CAMEROON ECONOMIC UPDATE January 2012 l Issue No.3 71651 UNLOCKING THE LABOR FORCE AN ECONOMIC UPDATE ON CAMEROON With a Focus on Employment Cameroon Country Office January 2012 Unlocking the Labor Force An Economic Update On Cameroon With a Focus on Employment Cameroon Country Office Table of Contents Contents ABBREVIATIONS AND ACRONYMS ................................................................................... 3 UNLOCKING THE LABOR FORCE........................................................................................ 4 Introduction ...................................................................................................................................... 4 Recent Economic Developments ...................................................................................................... 5 2012 Outlook .................................................................................................................................... 9 Employment in Cameroon.............................................................................................................. 16 REFERENCES .................................................................................................................. 29 Table of Figures Figure 1: Sectoral contributions to GDP growth, 2006-11.................................................................... 6 Figure 2: Oil production (millions of barrels) ........................................................................................ 7 Figure 3: Inflation rates over previous 12 months................................................................................ 7 Figure 4: Non-oil revenue, 2005-11 ...................................................................................................... 8 Figure 5: Current expenditure, 2005-11 ............................................................................................... 8 Figure 6: Capital expenditure, 2005-11 ................................................................................................ 8 Figure 7: Euro-zone: GDP growth projections, 2010-12 ..................................................................... 11 Figure 8: Total public debt, 2004-11 ................................................................................................... 14 Figure 9: Employment by sector and location, 2010 .......................................................................... 17 Figure 10: Employment by sector and gender, 2010 .......................................................................... 17 Figure 11: Youth employment by sector, 2010................................................................................... 17 Figure 12: Underemployment by category and gender...................................................................... 18 Figure 13: Underemployment by education level .............................................................................. 18 Figure 14: Underemployment by sector ............................................................................................. 18 Figure 15: Informal employment, 2011-20 ......................................................................................... 19 Figure 16: Net school attendance, 2010 ............................................................................................. 22 Figure 17: Completion rates by region, 2010 ..................................................................................... 22 Figure 18: Literacy rates, 2005 ............................................................................................................ 22 Figure 19: Literacy rates in rural areas by gender, 2005 .................................................................... 23 Figure 20: Gross enrolment rates in lower secondary, 2008 .............................................................. 23 Figure 21: Gross enrolment rates in upper secondary, 2008 ............................................................. 23 Figure 22: Professional training by region, 2010 ................................................................................ 24 Figure 23: Professional training by source, 2010 ................................................................................ 24 Figure 24: Enrolments in higher education, 2005-10 ......................................................................... 24 Figure 25: Starting a business, 2007-12 .............................................................................................. 25 Figure 26: Cost of enforcing contracts (number of procedures) ........................................................ 26 Figure 27: Cost of enforcing contracts (in days) ................................................................................. 26 Figure 28: Cost of enforcing contracts (in percent of claim) .............................................................. 26 Figure 29: Export costs (number of documents) ................................................................................ 27 Figure 30: Import costs (number of documents) ................................................................................ 27 January 2012, Issue No. 3/ Page | 1 Table of Charts Chart 1: Employment structure, 2010 ................................................................................................ 17 Chart 2: Enrolment by program in higher education (excluding teacher training), 2010 .................. 24 Table of Boxes Box 1: Effects of the Global Crisis on Cameroon’s Economy .............................................................. 10 Box 2: Possible Transmission Channels............................................................................................... 12 Box 3: Adequacy of Fiscal Reserves in Cameroon............................................................................... 13 Box 4: Cost of Fuel Subsidies............................................................................................................... 15 Box 5: Some Unemployment Characteristics (in percent unless otherwise stated) .......................... 20 Box 6 : Some Characteristics on Education (in percent unless otherwise stated).............................. 