Cameroon Grants Fiscal Incentives to Banana Producers in the 2022 Finance Law to Revive its Weakened Banana Sector

By Barrister Jacob A. Akuo, Founding Partner,

Email: jacobakuo@dayspringlaw.com

Cameroon is an incredibly blessed and rich country with arable soils to grow all species of tropical fruits. These include bananas which are a relatively cheap and ubiquitous staple in Cameroon. Bananas are not only consumed by Cameroonians as a fruit when ripe but are also cooked into various types of delicacies when unripe or semi-ripe, the most renowned of which is the “banane malaxée” (a specialty of the Bamiléké ethnic group).

On the other hand, bananas are a major part of the agricultural production that makes up almost 30 percent of the gross domestic product (GDP) of Cameroon. As a matter of fact, bananas are Cameroon’s third largest export product after oil, which accounts for more than 40% of the country’s total exports, and timber or sawn timber, which accounts for about 15% of total exports.  An overwhelming majority of bananas produced in Cameroon are destined for countries in Europe (the largest export market of Cameroon for agricultural products), North America and Asia. For a long time, Cameroon had always enjoyed the leadership position in the production and exportation of bananas in Africa but got upstaged by Cote d’Ivoire nearly every year between 2007 and 2020, according to data from the Food and Agricultural Organization (FAO).

Actually, Cameroon banana production and exportation has largely witnessed a steady decline during the past 20 years from close to a million tonnes in 1993 to just over 204 thousand tonnes in 2020 as per the FAO data. This decline can be attributed to a combination of factors which can be regarded as local and international.

At the local level, some of these factors include: unswerving gross mismanagement by stakeholders; inadequate funding of the state-owned entities in this sector (particularly the wholly state-owned Cameroon Development Corporation) that oversees government farm concessions and production; poor and exploitative wages/labour practices by producers that has dampened farmworkers’ confidence and interests to work in this sector; endemic corruption; insufficient infrastructure or lack thereof; unpredictable micro and macroeconomic policies by the State that does not encourage investors, including convoluted and cumbersome fiscal policies that do not inspire investor confidence; tribal land quandaries with indigenous peoples; persistent climate change; and so on.

At the international level, Cameroon has faced fierce competition from previously uncompetitive exporting countries in Africa and in the Americas such as Cote D’Ivoire, Ghana, Madagascar, Ethiopia, the Dominican Republic, Argentina, etc., in Europe and North America export markets. Additionally, Cameroon was taken off its preferred trade status under the US African Growth and Opportunity Act (AGOA) in January 2020 following a US decision to revoke its status “due to its engagement in gross violations of internationally recognized human rights”. This has made Cameroonian banana less competitive in an already very tough US market where they had to go toe to toe with major producers from the Americas.

Things have been exacerbated by the Anglophone Crisis that intensified in 2016 and then metastasized into an ongoing armed separatist conflict in 2017 in the Anglophone Regions of the North-West and South-West. Unluckily for Cameroon, the South-West Region accounts for the largest banana plantations that produce an overwhelming majority of Cameroon’s bananas for exportation. It is the seat of several plantations owned by the Cameroon Development Corporation (CDC), other foreign large companies, domestic small and medium sized banana producers. Plantation workers have been victims of sporadic attacks and have had to seek refuge outside this Region. The remaining plantation workers live in fear of such attacks. This has led to sharp declines in labour supply and productivity. Altogether, the conflict has displaced over a million in these two regions and further created thousands of refugees. As if that was not excruciating enough, the COVID19 Pandemic seemingly sealed the fate of Cameroon’s leadership plans in banana exportation in Africa.

But it is not all doom and gloom. The banana sector in Cameroon has been gradually digging itself out of the hole with promising signals from the wholly state-owned CDC. According to data by the Banana Association of Cameroon (ASSOBACAM), CDC exported 20,631 tonnes of banana in December 2021, up 9.7% as opposed to the 18,804 tonnes that were exported in December 2020. However, these figures are mainly thanks to productions by plantations situated in the Francophone Regions of Cameroon like the Plantations du Haut Penja (PHP), a subsidiary of the French giant Compagnie Fruitière de Marseille.

