Central African Econonomic and Monetary Union: Why is CEMAC’s international recognition strategic?
At a time when international investors are looking for attractive risk/return and decorrelation, the Central African Economic and Monetary Union, or CEMAC (in French), offers high bond yields, a fixed exchange rate against the euro and a specific asset class. Are these arguments sufficient to attract international asset managers?
What is CEMAC?
Created out of a treaty signed on 16 March 1994 in N'Djamena (Chad), the Central African Economic & Monetary Union comprises six countries: Cameroon, Congo, Gabon, Equatorial Guinea, the Central African Republic and Chad.
CEMAC in numbers1
Population (estimate): 51 million;
Surface area: 3,020,144 Km2;
Economic growth rate: 2.8%;
Main export products: crude oil, cocoa, coffee, cotton fibre, wood logs, sawn wood, aluminium, natural rubber, bananas, diamonds, gold, manganese, uranium, methanol;
Inflation rate: 2.3%.
A buoyant economic environment
After the economic slowdown in 2016 and 2020, growth is expected to pick up in 2022 in the CEMAC zone. The President of the CEMAC Commission, Daniel Ona Ondo, also announced at the UEAC2 (Union of Central African States) Council of Ministers meeting held in February 2022 in Cameroon that the market could experience a growth rebound at a rate that could reach 2.7% in 2022.3
This rebound is expected to be driven by non-oil sectors. The governments of the CEMAC zone have supported diversification efforts to stimulate agriculture, in particular the extraction industry: manganese, gold, diamonds, bauxite, zinc and wood will continue to experience growth.4
The bond market for public securities
This favourable economic environment supports the financing needs and the development of the bond market for public securities. The latter was created in November 2011 and is intended to provide an alternative framework to the States of the sub-region.
The main players in the public securities market are:
The six national Treasuries, as issuers;
The primary dealers, which are credit institutions authorised as market makers;
The National Departments of the BEAC5, the Bank of the Central African States, which are responsible for the physical organisation of auctions;
Investors (resident and non-resident individuals and legal entities);
The CRCT6, the Securities Settlement and Custody Unit, as Central Depositary and in charge of coding, custody, administration of securities and settlement/delivery.
Among the instruments in the public securities market, there is a distinction between Treasury bills (BTAs) and bonds (OTAs), which have the following characteristics.
Treasury Bills (BTAs)
Treasury Bonds (OTAs)
CEMAC Member States (Cameroon, Congo, Gabon, Equatorial Guinea, Central African Republic, Chad)
Auction via weekly tenders
Auction via monthly tenders
1,000,000 CFA francs
10,000 CFA francs
13 weeks (91 days)
26 weeks (182 days)
52 weeks (364 days)
More than or equal to 2 years
Basis for calculating interest
Interest paid upfront
Interest paid annually at maturity
Bullet at maturity
HARVEST ASSET MANAGEMENT, a leader in asset management in the CEMAC zone with assets under management of €370 million at the end of 20217, is a specialist in investment in the CEMAC zone and the public bond market.
Bonds make up the majority of investments. Harvest Asset Management's bond mutual funds account for 50% of assets under management, money market funds 9% and equity funds 1%, according to the company’s Chairman and Chief Executive Officer, Marc Kamgaing, who specifies:
In portfolio management, CEMAC is a growth market. The overall assets under management of the market are increasing at a steady pace: CFAF 30bn at end-2019, CFAF 70bn at end-2020 and CFAF 350bn at end-2021.
But does this momentum on CEMAC’s financial markets include the equity markets?
Louis Banga N'Tolo, CEO of BVMAC8 (Central African Securities Exchange), interviewed by Societe Generale Securities Services (SGSS), answers:
We are seeing real global momentum thanks to the financial and technical support of development partners (African Development Bank, World Bank); several authorisation requests by stakeholders were registered with the regulator, COSUMAF9 (Central African Financial Market Supervisory Commission), BVMAC (Central African Securities Exchange) has recently embarked on major reforms including the liquidity contract required of issuers, continuous quotation, market orders, daily quotation, a denomination campaign for the first stock market index and the planned share split.
It seems that many initiatives have been taken to develop liquidity on the stock exchange:
Registration of companies: CEMAC is introducing incentives to motivate companies to register on the stock market
Good management: The Central African stock market now has a new management body that has already shared many innovative ideas to give impetus to the financial market in the CEMAC zone
Creation of new stock market indices
Broader trading periods: The number of trading days has been increased from three to five days and an extension of the hours is under consideration
Accessibility: Equity prices must be affordable for regional investors
SGSS Cameroon supports the development of CEMAC by providing secure access that complies with international standards
In this buoyant environment, international investors must be able to rely on robust market infrastructure and trustworthy custodians.
Isabelle Fodop, Head of Societe Generale Securities Services Cameroon, explains:
In order to capture large international investors interested in the returns offered by emerging markets compared to more mature markets, Societe Generale Cameroon has partnered with the Group’s Global Business Line, Societe Generale Securities Services, by signing a Joint Venture Agreement (JVA) in July 2020.
SGSS Cameroon is now positioned as one of the leading custodians in the reference CEMAC zone and is developing ambitious plans to develop services for asset managers.
The competitive risk/return trade-off, stock market initiatives for closer alignment with international standards, growth in asset management, and improving economic conditions are the key arguments for international investors. However, liquidity still has room for improvement and the procedures for foreign exchange and repatriation of cross-border funds require specific knowledge of local regulation and the support of an experienced local custodian to be able to take full advantage.
2UEAC: Union des Etats de l’Afrique Centrale (Union of Central African States)
5BEAC: Banque des Etats de l’Afrique Centrale (Bank of the Central African States)
6CRCT: Cellule de Règlement et de Conservation des Titres (Securities Settlement and Custody Unit)
7Harvest Asset Management
8BVMAC: Bourse des Valeurs Mobilières de l’Afrique Centrale (Central African Securities Exchange)
9COSUMAF: Commission de Surveillance du Marché Financier de l’Afrique Centrale (Central African Financial Market Supervisory Commission