21 January 2012, Issue No. 3/ Page | 2 ABBREVIATIONS AND ACRONYMS AFD Agence Française de Développement (French Development Agency) BEAC Banque des Etats d’Afrique Centrale (Central Bank of Central African States) CAR Central African Republic CEMAC Communauté Economique et Monétaire de l’Afrique Centrale (Economic and Monetary Community of Central Africa) CFAF CFA Franc CIRAD Centre de Coopération Internationale en Recherche Agronomique pour le Développement (Agricultural Research Center for Development) CPI Consumer Price Index DSCE Document de Stratégie pour la Croissance et l’Emploi (Growth and Employment Strategy) GDP Gross Domestic Product IFAD International Fund for Agriculture Development ILO International Labor Organization IMF International Monetary Fund LPG Liquefied Petroleum Gas RAC-ESF Rapid-Access Component of the Exogenous Shocks Facility SONARA Société Nationale de Raffinage (national refinery) US United States VAT Value-Added Tax WEO World Economic Outlook January 2012, Issue No. 3/ Page | 3 UNLOCKING THE LABOR FORCE A Special Issue on Employment in Cameroon Introduction With this Cameroon Economic Update, the the informal sector with few formal jobs. World Bank is pursuing a program of short, Unemployment is low, because most crisp and frequent country economic Cameroonians cannot afford not to be reports. These Economic Updates provide an working. Most of these jobs, however, have analysis of the trends and constraints in extremely low productivity and generate Cameroon’s economic development. Each very little money. The challenge is thus to issue, produced bi-annually, provides an enhance the productivity – hence the update of recent economic developments as earnings – of those already employed, while well as a special focus on a topical issue. at the same time creating more formal jobs. In this regard, education may be at fault The Economic Updates aim to share with many children leaving school without knowledge and stimulate debate among mastering basic skills such as literacy and those interested in improving the economic numeracy. An unfavorable investment management of Cameroon and unleashing climate, particularly inappropriate its enormous potential. The notes thereby infrastructure, is also holding the country offer another voice on economic issues in back. Against this backdrop, a cross-sectoral Cameroon, and an additional platform for strategy dealing with both the supply and engagement, learning and change. demand constraints would be needed to This third issue of the Cameroon Economic make Cameroon’s economic growth faster Update is titled “Unlocking the Labor Force and more inclusive. – An Economic Update of Cameroon, with a The Cameroon Economic Updates are special focus on employment�. This title produced by the World Bank Country Office reflects the country’s difficulties in unlocking in Cameroon by a Team led by Raju Jan the huge potential embodied in its Singh. The Team included Abel Bove, population. As in many African countries, Gilberto de Barros, Fadila Caillaud, Bjorn Cameroon’s labor market is characterized by Dahlin van Wees, Sebastien Dessus, Patrick a large share of the labor force occupied in January 2012, Issue No. 3/ Page | 4 Eozenou, Louise Fox, Faustin Ange Koyassé, the Director General Joseph Tedou for his Sara Giannozzi, Norma Gomez, Mombert support on the employment chapter. The Hoppe, Maureen Lewis, Victoria Monchuk, Team is also grateful to the Cameroon Paul Moreno, Amadou Nchare, Sylvie Ndze, country team at the International Monetary Hannah Nielsen, Carlo Del Ninno, Peter Osei, Fund. Vincent Perrot, Gael Raballand, Jacob Robyn, Manievel Sene, and Gaston Sorgho. Greg Binkert (Country Director for Cameroon), Eric Bell (Acting Sector Manager), and Cia Sjetnan (Senior Country Officer) provided guidance and advice, and have been an invaluable source of encouragement. The Team also benefited greatly from consultations with Cameroon’s key policy makers and analysts, who provided important insights, in particular the following institutions: the BEAC, the Ministry of Finance, the Ministry of Economy and Planning, and the National Institute of Statistics. Particular thanks go to Photo credit: Raju Jan Singh Recent Economic Developments Growth 2011 witnessed a number of spectacular Cameroon’s economy gained greater events: an earthquake and tsunami in Japan, momentum in 2011 than we expected in the the Arab Spring, and the sovereign debt July issue of the Cameroon Economic crisis in advanced economies. Despite all Update (Figure 1). After a slowdown of two these developments, preliminary indications years following the global economic and would suggest that the recovery of financial crisis, the economic rebound January 2012, Issue No. 3/ Page | 5 observed in 2010 has strengthened in 2011 % contribution towards GDP growth 2011 July Proj. Est. with an estimated growth reaching 4.1 Primary sector 0.9% 1.6% Secondary sector (excl. oil) 1.2% 0.6% percent (compared with 3.2 percent in Oil -0.5% -0.7% Tertiary sector 2.2% 2.5% 2010). As last year, the main drivers come GDP Growth 3.8% 4.1% Sources : Ca merooni a n a uthori ti es a nd s ta ff ca l cul a ti ons from the non-oil economy (expanding by a Consistent with this picture, credit to the bit less than 5 percent), while oil activities private sector expanded end-September by continue to decline. about 25 percent year-on-year (compared to Figure 1: Sectoral contributions to GDP growth, 2006-11 (in percent) 5 percent at end-September 2010). In addition to a more vibrant economic 6 5 4 activity, this strong expansion also reflected 3 2 partly the increased competition in the 1 0 banking sector, following the entry of two -1 -2 new banks. Manufacturing, construction, 2006 2007 2008 2009 2010 2011 Primary sector Secondary sector (excl. oil) hotels and restaurants, as well as transport Oil Tertiary sector GDP Growth Sources: Cameroonian authorities and staff calculations and telecommunications absorbed most of More particularly, growth in the primary and this new credit. tertiary sectors is estimated to have Turning to the oil sector, Cameroon is a contributed for most of the expected relatively small and mature oil producer, expansion in economic activity in 2011 (1.6 experiencing a declining production (Figure percent and 2.5 percent, respectively). In 2). Depleting reserves, aging equipment, the primary sector, these positive and – more recently – postponements of developments are mainly driven by efforts some development projects and to expand cultivated areas and enhance investments because of the 2008-09 agriculture productivity through the financial crisis explain this profile. The dissemination of improved seeds, contribution of this sector to GDP growth equipment, and training, as well as a has been mostly negative in recent years stronger pick-up in forestry (growing at an and oil production is estimated to have estimated rate of 33 percent). In the tertiary contracted by a further 10 percent in 2011 sector, telecommunications continued to (to 21.1 million barrels). perform strongly. January 2012, Issue No. 3/ Page | 6 Figure 2: Oil production (millions of barrels) Figure 3: Inflation rates over previous 12 months 40 14 12 10 35 8 6 30 4 2 0 25 -2 -4 -6 20 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 15 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total (Headline) CPI Food Price Index Fuel Price Index Sources: SNH and staff calculations Sources: Cameroonian authorities and staff calculations Inflation Fiscal performance In line with our expectations in the July issue The overall fiscal position on a cash basis of the Cameroon Economic Update, price (including grants and before payment of pressures have picked up mostly on the back arrears) is expected to have returned to of higher food prices (Figure 3). Inflation near balance in 2011 from a deficit of close over the first nine months of 2011 to one percent of GDP in 2010 on the back amounted to just below 3 percent (year-on- of higher than budgeted oil revenue. year), the regional convergence criterion, up Fiscal Performance, 2010-11 (in CFAF Billions) from 2.4 percent observed over the same 2010 2011 Est. Budget Jan.