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POLICY BRIEF : THE IMPORTANCE OF A FLEXIBLE ENERGY POLICY IN CAMEROON FOR A CONDUCIVE BUSINESS ENVIRONMENT, 14 September 2016, by Eposi Ethel Ekeke and Sirri Caroline Nfornah


Background
Cameroon is a growing economy with rapidly increasing electricity demand, particularly in the industrial sector. The county is currently grappling with a power deficit, and energy efficiency measures are becoming critical for meeting Cameroon’s electricity demand in short, medium and long term. This precaious electricity crisis negatively affects doing business in the country. Cameroon’s development objectives, under the programme Vision 2035, contemplates significant investments in the energy sector including renewable energy. The policy goals of the government are to ensure energy independence via increased production and distribution of electricity (through the development of Cameroon’s hydropower potential), of oil and gas and to contribute to economic development. According to Basil Atangana Kouna, Cameroon’s Minister of Water and Energy Resources, “Energy supply has been the main hurdle in Cameroon’s path towards economic growth.”
This policy brief examines the state of affairs of the electricity sector in Cameroon and how its insufficiency hampers the business environment. The policy brief first of all gives an overview of the electicity situation in Cameroon as well as the juridical and policy atmoshphere governing the elelctricity sector in the country. The policy brief then examines certain challenges the electricity sector faces with respect to doing business in Cameroon. Suggestions are made for the need for adequate laws and policy, the need for better leadership, the need for Small and Medium Size Enterprises (SMEs) to be involved in the renewable energy sector and the need for a vibrant national stock exchange as a way out of the electricity crisis in Cameroon.

An overview of Cameroon’s (energy) electricity situation and major challenges
Cameroon, Africa in miniature, is a country with a lot of potential: rich in natural resources and fertile soils and a vibrant age group, being the most populated country in the Economic Community of Central African States (CEMAC) region. Unlike other African countries, Cameroon benefits from a relatively high social and political stability seen in the fact that she has not suffered from any major political conflict since independence except from the recent Boko Haram attacks.

Cameroon is the 114th most competitive economy in the world, out of 140 countries assessed by the World Economic Forum (WEF). The country moves up two places compared to 2015, but still comes behind Gabon (103rd), first Central African nation in this ranking 2015-2016. However, the WEF emphasizes, that Cameroon is 10 places ahead of Nigeria (124th), the leading economy on the continent. Cameroon could be a favourable doing business environment in Africa, but for the chronic energy crisis.

Concerning energy resources, Cameroon is endowed with abundance of renewable energy sources most of which is underutilized or unexploited. Field surveys carried out in August 2016 by the Central African Centre for Libertarian Thought and Action (CACLiTA) in several neighborhoods in the political and economic capitals, Yaoundé and Douala, respectively, show that in Cameroon today, a great majority of the population still relies on conventional solid fuels such as charcoal for domestic activities. However, other sources of energy exist such as hydropower, coal, petroleum, biofuels and waste (most of which is not recycled). Those other energy sources are not exploited and most of Cameroon’s electricity is obtained from three major hydroelectric power stations which are Edea, Lagdo and Song Loulou with ongoing hydroelectric dam projects like the Lom Pangar and the Memve’ele and Mekin hydroelectric dams.

According to the Electricity Sector Regulation Agency (ARSEL), Cameroon has significant considerable hydroelectric resources, renewable energies and small hydrocarbons. Apart from oil, Cameroon has natural gas reserves currently estimated at about 186 billion m³ as well as has the second hydroelectric potential in Sub-Saharan Africa after the Democratic Republic of Congo(19.7 GW fair technical potential for energy production of 115 TWh / year). In terms of solar energy, Cameroon has a rich and handy potential, especially in the country’s Northern part.

The organization, Renewable Energy & Energy Efficiency Partnership (REEEP) in a recent Policy Database reported that, 70% to 80% of Cameroon’s power is derived from hydropower sources, with the remainder from conventional thermal sources. Cameroon’s first independent power producing agreement (IPP) will add 216 MW in power generation and trigger the development of Cameroon’s gas reserves, as yet unexploited. Also, Cameroon will further increase its generation capacity when the new Lom Pangar plant becomes fully operational.

According to REEEP in the same report quoted above, the key constraints facing the electricity sector relate to the narrow geographic space and relative obsolescence of the transmission and distribution networks. Consequently, there is significant unmet solvent demand. This situation is exacerbated by the fact that the country’s three main transmission grids are completely isolated from one another and no exchange of available surpluses can be made between the grids.

