Cameroon: Selected Issues
Author: International Monetary Fund. African Dept.
Publication Date:
17 Jul 2014
eISBN:
9781498396011
Language:
English
Keywords:
ISCR; CR; wage bill; public-private partnership; IMF staff estimate; Cameroon; base salary; PPP contract; PPP framework; PPP project; PPP contact; Infrastructure; Budget planning and preparation; Stocks
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In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.

Abstract

In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.

Infrastructure Road Map

The government launched an ambitious public investment plan to reach its long-term development goal. Private sector participation is sought through responsible public-private partnerships. Policy options are discussed to increase public investment spending and efficiency, while preserving fiscal sustainability.1

A. Introduction

1. As part of its growth and employment strategy paper (GESP), the government launched a ten-year development plan giving priority to infrastructure development. Accordingly, the government has been implementing a massive public investment program, comprising a dozen large infrastructure projects, including roads, a deep-sea port, a bridge, and thermal and hydraulic power plants. Improving the quantity and quality of infrastructure is essential to progress toward the Millennium Development Goals (MDGs) and to achieve the growth necessary to reach Cameroon’s development objective.

2. Against this backdrop, the authorities plan to promote private sector involvement in the provision of large infrastructure projects through public-private partnerships (PPPs). Starting in 1994, several PPPs were negotiated under a first-generation PPP legal framework, which was solely based on sectoral strategies. Since 2006, the authorities have established a comprehensive PPP framework and created the Council for the Realization of Partnership Contracts (CARPA), paving the way for second-generation PPPs. A number of small PPPs have been signed within the new framework in the social sectors (hospitals, schools, tourism centers). The authorities plan to increase private participation in large infrastructure projects significantly in transportation (deep-sea port, railways, tramways, roads), energy (wind farms, hydroelectric plants), urban development, and the agro-food industry.

3. This paper examines infrastructure needs in Cameroon and makes policy recommendations to address them. In doing this, it provides advice to strengthen the public investment management framework, including PPPs. In particular, the paper reviews the recent experience with public investment and PPPs and discusses policy options: (i) increasing spending on public investment through traditional public procurement, while preserving fiscal sustainability; (ii) increasing the efficiency of public investment institutional processes; and (iii) increasing reliance on private-sector participation in infrastructure (through PPPs), while properly addressing their associated fiscal risks.

B. Infrastructure Needs

Infrastructure indicators in Cameroon trail those of regional peers. Despite a slight improvement in the overall quality of infrastructure in 2013, infrastructure indicators remain low when compared to other sub-Saharan African (SSA) countries, especially for roads, air transport, and electricity (Figure 1). The World Economic Forum global competitiveness index (2013–14) ranked Cameroon 128th out of 148 countries for infrastructure quality. Inadequate supply of infrastructure was perceived among the top three problematic factors for doing business.

Figure 1.
Figure 1.

Sub-Saharan Africa: Infrastructure Rankings, 2013-14

Citation: IMF Staff Country Reports 2014, 213; 10.5089/9781498396011.002.A001

Source: Global Competitiveness Report, 2013-14.

4. Closing the infrastructure gap is essential to achieve Cameroon’s development objective. Growth has averaged 3.6 percent since 2000, which remains well below the 5.5 percent average target rate in the GESP for 2010–20. Beyond the need to increase the “stock” of infrastructure, Dominguez-Torres and Foster (2011) estimate a potential gain of 3.3 percentage points in growth if Cameroon were to raise infrastructure “quality” to the level of middle-income peers.2 Most of this potential growth could come from addressing infrastructure challenges in power supply by lowering production costs and increasing national access rates, and in transport services by improving road conditions and transport costs along the main transit corridors to neighboring countries.

5. In practice, a country has four policy options to reduce its infrastructure gap. Each option has its advantages and disadvantages:

  • Increase the public investment rate via traditional procurement. This option is appropriate when initial levels of public investment are low and the stock of public capital inadequate, and when fiscal space and appropriate financing conditions are available.

