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Politicking- and Knave-led Privatizations
Behind every sale, liquidation or leasing of a state-owned corporation in Cameroon, there is an unsavory story of underhand dealings. The rules governing privatization, as well as the conduct of the exercise are loaded against the indigenous business class. After the re-introduction of multiparty politics in the 1990s, state corporations took on the function of providing financial, material and human resources to the ruling party during election campaigns. The government would not voluntarily relinquish such enormous advantages, since they dreaded the idea of a strong local entrepreneur class. French investors find that their style of business is better adapted to a corrupt environment such as Cameroon.
By John Manga, USA
The case for privatization of state enterprises appears to be very strong today, given that it ties in well with the present craze for globalization. But as Cameroon privatizes, a few pertinent remarks need to be made.
We have a tendency to equate the term “privatization” with acquisition of public companies or agencies by foreign investors. If that were the case then we might as well start preparing ourselves right away for a net outflow of capital in just a few years.
Of course, the foreign investors are likely to start repatriating the return on their investments as soon as it starts flowing in. The unpredictable political climate in many third world countries (including ours) is no doubt a major factor in such a decision.
Moreover, experience has shown that many foreign investors would use any pretext to avoid fulfilling their fiscal obligations to the host country. With the use of accounting techniques like transfer pricing, they may avoid completely or reduce significantly their tax liability to the host country.
Privatization, in itself, is not a bad idea. Especially, in a situation where most state corporations are managed with no concern, whatsoever, for efficiency and profit-making. There’s no gainsaying that public enterprises in Cameroon have been managed with such wanton recklessness by cronies of the regime who appeared to have no other intention than the grounding of the public sector of the economy.
The problem with privatization is that it may open up avenues for corruption if the rules of the game are not clearly defined. That just happens to be the case with Cameroon.
But even worse than that, privatization might lead to a repossession of our national economy by foreign interests. Privatization will no doubt present a great occasion for all sorts of dubious transactions, all at the expense of the taxpayer.
The “rip-off” which Mr. John Niba Ngu alluded to in respect of the sale of the CDC’s tea estates is just an indication of what might have been going on or is likely to go on as Cameroon privatizes. The Tea Estates scandal is in no way a unique case.
Let me press the point further with a story of another instance of attempted rip-off that has made the rounds in the country.
In may of 2001, a certain Mr. Alexandre Ekollo Moundi, president of a Douala-based NGO called Association pour l’amitie franco-camerounaise, started proceedings in Douala to get the courts to annul the announced decision to cede SNEC to the French company, La Lyonnaise des Eaux for 500million francs cfa. According to Mr. Moundi, the National water corporation was being sold at such a low price only because pressure had been brought to bear on the Cameroonian authorities involved in the transaction by representatives of both the World Bank and La Lyonnaise des Eaux. But even before the courts could rule on the matter, la lyonniaise des eaux unilaterally increased its offer from 500million to 1.500million frs cfa. What a surprise!
Behind every sale, liquidation or leasing of a state-owned corporation in Cameroon, there is an unsavory story of underhand dealings.
The tea plantations transaction was no exception. As we shall soon see, the leasing of the railway corporation to Vincent Bollore’s SAGA group was fraught with intrigues. So too was the dissolution of National Produce Marketing Board, ONCPB. And so too was the sale of SODECOTON to the holding company, Societe Mobiliere d’Investissement du Cameroun, SMIC, which is owned by a group of northerners. In the latter case, the then PM allegedly authorized the sale of SODECOTON to SMIC, an indigenous investor. But this authorization was promptly annulled by the minister of finance who wanted the company sold but to Compagnie Francaise de Developpement du Textile CFDT. (In another setting, it would be improper for a minister of finance to set aside a decision of the PM’s under whom he is serving. Which leaves one with the impression that either the PM is powerless or the minister has the backing of someone higher up the ladder. Guess who that could be.)
The Indigenous Business Class Excluded
The rules governing privatization, as well as the conduct of the exercise are loaded against the indigenous business class. Which prompted certain local businessmen to cry foul. James Onobiono, the GM of Sitabac said:
“90% of Cameroonian businesspeople are excluded from the process. According to certain provisions, you are expected to have 5 years of experience in the sector as well as to hold shares in similar companies abroad. We cannot accept that the enterprises which are up for privatizing,(…), be transferred to the French, the English, etc. without seeking our opinion.”
See Mutations #177 of 18/12/1998, p.3.
In April, 1998, Akame Mfomou, the then minister of finance, as if to prepare public opinion for the scheming that was to come in the selection of the winning bidder in the race for the railway corporation, said:
"If the gap between the best bidder and the next best bidder is very wide, there is no match and the best bidder wins. If the gap is small, the government has a margin [in which] to maneuver in order to take into account the experience of the bidders, their technical know how, the relationships they each have with Cameroon."
See L’Expression #276 of 27/may/1998, p5.
It turned out that Vincent Bollore’s SAGA group, which eventually became the winners in this tussle for Regifercam, was ranked third on the short list of bidders after the first evaluation exercise. Akame Mfomou then came up with a scheme to move his favorite bidder to at least the second position.