In terms of Cameroon’s energy potentials, hydropower remains the major source of energy in Cameroon although its resources have not been completely exploited. Also, there is good solar potential which is not well developed due to limited commitment and dedication of government in taking important steps to boost the sector, save a few solar panels which have been installed in Yaoundé, Cameroon’s political capital, and Douala, the economic capital used mostly for lighting, nothing else has been done.

Furthermore, wind energy is almost completely neglected, there are only about two rapid wind turbines installed in Douala, the economic capital, meanwhile the regions which have warm springs like Ngaoundere, the mount Cameroon area and the Muanenguba zone, all in the South West region of Cameroon, which can generate great amounts of wind energy have not been developed.

Being a dominantly agricultural economy, Cameroon has a large and unutilized potential of biomass primarily from agriculture and forest. Also, palm oil produced by companies like Cameroon’s palm oil production industry, PAMOL, and Cameroon Development Cooperation ( CDC) has been used to generate biodiesel which is mainly used for agricultural purposes. Furthermore, some rural areas face deforestation due to the fact that wood cut for domestic purposes like cooking and heating is not replaced and this has led to many challenges of energy affordability and environmental impact.

Cameroon has potentials for geothermal energy which has not been tapped. There are hot water regions like the Ngaoundere region and the mount Cameroon region amongst others, but little or no feasibility studies have been carried out to identify their full potential.

In its vision 2035, the Cameroonian government has developed an objective to invest in the energy sector with its major target being to increase energy production in order to meet up with the increased demand caused by population growth and the current economic boom especially in the industrial sector. This is also aimed at attracting both foreign and national investors.

Tackling major challenges
Poor policy and juridical environment governing Cameroon’s electricity sector
Cameroon does not have an explicit energy policy which is available to the public. Several attempts have been made at coming up with an energy policy but they have all been faced with shortcomings as outlined below,

– In 1990, Cameroon had an energy policy which aimed at incorporating all the available energy sources but it has not been implemented.
– In December 1998, there was another policy concerning energy which focuses only on hydroelectric power.
– In 2005, the Ministry of Energy and Water stated that a new Energy plan would be developed by 2030.
– Also, the Vision 2035 projects the development of renewable energy.
– Finally, there is also a plan known as the rural electrification plan which aims at developing electricity in rural areas through the construction and renovation of diesel and power plants.

Although they are prescribed by the regulations in force, renewable energy is almost inexistent in Cameroon. Law N ° 2011/022 of 14 December 2011 governing the electricity sector in Part IV spells out general goals for promoting renewable energy and energy efficiency, and for the use of renewables within the context of expanding rural electrification. The law also states that the State will ensure the promotion and development of renewable energy through establishing regulation for conditions and mechanisms for research, development, production of equipment and project financing. Also, in its title IV, Chapter I, Law n°98/022 of 24 December 1998 governing the electricity sector, the Electricity Sector Regulatory Agency (ARSEL) and the Rural Electrification Agency (REA) are in charge of the promotion and the follow-up of the use of the primary sources of energy, in particular renewable sources.

Cameroon’s Ministry of Water Resources and Energy (MINEE) through ARSEL requested the formulation of a National Policy, Strategy and Action Plan for the development of Energy Efficiency Policy in the country which would be developed by 2030. It seems the formulation and implementation of the long-term Energy Sector Development Plan (PDSE 2030) is slow.

Even though slow, a renewable energy policy is being prepared, with policy goals to increase the share of renewables in power and heat generation, and to involve private capital in the delivery of energy but it has to be an articulate energy policy which is vital in leading the country towards effective utilisation of its resources. This policy will favour investments in the corporate and industrial sector.

Giving priority to the production of renewable energies
The electricity policy in Cameroon should promote the development of renewable energies like solar thermal and photovoltaic, wind power, exploitable hydropower streams with power exceeding 5MW, biomass energy, geothermal energy and energies from marine origin. The state should therefore ensure the promotion and development of renewable energy as well as provide the conditions, procedures and mechanisms for research and development, local production of materials and project financing. This will go a long way to fill the void which exists in terms of demand of supply of energy in Cameroon.

A survey was carried out by CACLITA involving 40 policy actors randomly selected from ministerial departments in Cameroon including the Prime Ministry and the Ministry of Water and Energy, with respect to improving the juridical and policy environment of the energy sector. 62.50% strongly agreed that there was indeed a need to improve laws and policy governing this sector. 20% of the policy actors agreed though not strongly. 12.50% neither agreed nor disagreed. 5% strongly disagreed that there was need for new laws and policy change.