  • Improve the efficiency of public investment processes. Reducing institutional inefficiencies3 increases the effectiveness of public spending and its impact on growth and ensures the execution and implementation of sound projects from an economic and social perspective. Moreover, strengthening public investment management, such as transparent and competitive public procurement processes, is important to attract private sector participation in infrastructure projects.

  • Increase reliance on PPPs (Box 1). PPPs can offer efficiency gains from private sector management and innovation (higher quality service at a lower cost), while transferring some responsibilities and risks to the private sector. This option can be attractive when governments’ borrowing constraints are tight, because financing is borne by private firms. However, in order for PPPs to offer better value for money (VfM) than traditional public procurement, efficiency gains need to offset PPPs’ typically higher borrowing and transaction costs. Moreover, PPPs usually involve a very long-term contract with the private sector, reducing flexibility for governments in case public policy priorities change. Most importantly, in order for PPPs to be successful, governments need to put in place sound legal, institutional, budgeting, accounting, and reporting frameworks in order to limit rent-seeking and properly manage fiscal risks.

  • Increase reliance on privatizations. Like PPPs, privatizations draw on the private sector’s efficiency and financing. While privatizations fully transfer the risks to the private sector, a disadvantage is that governments cannot fully control the quality of services provided. This may not be an attractive option for some types of infrastructure (e.g., roads) or for services where social policies are considered desirable (e.g., education and health).

6. The next two sections examine the practical implications of these financing options for Cameroon. Section C focuses on options to increase the rate and efficiency of public investment (i.e., investment financed through traditional procurement), while Section D discusses PPPs.

Public-Private Partnership versus Traditional Procurement?1

A public-private partnership (PPP) is a long-term contract between a public institution and a private contractor to provide public services or infrastructure with a varying degree of risk transfer to the private sector. Specifically, the private contractor agrees to build, operate, maintain, and finance an asset at its own cost, while the government agrees to: (i) remain accountable for the service; and (ii) either pay directly for the service through availability payments (government-funded project) or allow the contractor to collect fees from users (user-funded project). In both cases, the government may provide additional support in the form of subsidies and guarantees. While the private contractor is typically the legal owner of all PPP-related assets and liabilities, the government may be considered the economic owner in cases where limited risks are transferred to the private partner.

An important difference between traditional procurement and PPPs is that under the latter, the government enters a contract with a single firm (special purpose vehicle). Construction, maintenance, operation, and financing can be undertaken by private firms both under traditional procurement and PPPs. What defines a PPP is that the government writes a contract with a single firm that agrees to provide the service (top figure).

Cash flows differ between PPP and the traditional public financing, but are similar in present value terms. The lower figure illustrates stylized cash flows where possible efficiency gains and cost differentials are ignored. Under traditional procurement, the government fully pays for an investment in the year the investment takes place (year 0; grey bar). PPPs imply different cash flows:

  • Under a government-funded PPP (left panel), the government pays for the expected full cost of the asset, but payments can be deferred over the horizon of the long-term contract (years 1-10; black bars).

  • Under a user-funded PPP (right panel) in which user fees exactly cover the project’s costs, the government does not make any cash payments (black flat line), but it gives up the opportunity to collect user fees, which would have been possible under traditional procurement (years 1-10; grey bars).

A01bx01ufig01

PPP versus Traditional Procurement

Citation: IMF Staff Country Reports 2014, 213; 10.5089/9781498396011.002.A001

Source: Funke, Irwin, and Rial (2012).

The difference in the timing of cash flows can create a bias in favor of PPPs, especially in countries with accounting and reporting systems on a cash basis. Even though the financing mechanism (PPP versus traditional procurement) does not reduce the net present value to the government by much, the difference in the timing of cash flows can create a strong bias in favor of PPPs. When governments with cash accounting systems want to reduce the budget deficit in the short term, PPPs may seem attractive, irrespective of whether they are affordable and more efficient than traditionally procured projects. The main fiscal aggregates on a cash basis (budget deficit and debt) are misleading in portraying the level of commitments and risk undertaken by the government.

