ECONOMIC GROWTH RATE:  5%
INFLATION RATE:        12%
1995/1996 BUDGET       682bn
TURN OVER TAX:         17.8%

OVERVIEW

Since 1985, Cameroon has been plagued by economic stagnation and regression resulting to an economy void of substantial economic growth. There has been an ill conceived Macro-economic strategy and a persistent budgetary deficit.

In January 1994 the Franc CFA was devalued by 50% with the view to contain the budgetary deficit and inflation which stood by then at 12%.

Cameroon is one of the African countries where the structural adjustment plan is being determined and monitored by International Bank for Reconstruction and Development (IBRD) and the International Monetary Fund (IMF). The budgetary policy of Cameroon is thus defined in strict conformity to the prescription of the IMF and the Bretton Woods Institution.

Faced with the regressive and stagnating economy, numerous measures both political and economic have been put in place by the Cameroon government with the view to ameliorate employment and stimulate economic growth.

On the political front, on 19 December 1990, the president of the republic of Cameroon promulgated a series of laws which the National Assembly had just adopted during its second Ordinary session dubbed "liberty session". The legal change here was characterised mainly by the triumph of democracy with its classical outcome (freedom of Association, freedom of the press, multi-partism) and on the economic scene, by the widespread liberalisation which reduces the states omnipresence in business matters and institutes a real pedagogy of increased responsibility in the Civil society.

In 1990 law No 90152 of December 19, 1990 instituting freedom of mass communication was promulgated together with law No 901056 instituting multi-partism.

On 1st March 1992 and IP October 1992, the multiparty legislative and Presidential elections were held respectively. On 21st January 1996, municipal elections were also held.

These measures have greatly improved the Socio-Political situation of the country thus leading to positive economic indicators as buttressed by the acknowledgement of the Director General of the L M. F. Michel Camdessus during his visit to Cameroon on 3 July, 1995.

1. LEGISLATION AND REGULATIONS RELATING TO INVESTMENT IN CAMEROON

The following are the main legal texts governing foreign investments:

  • Law No 95/010 of I July, 1995 promulgating the 1995196 Finance Law of the Republic of Cameroon.
  • In Cameroon the finance law is promulgated every year to regulate yearly income/expenditure.
  • Ordinance No 90/007 of November 1990 to institute the Investment Code in Cameroon.
  • Decret No 90/1297 of 30 August 1990 on the application of Ordinance No 90/004 of 22 June 1990 relative to the privatisation of Public and semi-public corporation.
  • Ordinance No 95/003 of 17 August 1995 to lay down the general statute of public and semi-public enterprise.
  • Decret No 951101 of 9 June regulating public contracts.
  • Ordinance NO 90/003 of 27 April 1990 on the dissolution and liquidation of Banks.
  • Law No 90/023 to ratify ordinance NI 901001 of 29 January 1990 establishing the Free Zone regime in Cameroon.
  • Law No 90/025 of August 10, 1990 to amend and supplement certain provisions of Ordinance No 85/3 of 31 August 1985 relating to insurance business.
  • Law No 90/031 of August 10, 1990 regulating commercial activity in Cameroon.
  • Law No 90/10 of August 10, 1990 to amend and supplement certain provisions of Ordinance No 85/2 of August 31, 1995 relating to the operation of Credit Establishment.
  • Law No 90/071 of December 19, 1990 to ratify Ordinance No 90/7 of November 8, 1990 relating to the investment code in Cameroon.

The treaty establishing the economic and customs union of Central African (UDEAC) signed in Brazzaville on 8 December 1964.

Act No 18/65 UDEAC - 15 of 14 December 1965 promulgating a Common Agreement on Investment in the member states of UDEAC.

In Cameroon the Investment Code is applicable regardless of the Investor's nationality, and the Government guarantees that shareholders and executives of foreign enterprises will not be discriminated against.

Cameroon is a member of the Economic and customs Union of Central African (UDEAC), which has its head quarters in Yaounde.

Law No 92/007 of 14 August 1992 instituting the labour code.