Addressing the problem of lack of renewable energy expertise
Renewable energy is often identified as too costly, partly due to lack of well trainned personnel. The renewable sector unfortunately lacks human resources to plan, design, install, monitor and maintain energy systems — but demand for this expertise is growing. There is no gainsaying that the country experiences poor human resources in the field of designing, evaluating and implementing renewable energy and energy efficiency projects. Addressing the human resource issue is a key point for attaining the objectives.

CACLiTA also questionned the selected team of policy actors from various ministerial departments including the Prime Ministry and the Ministry of Water and Energy with respect to the lack of expertise in the renewable energy sector which negatively affects the planning, design and monitoring of the energy systems in the country. 72.50% of these policy actors strongly agreed that poorly trainned personnel negatively impacts progress in the electricity sector. 22.50% agreed though not strongly. 2.50% strongly disagreed while 2.50% disagreed.

Dismantling the monopoly in the management of electricity in Cameroon
There is need for the envisaged energy policy to promote the independent electricity production. Currently, the production and distribution of electricity in Cameroon is in the hands of one company which is the National Electricity Company with French acronym ENEO. This company is a monopoly which faces no competition from any other producer. For this reason, ENEO is not motivated to deliver the best services and their prices are quite high. This explains the constant electricity issues which the country faces. Thus, it is recommended that the production and distribution of electricity should be liberalized and independent producers should be encouraged to enter the market as stipulated by Law No 2011/022 of 14th December 2011. This will lead to increased production and competition which will result in better services and lower prices.

Effective leadership
In order to meet the renewable energy and energy efficiency targets, effective leadership is also a key issue for the attainment of the targets within Cameroon. At national and regional levels, political authorities should be involved and support the action.

Moreover, politicians and government leadership of the country have to be aware of the opportunities that exist in the use of renewable energy as an alternative source of energy, and then put policies in place to advance the sector. This would go a long way in revamping the doing business environment in the country.

CACLiTA equally questionned the selected team of policy actors from various ministerial departments including the Prime Ministry and the Ministry of Water and Energy with respect to the lack good leadership which negatively affects the planning, design and monitoring of the energy systems in the country. 45% of these policy actors strongly agreed that bad leadership negatively impacts progress in the electricity sector. 30 % agreed though not strongly. 15% strongly disagreed while 10% disagreed.

The need for small and medium enterprises (SMEs) to invest in the sector via public private partnerships
In spite of the country’s endowment of vast renewable energy resources, as well as small and medium sized enterprises (SMEs) which can be involved in the renewable energy sectors, much of the population still suffers from limited access to affordable and reliable modern energy services. The need for scaling-up investments in small- to medium- sized renewable energy and energy efficiency projects in Cameroon remains urgent. It is thus important to promote private investments via SMEs in the electricity sector, in order for the population to benefit from a competitive service through innovation and efficient management of the available resources.

Likewise CACLiTA questionned the same 40 policy actors from various ministerial departments including the Prime Ministry and the Ministry of Water and Energy with respect to the need for small and medium size entreprises(SMEs) to invest in the enegy sector for better planning, design and monitoring of the energy systems in the country. 62.50% of these policy actors strongly agreed that allowing SMEs invest via public private partnerships in this sector will positively impact progress in the electricity sector. 20 % agreed though not strongly. 12.50% strongly disagreed while 5% disagreed.

An assessment by CACLiTA with respect to the need for SMEs to be involved in the electrcity sector shows that there is a growing concensus amongst government officials for the need for public private investment options. Though this concensus remains weak it will go a long way to improve competition and better services for busineses and households.

Curbing corruption
Issues like corruption need to be addressed for Cameroon to adequately benefit from doing business opportunities with a sound energy policy. The American think-tank Heritage Foundation and the Wall Street Journal recently published the 2016 ranking of the economic freedom index in the world, which measures economic freedom in countries since 1995, using criteria such as protection of property rights, the size of the state, budgetary and monetary policy and the fight against corruption. Out of a ranking of 178, Cameroon is positioned 29th in Africa and 130th in the world. When you have too many regulations (lack of economic freedom), companies face additional burdens and costs of transactions, undermining their competitiveness in the end. Corruption too, is a symptom of too much government intervention, so less freedom of choice for households and businesses. Therefore, with corruption, businesses pay bribes, additional expenses instead of investing them. The result is low competitiveness.

The current state of affairs with respect to corruption in the Cameroonian energy sector should be an eye-opener for the country to raise awareness and educate key stakeholders to create and develop a corupt free enabling environment for rapid renewable energy market development.

