Chad

The Economic and Monetary Community of Central Africa, EMCCA (CEMAC)

Overview 

The Economic and Monetary Community of Central Africa (Communauté Économique et Monétaire de l’AfriqueCentrale, or CEMAC) is made up of five former French colonies in Central Africa – Cameroon, Central African Republic, Chad, Congo Republic and Gabon – and Equatorial Guinea, a former Spanish colony. It was set up to promote the process of sub-regional integration through the forming of a monetary union, with the Central African CFA Franc as a common currency.  It has its headquarters in Bangui, the capital of the Central African Republic. There are ongoing plans to unify the Douala and Libreville Stock exchanges into a Unified CEMAC Securities and Stock Exchange.

The treaty that specified the legal and institutional arrangements of CEMAC created the following bodies:

Central African Economic Union (Union Economique de l’Afrique Central – UEAC) with an Executive Secretariat based in Bangui, Central African Republic. The Customs Union is one of the central pillars of CEMAC. It has established a regime for trade with third countries, and trade inside the community has been duty free since

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The Economic and Monetary Community of Central Africa, EMCCA (CEMAC)

Overview 

The Economic and Monetary Community of Central Africa (Communauté Économique et Monétaire de l’AfriqueCentrale, or CEMAC) is made up of five former French colonies in Central Africa – Cameroon, Central African Republic, Chad, Congo Republic and Gabon – and Equatorial Guinea, a former Spanish colony. It was set up to promote the process of sub-regional integration through the forming of a monetary union, with the Central African CFA Franc as a common currency.  It has its headquarters in Bangui, the capital of the Central African Republic. There are ongoing plans to unify the Douala and Libreville Stock exchanges into a Unified CEMAC Securities and Stock Exchange.

The treaty that specified the legal and institutional arrangements of CEMAC created the following bodies:

Central African Economic Union (Union Economique de l’Afrique Central – UEAC) with an Executive Secretariat based in Bangui, Central African Republic. The Customs Union is one of the central pillars of CEMAC. It has established a regime for trade with third countries, and trade inside the community has been duty free since 1998.

The Central African Monetary Union (Union Monétaire de l’Afrique Centrale), which specifies the responsibilities of the central bank, Banque des Etats d’Afrique Centrale (BEAC) and the Central African Banking Commission (COBAC). BEAC is a single central bank for the region and there is a single currency (CFA franc) and defined criteria for macroeconomic convergence. The BEAC regulates the sector through its regional banking commission, COBAC, which shares responsibility with the national Ministries of Finance for licensing new banks and regulating microfinance institutions. There is also a budgetary agreement between the French Treasury (Ministry of Finance) and the BEAC with fixed convertibility of the CFA franc and a droit de regard (oversight with veto powers) by the French Treasury.

The region has a population of about 43 million people, of which 65% are below 25 years of age.  The average population growth rate was 2.5% in 2012.  The real GDP growth rate of 4.1% in 2012 was mainly driven by oil and agriculture exports. Cameroon is the largest economy in the region, with about half of the region’s total financial assets. Oil and agriculture have been the mainstay of most of the economies in the region. The mining industry is expanding, with new exploration and mining activities in Cameroon. The region is blessed with minerals and resources such as diamonds, gold, gas and bauxite (aluminium). The countries in the region are about 50% urbanised. Gabon has the highest level of urbanisation at 86%, with a third of the country’s population living in the capital Libreville.

Access to finance

The formal financial system across CEMAC countries is not well developed. Most banks are foreign-owned and are subsidiaries of foreign banks. There are also a few small to medium‐sized African banks from other African countries such as Nigeria and Togo. Recently, banks from Cameroon have also moved into other countries in the region, including Gabon, Congo, Chad and Equatorial Guinea. At present Cameroon has the most banks in the region, 11, followed by Chad (seven) and Gabon (six). Both Congo and Equatorial Guinea have four banks, and Central African Republic has three. The number of savings banks in the region remains low. On average, in the six countries, there are 2.78 bank branches per 100 000 adults. The mortgage finance market is still in its infancy, but with huge potential for growth. Very few banks in the Central African region provide medium-term and long-term credit. The only banks that grant this type of credit are the Gabonese Development Bank, the National Investment Company (in Gabon and Cameroon) and  SOCOFIN in Congo Republic.