Decret No 93/571/PM of 15 July 1993 fixing the conditions of employment of foreigners is to the effect that:

  • A contract of employment of foreigners must be endorsed by the Minister in charge of labour previously to commencement thereof.
  • The application for endorsement shall be made by the employer. Where such endorsement is refused, the contract shall be null and void.
  • Where the Minister in charge of labour fails to announce a decision within the two month immediately following reception of the application for endorsement, the contract shall be deemed to have been endorsed.

2. 1995/96 FINANCE LAW

The 1995/96 Finance law has been designed with the view to:

  • Realise economic growth rate of 5% IN REAL TERMS.
  • Reduce inflation rate from 12 to 8%.
  • Ensure proper treatment of internal and external debts.
  • Increase public investment.
  • Ameliorate the employment situation.
  • Stimulate agricultural productivity which represents more than 30% of the Gross National product.

3. TREATY RELATIVE TO BUSINESS LAW IN AFRICA

This harmonised text governing Business in the Franc zone is in strict compliance to the prescription of the IMF. This text is aimed at:

  • Consolidating African Unity especially amongst the Franc zone.
  • Encouraging economic development and stability within the Franc Zone.
  • Reaffirming their engagement in favour of the constitution of an African Economic Community.
  • Encouraging arbitration as a means of settling dispute amongst member states.

This harmonised text embodies, company law, commercial law, procedure for the recovery of debts, judicial liquidation, arbitration and labour law.

4. THE CODE CIMA

The CODE CIMA (La Conference Interafricaine des Marches d'Assurance) is a harmonised legal text adopted by the Francophone African States. This text regulates the operation of insurance Companies within the Francophone member African States. It governs the relation between the insured and the insurer and has greatly protected the interest of insurance companies.

5. REGULATORY AUTHORITIES

Investment in Cameroon is regulated by:

(a) The Ministry of Trade and Industry
This Ministry is charged with the registration of statute and grant of Investment permit.
It also undertakes price control services.

(b) The Ministry of Finance
This Ministry takes charge of currency exchange and transfer and grants of tax exonerations.

(c) Investment Code Management Unit (ICMU)
This body obtains visas on behalf of expatriate workers employed in approved enterprises in Cameroon.

  • It also receives application files for placement under one of the schedules of the Investment Code.
  • It grants approval document to enterprises.

(d) Ministry of Labour
It is charged with the sanctioning of labour contracts of non-nationals.

(e) Ministry of Foreign Affairs
It grants visas to foreign investors.

6. MONITORING AND SCREENING OF INVESTORS

Any physical or judicial person, wherever he resides, is free to undertake any professional, economic and profit-making activity in Cameroon. Private investments can be freely carried out in Cameroon subject to specific regulations for the protection of health sanitation, the natural patrimony, social protection and the economic public order. Enterprises are required to carry out their activities with due respect for the laws and regulations in force.

The guarantees and incentives contained in the investment code are automatically granted by the state upon a mere declaration to all enterprises meeting the following conditions.

  • To be legally constituted to carry out their activities in Cameroon.
  • To pay their corporate income tax.
  • To reply to the confidential annual survey submitted by the Ministry of trade and Industry.
  • To keep their accounts up-to-date, regardless of the turnover sales submitted for audit.
  • To respect the laws and regulations in force. Incentives are granted upon simple request and submission of the statistics number given by the chambers of commerce and evidence of payment of patente. (Corporation income tax.)

7. CUSTOMS EXONERATIONS

They have been annulled. However most imported equipment pay a flat 10% customs duty and no VAT or Turn Over Tax.

Imported Raw materials are generally levied a 10% customs duty and a VA T which is deductible from the cost of production ; i. e This VA T does not constitute one of the elements used in the calculation of the sales price of goods when produced.

8. TAX EXONERATIONS

After the entering into force of the Taxation and Customs Reforms the following tax exonerations provided by the Investment Code remain applicable.

A. Advantages Linked To The Installation Phase Of The Enterprise

The company is exempted from:
  • Tax on registration fees,
  • Tax on the transfer of acquired premises,
  • Registration fees on contracts for supply of equipment,
  • Internal turnover tax,
  • Taxes on loans contracted in respect of the Investment programmes,
  • Minimum fixed tax,
  • Special company tax,
  • a 50% reduction of company tax from the first year of levy.

