Introduction

Cameroon is a resource-rich country that depends on oil, which accounts for about 40% of export earnings and is building Africa’s only deep sea port that is financed primarily by China’s Export-Import Bank while expanding hydropower generation. However, one central question remains. Are Cameroonian citizens free? Do they have control over their labor and property? This is why economic freedom and economic liberty exists as a concept. According to the Heritage Foundation (2023), financial freedom is the right of every individual to control their labor and property. In an economically free society, individuals should be free to work, produce, and consume as they please and contribute to local development.

Each year, the Heritage Foundation ranks countries based on their level of economic freedom. In their most recent ranking, Cameroon ranks 29th out of 46 countries in Sub-Saharan Africa, with a lower score than the regional average. Cameroon fell one point and scored 51.9, making it the 135th most accessible country in the index. This article looks at four indicators that explain Cameroon’s rank and illustrate current reforms to facilitate economic freedom in Cameroon.

Regulatory Efficiency: Structural reforms in Cameroon are progressing slowly nationally and under the Extended Credit Facility Agreement from the IMF, estimated at $72.9 million, there have been some positive developments. For example, new targets were set for good governance, and the Supreme Court (Chambres des Comptes) published an annual audit on COVID-19 expenses. Secondly, the government established an ARMP website and an overall table of results of contracts related to COVID-19. It was awarded from June 2021 to December 2021, including the actual beneficial owners of contracting entities. Nevertheless, there is more to do. Cameroon did not complete the audits of government arrears as well as adopt a settlement plan of arrears certified by these audits.

Secondly, Cameroon must strengthen accountability and modalities for monitoring the performance of all programs and projects financed from domestic and external sources. Cameroon should adopt a legal and regulatory framework governing Public-Private Partnerships (PPP) so that all PPPs follow a single framework and a diagnostic study of large parastatals, including CAMTEL, PAD, and CAMWATER.

However, citizens now have social security numbers – for formal sector workers – while taxation dematerialised, allowing businesses to pay taxes online. However, starting business costs between CFAF 34,000 and CFAF 40,000 (i.e., between $72 – $80). This process must be digitised. Cameroon dropped in the business freedom index (47.2) despite advances in labor (46.7) and monetary freedom (80.3) (Heritage Foundation, 2022).

Government Size and Taxes: The top individual and corporate tax rates are 38.5% and 33%, respectively. The tax burden equals 14.2% of GDP. Three-year government spending and budget balance averages are 17.3% and 2.9% of GDP. Public debt equals 43.9% of GDP. However, the government is the largest employer, with over 70% of formal sector workers. Taxes are burdensome even as government spending has maintained momentum due to higher debt levels. The fiscal deficit will rise further due to rising interest payments and an expected drop in oil prices from current levels.

Open markets: The trade-weighted average tariff rate is 14.9%, and layers of non-tariff measures discourage more dynamic trade flows. However, Cameroon recently signed the African Continental Free Trade Area (AfCFTA), boosting intra-regional trade and trade freedom. However, Cameroon is still in the experimental phase of the AfCFTA, which is nonetheless a signal of their commitment to the continent-wide agreement. Furthermore, obtaining an import-export is now digital, reducing bottlenecks and corruption that have long held back trade.

Secondly, the investment code includes several general minimum and local content requirements, which has discouraged FDI flows even as the government has put several measures in place to attract investment. Investors are exempt from taxation for the first three years and can benefit from tax deductions if they invest in the agriculture and manufacturing sectors. Cameroon’s score was unchanged in the investment freedom sub-index for 2023.

Financing costs remain high, and access to credit still needs to be improved in rural areas. Women- over 60% of entrepreneurs – have difficulties accessing credit. However, Cameroon’s performance on the financial freedom index held steady, as a growing share of Microfinance institutions provided products aimed at women micro-entrepreneurs and marginalised groups.

Rule of Law: Overall, the rule of law could be more robust in Cameroon. The country’s property rights, government integrity, and judicial effectiveness score are below the world average. Cameroon’s performance in the property rights sub-index and judicial index fell (10.3) while government integrity increased due to a raft of measures to boost efficiency and reduce corruption. Popularising the laws and norms for purchasing land should be formalised to prevent fraud. Double sale continues to plague Cameroon, and standardising laws against such practices nationwide are necessary.

Policy Recommendations:

1. Cameroon should continue implementing reforms under the Extended Credit Facility Agreement with the IMF to improve governance, improve the effectiveness of public spending and reduce corruption. These reforms will improve the quality of domestic reforms and create the conditions for economic growth.
2. The government should make it easier and cheaper to start a business. More start-ups and enterprises will become formal and contribute to the development  of the economy.
3. The government should digitize procedures to enhance transparency and accountability across all its departments. Citizens will be more trusting of government services and its ability to deliver for its citizens.

Conclusion

Cameroon ranks lower than its regional peers in the Economic Freedom Index due to an unreliable legal system, little protection from property rights, and widespread corruption. The absence of a dynamic private sector restrains economic development, while structural reforms have only progressed marginally, accentuating a problematic environment for wealth creation. If implemented effectively, Financial Freedom will boost growth, facilitate job creation, and attract investment.

 Reference List: 

1. Guardian Post. (2023). 2023 third quarter report: Autonomous Sinking Fund says debt payment, servicing gulp gov’t 896 BFCFA. https://theguardianpostcameroon.com/post/1811/en/2023-third-quarter-report-autonomous-sinking-fund-says-debt-payment-servicing-gulp-govt-896
2. Heritage Foundation. 2023 Economic Freedom Index. https://www.heritage.org/index/
3. IMF. (2023).IMF Executive Board Concludes the Second Reviews of the Extended Credit Facility and Extended Fund Facility Arrangements for Cameroon. https://www.imf.org/en/News/Articles/2022/07/25/pr22273-cameroon-imf-executive-board-concludes-second-reviews-ecf-eff-arrangements
4. IMF. (July, 2023). Fourth Reviews under the Extended Credit Fund Facility arrangement and request for waiver for non-observance of performance criterion and modification of performance criteria. Country Report No. 23/251. https://www.imf.org/-/media/Files/Publications/CR/2023/English/1CMREA2023002.ashx
5. Ministry of Finance. (2023). Formalities of setting up an enterprise in Cameroon. https://minfi.gov.cm/en/formalities-for-setting-up-an-enterprise-in-cameroon/
6. Nkafu Policy Institute. (2023).Entrepreneurship, Youths, and Women Economic Inclusion. https://nkafu.org/entrepreneurship-youths-and-women-economic-inclusion-in-cameroon/
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8. WTO. (2023). Trade Policy Review. Cameroon WT/TPR/S/187/Rev.1 Page 29. https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=Q:/WT/TPR/S187R1-03.pdf&Open=True

Mr. Henri Kouam

Founder