Can the Devaluation of the CFA Franc pose any Challenges for Public Procurement in CEMAC Countries?

The issue of the devaluation of the CFA Franc, a common currency used by CEMAC Countries, is increasingly sparking debates. This question is not only economic but also impacts strategic sectors like Public Procurement, its financing, and execution. Devaluation could have profound consequences on these processes, particularly concerning bank financing, payment management, and the handling of Interest on late payment. Furthermore, the commitments of the Central African Economic and Monetary Community (CEMAC) regarding the ninety (90) day deadline for Public Procurement payments appear to be difficult goals to achieve, creating significant challenges for Bidders and Investors.

1.???? The Financial Stakes of the Devaluation of the CFA Franc The devaluation of the CFA Franc could directly affect the costs of Public Procurement contracts. A devaluation results in a loss of purchasing power for local businesses and economic actors. Bidders, whether local or international, might see the cost of materials, equipment, or services rise, as devaluation makes imports more expensive. This could lead companies to reassess their interest in government-funded projects or projects financed by international institutions using the CFA currency. Banks, which are key players in Public Procurement financing, could also be affected. Devaluation could put pressure on interest rates, complicating access to credit. Local banks may reduce their financing offer for public procurement if they anticipate increased monetary instability.

2.???? The Role of Banks in Public Procurement Financing Banks play a crucial role in financing Public Procurement contracts. However, economic tensions resulting from a potential devaluation of the CFA Franc could introduce increased risks for these financial institutions. If devaluation weakens the stability of CFA zone economies, banks may be less willing to finance new public projects, on the premise that returns on investment might not be guaranteed due to currency instability. A lack of confidence in the monetary system could also discourage foreign investors, limiting private sector financing opportunities. Bidders, particularly in sensitive sectors like infrastructure and energy markets, might face a scarcity of funds necessary to carry out projects.

3.???? Payment Deadlines and Interest on Late Payment .One of the major issues with Public Procurement in Central Africa is the adherence to payment deadlines. The CELAC Convergence Ratio provides that the settlement of bidders' claims should occur within 90 days after receiving the invoice or the completion and reception of work. However, this rule is rarely respected. Payment delays have significant consequences for companies, which must bear additional financing costs or penalties due to delays. Interest on Late Payment is a legal compensation for such delays, but its implementation remains uneven and hard to track. Bidders often lack the means or capacity to effectively follow-up the management of interest on late payment . Non-compliance with payment deadlines creates a climate of mistrust towards public institutions and discourages some bidders from participating in public tenders.

4.???? The Impact of Payment Delays on Bidders Payment delays not only affect bidders' profitability but also create an uncertain economic environment that limits the attractiveness of Public Procurement. Bidders may turn away from Public Procurement in favor of other more profitable or stable opportunities. This is especially true for small and medium-sized enterprises (SMEs) that rely heavily on the timeliness of payments to maintain liquidity and ensure the continuity of their operations. The lack of transparent monitoring of payments and the non-compliance with contractual deadlines could therefore discourage bidders in the long term, as they cannot rely on the State to honor its commitments. This situation may lead to reduced competition in public tenders, which could increase project costs for governments.

5.???? CEMAC Convergence Rate and Public Procurement Management Through its economic convergence program, CEMAC strives to promote harmonized practices in the management of Public Procurement and payments within the Region. The goal is to ensure shorter payment deadlines and more rigorous management of public finances. However, the implementation of these principles is often uneven, with chronic delays in settling debts and a lack of coordination between different economic actors. The devaluation of the CFA Franc could further complicate the achievement of convergence goals. If the Region's economies are under additional pressure due to devaluation, States may have even fewer resources to meet their commitments to bidders. Furthermore, the difficulty of securing funding in a devaluation context will make it even more challenging to implement infrastructure projects and other public procurement contracts.

6.???? Conclusion: Will Bidders Turn Away from Public Procurement? The possibility of a devaluation of the CFA Franc, coupled with the inefficiency in adhering to payment deadlines and poor management of interest on late payment, could lead to a growing disinterest from bidders in Public Procurement in the CEMAC zone. The lack of predictability and stability in payments, along with the risks related to currency devaluation, would likely discourage businesses from engaging in these markets. If this trend persists, governments in the Region may find themselves in a situation where they struggle to finance their infrastructure projects, attract investors, and ensure the completion of their development plans. Strengthening payment mechanisms, better management of interest on late payment, and a more rigorous tracking of financial commitments could be solutions to restore confidence and revive investments in public procurement.

Berka Dzekem, IPRF, MMP, MCP, MFP -President of the Cameroonian Association of Public Procurement Practitioners (CAPPP),Lecturer Public Procurement, ENAM Cameroon.

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