Social Democratic Front, SDF, Shadow Cabinet member, Kakdeu Louis-Mariewho is incharge of Economy Finance and Trade for the opposition party has made a very gloomy prediction for the country in 2023, saying the year that starts in less than a month is going to be very tough for Cameroonians, infact tougher than the 2022 which will soon round up.
In a blistering critique of the just adopted budget of FCFA 6,345.1bn the SDF chief economist says the finance law has a lot of gaping holes that shall further impoverish the ordinary Cameroon. He made two incisive analysis which we carry in extenso below:
The 2023 Finance Bill has been passed in the National Assembly. The dice is now cast. No more dithering. Whoever has not sown corn will not reap corn. This is how the economy works. Here are some highlights:
- In his economic program presented to the National Representation, the Prime Minister had made a very mixed assessment of 2022 (the excuse is always the Russo-Ukrainian crisis and COVID-19) and a very worrying production deficit table at the local level.For example, Cameroon only produced 2.1 million tons of maize.
However, the deficit was 900,000 tons in 2022. And if we list the table of deficits, we will have: 1.2 million tons of deficit for rice, 6 million tons of cassava deficit, 1.3 million tons of vegetable oil deficit, 2.6 million tons of wheat deficit, etc. the Prime Minister took care to avoid embarrassment by presenting the production figures (local supply) without mentioning the real demand.
In 2022, no production sector was in surplus in Cameroon, which was a sharp regression compared to 2015. One would have expected the global economic situation to be an opportunity for local production. But that was not the case. The finance law has not been oriented in this direction.
Even the FCFA 10.3 billion promised by the Head of State for the local production of wheat seeds are not evident in the law. Maybe they’ll use chapter 94 to fund, like any other contingency. This would illustrate the lack of programming and planning in steering our economic policy.
- Tips for investing in Cameroon in 2023: If you want to invest in agricultural production or processing sectors in 2023, then do it mainly under the status of an individual, Common Initiative Group or Cooperative. If you create a company (Ets, SARL or SA), you will not benefit from the five years of exemption provided for. This means that the government encourages you (1) to migrate to the informal sector, which already represents nearly 90% of the country’s production structure and (2) to remain small.
This badly formulated provision and adopted with fault is out of phase with the efforts of MINADER to change the pyramid of national production in Cameroon from small family farms to businesses (even family ones) capable of meeting market requirements. You understand that these people have no tool for steering public policy and have been operating for 40 years without master plans.
- The influence of lobbies: The fifth article which initially provided for the re-taxation of certain imported products disappeared in the adopted text. This means that in reality, it was not MPs who amended the bill tabled in the National Assembly on November 11, 2022. It was lobbies that acted and forced the government to withdraw its text to return on November 24, 2022 with a new version unsuitable for the national economy. These lobbies are those of rice, fish and corn. These importation lobbies have no interest in the government organizing competition for them at the national level. In doing so, the Cameroonian government shows that it has no self-government and that it is also making the choice in 2023 to serve selfish interests. As for the people as a whole, they will always be neglected.
- Life will be more expensive: it is already expected that the price of gasoline, diesel, gas and oil will increase. I’m not talking about stamps and other land charges. This means that production and transportation costs will increase and selling prices will also increase. This means above all that local production is doomed never to be competitive and that the Cameroonian government has chosen, one more time as is often the case, to subject the country to external dependence. If there is another global crisis that arises, then we will bear the brunt of it.
- Political analysis: Everything seems to me calculated with a view on the political transition in Cameroon. If the country is empowered, then it will resist international interference. The weakening of its local economic fabric seems to be a political weapon in the hands of the clans which are preparing to seize power. Because, hungry bellies will not last long. And if they were to resist, then the country would be placed under an “embargo” to starve them further and force them to give in. This is also what makes the strength of the clientelism system that recruits so easily in our country today.
It’s up to everyone to prepare their viaticum or their spoils of war!
Very hot days ahead!
Analysis before adoption
Before the adoption of the bill the SDF chief economist had made the following startling analysis below:
The 2023 finance bill, if passed as it stands, contains real progress, but also inconsistencies likely to cancel the incentives planned to fight against the high cost of living in 2023.
- The import-substitution policy, which is the government’s policy for industrialization by substitution of imported products, presupposes the increase in tax on certain imported products and the allocation of incentives to produce them locally. In this regard, the government plans to set the Common External Tariff (CET) at 10% on certain imported products, including rice and fish (article five), to abolish the reduced rate of 5% on certain products such as corn (article five) and to offer five years of tax exemption to certain farmers (individuals, CIG, cooperatives) in the exploitation phase (article 122) out of fairness, we asked to offer 7 years as in the banana sector, but we only got 5. No big deal! Although this is progress, we can regret the discrimination established among farmers. As it stands, big investors are referred to the Investment Incentives Act 2013 which attributes obtaining any benefit to the goodwill (arbitrary choice) of the Finance Minister (clientelism) casually explained to MPs this November 19, 2022 at the National Assembly.
