Why You Need to Invest In Cameroon
Foreign Direct Investment, FDI, inflows into Cameroon is very low when you compare it with the potentials that Cameroon has in terms of man power, natural resources, fertile land and land to build. Statistics show that FDI inflows into Cameroon fell in 2016 to 128 million USD when compared with 627 million USD and 726 Million USD in 2015 and 2014 respectively (UNCTAD, 2017). The government of the country is doing all to attract foreign and local entrepreneurs to invest in Cameroon.
From our previous article, Starting a Business in Cameroon – What It Takes we indicated that Cameroon ranks 166th out of 190 economies in the world in the Doing Business Index for 2017. However, this does not mean that the economy lacks potentials for investors to come in. Many changes have been made in the taxation sector and company creation that is very encouraging for investors to implant in the various sectors.
Cameroon has the potential to become one of the most prosperous economies in Sub-Saharan Africa. This put it in the position to be the best place for foreign direct investment in Africa. The country is developing its infrastructures in order to attract foreign investors. A great part of foreign investment is carried out by France, Germany and lately China that according to the Cameroon’s Ministry of Economy, brought in direct and indirect investment that amounted to 2.43 billion USD in 2016.
Investor Protection Comparison
The latest data available from the Doing Business Index 2017 shows that the:
Index Transaction Transparency: Cameroon is at 7.0 compared to 7.0 for United States of America and 5.0 for Sub-Saharan Africa and Germany.
Index of Manager’s Responsibility: Cameroon stands at 1.0 which is lower than the 4.0 of the Sub-Saharan Africa, 9.0 and 5.0 for United States and Germany respectively.
Index of Shareholders’ Power: The country stands on the same level with the Sub-Saharan Africa region at 5.0 while the US and Germany are at 4.0 and 8.0 respectively.
Index of Investor Protection: The figures show Cameroon at 4.2, Sub-Saharan Africa at 4.3, Germany at 6.0 and the US at 6.5.
NB: According to the figures, the greater the index, the more transparent the conditions of transaction, the more the manager is personally responsible, the easier it will be for the shareholders to take legal action and the higher the the level of protection for investors.
Why You Should Invest in Cameroon
There are many points in favor of those who want to invest in Cameroon than weak points. The following are the reasons why it will be good for you to invest in Cameroon:
Cheap manpower is available. Labor is cheap and highly experienced.
Natural resources are in abundance with many sectors that the government has put in place plans to attract foreign direct investments. This include areas like the mining sector, energy, construction and food industries.
The taxation has put in place measures to reduce the time required to create a company. At first it could take up to 37 days, but with the creation of one-stop shops and the possibility of creating a company online, the time and long administrative procedures have been reduced drastically. Read this to know more on company creation.
The major weak points include:
Lack of infrastructure especially transport infrastructure. However, the government is in the process of upgrading the road, air, sea and rail transport system. China has been investing greatly in the country’s infrastructure. They have been involved in the construction of the Kribi Port and Industrial Complex which is now operational, the Memve’ele Hydroelectric Dam that will help to curb the energy problems and the construction of stadia across the country to host the upcoming 2019 Africa Cup of Nations.
Corruption which the government is fighting strongly against through its “Operation Sparrow Hawk” has seen many big guns of the regime jailed for several years.
With all the natural resources, the government needs to boost local entrepreneurship and improve on its fight against corruption. The oil, forestry and industrial sectors still remain underexploited. Most of the wood exploited is exported in its raw form without being transformed. The tourism sector remains underexploited given that Cameroon has a great tourism potential. You can find everything from the peoples, terrain and climate that you have in Africa in Cameroon. That is why it is called “Africa in Miniature”.
In order to promote investment, the government has developed a number of incentives to attract investors, both foreign and nationals. In effect, the so called “Re-investment System” is meant to encourage companies that plough-back their profits in renewing their production tools.
This mostly concerns companies that operate in the agricultural, industrial, tourism, mining, new information technology and communication and forestry sectors. Those who respect the clause benefit from tax reductions of up to 50%. The tax benefits include:
Reduction of taxes on the basis of 50% reinvestment admitted, and that may not exceed half of the earnings declared during the fiscal year concerned. In case of insufficiency for a fiscal year, carrying forward is allowed in the following fiscal years within the limit of three closed financial years;
For companies of the information and communication technologies, the reduction is granted on the basis of 25% of the admitted reinvestment, without exceeding one quarter of earnings declared during the fiscal year in question;
As concerns taxpayers subject to the minimum tax on turnover, the reduction is granted within the limit of 50% of the minimum tax.
The Stock Exchange Tax System
The system also encourages companies to go into the financial market. Companies that are in the stock market benefit company tax rates which stands at 35% to 20%, 25% and 28% for three years if they carry out capital increases of at least 20%, transfer of securities of up to 20% and increase and transfer of shares lower to the threshold of 20% of the share capital respectively.
Special Tax System for Developmental Projects
This applies to companies that are involved in specific sectors of the economy. This includes the industrial, tourism, agricultural and social housing sectors. For them to be illegible, they must generate employment, enhance economic and social development and must raise at least investment of up to XAF5,000,000,000 for large enterprises and XAF500,000,000 for small and medium size enterprises.
Their tax benefits include:
The exemption from the acquisition of of business licenses for the first two years of operation
The exemption from VAT when they purchase construction materials locally and imports for putting in place the project
Their registration fee is fixed at XAF50,000 for real estate deeds and transfers that are directly related towards the putting in place of the project
There are other investment benefits for people who have interest to invest in Cameroon like the regimes of the investment code and free zones, sectoral incentives like the tax system of the public/private sector partnership contracts and other regimes that promote activities of the extractive sector.
Other advantages for those who want to invest in Cameroon include the exemption from licenses, quota limitations for both imports and exports, possibility of having a foreign currency account and purchasing foreign currency, no restrictions placed on sales operations and the right to transfer profits abroad. For the latter, the investor has to re-invest at least 25% of the profits in Cameroon.
Sources: Cameroon Ministry Finance, The Presidency of the Republic of Cameroon, Santander TradePortal