Identifier
Created
Classification
Origin
07YAOUNDE128
2007-01-30 13:49:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Yaounde
Cable title:  

U.S. INVESTMENT IN CAMEROON: MAJOR PROGRESS IN 2006

Tags:  EINV ETRD EMIN ECON KCOR EAIR EPET CM 
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RR RUEHWEB

DE RUEHYD #0128/01 0301349
ZNR UUUUU ZZH
R 301349Z JAN 07
FM AMEMBASSY YAOUNDE
TO RUEHC/SECSTATE WASHDC 7234
INFO RUEHDK/AMEMBASSY DAKAR 0575
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHLC/AMEMBASSY LIBREVILLE 1423
RUEHAB/AMEMBASSY ABIDJAN 0248
RUEHAR/AMEMBASSY ACCRA 0452
RUEHLO/AMEMBASSY LONDON 1490
RUEHFR/AMEMBASSY PARIS 1740
RHMFISS/HQ USEUCOM VAIHINGEN GE
UNCLAS YAOUNDE 000128 

SIPDIS

DEPT ALSO FOR AF/C, EB
DEPT PLEASE PASS USTR
DAKAR FOR REGIONAL FCS OFFICER
LONDON AND PARIS FOR AFRICA ACTION OFFICERS
EUCOM FOR J5-A AFRICA DIVISION AND POLAD YATES

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EINV ETRD EMIN ECON KCOR EAIR EPET CM
SUBJECT: U.S. INVESTMENT IN CAMEROON: MAJOR PROGRESS IN 2006

REF: A. Yaounde 90

B. 06 Yaounde 1331

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Summary
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UNCLAS YAOUNDE 000128

SIPDIS

DEPT ALSO FOR AF/C, EB
DEPT PLEASE PASS USTR
DAKAR FOR REGIONAL FCS OFFICER
LONDON AND PARIS FOR AFRICA ACTION OFFICERS
EUCOM FOR J5-A AFRICA DIVISION AND POLAD YATES

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EINV ETRD EMIN ECON KCOR EAIR EPET CM
SUBJECT: U.S. INVESTMENT IN CAMEROON: MAJOR PROGRESS IN 2006

REF: A. Yaounde 90

B. 06 Yaounde 1331

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Summary
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1. (U) 2006 was an excellent year for U.S.-Cameroon commercial
relations, and we enter 2007 with literally billions of dollars of
pending U.S. investment on the table. In February we signed an Open
Skies agreement; Geovic and Hydromine, two firms with large
multi-year mining projects, made important progress; investors
planning to build a Marriott hotel in Douala secured land, capital
and OPIC backing; and Transnational Automotive Group launched urban
bus service in Yaounde and intercity bus service between Yaounde and
Douala. Two Embassy-organized trade missions produced numerous
deals, not only to purchase U.S. goods but also to export
Cameroonian products under AGOA. In addition to bureaucratic
hurdles, corruption-induced delays and the failure to complete the
privatization of CAMAIR, the greatest commercial disappointment was
the inability of Volvo Aero Leasing to get a repossession order
enforced (Ref B). This message summarizes the state of play on the
major ongoing commercial and investment deals involving U.S. firms
in Cameroon. Despite the urgent need for further improvements in
the investment climate here, the ongoing American experience shows
that a trade- and investment-driven development strategy is possible
and is working in a country that is among the least dependent on aid
flows in all of Africa. End Summary.

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Geovic
--------------


2. (U) With respect to Geovic's cobalt mining concession in the
East province, difficulties in reaching agreement with the local
shareholders early in 2006 were resolved by year's end. SNI, the
national investment corporation, stepped in to take a 20 percent
share and to serve as the sole representative for the Cameroonian

shareholders (who hold a further 19.5 percent),a development that
has streamlined negotiations and progress toward starting
operations.


3. (U) Shares in Geovic Mining began trading on the Toronto
Minerals Exchange, with some USD 12 million in capital already
raised. Geovic Cameroon General Manager Gary Morris told Ambassador
Marquardt December 7 that construction should start in late 2007
with cobalt mining commencing in early 2009.