B. Advantages Linked To The Production Phase

Exemption from:
  • Minimum charge payable under company tax,
  • Special company tax,
  • 50% reduction of,
  • Company tax for corporate bodies,
  • Industrial & Commercial profits (BIC) for entrepreneurs and individuals,
  • 50% reduction of proportional tax levied on the income of movable assets,
  • Carrying over to the following five years, deficits of depreciation normally taken into account during the first three years.
  • ECONOMIC ADVANTAGES:
  • PROMOTION OF EXPORTS:
  • Undertakings regularly established in Cameroon whose finished or semi-finished products are processed in Cameroon are exempted from export, insurance, and transportation charges in respect of their products meant for export.

An undertaking regularly established in Cameroon which exports all or part of its industrial products shall be granted export incentives in the forms of a deduction from its taxable income of an amount that cannot be carried forward;

the amount so deducted shall be equal to 5% of the F. 0. 8. value of exports of its finished or semi-finished products.

  • AT THE LEVEL OF PROMOTION OF INDUSTRIALISATION IN THE RURAL AREAS.
  • Deduction of the undertaking taxable income of an amount equal to 50% of transportation utilities where such undertaking is set up in an area from the major towns and cities.

Enterprises whose capital originates in other countries are able to acquire all kinds of rights needed to conduct their business, ie. property and industrial rights, concessions, administrative authorisations and permits, and the right to bid for public contracts on the same conditions as enterprises of Cameroon nationality.

Any enterprise pursuing an activity relating to prospection for and/or exploitation of mineral resources including hydrocarbons, the benefits of which shall be fixed by a separate instruments, any services oriented activity having to do with finance, maintenance and repairs of any kind, schools, dry cleaning and consultancies shall be exempt from the field of applications.

9. TRANSFER OF FUNDS

This constitutes:

  • Freedom of financial transfer and product marketing.
  • Freedom of transfer with respect to capital regularly acquired earnings and assets deriving from investment in enterprises.
  • Freedom of access to and movement to labour force, freedom of hiring and the free choice of supplies of goods and services subject to the creation of jobs enabling the recruitment of Cameroon labour.
  • Renewal where necessary of forestry and mining exploitation permits.
  • Enterprises whose capital originates in other countries are able to acquire all kinds of rights needed to conduct their business i.e. property and industrial rights, concessions, administration authorisation and permits and the right to bid for public contracts on the same conditions as enterprises of Cameroon nationality.

Worthy of note is the fact that an authorisation is needed by any citizen to convert the CFA into any other currency. This authorization can be granted at provincial level by the monetary authorities of that province.

The BEAC CFA is not convertible outside its zone of issue, for example, a bank note of the Bank of Central African States cannot be used in the zone of the Bank of West African States which also issues the franc CFA. Foreign exchange is the responsibility of the Ministry of finance through the Central African States banks (BEAC), authorised banks.

The investment code guarantees under normal market conditions and according to banking regulations the transfer of funds out of Cameroon as follows:

  • Funds to repay loans contracted abroad.
  • Funds to pay for services, supplies, equipment and technical know-how.
  • Funds representing the yearly profits corresponding to the proportion of capital brought in from abroad.
  • Funds representing the product of liquidation corresponding to the proportion of capital brought from abroad.

10. COMPANIES THAT CAN OPERATE IN CAMEROON

  • Sole proprietorship.
  • Partnership.
  • Private limited companies.
  • Public corporations.
  • Guarantee companies.

Foreign investors interested in establishing in Cameroon have to be disposed of resident permits and import/export licences.

Application for grant of authorisation must contain the address of investor, statute of the company bearing capital, type of company, shareholders and its seat. The company statute must also indicate whether the company has limited or unlimited liabilities.

The Ministries of Health, Trade and Industry grant authorisation for the operation of companies in Cameroon. Any company is entitled to be in position of a statistic number granted by the chambers of commerce and attestation of registration in the Commercial register before operation.

