Reflecting on the precarious economic and security atmosphere plaguing the Central African Economic Monetary Community by Chofor Che, 30 December 2016

The Monetary Policy Committee (MPC) of the Bank of the Central African States (BEAC) met during its fourth ordinary session in Yaoundé, December 20 2016. Top of the agenda of this meeting was a vivid analysis of the macroeconomic situation of the Central African Economic Monetary Community (CEMAC). This meeting held a few days before the Extraordinary Summit of four Heads of States on the Central African Sub region, slatted for December 23 2016.

The outcome of the MPC meeting revealed that the growth rate of CEMAC states which was projected at 1.7 per cent a few months earlier dropped to 1 per cent. According to experts and analysts, two main reasons are to blame for the precarious economic atmosphere in the CEMAC zone. The first reason is the negative impact of the drop in oil prices in the world market. In 2015, the growth rate in the sub region stood at 2.8 per cent. Inflation was at 3 per cent as initially projected. In 2016, the key rate in the CEMAC zone remained unchanged at 2.45 per cent, while budgetary deficit hovered around 4.2 per cent of the sub region’s Gross Domestic Product (GDP). Current external deficit has slightly dropped from 11.4 per cent of the GDP as external monetary coverage dropped from 71.1 per cent last year to 50 per cent.

There is no gainsaying that the economic atmosphere in the Central Africa Sub region is unstable and calls for member states to make important fiscal and economic policy readjustments. Coupled with the economic and fiscal challenges, member states such as Cameroon and Chad are faced with terrorists attacks from the terrorists group Boko Haram. The Central African Republic is still faced with serious security concerns.
A major mistake that member states of the Central African Sub region especially countries like Cameroon and Equatorial Guinea made as far back as 2014 was to depend a lot on oil and neglect other sectors like the agriculture and the tourism industries. According to analysts, though the oil sector is a very lucrative one, it remains a very unpredictable sector. Despite recent stabilisation, oil prices were expected to remain well below pre shock levels in the medium term as production was feared to start falling in the long run.

CEMAC countries have been therefore forced to rethink through their developmental priorities with respect to the new economic context overshadowed by falling oil prices. Countries like Gabon, Equatorial Guinea and Cameroon have decided to scale back their spending plans by reducing public investment and limiting current expenditure. All of the countries in the sub region have also sought advances from the regional central bank. The consequences of these and other debt related developments is that regional public debt is instead on the rise.

Reducing public investment and limiting current expenditure is definitely not the way to go for CEMAC member states. Depending equally on loans from the regional central bank will only make CEMAC member states highly indebted. One of the ways CEMAC member states may overcome such a financial quagmire is by boosting the private sector and focusing more on other sources of revenue. The agricultural sector in most CEMAC countries remains grossly unexploited. There is need for CEMAC member states to improve and mechanise their agricultural sector.

CEMAC member states need to ensure macroeconomic sustainability by boosting non oil revenue, curbing on public spending and encouraging serious competition in the non-oil sectors like tourism and agriculture. There is equally a need for unnecessary trade barriers to be dismantled and/or curbed so as enable fluid business transactions between member states. A drop in imports related to the public investment programmes will contribute in improving current accounts. Because of the magnitude of the necessitated adjustments, maintaining this course of action will be a challenge. Additionally, the degradation of the security situation in the sub region especially with the conflict in the Central African Republic and terrorist attacks in the North of Cameroon, could weaken an already complex business environment and hamper further efforts to invest in regional infrastructure, a major element for non oil growth. CEMEC member states thus have a serious challenge to embark on a very ambitious but realistic reform agenda to enhance macroeconomic stability as well as encourage inclusive and sustainable growth. Domestic and regional institutions need to play a major role in such efforts.

Chofor Che is co-founder and Chair at the Central African Centre for Libertarian Thought and Action Cameroon, an affiliate of the Washington DC based Atlas Network. He is also an associate of Africanliberty.org and LibreAfrique.org.

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Will the Central African bloc grow by up to 5.5 percent in 2014 as predicted by the International Monetary Fund? By Chofor Che, 7 June 2014

On the 5 of June 2014, the International Monetary Fund (IMF) predicted that economic growth in the six-nation Central African CEMAC bloc is set to double to between 5 and 5.5 percent in 2014. According to an article by Reuters dated the 6 of June 2014, this growth is supposed to be pivoted on the back of increased oil production.
The CEMAC zone is composed of Central African Republic, Gabon, Cameroon, Chad, Congo-Brazzaville and Equatorial Guinea. Reuters reports that five of these states produce oil, which accounts for 36 percent of the region’s Gross Domestic Product (GDP) and 87 percent of total exports. Growth reduced to around 2.5 percent in 2013 because of a substantial drop in oil output. The CEMAC zone’s central bank forecast 2014 GDP growth at 6.7 percent in March.
In an IMF statement at the end of a two-week evaluation mission, the team said “The outlook for the remainder of 2014 points to a pick-up in economic growth. Regional real GDP growth is projected at 5 to 5.5 percent, as oil production will increase. The team added that inflation is expected to remain below 3 percent.

The medium-term outlook seemed solid because of strong growth in non-oil sectors, but a projected decline in oil production was expected to bring overall growth down, observed Reuters. It is sad how states in the CEMAC zone depend on oil production to boast their GDP whereas there are sectors which can fire GDP up if harnessed such as the agricultural sector which remains under-exploited. The IMF confirmed that the deteriorating security situation due to conflict in Central African Republic and attacks by the Boko Haram Islamist group in Nigeria could also cut into growth.

The Central African region especially the CEMAC zone needs to get serious about other sectors of the economy rather than just relying on oil production. This zone has great potential in revamping the agricultural sector but has instead open room for land grabbing. Instead of ensuring that the populace in this zone benefits from vast arable farm land, governments in the CEMAC zone are giving away the land while their people languish in poverty.
Countries in the CEMAC zone still have a long way to go with respect to South-South cooperation. Rather than depending heavily on oil production to attain a 5.5 percent growth, which is not so evident, this zone needs to encourage trade amongst states in the zone and beyond. In recent weeks there have been tensions along the Gabonese and Cameroonian boarders. Both countries have accused each other of illegal poaching and trade which have led to arrests and repatriation of citizens from both states. There is need to encourage free trade among members states of this zone. Tensions amongst member states, such as that between Gabon and Cameroon will instead shrink growth in 2014 instead of boasting it.

Corruption also remains a serious reason why I remain pessimistic about the IMF’s predicted 5.5 percent growth in 2014. A recap on the Doing Business Report of 2013 and 2014 shows that states in the CEMAC zone are tailing the list when it comes to doing business. For instance, according to the AtlasFreeTrade.org initiative, Cameroon’s trade freedom ranks 128 out of 158 states and both the cost of doing business and tariffs remain extremely high. This picture mirrors itself with other states in the zone.

There is indeed high potential for states in the CEMAC zone to attain the 5.5 percent growth as predicted by the IMF. The zone is not only blessed with oil production, but has other sectors which need to be exploited. If the CEMAC zone is really serious about attaining the predicted 5.5 percent growth and more, then it is time for a policy rethink and shift. Government leaders need to also concentrate more in encouraging trade between member states as well as revamping their various agricultural systems. Government leaders need to be serious about true privatization and free trade. There is also need for the corruption canker worm to be curbed. Only such measures may project the CEMAC zone to the 5.5 percent target .