A01bx01ufig02

Government Cash Flows: PPP versus Traditional Procurement

Citation: IMF Staff Country Reports 2014, 213; 10.5089/9781498396011.002.A001

Source: Funke, Irwin, and Rial (2012).
1 Adapted from Schwartz, et al. (2008) and Funke, et al. (2012)

C. Public Investment

7. A large body of theoretical and empirical work finds a positive relationship between public investment and growth. Physical and social infrastructure is widely considered to be a critical input for economic growth, productivity, and welfare. From a theoretical standpoint, this is based on the premise that public investment in infrastructure turns into a public capital stock, which not only is a direct input in the aggregate production function, but also boosts private capital productivity through crowding-in channels. Several empirical studies estimate a positive relationship between public capital and growth, although the estimated productivity of public capital varies widely across studies depending on the approach used.4

Cameroon’s public investment has been low and insufficient to accelerate growth. The public investment-to-GDP ratio averaged 2 percent over the last 50 years and 3.6 percent since 2000, which is well below the investment level of peer countries in SSA (Figure 2). As a result, GDP growth has been sluggish compared to regional peers, and the public capital stock, estimated at about 42 percent of GDP, is considerably lower than the 109 percent average in SSA, and the 84 percent average in peers.

Figure 2.
Figure 2.

Sub-Saharan Africa: Real GDP Growth, Public Investment, and Capital, 2000-12

Citation: IMF Staff Country Reports 2014, 213; 10.5089/9781498396011.002.A001

Sources: Penn World Tables (2012); and IMF staff estimates.

8. Moreover, less than half of cumulative public investment translated into productive capital because of institutional inefficiencies. The efficiency-adjusted public capital stock is estimated at about 17 percent of GDP at end-2011 in Cameroon, less than half of the unadjusted public capital stock (Box 2). As discussed in World Bank (2006), this reflects weaknesses in public investment management processes, particularly: (i) project planning and appraisal; (ii) project selection and budgeting; (iii) project procurement and implementation; and (iv) ex post project evaluation.

Constructing the Public Capital Stock

The public capital stock is constructed following the perpetual inventory equation

Kt=(1−δt)Kt−1+(1−δt2)It−1,

where Kt is the stock of public capital at time t; δt is a time-varying depreciation rate; and It−1 is public investment spending at time t-1 assuming that new investment is operational in the middle of the period.1 Data start in 1960; for the period prior to 1960, an artificial investment series is built assuming that investment grew by 4 percent a year to its observed level in 1960. The public capital stock is then constructed using the initial capital stock (starting at zero in 1860), public investment flows, and depreciation rates.

A01bx02ufig03

Sub-Saharan Africa and Cameroon: Public Investment and Capital, 1970-2011

(In percent of GDP)

Citation: IMF Staff Country Reports 2014, 213; 10.5089/9781498396011.002.A001

Sources: Penn World Tables (2012); and IMF staff estimates.

An “efficiency-adjusted” public capital stock series is constructed taking into account that public investment is unlikely to translate fully into productive capital assets under weak institutional frameworks. Gupta, et al. (2014) argue that in countries with weak public investment management processes, the traditional public capital stock series may not provide comparable and accurate information. For example, the cost of building infrastructure assets can be much higher in countries with weak project appraisal or competitive bidding processes, leading to inflated project cost. The “efficiency-adjusted” public capital stock series is constructed using a proxy for efficiency:2

Kt=(1−δt)Kt−1+(1−δt2)It−1*q,

where q is a time-invariant index (varying between 0 and 1) capturing the efficiency of public investment.

