Biya Raises Salaries: Cools Tempers Amidst Opposition to Fuel Subsidy Cuts

Cameroon raised the base salary for government workers and the military on Monday and entered negotiations with transport workers in an effort to head off potential social unrest after it cancelled fuel subsidies last week in a bid to cut costs.

The government announced it was ending subsidies on petrol, diesel and cooking gas last Monday, pushing up the price of petrol by 14 percent and diesel by 15 percent. Gas rose 8 percent.

"The monthly base salary of civilian and military personnel is, from the date of the signature of this decree, raised by 5 percent," read the decision signed by President Paul Biya.

Transport workers had threatened to go on strike from Monday to protest the decision to cut the subsidies, raising the spectre of unrest as the country tries to please international donors.

However, union officials said on Monday they agreed to a government request for a one-month delay of the planned strike to allow time to negotiate a settlement.

"Since the government began with the increase in civil servant salaries, we are confident that our complaints will also be taken into account," said Jean Vidal Nji, the president of one of the transport unions.

The unions representing drivers of buses,taxis and trucks argue that the increased fuel prices will lead to higher operating costs and cut into their earnings.

Cameroon has long produced both oil and cocoa, but analysts say a lack of reform and political stagnation under President Paul Biya, who has been in power since 1982, have stymied economic growth and development.

The International Monetary Fund, which has projected Cameroon's economy to grow by 4.8 percent this year and 5.1 percent in 2015, has for years called for subsidies, which cost around $600 million a year, to be cut.

But Cameroon has repeatedly delayed the move following a violent 2008 taxi strike over fuel prices that left over 100 dead and a failed bid to cut similar subsidies in neighbouring Nigeria in 2012.

(Reporting by Tansa Musa and Anne Mireille Nzouankeu; Writing by Joe Bavier; Editing by Toby Chopra

SONARA is at the verge of collapse — Issa Tchiroma, Cameroon's Communication Minister

Issa Tchiroma, Communication Minister

Cameroon Headlines, Yaounde, July 2 —The Minister of Communication and government’s spokesman has revealed that the increase in the fuel and domestic gas prices in Cameroon is a measure to rescue the country’s lone refinery, the National Refining Company (SONARA) which is at the verge of collapse.

The state currently owes the refinery an estimated FCFA 300 billion within the framework of the subsidy policy, whereas the total SONARA unpaid bills vis-à-vis its partners and other suppliers, amount to FCFA 550 billion.

The refinery is thus at the verge of reaching a serious critical point as its treasury does no longer permit it to obtain credit lines, which are necessary to purchase sufficient crude oil to satisfy internal market demand. In the phase of this situation, SONARA has been obliged to drop its production capacity from 340 cubic meters per hour to 200 cubic meters per hour, to avoid a total stop of its production units.

“SONARA, through which the state intervenes to subsidize hydrocarbons prices at filling stations, is today threatened in its survival, by the pressure exercised on its economic and financial balance through the weight of its intervention in the process of implementing this subsidy”.

Since the last increment in fuel prices in February 2008 in Cameroon, the price of crude oil at the world market has been rising. Government maintained subsidies despite the persistent hike in crude oil and pressure from international funding bodies to increase fuel prices.

Between 2008 and 2013, the government spent FCFA 1200 billion; more than the 2014 investment budget of  FCFA 1000 billion. Within the first six months of 2014, subsidy paid or due by the state in this respect, amounts to FCFA 157 billion, with a cumulated amount, from 2008 to date, amounting to FCFA 1 357 billion.

The reduction in subsidies, the minister said will permit the government to secure money for many social, educational and infrastructural projects, necessary to improve the well-being of populations and to increase growth rate.

“The cumulated amount of government subsidy to hydrocarbons prices at filling stations, that is FCFA 1 200 billion from 2008 to 2013, representing 120% of the 2014 public investment budget, five times the budget of the Ministry of Public Works, four times the budget of the Ministries of Basic Education, Secondary Education and Higher Education, all three together”

Minister Tchiroma revealed that the amount spent on subsidies would have also permitted the construction of four hydroelectric dams, like Lom Pangar, six referral hospitals, or the construction of 2400 km of tarred roads.

Gov’t has not completely removed subsidies

Despite the hike in fuel and domestic gas prices, the minister of communication said government has not completely abandoned consumers by putting an end to the subsidy.

He explained that the subsidy has not been completely removed; it has simply been reduced to reasonable proportion to be easily supported by the State budget.

“This increase simply aims at bringing back the said subsidy to affordable levels by the State finances”.

According to Issa Tchiroma, the prices of the hydrocarbons products at filling stations exclusive of government subsidies are as follows:

-          Fuel, CFA 825 F per litre, with a difference of CFA 175 F

-          Gasoil, CFA 770 F per litre, with a difference of CFA 170 F

-          Kerosene, CFA 705 F per litre, with a difference of CFA 355 F

-          12 and half kg bottle of domestic gas, CFA 9230 F, with a difference of CFA 2730 F.

Minister Tchiroma maintained that, despite the reduction of this subsidy which resulted in the increase of hydrocarbon prices at filling stations, the average of these prices in Cameroon still remains far under the average applied in countries with the same level of development Cameroon.