-Sept Proj. period in 2010. Despite ongoing initiatives Revenue and Grants 1940 2095 1637 2307 Oil revenue 497 415 436 624 to boost agricultural production, subsidize Non-oil Revenue 1372 1576 1180 1579 Grants 71 104 21 104 imports of food, and improve distribution, Total Spending 2040 2245 1718 2254 Current Spending 1584 1565 1308 1616 Capital Spending 456 680 410 638 pressure on food prices has gained Overall Balance -100 -150 -81 53 Arrears -125 -158 -83 -158 momentum over the past 12 months, Overall Balance on a cash basis -225 -308 -164 -105 Sources : Ca merooni a n a uthori ties a nd s taff ca l cul a tions reaching 4.7 percent in September (up from 3.5 percent a year ago). The stability of retail This fiscal performance – better than prices for petroleum products has, however, budgeted – is remarkable in many respects. continued to moderate the impact of rising First, on the back of stronger revenue food prices and contributed in containing administration and a tighter management of inflation. exemptions, the mobilization of non-oil revenue in terms of non-oil GDP is estimated to have picked up, reversing the steady decline observed over the past years January 2012, Issue No. 3/ Page | 7 (Figure 4). Second, despite spending retail prices of petroleum products. This pressure related to the elections, current continued high stock of unsettled payment expenditure is expected to have remained obligations will weigh on the liquidity contained within its budgetary allocation, position of the government and on the declining in terms of GDP compared to last execution of the 2012 budget. year’s outcome and building the needed Figure 4: Non-oil revenue, 2005-11 fiscal room for additional capital outlays (in percent of non-oil GDP) 14.6 (Figures 5 and 6). 14.4 14.2 14 On the financing side, the second 13.8 13.6 government bond issue had to be 13.4 13.2 postponed: the preparation of the large 13 12.8 infrastructure projects that the proceeds are 12.6 2005 2006 2007 2008 2009 2010 2011 Sources: Cameroonian authorities and staff calculations to finance not being deemed advanced enough. Higher oil revenue from more Figure 5: Current expenditure, 2005-11 (in percent of GDP) favorable prices could, however, offset this 15 resource shortfall. The government has also 14 initiated a series of Treasury bill issues to 13 improve its cash management and build its 12 yield curve. The first issue was well received 11 by the market, being subscribed more than 10 twice, and, combined with a securitization 2005 2006 2007 2008 2009 2010 2011 Sources: Cameroonian authorities and staff calculations transaction, allowed to settle part of the government’s outstanding payment Figure 6: Capital expenditure, 2005-11 (in percent of GDP) obligations. 6 5 However, at the same time, new payment 4 obligations are reported to have 3 accumulated, particularly with the SONARA, 2 1 the national oil refinery, to compensate the 0 company for its revenue shortfalls stemming 2005 2006 2007 2008 2009 2010 2011 Sources: Cameroonian authorities and staff calculations from the government’s policy to freeze January 2012, Issue No. 3/ Page | 8 2012 Outlook The unfolding sovereign debt crisis in diaspora may have less money to transfer advanced economies, particularly in the back to their relatives or may even return Euro zone, clouds the economic outlook and should unemployment seriously rise and makes any projection particularly migration regulations tighten. challenging. At the time of writing, the Against this backdrop, the economic transmission channels to Cameroon’s momentum observed in Cameroon in 2010 economy are expected to be similar to those and 2011 is expected to carry over into 2012 observed during the 2008-09 global financial with the construction of large infrastructure crisis (Box 1). projects and continued efforts to improve The global linkages of the financial system of agriculture productivity. Production under the CEMAC region are still limited and the the emergency thermal power program is banking sector remains sufficiently liquid to expected to contribute in alleviating power meet the credit needs of the government bottlenecks. In the tertiary sector, and the private sector. Furthermore, the telecommunications are expected to budget in Cameroon does not rely heavily perform strongly with a continued on aid flows, hence any adverse impact from expansion of subscribers. Furthermore, in lower aid following fiscal austerity measures the oil sector, following significant in the Euro zone should be limited. exploration in the past years, the declining trend observed in production is expected to The economic slowdown in the Euro zone reverse in 2012 and expand by 15 percent. will thus more probably translate into lower As a result, economic growth in Cameroon exports and remittances. The Euro zone is could amount to 4½ - 5½ percent in 2012. still the largest market for Cameroon’s exports and hosts the largest community of Cameroonians abroad (Box 2). With slower economic growth, demand for products using Cameroonian input such as housing (wood) or cars (rubber) could decline. The January 2012, Issue No. 3/ Page | 9 Box 1: Effects of the Global Crisis on Cameroon’s Economy The 2008-09 global financial crisis was triggered by the bursting of a real estate pricing bubble in the US market. The crisis propagated to financial institutions globally and resulted in a sharp tightening of credit conditions worldwide. As a result, international trade declined and real global activity contracted, affecting more particularly high-leveraged sectors such as real estate. World real GDP growth contracted, turning from a positive growth rate of 3 percent in 2008 to a decline of 0.6 percent in 2009. Trade volumes declined substantially, the expansion observed in 2007 (7.3 percent) giving way to a drop in 2009 (10.7 percent). Imports from advanced economies contracted by 12 percent while those of emerging economies declined by 8.4 percent. The slowdown of global demand resulted also in a sharp decline in world commodity prices (36.3 percent for oil and 8.7 percent for nonfuel commodities). Although Cameroon’s financial sector was not directly exposed to the global financial crisis, the country was indirectly affected by the crisis through the following channels (i) deteriorating terms of trade (15 percent); (ii) slower world demand for oil, timber, rubber, cotton and aluminum, resulting in a reduction in export volumes of 4.8 percent; (iii) tighter international liquidity conditions that led to reductions in capital inflows and the postponement of some investments; and (iv) a slight decline in remittances (0.5 percent). Compared to other sub-Saharan African economies, the impact of the global financial crisis on Cameroon was considered moderate at the aggregate level with real GDP growth slowing by one percentage point (from 3 percent in 2008 to 2 percent in 2009). This relatively