1 The methodology is similar to that used in the literature; e.g., Gupta, et al. (2014) and Kamps (2006).2Gupta, et al. (2014) use the Public Investment Management Index (PIMI) constructed in Dabla-Norris, et al. (2012) as a proxy. Owing to lack of PIMI data for Cameroon, the Global Competitiveness Report’s index for “quality of roads” is used as a proxy instead.

9. Cameroon recently almost doubled its public investment-to-GDP ratio and plans to stabilize infrastructure investment rates over the medium term. Public investment-to-GDP increased from about 4 percent in 2010 to 7.4 percent in 2013, financed in large part through external borrowing on nonconcessional terms. One of the GESP goals is to increase the share of public investment to total expenditure progressively from 20 percent to 30 percent. This objective was already reached in 2013 and the public investment share is now projected to stay not far below 30 percent over the medium term (Figure 3).

Figure 3.
Figure 3.

Cameroon: Public Investment, 2002-19

(In percent of total expenditure)

Citation: IMF Staff Country Reports 2014, 213; 10.5089/9781498396011.002.A001

Sources: Cameroonian authorities; and staff estimates and projections.

10. Priority areas where increased investment is planned until 2020 are (Table 1):

  • Electricity. The GESP objective is to bring the installed energy capacity from 1,000 MW in 2010 to 3,000 MW in 2020 by building two gas power stations and several hydroelectric dams. The privatization of the state-owned electricity company in 2001 helped improve national access to power, but access in rural areas remains poor, and power tariffs fail to cover production costs. Looking ahead, cost reductions could come from low-cost hydroelectric power, with a potential for Cameroon to export electricity to Chad, the Republic of Congo, Gabon, and Equatorial Guinea (Dominguez-Torres and Foster, 2011).

  • Transport. Cameroon provides transit corridors for landlocked countries in Central Africa, but transport costs to Chad and the Central African Republic (CAR) are among the highest in SSA because of poor road quality and port performance. The GESP objective for 2020 is to construct two new deep-sea ports. Cameroon attracted private-sector participation in the Douala port container terminal in 2004, but the port lags behind the average SSA time for handling containers and is quickly approaching maximum capacity (Dominguez-Torres and Foster, 2011). Looking ahead, the two new ports will help fill the demand for additional port facilities, as robust growth in the region continues. Plans to rehabilitate 2,000 km of existing roads and to build 3,500 km of new roads will help improve the current situation.

Table 1.

Cameroon: Selected Large Infrastructure Projects Planned1

article image
Sources: Growth and Employment Strategy Paper (GESP) 2010; and IMF staff projections.

Missing values indicate the information is not available.

11. To illustrate the importance of addressing inefficiencies in public investment management, three scenarios are estimated (Figure 4): (i) a baseline scenario, corresponding to a medium-term public spending plan, under which public investment rates stabilize while inefficiencies in public investment management persist; (ii) a moderate scenario where inefficiencies are fully eliminated by the year 2030; and (iii) an ambitious scenario under which inefficiencies are fully eliminated by 2020. Under all three scenarios, public investment is maintained around 6 percent of GDP over the medium term, financed through a combination of external borrowing (30 percent) and domestic financing (70 percent).

Figure 4.
Figure 4.

Cameroon: Public Investment and Capital Projections, 1990-2030

(In percent of GDP)

Citation: IMF Staff Country Reports 2014, 213; 10.5089/9781498396011.002.A001

Sources: Penn World Tables (2012); and IMF staff estimates and projections.

