Cameroon is losing millions a year due to tax exemptions

Cameroon is heavily dependent on its extractive industries, and places a particular emphasis on its oil sector. From 2007 to 2009, oil revenues represented more than 25% of its national budget. Even during the 2008 financial crisis, Cameroon kept its national oil revenue average going strong.

Over the last five years, Cameroon has exported around 42.29% of its oil because it recognises the importance of its oil sector on a global scale. It is therefore clear that revenues derived from natural resource extraction are crucial for Cameroonian citizens.

The Cameroon Constitution ascertains that it is determined to exploit its natural resources “in order to ensure the wellbeing of all by raising the standard of living of the populations without any discrimination”. Because all mineral resources belong to the Cameroonian State, there is plenty of opportunity to make that vision a reality.

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Source : Cameroon Statistical Yearbook, 2015 edition

But instead, tax loss in Cameroon amounts to around 5850 billion CFA franc. This is equivalent to 1.5 times the 2016 national budget, 24 times the average budget of the public health ministry or 15 times the education budget, according to a new study by Publish What You Pay (PWYP) Cameroon in light of the case study of the Mbalam Iron Project.

Prospecting, exploration and mining activities for any mineral deposit in Cameroon are regulated by permits. When a company wants to extract resources in Cameroon, it needs to enter a mining agreement/convention with the State. The Cameroonian State collects a significant amount of revenue from mining companies by fixed duties, proportional royalties (mining royalty and superficial royalties) as well as ordinary taxes. This income is paid into the public treasury, and if correctly used, will improve the economy of the country, region, council and local communities around the project.

In accordance with Article 137 of the Decree implementing the Mining Code (2014), 10% of revenues from extraction tax goes to local mining communities and 15% goes to their local councils. Yet in light of the marble and Figuil limestone projects, it appears that municipalities and communities bordering mining sites do not receive their share of mining royalties.

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Source : Ministry of Finance, (2015)

However, in the last few years, the government has been making a number of amendments to its legislation as it has been keen to encourage foreign investments in the country. Law No. 2013/004 of 18 April 2013 sets incentives for private investment in the Republic of Cameroon. This law complements the Mining Code which was amended in 2001 in the context of attracting extractives investment.

The PWYP Coalition in Cameroon and other civil society partners in the country have found that a large amount of companies have been benefiting from these amendments.
These amendments have lead to a lack of oversight, which in turn has led to loss of tax revenues and an increase in tax exemptions.

With the case study of the diamond exploitation project of Mobilong, civil society members of PWYP’s Coalition in Cameroon have shown that there is a lack of monitoring of mining projects in Cameroon. Without monitoring production it is difficult to know if fiscal revenues are being used in accordance with Cameroonian mining laws.

With the current judicial set-up of the country and companies’ less complicated rights to operate, the Constitution’s goal of ensuring that all Cameroonian citizens benefit from the country’s natural resources will be hard to reach.

Real political will is needed to bring in financial investments from extractive companies. Effective monitoring should help ensure that contractual obligations between mining companies and the government of Cameroon are respected. These contracts must also allow the government to capture maximum benefits from extractive activities in the country.

There is an urgent need for the Cameroonian Government to review its tax exemption policy. With annual petroleum production consistently falling since 1985 as existing reserves are depleted, there is not much time left for the country to harness its potential oil wealth.


Background
Key resources: oil, gas, mineral, quarry, marble, limestone, bauxite, aluminium and iron ore.

Cameroon’s oil sector is now “mature”, consequently oil production is declining. In order to encourage foreign investments, Cameroon has recently made a number of amendments to its legislation, notably by the law n°2010/011 on mining activities dated July 29, 2010 (the “2010 Mining Law”). This law is aimed at improving the existing mining code dated April 16, 2001 (the “2001 Mining Code”).

As is usual in other African jurisdictions, a mining convention must be entered between the relevant mining companies and the State in order to define the rights and obligations of each party under the relevant mining title.