good performance in weathering the crisis was achieved through countercyclical fiscal measures made possible by using some of the fiscal savings accumulated in the years preceding the crisis, and with the renewed financial assistance of the IMF (a US$144 million disbursement under a RAC-ESF agreement). The 2012 Budget aims at containing the and an increase in exempted imported deterioration of the overall fiscal deficit to goods is expected in relation to the 2.2 percent of GDP on a cash basis (including advancement of large infrastructure grants and before payment of arrears). This projects. The VAT threshold will be revised would reflect a continued expansion in upwards with a view to reduce public investment (to 6.2 percent of GDP) in administration costs. The tax regime for line with the objectives of the DSCE, but a small- and medium-sized enterprises will weaker mobilization of non-oil revenue also be simplified, allowing for deductions (declining to 13.9 percent of non-oil GDP). that the previous regime did not permit. Duties on some oil imports will be lowered These measures are expected to reduce the January 2012, Issue No. 3/ Page | 10 tax burden faced by these enterprises and Although Cameroon has a fairly diversified are hoped to foster their development, but export base and markets, the recent will imply a revenue shortfall for the budget. declines in some of its key commodity exports may indicate that the crisis could be deeper than currently envisaged and downside risks to our projections significant. Figure 7: Euro-zone: GDP growth projections, 2010-12 (in percent) 1.9 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1.0 0.9 2010 2011* 2012* WEO April 2011 WEO September 2011 Source: International Monetary Fund *Projected Against this background, mitigating strategies might be considered to protect the economy should matters become worse than currently projected. In 2008-09, public Photo credit: Raju Jan Singh spending could be protected and supportive fiscal measures introduced using the fiscal Uncertainty surrounding the international savings that had been accumulated in outlook is, however, greater this year with previous years. The reduced level of developments rapidly unfolding and remaining government deposits at the economic difficulties possibly spreading to regional central bank will only provide a other parts of the world. Projections are limited buffer this time around (Box 3). rapidly being revised downwards (Figure 7). January 2012, Issue No. 3/ Page | 11 Box 2: Possible Transmission Channels The Euro zone is an important export market for …as well as its main source of remittances. Cameroon... China Other and India Sub- 8% 15% Saharan Euro Africa Area 22% 45% Others 8% United Euro States Sub- area 15% Saharan 55% United States Africa 7% 25% Growth is expected to slow down. Although Cameroon’s exports are diversified,… Others Oil& China and India 22% petroleum products Bananas 39% Euro Area 2010 3% 2011 Rubber United States 2012 3% Cotton 2% Sub-Saharan Africa Wood products Cocoa 0 2 4 6 8 10 12% 19% … recent declines in commodity prices… …may indicate even slower world demand. 450 150 Rubber 400 140 Cotton 350 130 Petroleum 300 120 250 110 200 100 150 100 90 50 80 Cocoa Banana Logs Sources : Cameroonian authorities and staff calculations January 2012, Issue No. 3/ Page | 12 Box 3: Adequacy of Fiscal Reserves in Cameroon Cameroon being an oil producer is highly dependent on oil exports, making the country vulnerable to swings in oil prices and production. Receipts from oil exports are the country’s predominant source for foreign exchange earnings, as well as a substantial source of its government revenue. On average between 2000 and 2010, oil accounted for 46 percent of total exported goods and accounted for 30 percent of total government revenue. The accumulation of foreign exchange reserves and government deposits can help protect a country against such shocks. As a member of the CEMAC, Cameroon can access the common pool of foreign exchange reserves accumulated by all member countries at the BEAC. To mitigate shocks to government revenue, however, each country has to accumulate an adequate buffer of government deposits. The question then becomes how to define the appropriate level of fiscal reserves. This question can be approached in a similar way as the evaluation of the appropriate level of foreign exchange reserves.1 Reserves can be considered as a shield to protect a certain level of imports or spending against shocks on income, very much like precautionary savings would do for consumption. For these calculations, the frequency and strength of past shocks are taken into account and some restriction on borrowing assumed. Although imperfect, this indicator provides a useful benchmark for fiscal reserves adequacy from a policy perspective, because it takes into account the specific frequency and size of shocks faced by a country. Following this approach, the level of fiscal reserves in Cameroon were measured in months of current spending (considered to be more Government Deposits difficult to cut than investment) and the past (in months of current public spending) 5 development of exports and oil revenue Usable Deposits 4 between 1980 and 2009 were taken into Net Deposits 3 account.2 The results would suggest that the 2 country should be holding at the minimum 1 fiscal deposits to cover about nine months of 0 2005 2006 2007 2008 2009 2010 current spending to be sufficiently protected -1 against shocks affecting fiscal oil revenues.3 At -2 -3 the end of 2010, net government deposits Sources: Cameroonian authorities and staff calculations (measured as government deposits minus its liabilities to the regional central bank) were only sufficient to cover 1.9 months of current spending. Usable government deposits (measured as non-earmarked government deposits) amounted to ¼ month of current spending. 1 See for instance, Aizenman, J. and J. Lee (2005); Jeanne, O. and R. Rancière (2006); Valencia, F. (2010); and Tereanu, E. (2010). 2 The underlying assumption is that investment spending is cut first in times of revenue shortfalls, but current spending needs to be maintained. 