Bringing Light to the Challenges that Cameroonian Startups face: The Pressing Need for a Law on Startups

By Dr. Adeline M. Nembot and Dr. Yollande Tankeu

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1. Introduction

Over the last few decades, Cameroon’s startup ecosystem has grown steadily (1). Of the more than 101 technology companies currently active in the country, 36 were created between 2019 and 2020 (2). This ecosystem includes a number of industries, such as technology, renewable energy, healthcare, and agriculture. The agricultural industries make substantial economic contributions and present opportunities for agri-food businesses in the country. Although Cameroon’s startup ecosystem is very promising, many obstacles remain evident. This includes a weak financial system, lack of skilled labor, high taxes and tariffs, bribery and corruption, a cumbersome and complicated bureaucracy, and a complicated administrative and legal system. Compared to Nigeria, which has 1,697 digital companies in Lagos alone, the growth of startups in Cameroon is still modest (3). The regulatory and administrative framework in Cameroon is complicated and unclear, contributing to the limited expansion of startups in the country. It is against this backdrop that the Nkafu Policy Institute of the Denis & Lenora Foretia Foundation organized a round table to gather feedback that helps to shed light on the difficulties faced by startups in Cameroon (4). At the end of the round table discussions, it was stated that Cameroon needs a “Startup Act,” which is seen as essential for providing funding, extending companies’ market outreach, finding collaborators, and developing business ventures. A Startup Act is a comprehensive policy framework designed to support and promote the growth of startups and entrepreneurial activities in a country.

This article seeks to analyze the constraints still hindering the growth of startups in Cameroon, as well as the opportunities that would open in the ecosystem if a “Startup Act” was put in place. The aim of this article is therefore to encourage startup founders, public authorities, software engineers, and capital providers to take advantage of the opportunities offered by the introduction of a Startup Act in Cameroon.

The rest of this article will present the challenges faced by startups in Cameroon, in Section 2; in Section 3, the opportunities offered by the implementation of a Startup Act in Cameroon; some policy options are presented in Section 4; and finally, the conclusion.

2. Challenges Faced by Startups in Cameroon

In Cameroon, startups face a number of challenges, such as limited access to capital, markets, and talent. Similarly, in Cameroon, entrepreneurs find it difficult to obtain finance due to the inadequacy of the country’s infrastructure and banking system (5). The size of the informal sector in Cameroon can make it difficult for formal businesses to compete.

In addition to these, the coexistence of two business laws (Cameroon government Law no. 2016/014 of 14 December 2016 and the 1997 OHADA Law, which was amended on 30 January 2014) have prevented the country from moving up the World Bank’s business creation indicator. To start a business in Cameroon, several documents must be provided to the Business Creation Formalities Centre, including a photocopy of an identity card, a taxpayer’s card, company registration, and a location plan. Many potential entrepreneurs wishing to formalize their businesses may find the costs of these legal documents prohibitive, which could force them into the informal sector (6).

Finally, in Cameroon, entrepreneurs face many financial constraints, and one of the top five barriers to business expansion in the country is taxation. In both 2009 and 2016, taxation was cited as the main obstacle to business growth in Cameroon. This is because inventions need to be approved or homologated before they can be commercialized, which can be a kind of closing off of the market and the public arena (7).

3.  The opportunities offered by the implementation of a Startup Act in Cameroon

Cameroon has a strong potential for entrepreneurial growth and innovation due to a young and dynamic population, a diversified economy with many sectors, a stable political environment, and a favorable economic environment (8). In this context, a Startup Act can have a significant impact on the startup ecosystem for several reasons as follows:

Firstly, a Startup Act regulates the startup industry by providing legal clarity and protection for entrepreneurs and investors. These boost confidence in the sector and encourage more people to become entrepreneurs. In this respect, empirical research shows that there is a positive relationship between the existence of a law on startups and an increase in investment opportunities (9). Indeed, the adoption of startup policies in Cameroon provides various incentives to new and existing businesses. These incentives can take the form of tax breaks, subsidies, and grants, among other benefits. By offering these incentives, the government can help startups reduce their operational expenses, thereby enabling them to allocate more resources to developing their businesses.

Secondly, regulations that are favorable to startups attract more investment and have higher rates of entrepreneurial activity. Access to adequate funding remains one of the main challenges faced by young businesses in Cameroon. The implementation of a Startup Act can address the challenges by enabling startups to access finance through different channels, such as grants, loans, and equity financing (10).

Finally, a Startup Act can promote innovation and entrepreneurship in Cameroon. For example, with the young tech population with an internet usage rate of 45.6% and a mobile phone usage rate of 84.6%, there are plenty of opportunities for startups in sectors such as fintech, e-commerce, edtech, agritech, and healthtech. By using digital technologies and drawing on local talents and resources, entrepreneurs in Cameroon can develop innovative solutions that address the pressing societal challenges to stimulate economic growth. In addition, the strategic location of Cameroon in the Central African region enables startups to access a wide market and expand their activities beyond national borders by creating companies with a pan-African perspective.

4.  Some Policy Options

The following policy options were presented by experts at the first panel discussion on startups in Cameroon, conducted by the Nkafu Policy Institute (11). It was noted as follows:

• Cameroon needs a Startup Act, be it the definition, procedures, or any other legal procedure concerning startups in the country to attract venture capital funding.
• Participation in discussions can provide an opportunity to learn from those who have succeeded in raising funds.
• The government should offer opportunities to startups and startups should make proposals and submit them to the government. Startups should also take part in competitions where they can win prizes.
• The government should improve the digital education of Cameroonians so that they can learn more about innovative projects on the internet.

5. Conclusion

This article aimed to analyze the constraints still weighing on the growth of startups in Cameroon, and the opportunities that would open up the ecosystem if a Startup Act was put in place in the country. From the above analysis, it appears that a Startup Act in Cameroon will have several positive effects not only on startups but also on the Cameroonian economy as a whole. In concrete terms, a Startup Act will make it possible to encourage innovations, support job creation and combat youth unemployment, attract foreign investments, promote economic diversification, strengthen national competitiveness, and meet certain social challenges. The implementation of a Startup Act in Cameroon would have significant benefits for the country’s economy, the entrepreneurship ecosystem, and society as a whole. By providing support and incentives to startups, Cameroon would unlock the potential for its entrepreneurial talents and foster sustainable economic growth and development in the country.