According to Renault Group, auto sales for the first two months of 2015 came in at 617 units, an increase of 7.9% year-on-year (y-o-y). As such, we maintain our growth forecast of 7.5% in 2015 (compared with 0.5% in 2014) on the back of stronger private consumption in Cameroon. Indeed, our Country Risk team forecasts real growth in private consumption to pick up to 6.5% in real terms in 2015 compared with our estimate of 5.3% in 2014. At the same time, the substantial decline of global crude oil prices since June 2014 and our Oil & Gas Team's forecast for Brent crude to remain subdued, trading in the USD40.0-65.0/bbl range in 2015 supports our optimistic forecast, as it represents a substantial tax cut for consumers. Low interest rates, which we expect to come in at 2.50% by end-2015, will marginally lend support to vehicle sales. Over the 2015-2019 period, we forecast auto sales to grow at an annual average of 7.1%, which will see sales reach 5,286 units in 2019.
We forecast fixed capital investment to grow at an average rate of 7.2% over the 2015-2019 period. This will boost demand for commercial vehicles (CVs), as explained further below. Capital-intensive drivers of headline growth are unlikely to employ many Cameroonians and since so many of the new mega-projects are foreign owned, we do not anticipate them having a major impact on domestic consumption. Instead, we believe job growth - a key driver of private consumption growth - will come from growth in retail and telecoms sectors, as well as some sectors of agriculture.
A marked uptick in infrastructure spending (with the government increasingly turning to China in its development efforts), and construction projects in particular, shows potential not just for CV demand, which often correlates with infrastructure investment, but also for the improvement of the country's roads to accommodate increased vehicle use. Road transport accounts for around 70% of the country's transport network but is severely constrained by the poor state of the roads.
Although in November 2012, Chinese auto manufacturer Futian Automobiles announced plans to invest USD500mn to construct a production plant in Cameroon, BMI believes a number of barriers exist to investment in Cameroon and we are doubtful on the likelihood of this project being completed.
Indeed, the country suffers from a weak business environment, consistently scoring near the bottom of business indices, such as those produced by the World Bank and the World Economic Forum. To an extent, this is due to weak infrastructure and overly burdensome regulations, so the country may improve its standing over the next 10 years. However, infrastructure is already a (relative) strength for Cameroon, mitigating the potential gains. Also holding down the business climate is widespread corruption and weak rule of law. With little likelihood of an upheaval in the ruling political class, we see few prospects for fundamental reform in these areas.
Additionally, Cameroon's new vehicle market is a fraction of the size of some of its larger regional neighbours, but its growth rate picked up significantly in 2013. Vehicle ownership is still low by regional standards and is expected to remain below 15 vehicles per 1,000 people during our five-year forecast period to 2019, which suggests there is not the same level of middle-class development as in some of the bigger Sub-Saharan African markets. Several economic episodes have reduced demand for new cars in favour of cheaper second-hand alternatives. These include the economic crisis of the 1980s, the franc's devaluation and the reduction in civil servant salaries in the 1990s.