3 The results of a sensitivity analysis of the parameters used (such as interest rate, return on investment and risk aversion) suggest that the optimal range of deposits-to-expenditure ratio ranges between 9 and 12 months. January 2012, Issue No. 3/ Page | 13 The most recent joint IMF-World Bank low- reporting would also foster investors’ income country debt sustainability analysis confidence, since it will make the carried out indicates that Cameroon’s risk of government’s fiscal position more debt distress remains low, opening the transparent. Furthermore, stronger project possibility for some limited non- selection and preparation would contribute concessional borrowing. In this context, the to ensuring that the proceeds of new authorities are actively using the room borrowing would be put at the most provided by the country’s low level of public productive use. debt to tap non-traditional creditors and the As the government is turning to non- nascent domestic capital market by issuing a traditional creditors and non-concessional government bond last year and Treasury external borrowing, its debt management bills this year (Figure 8). These provide capacity would need to be strengthened, alternative sources of financing for the building on recent achievements. The budget, complementing any possible authorities have formulated a medium-term shortfall in fiscal savings. debt management strategy for central Figure 8: Total public debt, 2004-11 government debt; they are also producing (in percent of GDP) their own debt sustainability analyses; and a 70 60 National Debt Committee has been 50 instituted. However, the legal framework 40 30 governing debt management could be 20 10 clarified, institutional responsibilities 0 2004 2005 2006 2007 2008 2009 2010 2011 centralized, and capacity strengthened to Sources: Cameroonian authorities and staff calculations carry out more sophisticated negotiations Tapping the emerging domestic capital and analyses on risks and costs, as well as market could, however, also be a source of making the National Debt Committee fully vulnerability: the 2012 Budget relies on operational. further debt financing amounting to CFAF The composition of public spending could 250 billion. In this regard, efforts to create a also be examined to enhance its efficiency. liquid secondary market for government In this regard, the increasingly significant bonds would help sustain investors’ interest burden represented by subsidies, in future bond issues. Improvements in fiscal particularly fuel subsidies, is a source of January 2012, Issue No. 3/ Page | 14 concern (Box 4). The costs in terms of GDP 20 percent of the population). Measures related to the decision to freeze retail fuel that instead scale up existing transfer prices are the highest in the region, programs and develop effective social benefitting mostly the richest segment of protections, while achieving the same the population (the fifth quintile: the richest objectives, would be more cost-effective. Box 4: Cost of Fuel Subsidies SONARA, the national oil refinery, has been Cost of fuel subsidies, 2008-11 (in percent of GDP) benefitting from assistance to compensate it for 3 its revenue shortfalls stemming from the 2.5 government’s policy to freeze retail prices of 2 1.5 petroleum products (diesel, gasoline, kerosene, 1 and LPG). Subsidies for energy products are 0.5 provided both: i) directly to SONARA through 0 direct budgetary transfers from the treasury; 2008 2009 2010 2011 and ii) indirectly through tax reductions on the Sources : CEMAC member countries and IMF staff estimations prices of energy products. Budgetary allocations have been insufficient to Cost of fuel subsidies: international comparison, 2011 (in percent of GDP) cover the actual costs of freezing petroleum 3 prices. These costs are calculated as the 2.5 2 difference between the retail price applied and 1.5 the price that would be needed for SONARA to 1 generate a guaranteed margin on its domestic 0.5 0 operations. These amounts have substantially Cameroon Congo Chad Equatorial CAR Gabon Guinea increased, reaching an estimated 2.6 percent of Sources : CEMAC member countries and IMF staff estimations GDP in 2011 (14 percent of the budget), the highest level in the region. Distribution of fuel subsidies by income group and product Furthermore, the freeze on petroleum products (in percent of total fuel subsidy) 100 has mostly benefitted the richest segment of LNG Kerosene 80 the population. About 80 percent of the Diesel Gasoline 60 benefits from fixed fuel prices are estimated to accrue to the top income quintile because 40 richer households consume more petroleum 20 products than do poorer households, especially 0 Q1 Q2 Q3 Q4 Q5 diesel and gasoline. Source: World Bank January 2012, Issue No. 3/ Page | 15 Employment in Cameroon As in other parts of Africa, the formal When discussing labor supply, skills are manufacturing and service sectors have the important. Significant among demand-side potential to be an important source of interventions are those that reduce the employment, but because they hire such a costs of production, such as infrastructure small share of the labor force, even with investments. very high growth rates, they will not be able This chapter intends to provide a snapshot to absorb more than a fraction of the new of the employment situation in Cameroon entrants. Most Cameroonians are thus and of the possible hurdles for greater labor likely to continue working in low- productivity. It aims to present a number of productivity agriculture and non-agriculture ideas that warrant further reflection. informal sector activities over the next two decades. On the one hand, a large proportion of the workforce is not considered to master basic This observation calls for greater emphasis skills such as literacy and numeracy when on measures to increase the productivity, starting work. This is the case in spite of and hence the earnings, of those employed recent increases in access to education in the informal sector, while at the same rates. This represents a major impediment time working to create more jobs in the for their insertion in the labor market and, formal sector. Like most Africans, more importantly, for their ability to absorb Cameroonians already have jobs: they post-school training either on or off the job, cannot afford otherwise. The problem is and to adapt to changing job requirements. that these jobs have extremely low On the other hand, while Cameroon has productivity and generate low earnings. improved its ranking in the 2012 Doing Labor productivity enhancement can come Business, moving up seven places compared from two sets of interventions: (i) those that with 2011, poor infrastructure and an improve the supply of labor; and (ii) those unfavorable investment climate continue to that stimulate the demand for goods and hamper economic activity. services produced, and hence for labor. January 2012, Issue No. 3/ Page | 16 Where are the jobs? The informal sector – agriculture and non Figure 9: Employment by sector and location, 2010 (in percent of employment) agriculture – remains the main provider of 80 employment in Cameroon, with more than 70 Urban 60 Rural 90 percent of the overall labor force (Chart 50 40 1). Informality is predominant in urban as 30 20 well as rural areas and represents the main 10 0 employer for men as well as for women Public Private Informal Informal non agriculture agriculture Source: National Institute of Statistics, EESI 2, 2010 (Figures 9 and 10). Overall the formal private sector represents less than 4 percent Figure 10: Employment by sector and gender, 2010 of the labor force, employing essentially (in percent of employment) men in urban areas. Because it may be 70 60 Men easier to enter, most young people find jobs 50 Women 40 in the informal sector (Figure 11). In 2010, 30 20 about 92 percent of young people employed 10 were in the informal sector. 