EITI and mining governance in Cameroon: between rhetoric and reality

The Extractive Industries Transparency Initiative (EITI) standard among other things prescribes reporting of sub national revenue transfers and social expenditures of extractive companies in
conciliation reports. This study is based on the findings of research conducted by RELUFA on sub national revenue transfers and social expenditures in Cameroon. The exploitation of some natural resources in Cameroon, notably the forest and solid minerals, entitles councils and local communities where the resources are exploited to royalties. Paradoxically, unlike the forest and minerals sector, there are no royalty allocations to councils and local communities hosting oil projects. But despite the legal provision for mineral royalties, the effectiveness of sub national mining royalty transfers to councils and local communities is still shrouded with many inconsistencies. Consequently, since 2011 RELUFA has been interested in exploring the issue of sub national revenue payments and transfers to councils and local
communities in Cameroon.

This study explores the effectiveness of sub national revenue payments and transfers and the social expenditures of companies in the locality of Figuil in the Mayo Louti division of the northern region of Cameroon. Figuil is host to two companies involved in the production of cement and marble. The choice of Figuil was justified as it is the best known town in Cameroon where industrial extraction has been on-going for more than 50 years. Under such circumstances, there is widespread expectation of the social and economic development of Figuil. But the reality is far from it.

In 2011, RELUFA conducted a study whose results were presented in a report titled: Sub National Natural Resource Revenue Management in Cameroon: Forest and Mining Royalties in Yokadouma, East Cameroon. This study drew experience from the forest royalty management and concluded the framework for sub national mining royalty management should be clarified so that the expectations of the local communities for development can be addressed. We can argue that this study contributed to changing public perceptions about the issue of mining royalties. CELPRO, a local civil society organization in Figuil wrote to the minister of finance in 2012 to request clarification on royalties for the council and local communities in Figuil. This made sub national mining royalty payments and transfers a topical issue.

Now that Cameroon has acquired an EITI “compliance country” status at the time a new EITI standard has been approved, RELUFA has opted to deepen the discussion on sub national
revenue payments and transfers and social payments by extractive companies in Cameroon. The aim of this study is to highlight the importance of effective sub national revenue transfers and monitoring of social expenditures of extractive companies. The study explores how sub national transfers and social expenditures can be effectively integrated in the EITI process so 5 Chapter VI. Conclusion and Recommendations
that mining can effectively contribute to local social and economic development.

This report was made possible by the financial support of the Natural Resource Governance Institute (NRGI). We are grateful to Evelyne Tsagué, Francophone Africa Coordinator for the NRGI.

Climate change and the extractive industries – a campaign by PWYP Cameroon

The PWYP coalition in Cameroon is calling for EITI standards to include climate change

By publishing an encyclical on the protection of nature protection, Pope Francis wanted to offer the world a contribution of the Church to solve the ecological crisis that humanity is currently facing. He has invited national Civil Society Organisations involved in the ecological field, such as the PWYP coalition in Cameroon, to be at the forefront of ecological conservation.

Climate change is no longer mere scientific theories: our lifestyles and our daily consumption emit large amounts of greenhouse gas (GHG) emissions. The current climate change is mainly related to the emission of greenhouse gases from human activities. More than 3/4 of these emissions are because of carbon dioxide (CO₂). The consumption of fossil fuels (power generation, vehicle fuel, heating of housing, industry) is, by far, the most incriminating sector. The changing use of lands, including deforestation, comes in second place in terms of responsibility for the increase in global emissions of greenhouse gases. accounting for 17% of global emissions.

Cameroon, like many other developing countries, is particularly vulnerable to the effects and impacts of climate change regardless of the origins of greenhouse gases. We may not be polluting as much as others, but we will probably be more affected than many other countries. And this single perspective must be an urgent inquiry for our country.

The unreliable and changing seasons have had an alarming impact on the periods of agriculture and have created an enormous challenge for the Cameroonian farmer on his/her living conditions.

This is a major challenge of humanity. As the exploitation of natural resources contributes to high levels of emissions: should we necessarily use all the resources at our disposal? Should we not sometimes abstain, especially when the potential benefits may be insignificant compared to the damage that they could contribute to the climate, our lifestyles and our sources of revenue? Moreover, is it not time for the EITI to adopt requirements to monitor climate risk?

It goes without saying that the needs in terms of capacity building of actors responsible for this monitoring will increase. However, through a cost / benefit analysis, there is no need to doubt about the urgency of this. It is also an opportunity to see new players better equipped on the climate risk issue to join the monitoring of the implementation of a new “climate sensitive EITI standard.”

