• Financial Institutions Vouch For Cameroon’s Credibility
• Gov’t To Commit Bulk Of Funds To Important Road Projects

By Joe Dinga Pefok

An operation launched on May 16, 2022, by the Cameroon Government to raise FCFA 200 billion through the sale of public bonds in the financial market of the Central African Sub-region, to fund some important development projects in the 2022 Finance Law, is well underway. 

The background paper for this bond issue operation has been registered by the Central African Financial Market and Supervisory Commission commonly known by the French acronym, COSUMAF, under serial number: COSUMAF APE-01/2022 of April 29, 2022. COSUMAF is the supervisory institution of the ongoing bonds sales by Cameroon.

Also highly involved in the public bonds sales project by the State of Cameroon, is the Bank of Central African States, BEAC, which is the central custodian of the bank account being used for the  project.  BEAC will also be the Settlement Bank for the payment of interests to bondholders, as well as in the repayment of the loan to the bondholders.

Subscription Period, May 16 – 25, 2022

Meanwhile, the subscription period for the public bonds sales is scheduled to end on May 25, 2022. It should, however, be noted that, as is the normal practice in bonds sales in  financial markets, the subscription period of the ongoing exercise may be extended or reduced upon authorisation by COSUMAF.

The ongoing operation is dubbed: Bond Issue By Public Offering Of The State of Cameroon 2022 – 2029. The issuer is the State of Cameroon, and the Security Name of the operation is ECMR 6.25 % net 2022 – 2029.  

Also, the nominal value of the bond is FCFA 10,000, while the minimum investment by a subscriber is FCFA 300,000. This means that a bond costs FCFA 10,000 each, and the least number of bonds that a subscriber can buy is 30, which cost FCFA 300,000.

As for the interest rate on the bonds, it is as high as 6.25 %, which is the highest interest rate that the Cameroon Government has offered since it started the operation to raise funds for development projects through bond issue by the public offering in 2010. It has been explicitly stated that, “Interest will be paid annually from the first anniversary of the date of entitlement of the loan”.

Tax Exemption

As regard taxation, it is Interesting to note that the interest to be paid on the bond will be exempted from all taxes in Cameroon. The interest will also be exempted from income tax on removable capital in member countries of the CEMAC Zone.

Repayment Of Money To Bondholders

The maturity period of the bonds, which is a form of loan granted by the bondholders to the State of Cameroon, is seven years (2022- 2029). It has been explicitly explained in the document issued by the Cameroon Government on how the loan or capital will be repaid. “Repayment of the capital will occur after two (2) years of deferment. That is from the third year by constant amortisation of one fifth (1/5) of the principal”. This means that the repayment of the loan or capital by 1/5 each year, will start in 2025, and will be completed in 2029.

It is further explained that: “The loan will be repaid by debiting the escrow account of the State of Cameroon opened in the books of BEAC, and recalled in the security mechanism. The account shall be replenished on the 5th of each month, by automatic debit of the Single Treasury Account, to the extent of one twelfth (1/12) of the annual instalment corresponding to the principal and interest due at each end of the year, in accordance with the financial amortisation table of the loan.

This means that the payment will be initiated by BEAC, which is the Settlement Bank. BEAC will withdraw from the escrow account of the loan at each repayment date, the annual instalments due, and make them available to the bondholders via the approved intermediaries, account holders – custodians of the securities.

Worth noting that, in line with the regulation regarding security mechanism, an escrow account exclusively meant to receive the sums that will be used to repay the loan, was opened by the State of Cameroon in BEAC, before the beginning of the subscription period.

The account will be managed exclusively by BEAC, which will credit it on the 5th of each month with one twelfth (1/12) of the annual instalment corresponding to the principal and interest due at the end of each year. This will be done in accordance with the amortisation table of the loan by automatic debit of the Single Treasury Account domiciled in its books, as was provided for in the agreement for the opening and operation of the said account.

27 Financial Institutions

The ongoing operation is being handled by a total of 27 financial institutions in the member states of the CEMAC Zone which is the Central Africa Sub -region comprised of Cameroon, Central Africa Republic, Chad, Congo Republic, Equatorial Guinea and Gabon.

The operation is being led by a consortium of brokerage companies duly authorised as Lead Managers by the issuer, the State of Cameroon. The Lead Managers that are four in number include: Afriland Bourse & Investment, BGFI Bourse, Societe General Capital Securities Central Africa, and Upline Securities Central Africa (USCA).  Co-brokerage companies include Atlantic Financial Group Capital, and ASCA.

Individuals or establishments in or out of the CEMAC Zone interested in subscribing for the bonds has to do the subscription at any of the 27 authorised financial institutions  for the bonds sales. The 27 financial institutions are comprised of specialised financial institutions and commercial banks.

As regard commercial banks involved in the bonds sales operation, those in Cameroon include: Afriland First Bank, Societe General Cameroun, BICEC, BGFI Bank Cameroon, SCB and CBC.