0 Public Private Informal Informal non agriculture agriculture Source: National Institute of Statistics, EESI 2, 2010 Chart 1: Employment structure, 2010 Figure 11: Youth employment by sector, 2010 (in percent of 15-34 employment) 6% 4% 50 45 Public 40 35 30 Formal private 25 20 53% 15 37% Informal non 10 agriculture 5 0 Informal Public Private Informal Informal non agriculture agriculture agriculture Source: National Institute of Statistics, EESI 2, 2010 Source: National Institute of Statistics, EESI 2, 2010 Unemployment in Cameroon, as strictly defined by the ILO, is estimated at only 3.8 percent in 2010.4 The typical unemployed is 4 According to the ILO, the unemployed population is made up of people who are available to, but did not, supply labor for the production of goods and services. They would have accepted a suitable job or started an enterprise during the reference period if January 2012, Issue No. 3/ Page | 17 a young, well-educated female, living in an Figure 12: Underemployment by category and gender (in percent), 2010 urban area and seeking her first job (Box 5). 90 80 Probably because she is financially relatively 70 60 comfortable, she can afford looking for a job 50 40 for more than three years. On average, the 30 20 unemployed tend to have higher incomes 10 0 than households occupied in the informal Total Urban Rural Women Men Source: National Institute of Statistics, EESI 2, 2010 agriculture sector (CFAF 64’000 compared to Figure 13: Underemployment by education level CFAF 40’000). The income enjoyed by the (in percent), 2010 unemployed is believed to come from 90 85 80 members of the extended family or from 75 70 scholarships. 65 60 55 50 While unemployment in Cameroon is 45 40 relatively low, underemployment concerns No education Primary Secondary Higher education more than 70 percent of the work force.5 Source: National Institute of Statistics, EESI 2, 2010 Similarly to the average unemployed, the Figure 14: Underemployment by sector (in percent), 2010 average underemployed is a female, but 90 80 living in a rural area with a much lower 70 60 education level (Figures 12 and 13). 50 40 Underemployment is mostly associated with 30 20 the informal agriculture and non-agriculture 10 0 Total Public Private Informal Informal non sectors (Figure 14). agriculture agriculture Source: National Institute of Statistics, EESI 2, 2010 Looking ahead, family farms and informal non-farm enterprises will remain the main employers for at least the next two decades. Formal employment has represented less than 10 percent of the labor force since 1990s. Because of this very low share, even the opportunity arose, and had actively looked for ways to obtain a rapid growth rates will not allow to keep job or start an enterprise in the near past. 5 Underemployment covers those who are unemployed and those pace with the number of new entrants in who are employed but who either work less than 40 hours a week or earn less than the minimum hourly wage. January 2012, Issue No. 3/ Page | 18 the labor force. Even under the ambitious Figure 15: Informal employment, 2011-20 (in percent of the labor force) Vision 2035, the share of informal 91 employment will decline only slowly (Figure 90 89 15). Improving labor productivity and 88 87 earnings of those employed, in addition to 86 85 creating new jobs, is therefore key in making 84 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Cameroon’s economic growth more Vision 2035 Baseline Sources: Cameroonian authorities and staff calculations inclusive. How to unlock the labor force? Education Low learning achievements in basic Education plays a crucial role in increasing education imply that most of the population labor productivity. The main pillars of a does not master basic skills. Despite notable performing education and training system progress achieved over the past decade in include: i) a solid basic education providing access to education and literacy, education people with a set of basic skills, including achievements in Cameroon still lags those literacy and numeracy, as well as soft skills observed in countries at similar income to easily adapt to changing labor market levels (Box 6). Less than half of the school conditions; ii) quality technical and age population completed primary vocational education, providing practical education in 2009 and school life skills that are directly applicable on the expectancy only increased by two years over labor market; iii) a balanced higher the past twenty years. The main reason for education system which offers programs at dropping out of school seems to be the lack various levels (including short post- of finance, surprising since public primary secondary programs), directly linked to the education is officially free. needs of the labor market, and facilitating As a result, a large proportion of the youth the absorption of new research and leaves school without mastering basic skills technology. The education system in such as literacy and numeracy. This Cameroon seems so far, however, to have represents a major impediment to failed to deliver these services. productivity in the sectors where it enters, as well as for its ability to adapt to changing January 2012, Issue No. 3/ Page | 19 Box 5: Some Unemployment Characteristics (in percent unless otherwise stated) The unemployment rate is highest for urban women… …especially in the Center and the South. 12 20 Men 10 15 8 Women 10 6 4 5 2 0 East North Yaounde Center Littoral West Douala Adamaoua South West South Far North North West 0 Country Urbanmen Urban Ruralmen Rural average women women Unemployed are mainly young… … and well-educated… 12 Highereducation 10 Urban Uppersecondary 8 Rural Women 6 Lowersecondary Men 4 Primary 2 Noeducation 0 10-14 15-34 35-64 65 + 0 5 10 15 20 25 …looking a long time for their first job… …while still receiving an income. 70 Urban Average income per household, 60 Rural by type of employment 196.6 193.1 50 (CFAF thousands) Total 40 30 93.1 20 64 39.9 10 0 First-timejobseekers (in Averagedurationof Public Formal Informal Unemployed Informal percent) unemployment(months) private non agriculture agriculture Sources: INS (EESI 2) and staff calculations January 2012, Issue No. 3/ Page | 20 Box 6 : Some Characteristics on Education (in percent unless otherwise stated) Although progress has been achieved in education… 20 25 Change in school attendance Change in adult literacy, 15 20 2001-2007 (ages 6-14), 2001-2007 15 10 10 5 5 0 0 -5 -5 -10 East Yaoundé Center North West Littoral Douala South Adamaoua South West Far North North West East Yaoundé North Center West Littoral South Douala Adamaoua South West Far North North West Sources: INS (ECAM 2&3) and staff calculations Sources: INS (ECAM 2&3) and staff calculations …Cameroon still lags behind comparable countries. Primary school completion rate Adult literacy Sub-SaharanAfrica Cameroon Sub-SaharanAfrica Cameroon World Lowermiddleincome Lowermiddleincome World 0 20 40 60 80 100 0 20 40 60 80 100 Source: World Bank (World Development Indicators, 2009) Source: World Bank (World Development Indicators, 2009) School attendance has improved little… … finance being the main reason for drop-outs. 16 Lack of finance (Expected years) Tunisia 14 Mauritius Pregnancy/marriage Malaysia 12 Work China Madagascar Girls 10 Cameroon Distance 8 Boys Mali Failure 6 Illness 4 Other 2 1991 2008 0 20 40 60 Source: UNESCO Institute of Statistics Source: INS (EESI 2) January 2012, Issue No. 3/ Page | 21 job requirements. Moreover, national Figure 16: Net school attendance, 2010 (in percent) averages hide wide location and gender 100 differences. While school attendance is high 90 80 in urban areas and shows little gender 70 disparity, it is particularly low for girls in 60 50 rural areas (Figure 16). Completion rates are 40 particularly low in the Adamawa, North and Country average Urban boys Urban girls Rural boys Rural girls Source: INS, EESI 2010 Far North (Figure 17). As a result, education achievements such as literacy are particularly low for women in these regions Figure 17: Completion rates by region, 2010 (in percent) (Figures 18 and 19). 