If such requirements were adopted into the EITI standard, it would be a major step forward, in terms of production practice of disclosure by extractive industries, and a move that Publish What You Pay Cameroon fully support. The coalition is now looking at COP 21 scheduled in a few weeks in Paris to see if it keeps its promises.

CSR in Cameroon’s Petroleum Sector: Questions of Power and Responsibility

Oil is central to Cameroon’s export-led economy. In its desire to achieve emerging nation status by 2035, intensified natural resource extraction has been positioned as a means of both poverty reduction and economic growth. Yet, there is a lack of inclusive dialogue to pacify potential opposition which undermines the developmental prospects and voices of Cameroon’s remote southern populations.

Whilst one of the smallest oil producers in Sub Saharan Africa, Cameroon’s oil sector contributes approximately 40% of export earnings and an estimated USD 1.5 billion in annual revenue. Additionally, the government’s oil-take is higher, at 66%, when compared to the 50% average for the majority of Sub Saharan African producing states.

As the final frontiers of non-renewable potential are explored and exploited, areas of unique biodiversity and ecological importance are subject to increasing pressures. The Douala-Edea Wildlife Reserve, located in the country’s resource-rich south and home to the endangered West African manatee and some of West Africa’s largest mangrove networks, is one such area. Established in 1932, and covering some 160,000 hectares, the Wildlife Reserve’s upgrade to National Park, and thus full protected area status, has been delayed since the discovery of oil and natural gas.

Drawing upon seven weeks of Cameroon- and UK-based research, this blog explores the Corporate Social Responsibility (CSR) strategies of two oil companies active within the Douala-Edea Wildlife Reserve and surrounding maritime area and the perspectives of relevant stakeholders.

As if scripted for a Hollywood blockbuster, a convoy of 4x4s could be seen arriving on the single dirt track through the densely forested reserve. Shortly after, a mega-phoned invitation for ‘the people of Mouanko’ to a public meeting was audible. But following initial personal interest in the purportedly benevolent CSR and stakeholder engagement, the underlying reality and vested interests of such dialogue became clear.

The participants of our research revealed that these supposedly public meetings were in reality far from inclusive. Participants highlighted the minimal opportunities for questions to be raised, and the use of technical jargon drawn from environmental impact assessments in an area of known high illiteracy. Participants even acknowledged that the pens provided to the local school, beds to the hospital and financial donations to the local chief were in reality tools to ‘shut us up.’

One participant, during a tour of the local area, highlighted a derelict school funded by active oil companies but constructed in an area devoid of any potential staff, running water or electricity.

Furthermore, the community showed a deep dependence for the active oil companies to provide a source of employment and broader development. Yet, this in turn served to marginalise debates of government-level solutions, with the business-society relations thus further disengaging the local populations from the Cameroonian state.

It remains questionable whether the perceived impacts of stakeholder engagement representing a medium of control and pacification is inextricably connected to the Cameroonian state’s post-independence history of covert repression.

The significant resources and expertise held within private sector enterprises is undeniable. Yet, for the mutual benefits of oil companies, local populations and areas of ecological value within the global South, cooperative engagement and collaboratively discussed CSR strategies are required. Although, perhaps that is all too much to ask for.

Cameroon

PWYP Cameroon was launched in August 2005 by 10 organisations and has grown to include new members from across the country. Much of the coalition’s work is focused on EITI implementation, including projects to make the EITI more accessible to local communities, a crucial step in ensuring that transparency translates into accountability.

The coalition is leading a series of actions to improve the legal and regulatory framework for the management of extractive resources, but also encourages community participation in the monitoring of extractive activities. It also works with journalists to increase their understanding of extractive issues, so that they can report on them more accurately and frequently. The coalition raises awareness among the country’s youth of the importance of good governance in the extractive industries, and monitors subnational payments involving extractive revenues.

Cyrille Tipane

For me transparency isn’t just a job or a value, it is a way a of life.

One of the things that motivates me in my work, is that in my environment, transparency isn’t an issue people talk about much. They ask themselves, ‘What’s transparency in the extractive industry? What’s the extractive industry?’ This makes me want to communicate with people who are interested in these issues, as well as with those who are more reluctant to discuss transparency. We live near mining sites; we see extractive activities every day. I like to motivate those around me to become interested in this question, to find out more about PWYP as a coalition and as a campaign and all the issues surrounding it. As a young person and as a member of a large family these can also be challenging moments.