CAMEROON HIKES PUBLIC SECTOR SALARIES: WHAT IMPACT FOR

UNCLAS SECTION 01 OF 02 YAOUNDE 000518

SENSITIVE
SIPDIS

DEPT ALSO FOR AF/C, AF/EX and AF/FO
DEPT ALSO FOR HR/OE
PARIS AND LONDON FOR AFRICA WATCHER

E.O. 12958: n/a
TAGS: ECON EFIN AMGT APER CM
SUBJECT: CAMEROON HIKES PUBLIC SECTOR SALARIES: WHAT IMPACT FOR
US?

REF: Yaounde 428


1. (U) Summary: The pay raise that President Biya promised
Cameroonian civil servants in the wake of February riots took effect
on April 25, when an estimated 170,000 officials saw their salaries
rise by 15 percent and their lodging benefits rise to 20 percent of
their base salaries. The United Nations and some international
organizations are planning to match the raises in their own payroll,
but private sector contacts believe their already elevated pay
scales will insulate them from additional wage pressure. The
Mission's locally engaged staff, however, has not received such
year-to-year plus ups; their wage stagnation, exacerbated by rising
costs of living, threatens to pose post management problems in the
short to medium term. End Summary

Money in the Pocket
--------------


2. (U) As part of his response to civil unrest in February,
President Biya promised a pay raise for Cameroonian civil servants
and military personnel, which took effect on April 25. The Ministry
of Finance's new benefits package includes a 15 percent increase in
base pay and an increase in lodging allowance from 8 to 20 percent
of base pay. According to the Ministry of Finance, the monthly wage
burden now totals about 50 billion CFA (about $120 million) per
month. The affected workers--about 170,000 in total--include, inter
alia, diplomats, judges, teachers, police and security officials.
Acknowledging the challenge of funding the pay raise at the same
time the President has temporarily suspended taxes on many
commodities, Finance Minister Essimi Menye told the press: "We can
pay the April salaries this month, but to keep the pay raise
sustainable, we will need to work hard to increase receipts and cut
back expenditures."

What Impact on the Private Sector?
--------------


3. (SBU) The head of GICAM, Cameroon's most important business
chamber, told Poloff on April 25 that their members would not feel
pressure to match the government's price hike because they had
already been increasing salaries annually and negotiating
sector-wide salary scales through collective agreements. Similarly,
the head of a large American company with its regional headquarters
in Cameroon told Poloff on April 25 that the private sector would
feel pressure but that larger companies would be "immune" because
their salary scales are already so superior to those of the public
service.


4. (SBU) The head of a leading private sector bank (and one of the
Embassy's salary comparators) predicted that banking sector unions
would use the public service pay hike to take a tougher line in
negotiations with the employers and that the private sector in
general would feel pressure to match the government's 15 percent
raise. Nevertheless, he too felt he and his comparators would be
relatively more insulated since they had given more substantial
annual increases and were thus on a higher pay scale than the
government.


5. (SBU) The heads of the United Nations system (another
comparator for the Embassy's pay scale) and the German development
agency GTZ told Poloff that their agencies would automatically match
the civil service hike.

Government Views
--------------


6. (SBU) Minister of Commerce Luc Antangana recently told Pol/Econ
Chief that the Ministry of Labor is in negotiations to increase the
minimum wage (SMIC) of 23,000 fcfa set in 1996. This needs to
increase, he said, and once it does, it will have broad impact,
especially among agricultural workers. He thought that in response
to the recent public sector salary increase, some private sector
managers would increase salaries, but he opined that only the
educated management level would benefit ("through tricks they will
get richer"),not impacting directly the salaries of the blue
collar/agricultural workers.

The Inflation Outlook
--------------


7. (SBU) Atangana predicted that inflation would not erode too
much of the 15 percent pay raise. The IMF projects inflation will
top 2.9 percent in 2008. However, most economists believe inflation
is actually substantially higher. Anecdotal evidence from the food
markets suggests that prices for basic commodities continue to rise,
despite the government's suspension of taxes and pressure on
traders. The government has announced measures to increase

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production (reftel),but there is no evidence that supply will catch
up with demand (especially regional demand from oil and cash-rich
Chad and Equatorial Guinea) in the short or medium terms.

Comment: Adding Pressure to LE Staff Salaries
--------------


8. (SBU) At first blush it seems inevitable that the substantial
civil service benefit raise will place pressure on private sector
wages as well. As the interlocutors argued, however, the private
sector has already been providing superior wage scales for many
years-and topping up those salaries with regular adjustments for
inflation. Furthermore, the President's decision was widely seen as
long overdue; it was the first public sector wage increase since
public sector salaries were cut by 50% in 1993 (which was further
exacerbated by a 50 percent currency devaluation in 1994). In this
context, many viewed this raise as a correction rather than
indicative of a broader need to realign wages. Additionally, many
highly skilled and well-educated Cameroonians are without work, so
there should be ample labor supply to dampen employee demands for
higher wages. Employees seeking to pressure their bosses will
likely have to leverage Cameroon's labor code and mass action to
push their point home.


9. (SBU) Unfortunately, the Embassy does not enjoy the same status
as the private sector firms: Embassy salaries have failed to keep
pace with comparators for more than five years. LE staff have
recently raised with post management the public sector salary
increase as a reason to review their stagnant salary structure.
While we do not expect our LE Staff to be tempted away en masse in
the short term (because there is a lack of other options),the
rising pressure on their purchasing power, increasing frustration
with the stagnation of Embassy wages, and the allure of growing
benefits elsewhere will inevitably take a toll if remedial action is
not taken in the short or medium term. GARVEY.