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Home > Manufacturing > Fabrication > Building/Construction
Cameroon Infrastructure Report Q3 2009
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Cameroon, despite some setbacks in the latest quarter, managed nevertheless to show some signs ofinfrastructure development. The country’s rail operator is scheduled to start this year on an 11-yearprogram of railroad improvements. Construction has reportedly begun on the road leading to the LomPangar dam project. The Japanese government approved its first loan to Cameroon since 1976.
But the problems that arose are serious ones. First, the economy deteriorated further in the latest quarterand BMI’s forecast now sees GDP growing less than 1% in 2009. Cutbacks in production at the Alucamsmelter because of electricity shortages could try the patience of Rio Tinto Alcan, which only last quartersaid it would stick to its plans to invest in Cameroon even as it cut capital spending elsewhere. In anotherblow for the country, the estimated cost of the Limbe Deep Water Port rose to twice its previous level.
Cameroon’s ability to overcome obstacles in the longer term may be dependent on companies andinvestors eager to tap into its mineral and energy resources. Projects depending on the Kribi Deep SeaPort, for example, include several participants, some of whom will take a long-term view of Cameroon’spotential.
Cameroon manages, in spite of its problems, to appeal to investors looking for opportunities in its keyinfrastructure sectors. Several projects have been proposed so far this year, although fewer in the latestquarter than the preceding one.
This interest bodes well for infrastructure development in the country over the next five years. Thanks todebt cancellation through the World Bank and the International Monetary Fund’s Heavily Indebted PoorCountry (HIPC) initiative, public finances have been improved. The Cameroon government iscollaborating with neighbouring countries and multi-lateral agencies, and the multi-national corporationsin the country are tolerant of risk and have diversified their risks over many countries. The governmentitself appreciates the benefits of build, operate, transfer (BOT) transactions.
The country still suffers from corruption, a lack of transparency and insecure borders, but the problemsare not getting worse.
Two infrastructure projects deserve - and are getting - especially close scrutiny. Both have the potentialto influence significantly the country’s long-term economic performance. The Kribi Deep Sea Port couldgreatly enhance Cameroon’s ability to exploit its mineral resources, while the Lom Pangar Dam wouldgive it the ability to increase and stabilise its electricity generation. Greater iron ore and aluminiumproduction - and export - is likely to result if the construction of the two projects goes ahead as planned,which would reduce the country’s dependence on oil. The dam would reduce vulnerability to drought byensuring that its hydroelectric generators, which account for more than 80% of electricity production inthe country, have the water they need.
If the country can get those and other projects to completion, the resulting momentum is likely to bringfurther investment in infrastructure, including into roads, railroads and water and sanitation. Thebeginning of construction on a road leading to the dam site may be a small step, but it is progress.
BMI is now forecasting real GDP growth in Cameroon to slow to just 0.5% in 2009 and to 2.0% in 2010.
That represents a sharp decline from our previous forecast of 2.4% growth in 2009 and 3.6% in 2010. Weexpect a real contraction of 1.6% in the construction sector in 2009 before growth resumes next year.BMI’s forecast is for 3.5% real construction growth in 2010 and 6.1% the following year.
Cameroon’s infrastructure activity, however, must be viewed in the context not just of the globaleconomic climate, but specifically in the context of commodities prices. Oil prices and some metals priceshave risen in recent weeks, and although the gains are not uniform across the commodities sector, anysign of price recovery should boost investors’ confidence about undertaking projects in Cameroon.
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