40 35 30 25 20 15 10 5 0 Source: INS, EESI 2010 Figure 18: Literacy rates, 2005 (in percent of population age 15-34) 100 90 80 70 60 50 40 Country Urban men Urban Rural men Rural women average women Photo credit: Raju Jan Singh Source: Cameroonian authorities and staff calculations January 2012, Issue No. 3/ Page | 22 Figure 19: Literacy rates in rural areas by gender, 2005 Figure 21: Gross enrolment rates in upper secondary, 2008 (in percent of population aged 15-34) (in percent) 100 Jordan 90 Kyrgyzstan Boys 80 Thailand Girls 70 Tajikistan 60 Gambia 50 Swaziland 40 Kenya 30 Morocco 20 Lao PDR 10 Bangladesh Ghana Liberia D.R. Congo Togo Source: Cameroonian authorities and staff calculations Cameroon Mali Eritrea Enrolment at secondary levels is low 0 20 40 60 80 Source UNESCO Institute of Statistics compared with peer countries. In 2008, the gross enrolment ratio in Cameroon was at Vocational training is not closely linked to similar levels than in Eritrea, Guinea, Liberia, the needs of the labor market. Vocational and the Democratic Republic of Congo, but institutions enroll only a small number of well below Ghana, Kenya, or South Africa students and focus on a few sectors such as (Figures 20 and 21). Secondary education is construction (representing about 25 percent divided into general and technical streams, of total enrolment) and leaving other with technical secondary education making important areas of the economy, such as up for only a small share of total enrolment tourism (three percent of enrollees) and (less than 20 percent in 2008). agriculture (less than one percent). Apprenticeships, which could be an efficient Figure 20: Gross enrolment rates in lower secondary, 2008 (in percent) way to deliver training closely aligned to private sector needs, can only take place Jordan Tajikistan Kenya informally in the absence of a legal Kyrgyzstan Thailand framework that would allow private Ghana Morocco Swaziland companies to partner with training centers. Bangladesh Gambia As a result, most youth do not seem to Togo Lao PDR D.R. Congo receive any professional training (especially Cameroon Eritrea in the Northern regions) and when they do, Mali Liberia they tend to get it mostly on the job with 0 20 40 60 80 100 Source: UNESCO Institute of Statistics the exception of the South-West region January 2012, Issue No. 3/ Page | 23 where vocational training is more with Cameroon’s plan to invest in a number widespread (Figures 22 and 23). of large projects in energy and transport (Chart 2). Health attracted a similar low Figure 22: Professional training by region, 2010 (in percent of population 10 +) share of students. 60 50 Figure 24: Enrolments in higher education, 2005-10 40 (in thousands) 30 250 20 Public 10 200 0 Private 150 100 Source: National Institute of Statistics, EESI 2, 2010 50 0 Figure 23: Professional training by source, 2010 2005 2006 2007 2008 2009 2010 (in percent of trained people 10 +) Source: INS, EESI 2005 80 70 On the job Chart 2: Enrolment by program in higher education 60 Vocational (excluding teacher training), 2010 50 40 30 2010 Education Health Sciences 20 Engineenering 2% 1% Human 10 5% Sciences Sciences 0 20% 22% Source: National Institute of Statistics, EESI 2, 2010 Economics Turning to higher education, while and Law Management 24% enrolment has significantly increased, the 26% Sources: Cameroonian authorities and staff calculations proposed programs may not meet the needs of the job market. Enrolments have more Investment climate than doubled since 2005, mainly in public tertiary education institutions, following the The supply of appropriately skilled labor is, creation of new universities (Figure 24). The however, not the entire story. A limited allocation of students by discipline could supply of jobs seems also to be at fault. Poor suggest, however, that there may be a gap infrastructure and an unfavorable with the needs of Cameroon’s economy. investment climate continue to hamper Excluding teacher training, engineering for economic activity and make it difficult to instance represented only five percent of reach the growth rates needed to reduce total enrolments in 2010, a share at odds poverty in a sustainable manner. January 2012, Issue No. 3/ Page | 24 As noted in previous issues, Cameroon is Cameroon’s investment climate remains endowed with significant natural resources, overall unfavorable to the development of including oil, high value timber species, and the formal sector. Initiatives such as the agricultural products (coffee, cotton, cocoa). Cameroon Business Forum, bringing Untapped resources include natural gas, together private and public partners with a bauxite, diamonds, gold, iron, and cobalt. view to identify and deal with the most Nonetheless, economic growth has been binding constraints, should be encouraged lagging behind the average growth rate for and strengthened. sub-Saharan countries. The poor state of infrastructure is a key bottleneck to growth Cameroon has improved its ranking in the in African countries and Cameroon is no 2012 Doing Business, moving up seven exception in this regard.6 places compared with 2011. The country has made particular progress in making it easier But would tackling these infrastructure to start up a business. The time and number bottlenecks be enough to create the needed of procedures, as well as the cost, implied jobs and increase labor productivity? for this transaction have been steadily Further analysis is probably needed to declining over recent years (Figure 25). understand better what holds back job Figure 25: Starting a business, 2007-12 creation in the formal sector and greater (number of procedures) labor productivity in the agriculture and 12 10 non-agriculture informal sectors. The 8 binding constraints would probably be 6 Cameroon 4 different from one sector to another, as Sub-Saharan Africa (average) 2 would the appropriate policy measures to 0 2007 2008 2009 2010 2011 2012 alleviate them. The remainder of this Source: World Bank (Doing Business database) chapter sketches some areas for further Progress in improving the investment investigation. climate has, nevertheless, been slow and starting