Cameroon Infrastructure Report Q2 2009 (Business Monitor International)
Market: Construction
Published Date: 21/05/2009
Report Title: Cameroon Infrastructure Report Q2 2009
Table of Contents: View Table of Contents
Report Type: Market Report
Country: Cameroon
Number of Pages: 69
Cameroon, despite its numerous economic problems, manages to appeal to investors looking for opportunities in its key infrastructure sectors. In the latest quarter, several new projects were proposed and key participants already operating in the country reaffirmed their commitment to the sector, despite their need to pare back investment spending elsewhere because of the economic crisis.
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 helped. The Cameroon government is collaborating with neighbouring countries and multi-lateral agencies; 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, 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. The Lom Pangar Dam would give it the ability to increase and stabilise its electricity generation. Greater iron ore and aluminium production – and export – are likely to result if the construction of the two projects goes ahead as planned, and therefore a reduction in the 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, 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.
In the short term, however, the economic environment has taken a clear turn for the worse. On the back of falling oil, commodity and tourism exports, we see Cameroon's current account surplus, equal to 1.12% of GDP in 2008, flipping to a deficit equal to 3.4% of GDP in 2009. The potential for an outbreak of militancy could exacerbate the size of the deficit, while a deeper than anticipated drop in imports on the back of CFA franc depreciation and falling investment could help bring in the current account deficit.
In the Cameroon Q209 Infrastructure Report we have thus revised downwards our forecasts for Cameroon to reflect the deteriorating macroeconomic outlook and risk aversion, which may keep a number of investors otherwise interested in the industry at bay. We now forecast that the industry real growth will be 8.2% for 2009, down from our previous forecast of 13.8%. This seems enviable, but it should be noted that the industry nominal value is forecast to be a mere US$800mn, therefore even one medium-sided project (such as the bridge in Douala) can have a big impact on real growth, whereas in other, larger markets the effects on one medium-sided project would be muted.
The report is forecasting real GDP growth in Cameroon to slow from 4.6% in 2008 to 2.4% in 2009.