CACLiTA’s team also carried out a survey from the same 40 policy actors with respect to the need for corruption to be curbed in the enegy sector for better planning, design and monitoring of the energy systems in the country. 72.50% of these policy actors strongly agreed that corruption negatively impacts progress in the electricity sector and there was need to eradicate this cankerworm. 22.50% agreed though not strongly. 2.50% strongly disagreed while 2.50% disagreed.

CACLiTA’s assessment of the survey on corruption shows that many policy actors agree that corruption is a problem. There is thus need for stringent measures to be put in place by government to fight this ill.

A need for a vibrant stock exchange
Finally, the financial market should be taken into consideration. The Cameroonian government should develop the Douala Stock Exchange, make sure that all energy producing companies are listed in this financial market and encourage private investors to invest in the energy sector through this stock exchange. This will ensure that energy producing companies have enough capital to invest in their activities which will further lead to an improvement in the services offered.

CACLiTA’s team questionned the same 40 policy actors with respect to the need for a vibrant stock exchange for better planning, design and monitoring of the energy systems in the country. 45.5% of these policy actors strongly agreed that there was need for a vibrant stock exchange to postively impact progress in the electricity sector . 30% agreed though not strongly. 15% strongly disagreed while 10% disagreed.

CACLiTA’s assessment shows that there is need for more policy actors to trust and become used to the stock exchange culture as a way of better managing the electricity sector in the country. Statistics from CACLiTA’s survey shows that just few policy actors (45.5% from the random selection) have faith in the Douala stock exchange as a way out for the electricity crisis in the country.

Conclusion
This policy brief has examined the state of affairs of the the electricity sector in Cameroon and how its insufficiency hampers the business environment. The policy brief has given an overview of the electicity situation in Cameroon as well as the juridical and policy atmoshphere governing the elelctricity sector in the country. The policy brief has also examined certain challenges the electricity sector faces with respect to doing business in Cameroon. Suggestions have been made for the need for better leadership, the need to involve SMEs in renewable energy, the need to fight corruption and a vibrant stock exchange as a way out of the electricity crisis in Cameroon.

Sources and other readings

– Asan Vernyuy Wirba et al, Renewable energy potentials in Cameroon: Prospects and Challenges, Volume 76, April 2015, Pages 560-565

– British High Commission Yaoundé, ‘The Power and Energy Sector in Cameroon’ accessed at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/237129/Cameroon_Doing_Business_Guides_Pt.1.pdf

– Cameroon’s population, accessed at http://www.worldometers.info/world-population/cameroon-population/

– Cameroon accessed at https://www.laurea.fi/en/document/Documents/Cameroon%20Country%20Report.pdf

– ENEO Cameroon is short form for Energy of Cameroon and it is the only company in Cameroon charged with the production and distribution of electricity in Cameroon accessed at http://eneocameroon.cm/index.php/en/l-entreprise-a-propos-d-eneo-l-entreprise-en/l-entreprise-a-propos-d-eneo-en

– Energy Sector Development Plan accessed at http://www.wame2015.org/policy-and-regulation/576/

– Heritage Foundation ‘2016 Index of Economic Freedom’ accessed at http://www.heritage.org/index/

– List of power stations in Cameroon, accessed at https://en.wikipedia.org/wiki/List_of_power_stations_in_Cameroon

– Michel Takam, ‘Development of Renewable Energy in Cameroon’ accessed at http://www.inforse.org/europe/pdfs/Conf_COP17_3-Takam_ADEID_Cameroon_INFORSE.pdf

– Pierre-Olivier Pineau, Transparency in the Dark – An Assessment of the Cameroonian Electricity Sector Reform, August 12, 2004, at https://www.internationalrivers.org/files/attached-files/transparencyinthedark.pdf

– Renewable Energy in Cameroon, Cameroon rural Energy Solutions accessed at https://sites.google.com/site/njinkengconey/

– Renewable Energy & Energy Efficiency Partnership (REEEP) Data Base accessed at http://www.reegle.info/policy-and-regulatory-overviews/CM

– UK Department for International Trade, Overseas Business Risks-Cameroon, 25 August 2015 accessed https://www.gov.uk/government/publications/cameroon-overseas-business-risk/cameroon-overseas-business-risks#bribery-and-corruption

– VISION 2035 has as main objective to make Cameroon an emerging country by 2035, with the specific objectives being to: eradicate poverty by reducing it to less than 10 per cent thanks to accelerated and job-generating growth, become a middle income country in order to increase the average income, become a newly industrialized country and become an emerging country accessed at Ministry of the Economy, Planning and Regional Development, Cameroon Vision 2035, Working Paper, February 2009, 1-10.

 
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Posted by on September 14, 2016 in Uncategorized

 
 
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