Presidential Decrees No 90/1470 of November 9, 1990, for example fixes the minimum share capital for credit institutions as follows :

  • Banks (commercial) 1 Billion F.CFA or approximately $2 Million.
  • Investment promotion houses: 500 million F.CFA or (about $1 Million)
  • Factoring houses 500 million F.CFA.
  • Broking establishments : 200 millions CFA Francs (about $400. 000)
  • Leasing establishments 500 Million F. CFA.

11. TECHNOLOGY TRANSFER AND RESTRICTIVE BUSINESS PRACTICES

Cameroon is a member of the "African Organisation for the Protection of Intellectual Property" better known in its French acronym as" l'Organisation Africaine de la Propriete lntellectuelle" (OAPI).

All the activities of the OAPI are co-ordinated in Yaounde, its headquarters in accordance with the 1972 Bangui Accord.

12. COMPETENCE OF THE OAPI

The organisation's competence covers both Industrial property as well as literacy and artistic property, hence the nomenclature "Intellectual Property". OAPI (created by the libreville Agreement of 13 September 1962 as amended by the Bangui Agreement of 2 March 1977) established a common system for obtaining and maintaining the protection of patent, trade marks and Industrial designs amongst member states.

13. TRADEMARKS

Trademarks are valid for a duration of 10 years meanwhile the property in it can be indefinitely preserved through successive renewals effected after every 10 years. This equally holds true for business names.

The minimum duration for designs is 5 years but capital of being extended to 15 years each. All taxes must however be paid. Apart from the fee that must be paid, a list must be provided enumerating the goods to which the mark is applied. Marks registered by the Centre Office may be annulled by civil tribunal of OAPI member states in their territories, if such marks are found to be contrary to public order, lacking distinctiveness or liable to public deception.

14. PATENT

The normal and minimum duration for the validity of a patent is 10 years but which may be extended to 20 years through prolongations of 5 years each. The payment of yearly taxes is imperative and exploitation of the rights is necessary.

Simply obtaining the granting of a patent is not enough. Maintenance of the acquired rights depends upon the effective use of the patent.

The application for trademark and/or patent should include the full name, domicile and nationality of the applicant and, in the case of a legal entity, its name and head quarters. Where applicable, the name and address of the agent authorised to make the application and the date of the power of attorney, the name of the inventor, the title of the invention and a succinct description of the invention, an application fee, and list of items filed indicating the number of pages of description and the number of sheets of drawings as well as, where appropriate, any priority documents attached. The signed and dated application must be accompanied by a sealed envelope containing, in duplicate, the description of the invention and the drawings.

15. RIGHTS CONFERRED

Patents and trademarks confer a right of exclusive exploitation of the invention. The beneficiary can always prohibit any undue exploitation.

16. PRIVATISATION

Privatisation of public and semi-public enterprises is one of the measures adopted by the Cameroon government to combat economic crises in strict respect of the structural adjustment plan. Privatisation of public and semi-public enterprises is regulated by ordinance No 90/004 of 22 June 1990 and Decret No 90/1257 of 30 August 1990 (Text of application).

17. AIMS OF PRIVATISATION

  • Maintenance of public finance
  • Stimulate and promote investment and private initiative
  • Restoration of market mechanism
  • Mobilisation and orientation of national savings on productive investment.

18. IMPACT OF PRIVATISATION

  • The disengagement of the state in the direct management of banks as well as in regulation through the suppressive enactments.
  • Liberty of various enterprises to freely appreciate and take risks without yielding to the institution of political authorities.
  • An increase in the responsibility of the shareholder, owners of enterprise and management. 56% of the government shares in the Cameroon shipping fines (CAMSHIP) have been privatised and both foreigners and nationals have until 7 June 1996 to propose their bids.

19. LIQUIDATION

The decision to liquidate a company can either be taken by the local Courts or Creditors of the company (judicial and voluntary liquidation). There is the appointment of a liquidator to proceed with the liquidation and to represent the company in all aspects. He assumes all the managerial functions. The appointment of a liquidator must be published in a legal gazette and notification made thereof.

NOTE: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought for specifics.

For further information contact Mr Nico Halle, Tel: +237 42 64 79 or Fax: +237 43 26 34 or enter text search 'Nico Halle Law Firm' and 'Mondaq Business Briefing'.