Abstract
Cameroon, despite some setbacks in the latest quarter, managed nevertheless to
show some signs of
infrastructure development. The country’s rail
operator is scheduled to start this year on an 11-year
program of railroad
improvements. Construction has reportedly begun on the road leading to the
Lom
Pangar dam project. The Japanese government approved its first loan to
Cameroon since 1976.
But the problems that arose are serious ones. First,
the economy deteriorated further in the latest quarter
and BMI’s
forecast now sees GDP growing less than 1% in 2009. Cutbacks in production at
the Alucam
smelter because of electricity shortages could try the patience
of Rio Tinto Alcan, which only last quarter
said it would stick to its
plans to invest in Cameroon even as it cut capital spending elsewhere. In
another
blow for the country, the estimated cost of the Limbe Deep Water
Port rose to twice its previous level.
Cameroon’s ability to
overcome obstacles in the longer term may be dependent on companies and
investors eager to tap into its mineral and energy resources. Projects
depending on the Kribi Deep Sea
Port, for example, include several
participants, some of whom will take a long-term view of Cameroon’s
potential.
Cameroon manages, in spite of its problems, to appeal to
investors looking for opportunities in its key
infrastructure sectors.
Several projects have been proposed so far this year, although fewer in the
latest
quarter than the preceding one.
This interest bodes well for
infrastructure development in the country over the next five years. Thanks
to
debt cancellation through the World Bank and the International Monetary
Fund’s Heavily Indebted Poor
Country (HIPC) initiative, public
finances have been improved. The Cameroon government is
collaborating with
neighbouring countries and multi-lateral agencies, and the multi-national
corporations
in the country are tolerant of risk and have diversified
their risks over many countries. The government
itself appreciates the
benefits of build, operate, transfer (BOT) transactions.
The country still
suffers from corruption, a lack of transparency and insecure borders, but the
problems
are not getting worse.
Two infrastructure projects deserve
– and are getting – especially close scrutiny. Both have the
potential
to influence significantly the country’s long-term
economic performance. The Kribi Deep Sea Port could
greatly enhance
Cameroon’s ability to exploit its mineral resources, while the Lom
Pangar Dam would
give it the ability to increase and stabilise its
electricity generation. Greater iron ore and aluminium
production –
and export – is likely to result if the construction of the two projects
goes ahead as planned,
which would reduce the country’s dependence
on oil. The dam would reduce vulnerability to drought by
ensuring that its
hydroelectric generators, which account for more than 80% of electricity
production in
the country, have the water they need.
If the country
can get those and other projects to completion, the resulting momentum is
likely to bring
further investment in infrastructure, including into
roads, railroads and water and sanitation. The
beginning of construction
on a road leading to the dam site may be a small step, but it is progress.
BMI is now forecasting real GDP growth in Cameroon to slow to just 0.5% in
2009 and to 2.0% in 2010.
That represents a sharp decline from our
previous forecast of 2.4% growth in 2009 and 3.6% in 2010. We
expect a
real contraction of 1.6% in the construction sector in 2009 before growth
resumes next year.
BMI’s forecast is for 3.5% real construction
growth in 2010 and 6.1% the following year.
Cameroon’s
infrastructure activity, however, must be viewed in the context not just of
the global
economic climate, but specifically in the context of
commodities prices. Oil prices and some metals prices
have risen in recent
weeks, and although the gains are not uniform across the commodities sector,
any
sign of price recovery should boost investors’ confidence about
undertaking projects in Cameroon.
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