In doing so, the Cameroonian government is still failing in its attempt to transform the economic fabric from the small farms that dominate today to large farms capable of abundantly supplying the market and reversing the inflationary trend in the cost of living (which has been progressing for at least 30 years).
- We also note that a reduction of 30% over three years on the tax base is provided for the production of local drinks in the event of purchase of raw materials at the local level (article 124). This is likely to boost local orders for corn, sorghum or seasonal fruits and therefore guarantee the market for national production. However, why limit this measure to beverages? Out of fairness, all agri-food industries must be targeted to guarantee the market for all local processing players.
one would have expected, in view of the ravages of the Russian-Ukrainian crisis, that there would be specific measures for the promotion of flour, in particular that of wheat likely to be produced locally. this is in any case what a serious government would have done to encourage investors to take advantage of the 10.3 billion FCFA offered to IRAD for the production of seeds. As expected, they limited themselves to promoting beer, the opium of the people!
- On the other hand, for the transformation on the national territory of local raw materials, the government provides for a reduction of 50% in respect of the monthly installment and the income tax (article 124A). This measure could concern producers of tuber meal, for example. but, before having the income to declare, it is first necessary to proceed with the investment and the exploitation. The challenge remains that of raising funds or raising capital that does not receive any support from the government. The question is therefore: where to find the funds to invest? For example, there is no tax exemption measure for money transfers that would have been good.
- For reshipments or re-exports of goods such as rice and fish (in neighboring countries), the draft law provides for the payment of customs at the normal rate (Article 5). Indeed, Cameroon was an Import-Re-export platform to neighboring countries. But, this provision must be accompanied by a resolution on the origin of the products to be operational.
- One of the major inconsistencies is that the same government increases the cost of acquiring landed property (chapter three). question: how will we increase local productivity when it is more difficult to obtain land ownership? There will be no massive investment in agriculture without land security. Also, there will be no massive investment at the local level without access to capital.
The government must exempt the obtaining of the title deed from taxation in order to increase the number of beneficiaries likely to integrate the financial system (banking and agricultural insurance).
- Moreover, the Cameroonian government limits the exemption from VAT on purchases of foodstuffs from producers to public entities only (article 128): Why? it would be a whimsical and discriminatory measure if it were not extended to all buyers, especially private ones (hotels, restaurants, etc.). In normal times, the government’s objective should be to increase the margin of producers currently under threat from intermediaries and to reduce prices in the market currently held hostage by speculators. To do this, the law should be stripped of any form of discrimination in the market that may even fall under the scope of unfair competition.
- Worse, the 2023 finance law, if passed as it stands, will promote the growth of the informal sector. it is a deficiency in fiscal policy. According to the NIS (National Institute of Statistics), Cameroon had 2.5 million Informal Production Units in 2011. This number must have doubled in 2022. Why? because every year, the Cameroonian government pushes taxpayers to migrate to the informal sector in order to escape the tax pressure. Indeed, the policy of increasing the tax base of the current government is vertical whereas it is necessary to apply a horizontal policy.
This means that the government is overcharging the few taxpayers who remain in the formal sector (chapter three) instead of favouring the return of the majority of taxpayers who have taken refuge in the informal sector (nearly 90%). The Cameroonian government will therefore submit to Members of Parliament a budget which provides “the resources and expenses of the state” (second article) without any real policy of wealth creation.
- An umpteenth inconsistency is to provide for the increase in fuel prices (petrol, diesel, gas) through the institution of a special tax (article 229). This unfortunate action will lead to an increase in the cost of production and transportation and therefore, an increase in selling prices on the market. This is very bad news for the consumer who will certainly buy more expensive in 2023.
In conclusion, we see that the measures provided for in the bill in circulation are ineffective and will have no impact on the cost of living in 2023. There is a lack of coherence and especially of financial engineering likely to allow the planned incentives to generate the expected effects.
It should be noted that this draft in circulation remains very incomplete and pernicious in so far as the government has insisted on replacing all the pills that are difficult to swallow with dashes or short broken dots. It shows the contempt with which the government treats the national representation to whom it is supposed to be responsible.
Let’s say it was the potato that had agreed to be eaten raw. National Assembly Members and Senators have to be respected.
(This article was written in the French language and translated by The SUN newspaper aided by Google. The views in the article do not necessarily reflect those of The SUN.)
