BENIN Country Profile

General Information

The Political Climate


Benin is a constitutional multi-party democracy and continues to receive substantial donor assistance in relation to its Poverty Reduction Strategy Papers and associated anti-corruption programmes. Elections have been considered free and fair since the first were held in 1991 and political violence is rare, which is indicative of Benin's relatively stable political climate. Both the previous and the current President have continuously emphasised the need to render the country's political-administrative structures more transparent. However, according to observers such as the Bertelsmann Foundation 2008, corruption remains a prominent characteristic of the Beninese political system and of the distribution of public funds. According to the World Bank & African Development Bank 2007 (in French) 81% of households and 87% of companies considered political parties to be the most corrupt public institutions.

According to Afrobarometer 2007, everyday corruption is rampant in Benin and pervades most in daily interactions between citizens and public officials, taking several forms: commissions paid for illicit services; fees for public services (e.g., at health clinics); gratuities given to public officials to perform their duties; 'string-pulling' or using connections to access administrative services; levies at customs or police outposts; abuse of office; and misappropriation. Benin's former President, Mathieu Kérékou, initiated the fight against corruption and promoted several anti-corruption initiatives, while making the 'moralisation of public life' a key element in his political programme. However, the outcome of these initiatives was limited. Although there have been trials of judges and police officials involved in corruption, there have been few trials of higher level officials. In fact, reports indicate that no action was taken in connection with several prominent corruption cases, and critics complain that corruption charges are sometimes applied to silence political opponents.

Former President of the West African Development Bank Thomas Yayi Boni succeeded Kérékou as President in April 2006. The fight against corruption in the management of public affairs was the main theme of his electoral campaign, and his election reflected public dissatisfaction with the fight against corruption up to that point. After taking office, President Yayi Boni signed into law an official code of conduct for governmental officials. He and other high-ranking government officials publicly disclosed their assets, and an official financial audit was commissioned of all ministries and the main parastatals. According to the Bertelsmann Foundation 2008, the audit revealed a number of questionable practices and embezzlement as well as a general lack of transparency. Despite these developments, corruption remains widespread within all essential administrative and basic services, such as the judiciary, political parties, educational system, as well as public initiatives have so far failed to improve the integrity of the public administration. This is illustrated by financial scandals within both the police and the judiciary - political-administrative structures which should be combating corruption.

Business and Corruption

Benin has undergone vast political and economic transformations over the past several years. Yet, economic reforms have proven more uneven than political transformation. Although the basic institutional framework for a market economy has been increasingly strengthened, the economy remains dominated by the informal sector. There is a lack of consensus as to the exact percentage of the workforce that is employed in this sector: estimates vary between 80% and 95%. In any case, sources agree that the informal sector continues to play an important role in Benin's economy with both productivity and trade of SMEs and individual labourers operating in the informal sector accounting for upwards of 50% of the country's annual GDP.

There are several obstacles to attracting foreign investors in Benin. The most important obstacle, according to many observers, is the widespread corruption in the country, both petty (facilitation payments and small bribes) and grand (government, contracts). According to the World Bank & African Development Bank 2007 (in French), 58% of the households and companies surveyed in Benin rank corruption in the public sector as the most important concern in their daily lives, along with unemployment and inflation. Furthermore, 20% of household and company respondents earning an income declare that they spend a minimum of 1% of their annual income on unofficial payments to public officials. Companies are also affected by corruption in Benin, especially in applications for licences, permits and contracts with the state institutions. According to the World Economic Forum Global Competitiveness Report 2008-2009, companies identify corruption as the second most problematic factor for doing business in Benin, right after tax regulations. Furthermore, according to an official estimate, corruption costs companies 8.4% of their annual turnover. Another obstacle for doing business in Benin is complicated bureaucratic procedures. Companies should therefore expect to encounter corruption in many sectors: when dealing with government bureaucracy, at the Port of Cotonou, and when applying for water, electricity and telephone connections etc.

Foreign investment in Benin has, for the most part, entailed the purchase of interests in privatised companies by investors from Lebanon, India, Germany, France and other European countries. Foreign investment is reportedly subject to government approval, and part-Beninese ownership of privatised companies is prioritised by the government. Corruption in the political system is endemic and the diversion of funds and allocation of state resources through patron-client networks is widespread. The distribution of funds through these informal networks creates a non-transparent investment climate that discourages foreign investment. On the basis of the above, companies are urged to develop, implement and strengthen integrity systems and to conduct thorough due diligence before investing in or when already doing business in Benin.

Regulatory Environment

The government's commitment to combat corruption and to attract investment has resulted in a number of laws, regulations and measures to improve the business climate. The government has established a one-stop shop in order to simplify procedures for the start up of companies, registration, tax declaration and import licensing, thereby aggregating all the formalities facing a new investor in one place, the so-called Guichet Unique within the Centre des Formalités des Entreprises (CFE) of the Ministry of Trade (in French). However, according to the World Bank & IFC Doing Business 2009, the effects of this one-stop shop have been mixed and Benin performs relatively worse in relation to starting a company than reported in 2008.

Benin is member of the Organisation for Harmonisation in Africa of Business Law (OHADA). OHADA aims to ensure a secure legal environment through modernisation and unification of business laws for OHADA's 16 countries by the adoption of Uniform Acts. OHADA also established a common court of justice and encourages the use of arbitration for the settlement of contractual disputes. The adoption of OHADA's Uniform Acts has solved a number of problems that foreign investors previously faced when entering Benin, such as uncertainty and outdated legislation. Access the Lexadin World Law Guide for a collection of legislation in Benin (in French).

Despite these initiatives, the official procedures in Benin remain bureaucratic and inefficient. Some observers note that instead of addressing complicated problems, the government only addresses those that are relatively easy to manage. According to the World Economic Forum Global Competitiveness Report 2008-2009, companies identify inefficient government bureaucracy as a relatively serious problem for doing business in Benin. According to the same report, companies identify tax regulations and tax rates as the most and third most problematic factors for doing business respectively. Amongst business managers in the World Bank & African Development Bank 2007 (in French), 64% consider customs and regulations in general to be the most constricting problems for doing business. In customs, for instance, the slow and inefficient procedures mean that importers have to pay so-called 'normal extras' (charges for storage in customs, penalty fees for delays, etc.). As a result, importers frequently choose to bribe their way through the system. Regulations are reportedly not always enforced evenly or consistently. Foreign companies complain that they are held to higher regulatory standards than Beninese companies and, according to the US Department of State 2008, this is especially true for social security and labour regulations. The US Department of State 2008 advises companies to hire a notary public who understands the country's business laws in order to ease start-up facilities.

According to the US Department of State 2008, Benin has legislation that recognises property rights and both acquisition of and disposing of property are facilitated and protected in the law. The Bertelsmann Foundation 2008 shares this view, but differs slightly by concluding that property rights, although adequately defined, are not safeguarded in practice due to corruption. Moreover, due to the inefficient and corrupt bureaucracy, the Investment Code (in French) is difficult to implement in practice. There is no such thing as a separate commercial court system, so the settlement of business and commercial disputes is referred to the civil courts. Although there have been some rulings by judges which were not in favour of government interests, companies should note that the judicial system remains permeated by corruption.