Why Cameroon contractors will remain corrupt

Cameroon’s public contracts sector, has been described as the most corrupt domain where government officials negotiate shady deals with contractors who in most cases, knock at their doors, cap in hand for contracts.

Below is an in-depth analysis of a public contractor on the high level of corruption and machinations which envelop the public contracts domain. Prince John Akere in the piece highlights six reasons to support his argument.

1. Poor evaluation of projects and bias contractual terms that bind contractors with the state. These contracts and project documents are sometimes drawn up by people with little or no legal knowledge and technical expertise. In fact, the documents most often are not even read or analyzed by contractors before signing. For instance, in most contracts, the government retains more than 65% of the amount allocated for the project before the execution; making it impossible for contractors to execute the contract as prescribed, pay bank loans, and make profit.

2. Late payment of contractors’ bills. Because of cumbersome and slow administrative procedures, government takes several months or years to settle contractors’ bills. Contractors become indebted to banks on very high interest rates, sometimes amounting to 3% per month even after delivering the job. They undergo very tedious procedures before obtaining payment.

In most occasions, when the banks must have consumed what was left in the contractors’ accounts as interests, it creates a negative difference in the contractors’ account resulting to debts. This leaves the contractors desperate at all times, with one language, always to tell friends and family or business partners: “my bills at the Ministry of Finance are yet to be paid.” When will those bills ever be paid? Why not tell people the truth about your situation? For how long shall we hide these from those who have the impression that contractors are very rich people from the figures they see every day on papers? Should contractors continue to die of heart attack because of debts? So many questions unanswered.

3. Soaring bank charges. A mafia has been created by banks and supported by the state, letting the bank to enter the game from the day of bid to the day of payment of job executed. The banks charge fabulous sums on documents issued to contractors which sometimes serve no purpose; neither to the contractor nor to the state.

For instance, what is the necessity for a bank to issue a bank caution and an attestation of financial capacity to a contractor, and at the end refuses to finance a contract won by this contractor? What action does the government take against this bank that leaves the ambitions of the state and the contractor frustrated? It means those documents are sold and not issued to fulfill the purpose for which they were requested.

This puts not only the contractor at risk but the state as well. In this case the state becomes unable to choose the rightful partner that can at the end satisfy her objectives.

4. High interest rates. Some micro-finance institutions charge more than 3% interest on loans per month, which is about 36% per annum. Consider a scenario where because of delays from the time of execution to payment of a contractor’s bill, it takes a year and interest goes up to 36% of what he borrowed, what is left for the contractor? Debts certainly. Do not forget also that the state had already retained more than 65% (Lowest bidder syndrome, about 30%, VAT 19.25, IR

5.5%, Registration 2%, Bon fin 3%, Guarantee deposit 10%, Insurance 3%), toll gates 10% and the contractor is left with a meager sum, less than 25% of the estimated budget by the state to realize the project and make profit, pay loans and interests. Can this ever be possible? What awaits the contractor? Debts certainly. What is the government doing to stop this act that can be qualified as deliberate extortion? Is there a law that regulates these banking activities? If yes what mechanism has the government put in place to bring these financial institutions to order?

5. Contractors pay double taxes. It is clear that more than 80% of contractors pay VAT twice to the state either due to ignorance or circumstances beyond their control. They buy goods or materials from retailers who sell with VAT and these goods are in turn supplied to the state with Value Added Tax – VAT calculated. Those that are aware sort these surpluses at the end of the year and request for reimbursement which takes years for the government to react or are sometimes never paid.

Another very serious situation is the amount paid on interest realized at the end of the fiscal year by contractors. The government says we are in a declarative system, true, but gives absolute powers to tax officials to control and institute by their supreme discretion what they consider as interest made by contractors. In some cases they include guarantee deposits, bon fin and other sums duly retained by the state, claiming that it is contractors’ money. Is the state a bank? How much interest is paid on the said sum after one year?

6. Kick backs. These are unofficial taxes which control officials of public contracts make them seem very official. I mean, fees for the commissions, control teams processing bills for payment etc. Carrying commissions and control teams to the field is a cut-throat operation. Tips at times go up to 2% for officials treating contractors’ bills to be paid at the ministry of finance, just to name a few in the chain. It is true that the government is making enormous effort to stamp out the canker worm, but all the efforts instead seem as if the government is “digging a pit to fill the other” or “creating more toll gates”. Just imagine the situation where the government has made a study by experts and budgeted about 10 million francs to realize a project. The same government decides to offer the project to the lowest bidder for 6 million francs, already retaining 40% “Lowest bidder syndrome”.

After the award the same government returns about 45% of 6 million again (VAT, IR, registration of contract, guarantee bond, bon fin, insurance etc), which is about 2.5 million francs, leaving the contractor with just net sum of about 4 million francs. In fact what magic shall the contractor use to realize the job? Notwithstanding that the bank waits to slice at least 3% of the sum lent to the contractor as interest every month. What shall be left for the contractor? To be free from this unfortunate situation, the contractor has to develop unscrupulous strategies, i.e. executing a bad job and corrupting officials to receive their jobs or fraud papers to receive advanced payment and abandon the projects. These are all unhealthy policies implemented by the state which promote corruption. In this way, the state and the contractor pay the price and the bank and corrupt officials continue to make their money.

For this reason, something must be done. There are three main players in the public contracts sector: The state, the contractor and the bank. Everyone has a vital role to play in order to take this nation to another level (emergence by 2035). The national reference bureau for government contractors (NARBUGCO) is being put in place to identify, rate and categorize contractors.

It shall build trust and instill confidence, first between contractors, then between the state and the banks. This is to create an opportunity for the main players to come together and brainstorm on how to revise the unhealthy rules of the game, making it more transparent and beneficial to the three parties.