Mortgage finance is mostly granted by government agencies, and the people who benefit most are government employees. Only about 2% of private sector employees have access to mortgage finance from commercial banks. Those in the informal sector and a large percentage of the middle class and lower income groups get housing finance (directly and indirectly) from different forms of MFIs. The microfinance sector is developing in all countries in response to difficulties associated with accessing credit through traditional banking channels. Links with the traditional, formal banking sector are weak and the consolidation of microlenders is not sufficient to allow for meaningful regulation and oversight, or the development of strong links with the banking sector. However, the BEAC, through COBAC, has developed a strategy for controlling the informal financial sector. COBAC, jointly with the Ministries of Finance of all six countries, now regulates the MFI sector in all six countries. There is an urgent need to develop mortgage finance products that address the needs of the growing middle class and lower income groups who have no access to housing finance. 

Affordability

In the formal sector, the state is the largest employer, offering an average monthly salary of about CFA Francs 200 000 (US$432). Though rapidly growing, the formal private sector is still small. Most people are involved in the informal sector, with a high percentage of people living under the national poverty line. These people cannot afford to finance their homes through existing banking funding instruments. Construction costs in the urban and semi-urban areas are high. It costs about CFA Francs 10 million (US$20 000) to build a standard three-bedroom house in the urban areas. This is mainly because of the high costs of inputs such as cement, sand, plates, iron, finishings and decorations. The Cameroon government has tried to set up local production facilities for some of the inputs to help bring down the cost. It has also set up an agency to develop and promote the use of local materials for construction. In the rural areas, construction costs are lower, as most of the houses built are of a semi-standard, with local materials used such as sun-dried bricks made from clay. Rental costs are also high. It costs on average about CFA Francs 150 000 ($325) a month to rent a three-bedroom house in the main urban areas. In the smaller towns, it is generally about 40% cheaper. N’djamena and Libreville, however, are the second and third most expensive cities in Africa for expatriates, as demand for accommodation far exceeds supply. It costs up to US$6 500 a month for a three-bedroom apartment in these cities. The government and the private sector need to explore mechanisms to increase the number of affordable housing units that enter these markets each year, either through ownership or rental, and also to ensure that middle class people and those in the lower income groups get access to affordable housing finance. 

Housing supply

The number of new housing units that enter the market annually is insufficient to meet the demands of the increasingly urbanised population in all CEMAC countries. The growing economy has swelled a middle class that needs to be housed. A third of the Gabonese population lives in Libreville, and a quarter of the Congolese population in Brazzaville, with huge housing backlogs. The demand for housing has increased without a subsequent increase in supply. The discovery of oil in Equatorial Guinea, and new economic sectors that have opened up, have seen the influx of expatriates and migrant workers, accentuating the demand for housing. This continues to push up house prices.

The current stock of housing units is produced mainly through incremental self-construction, and less so by government agencies and private developers. The poor live in sub-standard accommodation, sometimes on land that is not serviced. With the newly set up cement factories in Cameroon that also aim to service these markets, construction costs may drop, which may help to increase supply of new affordable housing units.

International oil and construction companies are driving the demand for high quality residential units in Malabo and Bata in Equatorial Guinea. There has been a great deal of volume home building in Malabo II and reserved government residential areas in the east of the city. Mainly expatriates live in these new areas, as they are expensive and the average middle class person cannot afford them. The central Klemat area in N’djamena, which is near the presidential palace, is also an important residential district with new developments. Again, it is mostly for the expatriate community and not affordable to middle class people. In Gabon, Congo and Central African Republic, too, new housing developments are driven by the expatriate community’s demand for high quality housing. There are no large-scale development activities to provide housing for middle income people.

Property market and opportunities

With fairly strong and sustainable economic growth due to economic reforms and the strong demand for its natural resources from emerging economies such as China, India and Brazil, a growing middle class, increasingly urbanised populations, a huge housing backlog and a large diaspora that is seeking to invest in real estate, huge opportunities exist for residential high end and middle/low income housing in all areas of the value chain – real estate development, construction, finance and real estate management services. The prospects for the property market are very good. For the potential to be realised, governments in the various countries and other stakeholders must continuously find ways to increase supply and make them affordable to the middle and lower income groups. This is already being done in Cameroon. 

Policy and regulation

Governments in the CEMAC countries have been slow in putting in place reforms that would address the constraints in this sector. The main constraints are in the areas of land ownership, access to serviced land, construction and development, and the availability of finance. According to the World Bank’s Doing Business 2013 report, compared to 2012, most countries in the region have made some progress on issuing construction permits and registering property. Getting credit is still a big issue. This is something that needs urgent attention. Governments should continue to introduce reforms on land administration, construction, property registration and access to housing finance. Because of the potential role that MFIs could play, reforms and policies should also focus on tapping into that potential.