--------------
Hydromine
--------------


4. (U) Hydromine is working on a package of infrastructure, mining
and petroleum projects valued at over USD 2 billion (and potentially
worth up to 6 billion). In January, Hydromine signed a BOT
agreement for the construction of a rail line (Edea-Kribi) and a
deep water port at Grand Batanga (south of Kribi),the first BOT
ever signed in Cameroon. Hydromine has also secured agreement from
major partners in India, Dubai, and Japan to participate in the
development of proven bauxite reserves at Ngoundal and Minim-Martap
in the Adamoua province, and asked the GRC to sign its mining
concession agreement. Since then, Hydromine has decided to pursue
a regional oil refinery and is looking at several petroleum
exploration blocks.

--------------
Marriott
--------------


5. (U) 2006 saw tremendous progress in the USD 44 million Marriott
hotel project in Douala. Land and capital was secured, including
USD 10 million in OPIC investment. Ground-breaking is slated for
early 2007. As the first privately-financed new building to go up
in Douala in decades, this project will send a strong positive
signal to other potential investors about current growth potential
here.

--------------
AES-Sonel
--------------


6. (U) In December, U.S. owned AES-SONEL, the only power supplier
in Cameroon, secured a 240 million euro loan package to expand
Cameroon's power grid, an expansion that will also enable AES-SONEL
to sell excess electricity to Nigeria. The loan package, which
involved many lenders including the IFC, European Investment Bank,
the African Development Bank, and the Central African Development
Bank, is the largest ever for a privatization in Africa. In
addition to its obvious importance to the energy sector, AES-SONEL
is leading a corporate governance group along with cellular
providers MTN and Orange, Chad-Cameroon oil pipeline operator COTCO,
and others. AES-SONEL has instituted strict codes of conduct with
its workers and has begun promoting good governance to its
contractors and customers.

--------------
Caterpillar
--------------


7. (U) In March we signed a USD 180,152 USTDA grant with SHO
Tractafric Cameroun to conduct a feasibility study for heavy
equipment leasing in Cameroon and neighboring countries,
specifically Caterpillar equipment for road construction and repair.
The study showed that the market potential was greater than first
expected. The IFC, OPIC and Ex-Im bank are all expected to be
involved. Ex-Im in particular is reportedly very enthusiastic about
the project because Caterpillar's involvement will ensure
maintenance and repair, lack of which tends to lead small operators
to default on loans for heavy equipment. The firm plans a late
spring launch.

--------------
Kent Atlantic
--------------


8. (U) In 2006 Ex-Im bank granted a USD 2.4 million loan to Kent
Atlantic this firm to import garment manufacturing equipment from
her U.S. partner (G-S Solutions). This is the best example of
similar successes with firms seeking to take advantage of AGOA where
the Embassy helped local companies find production equipment in the
U.S. that will be used to produce AGOA-eligible exports.

--------------
Transnational Automotive
Group (TAUG)
--------------


9. (U) 2006's most visible U.S. commercial success was the
September launch of "Le Bus," which brought urban bus service back
to Yaounde after a 16 year absence. With an initial tranche of 28
busses (from China),and 30 more arriving each month for the next
two years, Transnational Automotive Group is becoming one of
Cameroon's most important employers. (Note: Each bus accounts for
at least 8 jobs.) Their trademark light blue busses are becoming an
ever more prominent feature on the urban landscape here.


10. (U) In late November TAUG's sister project "Le Car" began
inter-city coach service between Yaounde and Douala. Transnational
will devote 80 coaches to this segment of its business and expand
its urban transport service to Douala, with a total of 400 busses
(3500-4000 employees.) OPIC will be involved with USD 9-10 million
and is hoping to use TAUG's Cameroon project as a template for
investment elsewhere. (Note: TAUG secured its equity financing
first and then sought OPIC assistance for debt financing. End Note)
There have been delays in getting the GRC to deliver on promises
made to TAUG, but the Prime Minister is fully engaged and continues
to help resolve problems.

--------------
TRADE AND INVESTMENT FORUM
--------------


11. (U) In April 2006, our all-LES commercial team took some 50
Cameroonian businessmen and women to Washington, D.C. for a
week-long trade and investment forum, designed to match Cameroonian
firms with U.S. suppliers and clients and to familiarize the
Cameroonian participants with OPIC, EX-IM and Department of Commerce
programs.