12. The envisaged scaling up of investment spending cannot contribute to the desired growth objective, unless accompanied by reforms to strengthen the efficiency of public investment. Under the baseline scenario, the “efficiency-adjusted” capital stock rises from 17 percent of GDP in 2011 to about 25 percent in 2030, as the investment rates are not sufficiently high to offset rising depreciation rates at current inefficiency levels.5 The capital stock-to-GDP ratio could only rise substantially under one of the two alternative efficiency improvement scenarios (43 and 52 percent of GDP by 2030, respectively). Eliminating all inefficiencies by 2030 could boost the GDP growth average by an additional 0.6–0.9 percentage point, while eliminating all inefficiencies by 2020 could deliver a potential gain of 1.0–1.3 percentage points of GDP.6

Policy Recommendations

13. There is a need to mobilize domestic resources or alter resource allocations to increase public investment spending. Public investment and capital in Cameroon are low, and a large infrastructure investment program is needed to raise potential growth. The planned increase in public investment is not sufficient to reach the desired development objective. Given limited fiscal space, high external borrowing rates, and the expected increase in debt levels over the medium term, Cameroon may want to consider reforms to mobilize domestic resources (such as non-oil revenue) or to reallocate spending from less productive purposes (such as fuel subsidies).

14. Cameroon’s investment plan in infrastructure needs to be complemented by institutional reforms designed to increase the effectiveness of capital spending:

  • Project planning and selection. There is considerable scope to strengthen project cost-benefit analysis. Line ministries submit their three-year project proposals to the Ministry of Economy (MoE), but with the exception of large infrastructure and public works projects with external funding, projects do not pass through a rigorous cycle of evaluation to ensure that only those with the highest economic and social returns are retained. The limited capacity both in line ministries and in the MoE results in sub-optimal choices of investments, slows down the pace of implementation of public investment, and leads to low execution rates.

  • Capital budgeting. Achieving a higher quality of public investment requires strengthening budgetary processes. In Cameroon, as in many SSA countries, there is a dual budgeting system with the recurrent budget managed by the Ministry of Finance (MoF), and the investment budget managed by the MoE. This creates costly coordination problems and does not allow a coherent and strategic vision of the budget. There are considerable capacity improvements to be gained by shifting the investment budget to the MoF and integrating the recurrent and investment budgets in a medium-term expenditure framework, while focusing the role of MoE on project assessment and selection. Moreover, the inability of line ministries to shift spending from investment to recurrent expenditure is incompatible with the recent shift to budget programming. There is also a need to budget for externally funded investment in an exhaustive manner, and for the MoF to play a strong coordination role between donors and line ministries.

  • Project procurement and implementation. Addressing infrastructure deficiencies will require considerable improvements in implementation capacity in order to increase execution rates. The establishment of a new Ministry of Public Procurement (MoPP) in 2012 initially slowed down the pace of contracting of investment projects. This has since then been largely addressed. Tightening of procurement procedures is needed to ensure open competition and greater disclosure of procurement information on awarded contracts.

  • Project evaluation. A systematic monitoring and evaluation of project performance needs to be incorporated in the medium-term expenditure framework. The identification of performance indicators can help assess what went right and what went wrong, refine the project selection criteria, and ensure proper budgeting of maintenance needs for existing projects.

D. Public-Private Partnerships

15. Given fiscal constraints, PPPs could be an important vehicle to increase infrastructure investment and efficiency, but risks need to be properly addressed. Investment financed through PPPs contributes to the capital stock and to aggregate income. Additionally, when PPPs offer higher VfM than traditionally procured projects, they can contribute to even higher growth potential because of increased efficiency. However, international experience shows that PPPs also entail significant fiscal costs and risks, if not properly accounted for and managed. For this reason, PPPs should be introduced gradually to gain experience, while the institutional framework to properly manage associated risks is strengthened. Best international practices shows that risks can only be properly addressed by ensuring: good projects, good laws, good institutions, and good fiscal accounting and reporting standards.

