New Government Initiatives in Cameroon Promote Small Businesses and Startups

DOUALA, CAMEROON – Allain Rodrigue Ngonde needed to write a business plan to graduate from the industrial engineering program at the University of Douala in Douala, Cameroon’s economic capital. So he and his classmates conceived a plan for an enterprise that would recycle plastic waste.

He graduated in 2009 and began studying for a master’s at the same institution. But he never forgot his proposal.

In 2011, the Ministry of Small- and Medium-Sized Enterprises, Social Economy and Handicrafts hosted its first National Days for Small- and Medium-Sized Enterprises, a series of conferences, training sessions and workshops.

Ngonde entered a ministry competition for hopeful entrepreneurs to submit business proposals. He won first place for best business plan and more than 2 million Central African francs ($4,060).

Using the prize money, as well as funds from the Ministry of the Environment, the Protection of Nature and of Sustainable Development to support his idea, he launched RED-PLAST Sarl in September 2012. In doing so, he became the director-general of Cameroon’s first enterprise for industrial recycling of plastic waste, he says.

The ministry’s initiatives to boost young entrepreneurs and encourage a culture of small-business growth enabled him to launch his enterprise, he says.

“Without such support, we could not have been able to start off,” he says. “But when the Ministry of SMEs offers, say, a million CFA ($2,000), and other partners give another million, it’s encouraging.”

The government has been cultivating small-business growth in recent years through initiatives such as one-stop business registration centers. It also plans to open a bank to lend to small-business owners. A two-year tax exemption for new business owners also allows entrepreneurs to invest in their ideas. Some small-business owners predict that bureaucracy will hamper these initiatives. But government officials say they have already seen a rise in new businesses, which create employment opportunities for other citizens as well.

The government is encouraging the growth of small businesses and startups to achieve the goals of Cameroon Vision 2035, an ambitious development plan the Ministry of the Economy, Planning and Regional Development established in 2009.

Small businesses already contribute significantly to Cameroon’s economy. At least 90 percent of enterprises in Cameroon are small businesses, says Gabriel Enumedi, the regional delegate of small- and medium-sized enterprises for the Littoral region. Further, small businesses employ nearly 70 percent of the population.

To encourage more entrepreneurs to launch businesses – and employ more people in the process – the Ministry of Small- and Medium-Sized Enterprises, Social Economy and Handicrafts established regional centers for business registration in major cities throughout the country.

Now, entrepreneurs can apply for business licenses, taxpayers’ cards and two-year tax exemptions in one place, saving time and money, Enumedi says. In the past, applicants had to obtain these documents from different offices.

“First, the putting together in one place of all administrative services concerned reduces the loss of time and transport money to different locations charged with those tasks,” Enumedi says.

Applicants can register businesses in three days, he says. Since the government introduced the centers in 2010, more than 3,600 new businesses have launched, he says.

When Ngonde launched his business in 2012, he benefited from the center at the ministry’s delegation in Littoral, he says. He obtained a business license and a taxpayer’s card five days after presenting the necessary paperwork at the center.

Despite this success, the government must continue to raise awareness about these regional centers, Enumedi says. This will enable prospective business owners, as well as owners of existing illegal businesses, to register their enterprises.

Entrepreneurs who register small businesses will soon have access to a bank specifically for small- and medium-sized enterprises.

Although the government has not announced the bank’s official opening date, it will be operational soon, says Ngapne Fonzie, the treasury controller in Douala. The bank will enable entrepreneurs to access finances easily.

Most commercial banks require a guarantee before they grant loans to entrepreneurs, Ngonde says. But the bank for small- and medium-sized enterprises will not, Fonzie says.

To qualify for a loan at this bank, business owners must meet all current legal requirements to operate an enterprise, Fonzie says. Loan applicants must have business licenses and taxpayers’ cards and must provide social insurance to their employees, among other requirements.

Applicants will receive different amounts depending on the costs of their projects and how much they currently pay in taxes, Fonzie says.

“We try to see how much you give to the state,” he says. “This can encourage the government to give you money based on how much you give in to government.”

The Ministry of Small- and Medium-Sized Enterprises, Social Economy and Handicrafts also announced a two-year tax exemption for startups in 2010.

“The freedom from tax payment is to help you have some stability and also a means of inviting foreign investors into the country,” says Evaristus Ekane, the Littoral regional chief of brigade for recoveries, or tax collection. “It also enables you to know how you’re faring on with the business.”

When entrepreneurs are first launching their businesses, the government cannot expect them to pay extensive taxes yet, Ekane says. The exemption allows entrepreneurs to invest in their ideas.

“It is to encourage more people to invest,” Ekane says. “That’s the advantage.”

After the grace period, the owners declare the businesses’ revenue to the government. If it has improved, the business advances to a higher tax bracket.

“If the turnover has not improved,” Fonzie says, “then the business cannot be classified. You would be obliged to shut down because you cannot pay taxes.”

The two-year tax exemption does not mean that businesses do not need to pay any taxes, Ngonde says. Rather, it spares business owners from paying the annual patent tax.

Although small-business owners say they appreciate the government’s efforts, some are skeptical of the initiatives’ feasibility.

Rita Zaumu, the CEO of printing business NDEMS Communication, which launched in 2009, says she wants to believe in the government’s mission to help small businesses. But she doubts the government’s ability to succeed because of slow services in the past.

“Business is something that goes very fast,” she says. “So that’s where I have an issue.”

Zaumu says that although the pending bank could be successful, she plans to observe its speed and reliability before using it in case bureaucracy renders it ineffective.

“Imagine that you have a business pending, and then you’re following up to get a loan,” she says. “It’s going to take a long time, and by the time you get the loan, the job would have been awarded to someone else.”

As for the two-year tax exemption, businesses suffer under cripplingly high tax rates after the grace period ends, Zaumu says. For every service her business provides a client, it must pay 19.25 percent of the sale in taxes.

“That’s a lot of money out of your business,” she says. “And to think that at the end of the day, you still have to pay rents, workers, maintain your assets and your machines. At the end of the day, you don’t have much money to take back home.”

But Enumedi says there has been an increase in new businesses since the government introduced the tax exemption and regional registration centers. In 2011, 1,863 businesses launched, followed by 2,062 businesses in 2012 and already 913 during the first half of 2013.

These entrepreneurs have already improved the lives of many job seekers, says Gilles Lewat, the executive director of Youth Business Cameroon, an organization that empowers young Cameroonians to become entrepreneurs.

“When you bring someone who is employed to think about becoming self-employed, he’s not coming all alone out of employment,” he says. “He is going to generate a job for himself and many others.”

Startups and small businesses represent the future of Cameroon’s economy, he says.

“Just imagine the joy in one family when one person finds a job somewhere,” he says. “Just imagine the joy you can have in different families because of a company that has been generated by one person.”