12. (U) The most important deals emanating from this trip, the
second of its type, were the Bonn Group Inc.'s USD 1 million
purchase of medical supplies from Abbott Laboratory, and a USD
200,000 deal for Perseverance Globe Trotter to purchase equipment
and material to produce artificial marble using the Tiffany Marble
formula. In addition, the Embassy's Commercial Section and the
Foreign Commercial Service in Abidjan prepared trade leads which
resulted in a USD 3 million sale of four fishing boats from a
supplier in Florida.

--------------
Food and Technology Forum
--------------


13. (U) In October 2006, our commercial team took 70 participants
from Cameroon and other countries in the sub-region for a Food and
Technology Business Forum in Chicago. The food component of this
trip was especially important for promoting AGOA related trade.


14. (U) Highlights from this event include: UNIMARCHE's purchase of
10 containers of hotel furniture and household equipment from David
Bross and Co. (USD 500,000); an agreement between the Cameroonian
Coffee Growers' Association UCCAO and a Washington, D.C.
distributor, to export some 3,000 tons of coffee (ground and whole
bean) to the U.S. in 2007; and the USD 200,000 purchase of Tiffany
Marble formula by Essoka Ltd., the second Cameroonian firm planning
to produce artificial marble in Cameroon. (Note: A third local firm
is also interested in this activity.)

--------------
Comings and Goings
--------------


15. (U) 2006 saw several shifts in ownership, particularly in the
petroleum industry, with a number of firms re-evaluating their
positions in the up- and downstream markets. Following the late
2005 sale of Shell's retail operation to Chevron-Texaco, Exxon-Mobil
elected in late fall to exit the Cameroon market, selling its
downstream assets to the Libyan firm TAMOIL (Ref A.).


16. (SBU) In late August, Houston-based Noble Energy teamed with
the Malaysian parastatal Petronas to acquire an offshore block (from
Conoco-Philips) that abuts Noble's operations in Equatorial Guinea.
Noble will invest upwards of USD 25 million for each of three
drilling operations prospecting for gas condensate and petroleum.
Conoco-Philips gave up the block after concluding the potential
returns were not big enough for its operations. For its part, Noble
sees synergies with its adjacent block in Equatorial Guinean waters.



17. (U) Wackenhut, which provides security services to a number of
firms and diplomatic missions, including ours, sold its assets to
Group 4, a transition that sparked some labor unrest.

--------------
A few disappointments
--------------


18. (U) Corruption, bureaucratic bottlenecks, and difficulties in
disciplining Cameroonian investment partners comprised the sobering
counterpoint to our many commercial successes in 2006. Enthusiasm
for U.S. investment is not enough to overcome structural and
deliberate obstacles. Persistent and high-level Embassy engagement
was instrumental in making progress and resolving problems with
Geovic, Hydromine, Marriott and TAUG.


19. (U) Sadly, all the pressure we could bring to bear was not
sufficient to counter corruption that complicated, delayed and
scuttled some business ventures. An imperfect tender process that
disqualified a U.S. bidder was one factor delaying the privatization
of Cameroon's debt-ridden airline CAMAIR, previously envisioned for
summer 2006; however, this process will be revisited (transparently)
in 2007 and the U.S. bidder, among others, may have a second chance.
Even those enjoying commercial successes are continually subject to
petty corruption and avoidable bureaucratic hassles and as a result,
some are re-evaluating decisions to expand and/or remain. Finally,
at least one U.S. firm went home empty-handed and with holes in its
pockets. As reported in Ref. B, Volvo Aero Leasing was forced to
sell an aircraft at a USD 1 million loss, after it could not get a
repossession order in its favor enforced.

--------------
2007 Off to a Good Start
--------------


20. (SBU) On January 24, 2007 Cisco Systems signed a multi-faceted
Memorandum of Understanding with the GRC to develop Cameroon's
nascent information technology (IT) infrastructure, to develop its
human capital in the IT field, and integrate IT solutions into all
facets of government, from health records to primary schools.
Private estimates value the deal at USD 70 million in the early
stages, with a potential to reach USD 200 million. This landmark
deal is instrumental for Cameroon's continued development and
modernization and is yet another demonstration of Cameroon's
apparent strategic decision for closer engagement with the U.S.
(septel).

MARQUARDT