Key Takeaways

• In Cameroon, Small and Medium Enterprises (SMEs) comprised 99.8% of the economic fabric, contributed 36% of GDP, 30% of local taxes (Isoh et al., 2020), and generated 15,601 jobs in 2022 alone.
• Despite SMEs’ crucial role in the Cameroonian economy, they often need help to acquire financing, which would help boost capacity. The AfCFTA can change this.
• Policymakers should  digitise export and tax procedures while SMEs should match international standards. the current taxation rate of 25% should be maintained and other taxes such as property tax and taxation on rent should be reduced from 15% to 10% to support SMEs with office spaces. 
•  Finally, developing transport infrastructure and accelerating the energy transition will support SME growth and competitiveness. 

Introduction

In Cameroon, SMEs make up 99.8% of the economy, of which 79.32% are Very Small Enterprises (VSE), 19.43% Small Enterprises (SE), and 1.25% Medium Enterprises (ME). Furthermore, SMEs contribute 36% of GDP and 30% of local taxes (Isoh et al., 2020). Despite supporting economic growth, infrastructure, and employment, SMEs’ survival in Cameroon is heavily challenged.

Nevertheless, the African Continental Free Trade Area (AfCFTA) could change this by opening up new markets across Africa for Cameroonian SMEs. The AfCFTA will create a regional market with zero tariffs on over 97% of goods while reducing tariff and non-tariff barriers as countries increasingly align their trade policies and customs procedures.

Challenges Facing SMEs in Cameroon.

In a national economic context marked by the effects of the Russian-Ukrainian crisis and the persistence of inflationary pressures, the activity of SMEs improved during the 2022 financial year. In terms of assets, the stock of SMEs is estimated at 349,722 in 2022, i.e., an increase of 7.85% compared to 2021.

Of the companies on the national territory, 349,722 are SMEs and represent 99.8% of the total. Over half of Cameroon’s SMEs are located in Douala and Yaoundé, showing how important these businesses are for these major cities. In 2022, over 15,601 jobs were created, illustrating the sector’s economic importance. Nevertheless, they continue to face challenges such as formal Access to credit is minimal, capacity building and competitiveness and weak monitoring systems.

How Will the AfCFTA Impact SMEs

Cognisant of the challenges and government policies to support the SME sector, the AfCFTA will create new opportunities for the industry;

Greater Demand for Cameroonian Products: The AfCFTA will open up a 1.2-billion-person potential market for Cameroonian businesses. There are 349,722 SMEs out of 350,422 businesses, with 78.40% operating in the tertiary sector,  21.5% in the secondary sector, and 0.1% in the primary industry. As such, companies in the Agri-processing sector and consumer products could benefit from selling to other markets across the sub-region, especially countries like Nigeria and Kenya.

Innovation and Competition: The AfCFTA will increase competition, weeding out unproductive SMEs. In addition, it will encourage and support innovation as SMEs seek to lower costs and improve their product offerings to compete more effectively in the African market. Free trade causes SMEs to become more competitive. Imports from the United States to China equally boost innovation for local firms as creative ideas diffuse to the local market and local firms. Competition between African firms will cause firms to innovate and produce better quality products at cheaper prices. While technology may be imported from the West, the AfCFTA will force countries to look for local solutions to manufacturing and engineering.

Integration of Value Chains: There are obstacles related to the business environment that make it difficult for Cameroonian SMEs to be integrated into the Global Value Chain. However, the majority of intra-African trade takes place in intermediate products. The AfCFTA provides a unique opportunity for various companies to use Cameroonian drones, software, and cassava, plantain, or sweet potato flowers across the continent.

Investment: Through partnerships, greenfield investments, and better integration of value chains, SMEs could access finance across the continent. The AfCFTA will liberalise the free movement of people and capital, unlocking unexploited opportunities for Cameroonian SMEs, but this is possible only if we improve the business environment.

Recommendations

• Invest in people by protecting, improving, and increasing human resources investments, including increased spending on education and skills development. There is an urgent need to strengthen and regularly collect national data collection systems to measure progress in human capital;
• Accelerate the energy transition with measures to ensure universal access to affordable, reliable, sustainable, and modern energy by 2030. These measures include mobilising public and private investments, strengthening the local market for the energy trade, and promoting investment in low-carbon energy;
• Develop transport infrastructure capable of meeting the needs of industry. The implementation of the industrialisation process requires the existence of high-performance infrastructure networks that will facilitate trade and promote accessibility and connectivity of SMEs to markets;
• Accelerate digitalisation, stepping up efforts to achieve universal access to broadband connectivity by 2030. This will involve investing in infrastructure and policy and regulatory reforms.
• Accelerate local product standardisation processes within the framework of the implementation of the import-substitution policy and take into account the opportunities of the Economic Partnership Agreements (EPA) as well as the African Continental Free Trade Area (AfCFTA), which constitute levers for the development of regional and inter-regional markets, the Cameroonian economy should have an economic fabric made up of a competitive private sector. Thus, the products to be put on the market should be able to replace imported products in quality and quantity.

Conclusion

In Cameroon, SMEs make up 99.8% of the economic fabric, of which 79.32% are Very Small Enterprises (VSE), 19.43% Small Enterprises (SE), and 1.25% Medium Enterprises (ME). However, they face challenges such as limited access to finance, little competitiveness, and weak monitoring systems. The AfCFTA will create new markets for Cameroonian SMEs, integrate them into regional value chains, and attract investment, while competition will cause SMEs to become more innovative. Unlocking the benefits of the AfCFTA is contingent on accelerating digitisation, standardisation to match regional and international standards, developing transport infrastructure and accelerating the energy transition.

References

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How to Cite: Kouam. H. (2023). The African Continental Free Trade Area (AfCFTA) Impact can Boost the SME Sector in Cameroon.