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Encouraging entrepreneurship in Cameroon requires associated changes in policy to support it.

Encouraging entrepreneurship in Cameroon requires associated changes in policy to support it.

Each year Cameroon churns out 500,000 university graduates and with only 3000 posts available to work for the government, according to a report by Al Jazeera titled Studying to be Jobless’ (translated from French - Étudier Pour Chômer) of 2020. It becomes clear from the numbers employed by the government and the few hundreds absorbed in the private sector, how many thousands are relegated to the informal sector or joblessness. As a result, many graduates either travel abroad or fall back on the hustling economy. According to a demographic study published by Index Mundi, youths under the age of 25yrs constitute more than 60% of Cameroon’s active population.

With the skills market constantly changing, the youth barely finish learning one skill in school by the time they graduate when the job market requirements have changed. Gaining employment in urban areas in Cameroon is a major challenge that young people in urban areas in the country are encountering. Youths have needs and aspirations, they crave good jobs as well as aspire to live a good life. But for most of them, unemployment has led to poverty, particularly due to limited opportunities in the job market.

Unemployment and underemployment are as high as 40% for the youth. This vulnerable population segment is a call for concern as students keep pouring out of universities and higher Institutions into the streets. This active population is supposed to constitute a strong workforce that benefits the country’s economy, but high crime waves, massive migration to the Middle East and illegal migration to Europe, North America, and other parts of the world, characterize the state of Cameroon and most African countries.

This is the reason why entrepreneurship is particularly important and needs to be deployed in this context. Cameroon needs a generation of its citizens, a swathe of who are under 25yrs old to understand entrepreneurship, and its hardships and work daily to provide solutions that will contribute to the development of Cameroon.

A Poverty Reduction Strategy Paper (PRSP) report published in 2003 by the Cameroonian government identified youth unemployment to be a major problem in the country. Cameroon has a relatively youthful population with 40 per cent of its population being below 15 and two-thirds being under 30 years and residing in urban areas according to statistics from UNICEF.

According to this PRSP report, the average age of the country’s population is 22 years. These youth could potentially be an asset, but this increases pressure on the labour market, infrastructure, and social services. With a large proportion of the population being youthful, there is an increase in labour supply and demand for job opportunities. Unfortunately, the demand for jobs surpasses the supply. A World Bank survey conducted in 2001 on Cameroon about youth employment, revealed that 42.7 per cent of youths compared to 80.9 per cent of adults in Cameroon are employed (World Bank 2008/09:5).

As a result, the Cameroon economy faces major structural challenges, according to a 2018 report by the Nkafu Policy Institute. The report also notes that the poverty level is alarming as less than 17.65% of Cameroonian adults earn more than 200,000 FCFA (i.e. 400 US dollars approximately) and 41.58% of households spent more than 40% of their income on necessities like food, clothing, and housing.

 

Using Entrepreneurship as a springboard for innovation and job creation.

 

The government is the largest employer in the country. The second biggest employer is a parastatal company, the Cameroon Development Corporation (CDC). Since the Anglophone crisis started in 2016, 20,000 jobs have been lost. All these indicators point to an economy with a weak pulse.  

The government’s wage bill for 2018 was an alarming 1058 billion FCFA in comparison to the formal sector enterprises wage bill estimated at 996 billion FCFA according to the National Institute of Statistics. Any government with a large direct workforce without the potential for increased production capacity is forced to increase taxes or borrow more to finance its expenditures. This affects the economy adversely in the long run.

This is where entrepreneurs are needed to create employment. Entrepreneurs leverage new ideas or innovations to start new businesses, thereby creating jobs. With many businesses around, market competition can be reinforced, productivity increased with the correlated improvement in quality of products and reduced prices.

Cameroon has not been doing too badly in the entrepreneurship space, as in 2015, the country was listed among the 9 countries in the world with the most self-employed population by the World Economic Forum. In addition, a 2016 survey from the National Institute of Statistics (Cameroon) revealed that the number of ventures listed in 2016 in the country was superior to that of 2009 (i.e., 209,482 companies listed in 2016 against 93,969 units in 2009 representing an increase of 123%).

There is a start-up’ boom of sorts, with innovative or sustainable job creation which can be put down to simply the absence of other work options. Many businesses are started by people to escape unemployment and poverty. About 80% of businesses die before their 5 anniversary. Entrepreneurs are unable to fully establish and grow their enterprises. This situation certainly reveals the necessity of adopting a new system.

Better taxation conduct can save businesses in Cameroon.

Taxes in Cameroon are a huge deterrent to entrepreneurship development according to the General Enterprise Census in 2016. Entrepreneurs pay corporate tax of 30% plus 10% additional municipal taxes meaning 40% in total, and consumers pay the value-added tax of 19.25%. Put together, these rates are exceedingly high compared to those of next-door neighbour Nigeria. In Nigeria, the corporate tax is 30% and the value-added tax is 5%. Because of these structural differences, it will be difficult for Cameroonian entrepreneurs to compete with their colleagues in Nigeria.

As a business in Cameroon, should you land a contract, it will need to be registered with the tax office. Before a contract is considered valid after you win it, and before you can bill and start collecting on it, you must pay 2-5 per cent of the contract’s value upfront before it can be registered.

However, this article by Nkafu Policy Institute’s Ulrich D’Pola of May 2018, differs in opinion as regards taxes being the major constraint on small and medium-sized enterprises. He rather argues that informal competitors, access to finance and electricity, including corruption remain the top constraints. However, it should be noted that corruption is embodied in taxes which is borne by formal businesses who get more tax visits than is warranted from tax officials. This forces many businesses to operate in the shadow economy (informal) reducing the tax base further. Cameroon like most developing countries is grappling with how to marry its formal and informal sectors to work in a competitive global space.

Most entrepreneurs lack access to finance at an affordable cost as the collateral demanded by the banks is beyond reach for most. Entrepreneurs consider access to credit as the third obstacle to the development of their activities according to the General Enterprise Census in 2016.

For the government to encourage businesses to thrive in the small and medium enterprises category, they will have to adopt policies that put a reduction in taxes. This will encourage private savings, private consumption, and private investments. Rwanda, for example, reduced its corporate tax rate by 5% from 35% in 2006 to 30% in 2007. This tax rate reduction has had a direct consequence in sustaining the economic boom of the last decade helping to make the country a major destination for foreign direct investments in Africa.

A 2009 General Enterprises Survey conducted by Cameroon’s National Institute of Statistics though dated, showed that the informal sector employs approximately 90% of the total active population and constitutes 89% of small enterprises. Very little has changed in over two decades since when this survey was conducted as most of the employment in the country remains in the informal sector. Most businesses in the informal economy need incentives to go formal by the government using the right fiscal policies (use of government revenue collection and expenditure to influence the country's economy). In conclusion, government policies are a necessary salve to promote economic freedom and growth. Entrepreneurship cannot propel Cameroon’s economy to rapid growth without sustained policies to transform the economy and create more jobs and opportunities.

By Pamela Bongkiyung

Communications & Corporate Strategy 

BBIncubator

Published 1 year, 4 months ago

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