16. There has been some experience with PPPs in Cameroon since 1994 in all sectors, but total PPP investments have remained low. Table 2 shows the PPP portfolio in 1994–2013. Currently, there are about 14 PPP contracts totaling about US$2 billion.7 The top four investments are in electricity generation and ports: (i) a 20-year concession agreement (Build-Rehabilitate-Operate-Transfer) between the national electricity company (56 percent shareholding) and the government (44 percent) with a total investment of about US$530 million; (ii) a 20-year Build-Operate-Transfer (BOT) scheme for the construction of a 216 MW natural gas power plant in Kribi with an investment of US$342 million; (iii) a 20-year BOT scheme for the construction of an 88 MW diesel power plant in Dibamba for US$126 million; and (iv) a 27-year BOT scheme for the construction of a platform at the Limbé port for about US$214 million. Overall, Cameroon’s experience with PPPs has been positive, with all projects currently operational and no renegotiations so far.

Table 2.

Cameroon: Public-Private Partnership Projects by Sector, 1994-2013

article image
Source: World Bank PPI database and Cameroonian authorities.

17. More recently, the government signed PPP contracts in several sectors. Seven small projects were signed in the areas of education, health, social housing, and tourism in 2012–13, totaling about US$240 million. Other PPPs are currently under consideration for larger infrastructure projects, with the most important being the construction of the Kribi port terminals.

18. Cameroon established a legal and regulatory framework for PPPs in 2006. It comprises the 2006 PPP law (Law 2006/012) with its accompanying regulations.8 A 2008 decree created the CARPA, which is an expert entity, supporting ministries, local governments, and public enterprises in assessing and negotiating PPP contracts, and monitoring projects. It was originally placed under the authority of the Prime Minister, but was moved to the MoE in 2012, where the Minister holds veto power over its recommendations.

Figure 5.
Figure 5.

Cameroon: Public Capital and Public-Private Partnership Capital Stocks, 1970-2011

(In percent of GDP)

Citation: IMF Staff Country Reports 2014, 213; 10.5089/9781498396011.002.A001

Sources: Penn World Tables (2012); World Bank PPI database; and IMF staff estimates.

Policy Recommendations

19. The PPP framework has room for improvement and risks are significant. PPPs are legally and technically complex schemes requiring strong government capacity and expertise to handle their associated fiscal risks. Given existing weaknesses in public investment processes in Cameroon—an important prerequisite for a solid PPP framework—entering such arrangements without capacity building to monitor them could lead to disproportionate costs and potential contingent liabilities for the government.

Project planning, selection, and execution

  • As in the case of projects executed through traditional procurement, line ministries, local governments, and public enterprises conduct their own pre-feasibility studies of projects to be financed with PPPs. There is a need to strengthen the capacity and the economic and financial analysis used in the planning and selection process. This process involves two stages: first, project appraisal and cost-benefit analysis determine the viability of a project; and second, the use of a public sector comparator can help decide whether to pursue a project through traditional procurement or PPP depending on which option offers higher VfM. Although the CARPA offers advice in project selection methods when it comes to PPPs (including VfM), it is a relatively new institution with less than 20 employees and only 5 experts. Meanwhile, the direction in charge of planning at the MoE also advises on projects procured traditionally. In order to benefit from economies of scale in building capacity, there is a need to explore possible synergies and increase communication of information between the two units.

Legal framework

  • The 2006 law has a generally good definition of PPPs, clearly noting that PPPs could be selected if analysis shows that they offer high VfM and are fiscally affordable. However, a weakness in the legal framework allows PPPs to be selected for “emergency” and “complexity” reasons, such as when there is an urgent socioeconomic necessity to accelerate growth in a given sector, or when public agencies do not have the capacity to analyze complex projects. These types of criteria do not ensure that PPPs are selected for efficiency reasons.

  • The legal framework should clarify procurement procedures for PPPs to ensure maximum transparency. Although a MoPP exists, the PPP legal framework assigns launching of tender bids to public agencies, which initiate the project with assistance from CARPA, and then gives the authority for tender to the Prime Minister who forms an ad hoc committee to analyze bids. This approach is not transparent and does not promote competition. Furthermore, it is not clear how “unsolicited proposals” are handled in practice. International experience shows that the latter may lead to corruption and poor VfM, and therefore they should be subject to a competitive tendering process.