Credibility Of Gov’t’s Signature

One of the main speakers at the official launching of the bond sales in Cameroon, which took place in the nation’s economic capital, Douala, on May 17, 2022, was Pierre  Kamogne of Afriland Bourse & Investment,  who is the Spokesman of the Consortium of Brokerage Companies duly authorised as Lead Managers by the Issuer, Cameroon.  He  explained that anybody interested in subscribing for the bonds who does not have an account in any of the commercial banks accredited for the operation, should go to any of the accredited banks and there an account will be opened for them.

Taking questions from economic operators as to the involvement of as many as 27 well known financial institutions in the bonds sales project of the State of Cameroon, Kamogne attributed the interest of many financial institutions to participate in the project, to the credibility of the signature of the Cameroon Government. He asserted that, since the State of Cameroon started the bond issue by public offering in 2010, the Cameroon Government has lived up to expectations by respecting all the engagements and promises, and has been doing so on time.

The trust by financial institutions  in the signature of the Cameroon Government, is further seen in the fact that, before the start of the bond sales on May 16,  the Consortium of Brokerage Companies had already guaranteed the purchase of bonds to the tune of FCFA 180,500, 000,000 (One hundred and eighty billion, five hundred million francs CFA).

But as the Spokesman of the Consortium, Pierre Kamogne explained at the launching ceremony of the bond sales in Douala that the financial institutions have in this case acted as ‘Buyam Sellams’. This means that the financial institutions that constitute the Consortium, guaranteed the purchase of the bonds at the total of FCFA 180.5 billion by underwriting them, to sell to interested persons and enterprises or groups.  However guaranteeing or underwriting bonds to the total sum of FCFA 180.5 billion means that, if any of the financial institutions does not succeed to sell all the bonds for which it guaranteed the payment, the financial institution will pay for the bonds and hold them.

Purpose For The Bonds Sales

Speaking at the occasion, the Finance Minister, Louis Paul Motaze, who chaired the ceremony asserted that, since 2010, the State of Cameroon has embarked on a vast investment in projects that will spur economic growth and employment in domains like road, ports and energy infrastructures among others.

“This commitment is in line with the guidelines of the National Development Strategy (NDS 30), which aims to make Cameroon an emerging country by the year 2035”.

Minister Motaze went on to explain that, to pursue the various projects being undertaken, and also in a bid to finance new projects included in the 2022 State Budget, the State of Cameroon provided for an overall debt of close to FCFA 1,500.30 billion in the Finance Law to fill the financing gap of the said exercise.

The Finance Minister pointed out that Decree No. 2022/052 of 25 January 2022 “authorises the Minister of Finance to resort to the issuance of public Securities of a maximum of FCFA 350 billion, for the financing of development projects included in the Finance Law for the 2022 financial year”.

He explained that it was within this context that Cameroon has embarked on the operation to generate through public offering, an amount of FCFA 200 billion in the Central African Financial Market.

Minister Motaze hailed the dynamism of the business community of Douala. He noted that, whenever the State of Cameroon issues bonds by public offering, Douala always tops the chart in terms of the number of bonds acquired by subscribers in the Central Africa Sub-region. He expressed the hope that Douala will do the same in the ongoing operation of bonds sales (ECMR 6 25 % Net 2022 – 2029).

Why The High Interest Rate

During the question and answer session at the launching ceremony in Douala, one of the many questions posed by economic operators, had to do with their curiosity to know why the  Cameroon Government has this time around decided to raise the interest rate on bonds to as high as 6.25 %.

Minister Motaze explained that the Government took into consideration the fact that Cameroon, like many countries, is now in the post-COVID period, though the deadly virus is still lingering around. The Minister added that COVID-19 dealt a severe blow to the economies of countries across the World in the last two years (2020, 2021). Thus the private sector in Cameroon like those in other countries, was much affected by the pandemic.

Minister Motaze asserted that, in this post-COVID period, the financial market is as saturated with demands for funds, as Governments are struggling to catch up with development projects that were disrupted by COVID-19.

The Minister noted that, since Cameroon started issuing public bods, the interest rate has never reached 6 percent. 

Road Projects

Out of the FCFA 200 billion that will be raised through the bond sales, a bulk of the money, FCFA 119, 857,525.00 billion, will go to the Ministry of Public Works for road projects. Out of that sum, FCFA 3 billion will go as part of the payment for the ongoing  project to tar the Kumba – Ekondo-Titi Road; FCFA 1.5 billion (One billion, five hundred million francs CFA) will go for a project on the Kumba – Mamfe Road, as well as for the Ntaitock – Mamfe Road.

More good news on the list for the Anglophone Regions is that FCFA 1,433,000,000, will go for rehabilitation works on some parts of the road network in Bamenda, while FCFA 2 billion will go for the tarring on the Babungo-Nkor Noni-Lassin Road.

Also, FCFA 14,680,176,471 will be allocated by Government as part of the Special Intervention and Counterparty Funds for the reconstruction of the Northwest and Southwest Regions.