Cameroon Restricts Multinationals’ Use of Contractors

Cameroon’s government has issued two new rules that impact how multinational companies can use contractors in the country.

Mandatory local partner quotas

Cameroon’s new rules for subcontracting require foreign-based and large corporations that offer services in the country to reserve at least 40% of their total contract value for local subcontractors. Additionally, small and medium-sized businesses that are majority-owned by Cameroonian nationals must be prioritized in the awarding of contracts.

Businesses are allowed to bypass the rule for up to six months if they can formally prove that no local business has the technical capacity to perform the required work.

Upfront cash advance obligations

Cameroon has also enacted a rule that prohibits companies (prime contractors) from forcing their subcontractors to pre-finance a project in full. These companies must now pay an advance of at least 30% of the contract value before the subcontractor begins work, and the subcontractor must secure the advance with a valid bond. Global contract templates that use deferred payment terms or “pay-when-paid” clauses are no longer considered valid.

The government is assigning inspectors to conduct unannounced corporate audits and spot checks. In the case of both rules, noncompliance can result in steep penalties, and businesses that are caught using noncompliant contracts can face fines that are scaled to the value of their project. Noncompliant companies may also be disqualified from operating in the market.

Source: Dentons