By Obed Fung, Director
From a Promising Sector to an Agricultural bank
Of the close to 20 million inhabitants of Cameroon, about 8.5 million (42 percent of the total population) live in rural areas where informal agriculture is the predominant source of employment. Despite its subsistence nature, this sector employs more than 55 percent of the total workforce, while providing 22 percent of its GDP by sector and 30 percent of its export revenue on average. In the past couple of years, the agricultural sector has exhibited an average 5 percent growth rate and this is encouraging especially when compared to the 2.5 percent overall annual growth rate in the last few years. These trends are largely attributed to some improvements in policy as well as subtle changes in Cameroonians approach towards agriculture over the past few decades. This changing approach in addition to continuous innovation in sector strategies has the potential of accelerating its transition to second-generation agriculture. But for this to happen, health, education and infrastructure remain essential externalities. For example, we understand that a healthy population or an informed or educated one is more productive. Infrastructure for agricultural purposes entails anything from an improved network of roads, farming equipment, processing industries, marketing facilities to financial institutions that can leverage funds for these purposes. This is the reason why the creation of an agricultural bank as announced by the Head of State back in January 2011 is soon to materialize with the expected approval of the Banking Commission of Central Africa (COBAC). Close to two decades after the failure of Credit Agricole du Cameroon (CAC), the economy is on its way to a new financial institution for the agricultural sector. A lot has already been said and done towards the opening of the Cameroon Agriculture Financial Rural Corporation (CAFRUC) whose mission is to contribute to the financing of agricultural projects and whose creation is already at a very advanced state.
Does the Agricultural Potential Warrant the Creation of a Bank?
Given the natural and acquired potentials of this economy, the answer is “Yes.” Such an institution in Cameroon could reduce the rate of importation and improve the rate of exportation through a revival of domestic production thereby improving on the trade balance. Cameroon averagely imports 135 000 tons of rice which costs 138 billion CFAF per year (National statistics 2013). This represents the cost price of rice importation alone, not considering the other agricultural produce like millet and corn which are equally imported in large quantities every year to supplement domestic consumption. The budget of Cameroon stood at 2 800 billion CFAF in 2012 and 3 236 billion CFAF this year. When we consider imports on rice for these two years, we are faced with a colossal 276 billion CFAF. This amount is capable of stimulating economic activities in the country especially through job creation in the rice sector for example or better still can create approximately 28 agricultural banks in Cameroon if we go by the minimum requirement of 10 billion CFAF required by COBAC for the creation of a bank. These could seriously revive domestic production.
Cameroon is the agricultural engine of its 6 member state CEMAC region whose population is currently about 37 million inhabitants all of which depend to a large measure on Cameroon for food. Then we have the neighbouring Nigeria with a population of about 150 million inhabitants. Therefore the available market for its agricultural products is quite extensive and the possibilities of satisfying the effective demand (which is demand backed by purchasing power) is enormous. Passing on to second generation agriculture through investment in infrastructure by an agricultural bank will go a long way to better equip Cameroon to meet ever-increasing sub-regional and international demand. This international trade potential has already been facilitated by its strategic position and sea access.
Of the 47 544 000 hectares that make up the national territory, 9 000 000 hectares (which is 100 times larger than the whole of the Maldives – the 10th smallest country in the world) can be used for agricultural purposes. The Maldives has recorded remarkable economic growth over the past two decades, especially compared with the rest of the South Asian countries and is on the threshold of graduating from a Less Developed Country (LDC) status to the middle income group. It is therefore logical to think that Cameroon has the potential of doing better 100 times over in its agricultural sector alone than this archipelago of 1,190 islands nation in the Indian Ocean. If adequate funds are put into technology, research and development and appropriately applied over its extensive agricultural land surface through an agricultural bank, it will bring Cameroon to the rank of “highest producers” of some of its agricultural products in the world.