It is on this momentum that the government has decided to reverse the deterioration of the sector by putting in place measures to incentivize businesses and promote investments in both the belligerent regions of Cameroon and the seemingly stable regions of the country.

Regarding the belligerent regions, the Cameroon General Tax Code in 2021 provided for incentives for “Economic Disaster Areas” while Prime Ministerial Decree N° 2019/3179/PM of September 02, 2019, was passed to grant such a status of “Economic Disaster Areas” to the Far-North, North-West and South-West Regions.

Pursuant to article 121 of this General Tax Code, companies that carry out new investments in an economic disaster area shall be exempted from a host of taxes at the installation phase for up to three years and at the operational phase for up to seven years. These are the same incentives that have now been extended by the 2022 Finance Law (Law N° 2021/026 of December 16, 2021) explicitly to banana producers in order to revitalize the sector.

In this 2022 Finance Law, Section 14 provides that companies in the banana sector located in an economic disaster area shall be granted the tax benefits granted to new companies located in an economic disaster area as set out in section 121 of the General Tax Code, for a period of seven years, to revive their activities. Such benefits include:

• Exemption from business license tax;
• Exemption from VAT on purchases of goods and services;
• Exemption from registration fees on real property transfers;
• Exemption from land property tax;
• Exemption from VAT on purchases of inputs for production;
• Exemption from company tax, including exemption from the corresponding monthly installments and minimum collection;
• Waiver from taxes and employer’s contributions on the salaries paid to staff.

Additionally, the payment of the residual tax debt of companies in the banana sector located in an economic disaster area resulting from the application of the special measure to reduce the tax arrears of companies already established in an economic disaster area shall be frozen for a period of three years. However, before the end of this period, it may be offset against the claims of the above-mentioned enterprises on the State.

At the end of the above seven-year period, the companies shall be transferred to the tax system for the companies not located in an economic disaster area. However, they shall continue to enjoy the benefits granted to the banana sector.

As highlighted previously, the 2022 Finance Law intends for an all-round revitalization of the sector and so also provides for incentives for companies that are not located in the economic disaster areas as defined by the Prime Ministerial Decree above. For such companies not in the economic disaster areas, the following tax benefits apply:

• A 50 percent reduction on the rate of the advance payment and the minimum collection of the company tax applicable on the date of enactment of this law, for a period of seven years;
• The calculation of the advance payment and the minimum collection of the company tax on the FOB value plus, where necessary, the commissions paid to the intermediaries of the marketing chain of the said products.

The Law goes ahead to provide that, at the end of the seven years period, the companies referred to above shall be reimbursed at the common law rate of the advance payment and the minimum collection rate.

Finally, Section 15 of the 2022 Finance Law provides that, donations and gifts made by companies as part of the plan for the development and reconstruction of the economic disaster areas (the Far-North, North-West and South-West Regions) shall be deductible from the company tax for the fiscal year ended December 31, 2021.

In conclusion, the government is using every arrow in its fiscal policy quiver to restore Cameroon’s leadership in the banana production sector in Africa and the world. The question that many critics ask is whether these incentives are realistic and practical in the economic disaster area of the South-West Region where armed separatist continue to carry out sustained guerrilla attacks including in various banana plantations. Some critics have regarded this as half-baked solutions that do not cut to the core of the problem plaguing the Anglophone Regions. If these incentives are to be realistically implemented, then there has to be peace through a dialogue that will bridge both sides of the divide. Only then can the government effectively revitalize the production of cash crops, including bananas in this incredibly fertile Region.

Dayspring Law Firm assists farmers and agricultural companies to access farmlands through mechanisms provided by land laws and state policy, to comply with legislation regulating the agricultural sector, especially the law on food safety and quality, the laws on seed activity, law on the use of fertilizers, law on safety relating to biotechnology, phytosanitary protection regulations, environmental laws, customs laws (for importation of grains and exportation of produce), licensing rules for special agricultural sector (cocoa, coffee, etc.), OHADA Uniform Acts on Cooperative Societies (2010) and Economic Interest Groups (2014), intellectual property law (especially, new plant varieties and geographical indications), competition law, consumer protection law, food safety law, and tax laws and investment incentives. We equally assist enterprises in the sector to structure project finance and source capital to finance projects.