In an interview with Business in Cameroon, the CEO of Afriland Bourse & Investment expressed concern over the CEMAC states’ increasing dependence on bond debt on CEMAC capital markets, surpassing 50% of bank deposits as of December 31, 2023. He argued that such practices monopolize financing to the detriment of other economic actors, counteracting the region’s economic growth.
Business in Cameroon: During your presentation of Cameroon’s financing plan for 2024, you noted that the CEMAC states are consuming a significant portion of the market’s savings, leaving a smaller share for other parties. Could you expand on this point?
Pierre Kammogne: By the close of 2023, on December 31, the collective bond debt of the CEMAC nations on the region’s markets stood at CFA7,376 billion, with Cameroon’s contribution being CFA1,812 billion. This is already 10.5% of the whole CEMAC GDP and it does not include direct loans from banks. Also, this sovereign bond debt represents more than half of the total bank deposits. Notably, the rate of subscription fell from 201% in June 2018 to 70% by December 2023, while the average after-tax cost escalated from 4.72% to 7.65%. This shift clearly shows the scarcity and heightened cost of funds, rendering it prohibitively expensive for lower-risk entities such as our states, and even more so for businesses and households. Despite arguments that these funds are being circulated back into the economy, the tangible benefits remain elusive to the average citizen, raising questions about the actual destination of this money.
BC: What exactly are you suggesting?
PK: Our States should not contribute further to already high inflation by dipping into savings at very high yields, as this would make bank loans too costly and unavailable for businesses and households. This approach raises questions about the proper management of our public finances. In other economies, Treasury bill and bond rates are lower than bank refinancing rates, business loan rates, and even bank deposit rates.
BC: Then, where should the state seek financing instead?
PK: To secure financing, proper management, and trust are essential. If these conditions are met, the investor base can be expanded internationally, and if the state adds value for other economic agents, its revenues will increase.
BC: Could it also be that businesses often do not fulfill the requirements to access market funds?
PK: The criteria for financing generally include having the necessary human, material, and technical resources and being of good moral standing; having a current and future market; having solid prospects for generating money; and, to a lesser extent, having guarantees. The problem is not with the access criteria; it’s that even when you meet them, banks might not lend to you because the state, being a lower-risk borrower, offers better returns.
BC: What does it mean for our economy if companies are unable to obtain funding from the market?
PK: Without access to these funds, companies won’t be able to produce, leading us to rely on imports for our essential needs. This reliance undermines our monetary stability and compromises our economic sovereignty.