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(Business in Cameroon) - Factory gate prices (ex-factory price paid to producers, excluding taxes and subsidies, and excluding transport margin) in the industrial sector in Cameroon have experienced a record increase of 13.3% year-on-year. The highest growth since 2017, the National Stats Agency reported.
“The post-Covid economic recovery, the disruption of global value chains, the Russian-Ukrainian crisis, and the dependence of the Cameroonian economy on imported raw materials, among others,” are the reasons behind this record increase, INS said. As a result, the prices of raw materials and agricultural inputs for industrial production as well as sea freight costs have exploded. Subsequently, household final consumption prices followed the same trend, up 6.3% in 2022 (more than double the 3% threshold accepted in the Cemac region).
The data showed that companies have not entirely passed on the increments in producer prices to final consumption. Instead, they have cushioned the shock, either through government incentive measures or a reduction of margins.
Import-substitution policy
According to the INS, the extractive sector contributed the most to the rise in the factory gate and consumer prices in 2022. Production costs in the oil and gas industry in particular rose by 29% yoy. At the same time, costs rose by only 8.6% in the manufacturing industries over the same period. INS however noted significant disparities between industries.
For example, while factory gate prices rose by 5.8% in the chemical, pharmaceutical and plastic industries, the increase was only 1.9% in the textiles industry; 10.9% in the food sector, 15.9% in the leather industry, and 16.9% in the steel industry. The Cameroonian Organization of Steel Processing Industries (Ocita) points out that since China decided to reduce some of its exports to ensure supply of the domestic market after the Covid-19 pandemic, Cameroon’s steel industry has been relying heavily on imports of billets (molten iron waste in the form of ingots and used for the production of concrete iron) from Russia and Ukraine.
However, although the gloomy international situation has caused inflationary pressures on factory production costs and final household consumption in 2022, INS sees it as an opportunity for Cameroon to develop the national market. "These disruptions could provide opportunities to substitute imported raw materials and boost local production, especially in the agro-industry. Local flours (cassava, corn, potatoes, etc.) could be used in the food industry (instead of wheat massively imported from Russia, ed) and the iron deposits (Mbalam, Nkout, Kribi, Akom 2, etc., ed) could be better exploited for the metallurgical industry. The new national development strategy includes the structural transformation (of the economy), which involves second-generation agriculture, industrialization, and import-substitution," INS explained.
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