  • The law establishing the tax system applicable to PPPs (Law 2008/009 of 2008) offers several tax benefits to the private sector. For example, the public partner takes charge of the value-added tax (VAT) on imports and local materials and custom taxes during the conception and realization phases of the project, while the private partner is offered a discount on corporate taxes during the operation phase for five years. Sections 7 and 8 of the law leave room for discretion on benefits from custom clearance procedures. This leads to an uneven playing field between projects procured traditionally and those with PPPs. At the minimum, this distinction should be taken into consideration in VfM and public sector comparator analyses.

  • The legal framework should include provisions on the financial reporting and accounting treatment, including future costs and contingent liabilities. Ministries, local governments, and public enterprises should be required to disclose all decisions, which may have an impact on the economic and fiscal outlook. The legal framework should stipulate that the MoF determines what financial data are needed from the private partner to assess fiscal risks arising from PPPs.

  • The legal framework should strengthen the provisions for PPP contracts, such as mandatory clauses on how to renegotiate and terminate contracts, dispute resolution mechanisms, events triggering the need for renegotiation, and events triggering the use of escape clauses (external shocks, war, natural disasters).

Institutional framework

  • Good international practices indicate the need to establish a system of “gateway” safeguards when managing PPPs. This gateway process empowers the MoF to stop a PPP project if it is deemed unaffordable, or does not offer VfM. Gateways giving oversight to the MoF need to be installed at several stages of the PPP process: planning, preparation, negotiation, and before signing the contract.9

  • The gateway process in Cameroon is weak. The MoF’s assessment of fiscal affordability of PPP projects is limited to giving advice, following the submission of pre-feasibility studies by public agencies initiating projects, before the CARPA had the opportunity to ensure the VfM of the project. Although the CARPA board has a representative from the MoF, it also has representatives from the private sector, and the MoE has the power to veto its decisions. The gateway process needs to be strengthened by giving veto power to the Minister of Finance over projects at other crucial stages of the process to ensure budget affordability, such as at the procurement stage and before signing the contract. Although in the legislative framework, loan guarantees require the approval of the National Public Debt Committee (CNDP), created in 2008 and presided by the Minister of Finance, PPP contract signatures are not subject to approval by this Committee.

  • PPPs should be subject to an ex post independent evaluation. To ensure that PPPs deliver the performance standards set out in the contracts, the oversight role of the Audit Bureau (“Cour des Comptes”) should be an integral part of the gateway process. At present, monitoring of PPP projects is done by public agencies, which initiate the project in collaboration with the CARPA. In this regard, there could be a potential conflict of interest in the CARPA, as it combines advisory and monitoring roles.

Budgeting, accounting, and reporting framework

  • At present, signed PPP contracts are not integrated in the medium-term budget planning process. PPP proposals that have potential future spending (and balance sheet) implications should not be treated off-budget. Therefore, the assessment of medium-term sustainability of projects may bias investment decisions in favor of PPPs compared to traditional public procurement, which involves higher up-front budgetary spending, but lower future commitments. Similar to the recommendation for traditional capital spending, integrating the recurrent, investment, and PPP budgets in the medium-term expenditure framework under the MoF, in collaboration with the CNDP, is necessary to ensure the coherence of the fiscal framework and fiscal sustainability.

  • There is a need to ensure that PPPs are undertaken for efficiency reasons, and not solely because they push infrastructure spending off the government’s balance sheet, especially when undertaken by local governments and public enterprises. Applying international standards in budgeting, accounting, and reporting would help limit this bias, but given how far off Cameroon is from applying them (since fiscal accounts are on a cash basis), the government may want to start by limiting risk exposure to PPPs by establishing ceilings on the size of PPP operations.10 The CNDP should also collect information, estimate potential fiscal risks of PPPs, and assess implications for debt-sustainability analysis (firm or contingent liabilities), and transparently disclose this information in budget documents and fiscal statements.