To do that, he ordered a second evaluation of the offers, at the outcome of which the SAGA group was ranked second; which then enabled him to apply his subjective and arbitrary criteria, and to literally declare SAGA the winners of the contest. The two other finalists in this uneven race were a consortium led by a South African Company called Comazar, and including Belgian and French companies. The other consortium was Canado-Cameroonian, and was made up of the Canadian firm, Canac-SNC that had been providing technical assistance to the Regifercam for many years. Others in the latter consortium included Lavalain, SGS, SEBC, as well as SITABAC.
The same kind of bias against local business people was exhibited during the sale of SCDM (Societe Camerounaise de Metallurgie) by the government when it rejected the offer made by certain businessmen on the grounds that they only were seeking to arrogate to themselves economic power. A certain Alhadji Bachirou deposited 500million francs cfa with the SNI in a bid to buy SOLADO, a subsidiary of SCDM. This bid proved unsuccessful as the firm was eventually sold to a foreign investor, HOBUM AFRIKA.
Preventing the Emergence of an Indigenous Economic Counterforce
It must have been clear to the reader that there is a pattern developing here.
A pattern whereby the foreign investor is generally preferred to the indigenous investor.
A pattern motivated by the fear of having to put up with an emerging indigenous economic counterforce; as well as the fervent desire to prevent such an occurrence.
But such policy choices are not without down sides, one of which is the risk of transforming the country into a banana republic.
What would be the rationale for such a policy option? The answer to this question may be found in the history of state capitalism in Cameroon.
In the early sixties, the government decided to invest in almost every sector of the economy with the intention of ceding its investments to the indigenous business community. The motive behind such an investment policy was commendable inasmuch as it enabled the creation of an indigenous economy where one did not exist. In 1964, late first president Ahmadou Ahidjo created the National Investment Corporation (SNI) to serve as a holding company for all state-run enterprises. These enterprises were to remain under the watching eye of the SNI until such a time when they were considered strong enough to be ceded to the private sector.
But the government soon realized how much power and patronage it derived from owning these enterprises. It quickly became clear that government needed these enterprises to place its ever-growing number of cronies, irrespective of whether or not they had the training and the experience required to manage the companies they were appointed to manage. Someone who was dismissed as government minister would be appointed to the directorship or to the board of directors of this or that corporation. There were others who got such appointments as compensation for some undisclosable service they had rendered to the regime.
On the 14th of December 1999, Mr. Gustave Ngoufack who was standing trial in Douala on charges of obtaining employment with the Ports Authority by presenting a fake degree certificate said, under oath, that he was recruited in 1993 through a radio announcement, (…) when he was away in Belgium. He claimed that it was only several months later, that he submitted an application file to the Office National des Ports Autonomes . He claimed further that his recruitment by the ports authority was “compensation for the multiple services he had allegedly rendered to the regime in power at the university of Yaounde”.
It turned out that Gustave Ngoufack was one of those commissioned eyes the authorities usually planted in and around the university campus to observe and report on activities of both students and lecturers. As compensation for a “job well done”, he was thus appointed assistant director at the Ports Authority where, and for 6 years, he earned a monthly salary of more than 400.000francs cfa.
As one would guess, there are still many other Gustave Ngoufacks out there strolling the corridors of economic power; and freely mismanaging state-owned agencies.
After the re-introduction of multiparty politics, state corporations took on another function: that of providing financial, material and human resources to the ruling party during election campaigns. So why would anyone expect the government to voluntarily relinquish such enormous advantages?
Government continued to hold onto its possessions in the economy way past the point at which it should have disengaged in favor of the indigenous business class. Well, they enjoyed the power and the patronage they derived from owning what should otherwise belong to the private sector; and, most importantly, they dreaded the idea of a strong local entrepreneur class. Which would somehow explain why, when it became imperative to disengage, government tended to choose foreign investors over local ones. The new owners of the Tea Estates must have been well aware of those unwritten rules intended to keep the local entrepreneur class in check. Which is probably why they chose to use the South Africans as their Trojan horse.
It is clear that French investors are aware of government’s bias in their favor.
In April 1998, the PM led a 70-man delegation to France with the sole purpose of “selling Cameroon” to French investors. In December of the same year, a delegation of French entrepreneurs from the Mouvement des Entrepreneurs de France (Medef), effected a return visit to Cameroon, at the end of which they declared to reporters: “Les investisseurs français apprécient le sérieux camerounais. (…)La securité juridique et judiciaire se met en place et les français peuvent prendre de bons risques.” [Translation: “French investors appreciate the Cameroonian seriousness. (…)The juridical and legal security is set up and French can take good risks."]
In spite of the skepticism expressed by other foreign investors (especially, the British, the Germans and the Americans) about the unreliable nature of our judicial system, our French visitors were optimistic enough to say they were comfortable with the same judicial system. That did not stop Paul Biya from contradicting them only a fortnight later when, in his end-of-year address to the nation, he declared the judiciary and the police corrupt.
Of course the French were not unaware of the corrupt nature of the judiciary in Cameroon. What the French investors meant was that their style of business was better adapted to a corrupt environment.
In Cameroon, the French have a history of using undue influence to thwarting the judicial process.
Given the above circumstances, there isn’t much good we can reasonably expect from the present privatization exercise.
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