.
However, neither the Government nor the chamber of commerce has compiled a
comprehensive list of foreign investments in Cameroon or estimated of current
values. Flow data on DFI, disaggregated by country, is not available and there
are no statistics on Cameroon's direct investment abroad. According to IMF
data, foreign direct investment was CFA franc 53 billion (US$90 million) in
Cameroonian fiscal year 1996/97, about one percent of GDP. The figure has
likely increased in more recent years due to the Government's privatization
program and the upcoming Chad-Cameroon oil pipeline will represent a
substantial increase in the years ahead.
France is the most important foreign investor in Cameroon. The French firm
Pechiney has long owned a majority stake in ALUCAM, a large aluminum plant
outside of Douala, Cameroon's commercial capital. A French banking company in
2000 bought Cameroon's last state-owned bank, and French interests bought a
state-owned sugar production plant in 1998. A French telecommunications firm in
1999 won a license to establish a mobile telephone company. South African firms
bought majority shares of the privatized national railroad in 1998 and the
state-owned mobile telephone company in 1999. The commonwealth Development
Corporation has investments in some Cameroonian agro-business and industrial
ventures. It may participate in debt for equity swaps to reactivate its
investment program. In recent years, china constructed a tractor assembly plant
in the south and has built a tire retreading plant in Douala.
Taxation
The corporate income tax is 35 percent with 3.5 percent local council taxes.
Ten percent is added for every month that the tax is unpaid. Oil company net
profits are subject to a 57.5 percent tax.
Business expenses and depreciation allowances (ranging from five to 33 percent)
are deductible. Banks may deduct provisions for non-performing loans over the
course of three or four years.
IFZ firms receive a 10-year exemption from taxes and are subject only to a flat
tax of 15 percent on corporate profits beginning in the eleventh year. They
have a right to tax-free repatriation of all funds earned and invested in
Cameroon, and are exempt from foreign exchange regulations. They are exempt
also from existing and future customs duties and taxes including those on
locally purchased production inputs.
Stock Market
Cameroon has no liquid securities or bond market; however, ongoing discussions
between the six member states of UDEAC/CEMAC indicate a desire to create a
regional market. Banque Nationale de Paris has been mandated to draw up a model
for a small screen-based securities market for the Central African franc zone.
Sources: Country Watch, Central Intelligence Agency: http://www.cia.gov
International Monetary Fund: http://www.imf.org
World Bank: http://www.worldbank.org
Camnet: http://www.camnet.cm