Table 3.

An Example of a Good Gateway Process

article image
Source: IMF staff.

References

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1

Prepared by Samah Mazraani.

2

Calderon and Serven (2008) similarly estimate that low-income countries in SSA could increase their annual growth rates by 2 percent if they halved their infrastructure gap.

3

“Institutional inefficiencies” refer to weak institutional public investment management frameworks throughout the paper.

5

Following Gupta et al. (2014), the depreciation rate is assumed to increase monotonically from 2.5 percent in 1960 to 4.5 percent in 2012. This assumption is based on the observation that, as countries become richer over time, the share of assets with shorter life span (such as information technology) tends to grow, therefore raising the depreciation rate.

6

These estimates assume a marginal productivity of public capital ranging between 0.5 and 0.7, which is the range estimated for a middle-income country in Gupta et al. (2014).

7

The PPP capital stock in Cameroon is estimated at only about 6 percent of GDP at end-2011 (Figure 5). The construction of the PPP capital stock follows the same methodology as that of the public capital stock (Box 2).

8

These are: (i) Decree 2008/035 of 2008 which created the Support Council for the Realization of Partnership Contracts (CARPA); (ii) Decree 2008/0115/PM of 2008 specifying the regulatory decrees of Law 2006/012; (iii) Law 2008/009 of 2008 stating the accounting, financial, and tax systems applicable to PPP contracts; (iv) Order 186/CAB/PM of 2011 fixing the rates and conditions for the collection of fees payable for PPPs; and (v) Decree 2012/148 of 2012 to amend and supplement Decree 2008/035. The World Bank is assisting the Central Africa region, including Cameroon, in ensuring harmonization of laws and standardization of contracts in order to minimize transaction costs for the private sector. The application texts for the Law 2006/012 and Law 2008/009 are yet to be completed.

9

See Table 3 for an example of a strong gateway process, similar to the one in South Africa.

10

For example, a ceiling on annual PPP-related payments, complemented with a ceiling on the net present value of all PPP-related commitments (known and contingent) over the lifecycle of the project, would provide a clear budget constraint.

Other IMF Content

Other Publishers

Cover IMF Staff Country Reports
Cameroon: Selected Issues
Author: International Monetary Fund. African Dept.
Volume/Issue:
Volume 2014: Issue 213
Publisher:
International Monetary Fund
ISBN:
9781498396011
ISSN:
1934-7685
Pages:
91
DOI:
https://doi.org/10.5089/9781498396011.002
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    Sub-Saharan Africa: Infrastructure Rankings, 2013-14

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    PPP versus Traditional Procurement

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    Government Cash Flows: PPP versus Traditional Procurement

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    Sub-Saharan Africa: Real GDP Growth, Public Investment, and Capital, 2000-12

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    Sub-Saharan Africa and Cameroon: Public Investment and Capital, 1970-2011

    (In percent of GDP)

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    Cameroon: Public Investment, 2002-19

    (In percent of total expenditure)

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    Cameroon: Public Investment and Capital Projections, 1990-2030

    (In percent of GDP)

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    Cameroon: Public Capital and Public-Private Partnership Capital Stocks, 1970-2011

    (In percent of GDP)

Sub-Saharan Africa: Infrastructure Rankings, 2013-14

PPP versus Traditional Procurement

Government Cash Flows: PPP versus Traditional Procurement

Sub-Saharan Africa: Real GDP Growth, Public Investment, and Capital, 2000-12

Sub-Saharan Africa and Cameroon: Public Investment and Capital, 1970-2011

(In percent of GDP)

Cameroon: Public Investment, 2002-19

(In percent of total expenditure)

Cameroon: Public Investment and Capital Projections, 1990-2030

(In percent of GDP)

Cameroon: Public Capital and Public-Private Partnership Capital Stocks, 1970-2011

(In percent of GDP)