93-year-old President of Cameroon Paul Biya has not appeared in public since flying to Geneva two months ago, increasing concerns about the future transfer of power in the country. The absence of the head of state is increasingly affecting Cameroon’s dollar bonds as investors try to understand whether a hidden political transition has begun in the country.
Cameroon’s dollar bonds have shown the worst performance among African countries since early June. On Friday, the yield on bonds maturing in 2033 rose to 9.53% as of 15:30 London time, indicating a fourth consecutive week of decline in their value. Since June 7, when Biya left the country, the yield on bonds maturing in 2033 has increased by 70 basis points to 9.5%, and on bonds maturing in 2031 by 50 basis points. According to Matthew Vogel, head of emerging markets sovereign bond strategy at Marex, the main decline occurred at the end of July.
Concerns about power struggle
Paul Biya’s trips to Geneva are not unusual. He has previously spent extended periods abroad, usually staying at the InterContinental hotel. Questions about his whereabouts prompted the government to issue reassurances. “The president is doing well and will return to the country at any moment,” government spokesman Rene Emmanuel Sadi said in an interview with French broadcaster RFI on August 2, without specifying the return date and Biya’s location in Geneva. “The president runs the country regardless of where he is,” he added.
There is a risk that Biya’s health may have deteriorated, and the struggle for his succession could drag on, noted Francois Conradie, an analyst at Oxford Economics, in a research note. According to him, among the possible successors are the president’s second wife Chantal Biya (55 years old), his 54-year-old son Franck, and Finance Minister Louis Paul Motaze. “We expect uncertainty to persist for some time, and the quality of governance to deteriorate,” Conradie said, adding that “even if Biya returns home, questions about his successor will remain open.”
Economic consequences and opposition stance
The uncertainty is negatively affecting the yield on investments in Cameroon’s government bonds, causing the country to lag behind neighboring oil-producing countries — Gabon and the Republic of Congo, which are also part of the regional union of six countries. According to Bloomberg, over the past two months, Cameroonian debt securities have lost 0.6%, while Congo’s bonds have yielded investors 0.2%, and Gabon’s 1%. During the same period, the index of dollar bonds in emerging markets increased by 0.4%.
Cameroon, the largest economy of the Economic and Monetary Community of Central Africa, has “cautiously favorable” economic prospects, according to the International Monetary Fund. At the same time, the IMF points to risks associated with the country’s dependence on raw material exports, whose prices are unstable, budgetary challenges, and overall political uncertainty in the region. According to Matthew Vogel, investors do not yet believe that something “critical” has happened in Cameroon, but they are trying to assess the risks that may arise in the event of a political transition. He added that the situation is attracting increasing attention.
Cameroon’s opposition parties have already taken advantage of speculation about the president’s health. Last month, MP Jean-Michel Nintcheu appealed to the Constitutional Council to declare the presidency vacant. Opposition leader Issa Tchiroma Bakary also called on the army to facilitate a peaceful transition of power, reported Cameroon News Agency on July 21. Although Paul Biya has not yet named his successor, the constitutional provision for the transfer of power to the vice president in the event of the head of state’s death does not inspire confidence, as this position remains vacant. “Succession is the main risk,” said James Kwate, CEO and co-founder of Qantara Asset Management, whose company specializes in investments in African sovereign bonds.
Source: Bloomberg