a business remains comparatively costly, taking 15 days and 45.5 percent of 6 See Cameroon Economic Update, January 2011, for the average income. Publishing the articles a more complete discussion of infrastructure in of incorporation electronically as in Senegal Cameroon. January 2012, Issue No. 3/ Page | 25 and Cap Verde could reduce this time by Figure 26: Cost of enforcing contracts (number of procedures) three days. Streamlining the process at the Sub-Saharan Africa (average) 39 one-stop shop would lead to further Mali 36 Ghana 36 Madagascar 38 reductions. Gabon 38 Equatorial Guinea 39 Nigeria 40 Kenya Furthermore, the country’s overall Cameroon 40 43 Rep. of Congo 44 institutional environment remains weak and Angola 46 Source: Doing Business Index 2012 regulatory requirements cumbersome. Figure 27: Cost of enforcing contracts Contract enforcement, for instance, is still (in days) problematic with numerous lengthy and Sub-Saharan Africa (average) 655 Equatorial Guinea 405 costly procedures (Figures 26-28). While Nigeria 457 Kenya 465 Ghana improving contract enforcement is a Rep. of Congo 487 560 Mali 620 medium-term endeavor, entailing for Cameroon 800 Madagascar 871 instance specialized commercial courts and Angola Gabon 1011 1070 Source: Doing Business Index 2012 specially trained judges, a more short-term Figure 28: Cost of enforcing contracts solution could be to strengthen the Center (in percent of claim) for Arbitration and Mediation as an Sub-Saharan Africa (average) 50 Equatorial Guinea alternative mechanism to resolve Ghana 22.6 23 Nigeria 32 commercial disputes. Gabon 34.3 Madagascar 42.4 Angola 44.4 Due to its strategic location neighboring Cameroon Kenya 46.6 47.2 Mali 52 Nigeria and Gabon, and potential crossing Rep. of Congo 53.2 Source: Doing Business Index 2012 point to the landlocked countries of Central Africa (Chad and the CAR), Cameroon is a In 2010, the Logistics Performance Index – natural hub for the region with the port of reflecting the operators’ perceptions of the Douala as the main entrance. However, in logistic “friendliness� of countries – ranked addition to poor infrastructure quality, Cameroon 105 out of 155 countries. The significant deficiencies in logistics, such as quality of trade and transport infrastructure cartels, prevent Cameroon from playing this (e.g. ports, railroads, roads, information role effectively, inflating the costs and technology) and the efficiency of the lengthening delays for cargo bound inland to clearance process (i.e. speed, simplicity and CAR and Chad. predictability of formalities) by border January 2012, Issue No. 3/ Page | 26 control agencies, are the dimensions that infrastructure (marketing and transport); (iii) received the lowest scores. The number of weak linkages to markets and market documents required to import or export information; (iv) limited access to credit; goods, for instance, is far higher in and (v) weak producer organizations and Cameroon than on average in sub-Saharan low productivity techniques. Studies on Africa and illustrates these administrative Western and Central Africa tend to show, hurdles (Figures 29 and 30). for instance, that up to 50 percent of crops could be lost because of poor roads, Figure 29: Export costs (number of documents) hampering their timely transport to Sub-Saharan Africa (average) 8 consumers.7 Preliminary estimations on the Madagascar 4 Mali 6 Batibo-Ekok corridor would confirm that up Ghana 6 Gabon 7 Equatorial Guinea 7 to 40 percent of production could be lost Kenya 8 Nigeria 10 because of lack of appropriate roads and Rep. of Congo 11 Cameroon Angola 11 11 transport services.8 Source: Doing Business Index 2012 Figure 30: Import costs (number of documents) Sub-Saharan Africa (average) 8 Gabon 2 Kenya 7 Ghana 7 Equatorial Guinea 7 Angola 8 Nigeria 9 Mali 9 Madagascar 9 Rep. of Congo 10 Cameroon 12 Source: Doing Business Index 2012 Turning to agriculture, recent data are lacking for a proper discussion on policies to improve competitiveness and labor productivity in this sector. Growth in agriculture is nevertheless thought to be hampered by among other factors: (i) Photo credit: Raju Jan Singh limited access to improved inputs (such as high yielding improved varieties, certified 7 seeds, and fertilizers); (ii) poor rural AFD, CIRAD, IFAD (2010). 8 Mbida (2010). January 2012, Issue No. 3/ Page | 27 Early evidence from the government’s wage employment, so national governments ongoing efforts would suggest that the hesitate to include them in their strategies. growth potential of the agriculture sector When governments do want to support this could be unlocked – and labor productivity sector, however, most programs – not only improved – if the above-mentioned in African countries, but around the world – structural constraints and weaknesses were have not shown to be very effective. Given addressed. As mentioned earlier in this this poor record, a better understanding of Update, the government has been actively this sector and careful experimentation supporting the dissemination of improved would be called for before general advice seeds, equipment, and training, with a and lessons be drawn. measurable pick-up in agriculture production. Similarly for non-agriculture informal enterprises, further analysis would be needed to understand better their constraints. Recognizing that informal is normal would be the first step in developing effective policies and programs to help households create sustainable enterprises. Often the main obstacles to recognizing this sector are political and social. Informal enterprises are not necessarily attractive and tend to be chased out of the business areas in capital cities. They have been criticized in some development circles for not offering the income and benefits of Photo credit: Raju Jan Singh January 2012, Issue No. 3/ Page | 28 REFERENCES AFD, CIRAD, IFAD (2010), Cadre Opérationnel d’Intervention pour un Développement des Cultures Vivrières Pluviales en Afrique de l’Ouest et du Centre Aizenman, J. and J. Lee (2005), “International Reserves: Precautionary versus Mercantilist Views, Theory and Evidence�. NBER Working Papers No. 11366, National Bureau of Economic Research. Cambridge, MA Ateba A. (2010), L’Impact de la Hausse des Prix et de la Crise Financière, mimeo, University of Douala Calderon, C. (2009), “Infrastructure and Growth in Africa�, Policy Research Working Paper 4914, World Bank, Washington DC Jeanne, O. and R. Rancière (2006), “The Optimal Level of International Reserves for Emerging Market Countries: Formulas and Applications�, IMF Working Paper, 06/229. Washington, DC Mbida, M. (2010), Etudes de Suivi et d’Evaluation des Impacts du Projet d’Aménagement des Tronçons Routiers Batibo-Numba et Mamfe-Ekok sur le Développement et la Réduction de la Pauvreté : Rapport Préliminaire, University of Dschang Tereanu, E. (2010), “International Reserve Adequacy in the Gambia�, IMF Working Paper, 10/215, Washington, DC Valencia, F. (2010), “Precautionary Reserves: An Application to Bolivia�, IMF Working Paper, 10/54. Washington, DC January 2012, Issue No. 3/ Page | 29