Cameroon has so many important cash crops the most important of which are cocoa, coffee, cotton, bananas, rubber, palm oil and kernels, and peanuts. The main food crops are plantains, cassava, corn, millet, and sugarcane. Palm oil production has shown signs of strength, but the product is not marketed internationally. Cameroon bananas are sold internationally, and the sector was reorganized and privatized in 1987. Similarly, rubber output has grown in spite of Asian competition. Cameroon is among the world’s largest cocoa producers; according to statistics from the National Cocoa and Coffee Board (NCCB), cocoa production in Cameroon for 2011-12 stood at 208,000 tons. Cameroon is ranked 17th in the world in coffee production. Two types of coffee, robusta and arabica, are grown; production was 70,000 tons in 2011 up from 66 584 ton in 2010. About 85,000 hectares of agricultural land surface are allocated to cotton plantations. Some cotton is exported, while the remainder is processed by local textile plants. Total cotton output growth rate reached 41.54% in 2012 (www.indexmundi.com/agriculture). Bananas are grown mainly in the southwest; Cameroon exported 247,210 tons of bananas in 2011 mainly to Europe and government now targets a production of 500,000 tons annually by 2013 (Cameroon Tribune January 12,2012). The output of rubber, which is also grown in the southwest creates nearly 30,000 jobs and export earnings of about 20 billion CFAF per year. This industry provides 2 percent of Cameroon’s export revenue (www.businessincameroon.com). Estimated production in 2013 of palm kernel oil and oil seed is 32,000 and 113,000 tons, respectively (www.indexmundi.com/agriculture). For peanuts (in the shell) the figure was 30,000 tons. Small amounts of tobacco, tea, and pineapples are also grown.
Estimated 2013 production of food crops like sugarcane is 130,000 tons. Other food crops like cassava, (with an industrial processing unit underway in Sangmelima); sorghum, corn, millet, yams, sweet potatoes, potatoes, dry beans, and rice exist. From the above overabundance, Cameroon output can still be improved on so that it is capable of satisfying both domestic and foreign needs if a proper framework of agriculture is laid down.
Role of the Cameroon Diaspora
The Cameroon Diaspora is a formidable factor for the realisation of an Agricultural bank and for economic development in general. Government has created a platform for the Diaspora through the Ministry of External Relations. This is a good inspiration drawn from the case of China 80 percent of whose economic development in 2008 came from the Diaspora. It happened in China, it happened in the BRIC countries and it can happen in Cameroon. The government standing out as the sole proprietor of the agricultural bank may not be the best option. The fact remains that funds transferred from abroad involve so many charges and are more often than not channelled into social rather than development programmes and that access to loans by the Diaspora community may be restricted if the intention is to fund development projects out of the country of residence because banks may not have the means to follow up distant projects. Even with this difficulty, improvement in the foreign reserves of Cameroon has greatly been influenced by funds from residents abroad. In its conference held in Cameroon in August 2013 on “Accelerating Transition to Second Generation Agriculture: Role of the Diaspora” held in Yaounde, one of the resolutions of this conference was the raising of funds towards the creation of an Agricultural bank of Cameroon. With the greater public having a say in the funds of this bank rather than government being 100 percent equity holder, appointment of personnel will pass from political affiliations to a more competitive framework and this will have poor management in check. It is needless to emphasize on the fact that more funds will be leveraged by a wider community thereby giving room for more bank liquidity and more access to loans.
But All that Glitters is not Gold
This is true when we are aware of the fact that creating an agricultural bank for Cameroon is not an end in itself. It could well be a starting point towards second generation agriculture. Let us not be carried away by the beckoning opportunities and fail to look at the challenges that may seem so unapparent. The first step towards another agricultural bank should be a retrospective look at the causes of the failure of the defunct Crédit Agricole du Cameroun (CDC) a similar financial institution that existed nearly two decades ago. This was the same fate of the Cameroon Development Bank (CDB), the National Fund for Rural Development (FONADER) or the Guarantee Fund for Small Businesses (FOGAPE) whose mission was to see to the financing of the agro-pastoral activities. It is true that the imposition of austerity measures by the Bretton Woods institutions (World BanK and IMF) were partially responsible for their failures but mismanagement, corruption, embezzlement and misappropriation of funds were the greater reason behind it all. If Cameroonians are ever going to do anything worth something with the new agricultural bank, then these social ills have to be up rooted. Well, there is a consolation next door when we think of the existence of the embezzlement watchdog of Cameroon (CONAC) that has been in full activity in recent years.
The second challenge concerns loans. Creating a bank does not only entail putting funds in place but making them available when demanded. This new bank should not be another means of stashing away funds and making sure they are intact in the bank volts. The most important problem the Cameroonian entrepreneur faces with the banking sector is access to funds. Banks do not lend money, or even when they do, conditions for collateral knock out the average business man. At times it is almost 150 percent the amount to be loaned. This challenge is likely to affect this new bank. A few rich farmers or corporatives could be capable of providing collateral for their loans but what about a subsistent farmer in the village of Zongefu in Wum who can only afford for a few hectares of farmland? What about a small institution like the Zongefu Corporative which involves an entire rural community for example? It is worth mentioning that for now this class of farmers produce majority of the agricultural output in the economy and so the new bank will need to cooperate with the Credit Unions if the grassroot farmer needs to be reached. This bank should provide a platform that can effectively encourage agricultural entrepreneurs regardless of the size of their projects otherwise the process of giving out loans will become biased.