Part I - An Overview of Economic and Institutional Constraints on Benin’s Development

This first part of the volume comprises three chapters that review the economic, social, political, and institutional development of Benin. Chapter 1 looks at the context in which Benin’s development has taken place, including geography, historical legacies, and social and political characteristics. Chapter 2 provides a macro picture of growth performances and their determinants, structural change, and social achievements since 1960. Together, these two chapters contain many useful pieces of information required for a proper understanding of the background against which all the subsequent chapters should be read. To facilitate this understanding, the conclusion at the end of Chapter 2 summarises the main lessons drawn from both Chapters 1 and 2. Chapter 3 focuses on the institutional obstacles to development based on quantitative and qualitative evidence.

1 The Spatial, Historical, and Socio-political Context

Jean-Philippe Platteau

This chapter is structured as follows. After providing basic information about the overall geography of Benin, Section I goes into the country’s history in order to examine whether some important legacies can be traced back to particular events or circumstances. Section II then looks at the issue of ethnicity and discusses its possible role in Benin’s recent performance. Section III proceeds by supplying a summary view of the political history of the country in the post-World War II era. Taking the discussion up from there, Section IV attempts to characterise the political system of Benin by describing the main mechanisms governing its operation. Section V concludes the chapter.

I Geography and History

A Geography

Benin, shown in Map 1.1 and formerly known as Dahomey (1890–1975), is a West African country located between Togo and Nigeria, with which it shares 600 and 700 km of border, respectively. Currently, the country includes twelve administrative departments: Alibori, Atacora, Atlantique, Borgou, Collines, Couffo, Donga, Littoral, Mono, Ouémé, Plateau, and Zou.

Map 1.1 Map of Benin

Source: Nationsonline.

In 2016, Benin had a population of 10,822,298 living in an area of 112,760 km². Its gross domestic product (GDP) was estimated at US$8,583 billion. Benin is therefore a relatively small country in comparison to its giant neighbour to the east, Nigeria, which is currently Africa’s largest economy in terms of GDP (US$404,653 billion) and population size (185,989,640 inhabitants). In addition, Benin possesses few natural resources except for agricultural land, and its biggest geographical asset is its direct access to the sea.

B Deep Historical Legacies

Benin is an extraordinarily varied mosaic of people and ethnic groups, as well as a place with a long legacy of all sorts of political entities, running from old kingdoms or empires (the Yoruba kingdoms, which centred on the Ife and Oyo, the Bight of Benin, the Allada kingdom, and its successor states the Dahomey kingdom and the Borgou kingdom) to principalities and microstates (possibly born of the breaking up of kingdoms or empires), which also coexisted with stateless areas dominated by non-hierarchised families and clans (particularly among the peoples bordering Benin). Because over the last ten centuries the country has been the locus of numerous waves of migration from neighbouring countries, it is a multinational state with strong links to its neighbours, and has porous and flexible borders considered from the standpoint of human settlement. Relatedly, with its direct access to the sea in its southern part, Benin has long been a nexus of trade networks and routes actively engaged in regional and even external commerce. It is therefore not surprising that although the kings of Benin seem to have been reluctant to supply either the quantity or the quality of slaves that the Portuguese wanted during the sixteenth century, Benin became an important basis for the transatlantic slave trade by the end of the seventeenth century when the demand for slaves intensified under the pressure of growing needs in the Americas (Fage, 2002, pp. 235, 266–67; Iliffe, 2007, pp. 78–80).

The kingdom of Dahomey was thus created in response to the Atlantic trade. It was first an offshoot of Allada, the then chief polity among the Adja-Ewe people together with the Bight of Benin (late fifteenth century). When Allada tried to control the intensive trade in slaves and firearms that began at that time, the Dahomey king conquered it (in 1724) and became the dominant local power, although it remained tributary to Oyo state (in present-day Nigeria). It was a more efficient authoritarian state than its predecessors and was politically stable (until its dismantling by the French colonial power). This was partly due to three factors: the royal succession was largely determined by primogeniture, the kingdom was closely administered through commoner chiefs and royal courts, and it was stridently militaristic and treated its enemies cruelly (Iliffe, 2007, pp. 148–49).

That account suggests that in addition to the absence of mineral resources, present-day Benin might suffer from two important problems: (1) a lack of cooperation due to strong ethnic diversity (along the line proposed by Alesina and La Ferrara, 2005); and (2) a lack of interpersonal trust due to the traumatic experience of slavery (as argued in Nunn, 2007, 2008). The situation nevertheless appears in a more positive light if two favourable elements of Benin’s legacy are emphasised: (3) a tradition of centralised state organisations with the associated political and administrative skills; and (4) long periods of active engagement in supra-local trade and commercial entrepreneurship.

It is impossible to determine whether the net outcome of these forces is positive or negative. In fact, it is not even clear how strong the effect of each of them is on the long-term development prospects of the country. We now elaborate upon the reasons behind our agnosticism, and this is done under several points corresponding to the earlier categorisation (plus a point concerning the availability of natural resources).

The absence of natural resources, mineral and non-mineral, is not necessarily a disadvantage for economically poor countries where democracy is immature in the sense that institutions are weak and democratic habits not well ingrained. A widespread view argues, on the contrary, that abundant resources are liable to slow down development in these countries owing to the so-called resource curse: by creating easily appropriable rents, resources that are highly valuable and physically concentrated tend to establish a narrow link between political power and economic gains, thereby encouraging political leaders to sacrifice the collective good for their own personal interests (see, e.g. Mehlum et al., 2006a, 2006b; Robinson et al., 2006).

Turning to (1), two main points must be made. First, if ethnic fragmentation may ignite tensions between different ethnic groups in a competitive environment, it may yield favourable effects when the groups possess complementary skills. Second, even in the presence of competition, the existence of a large number of groups, as is the case in Benin (and Tanzania), is much less damaging than situations of ethnic polarisation, such as those found in Rwanda, Burundi, or Kenya (see Esteban and Ray, 1994, 2008; Duclos et al., 2004). This matters especially in the sphere of politics, where the possibility of different inter-group coalitions and counter-coalitions may give rise to a spirit of cooperation more conducive to development than the ‘winner-takes-all’ approach that a polarised society typically fosters. More will be said about this when we turn to the political system.

The idea that slavery has left deep scars in the societies where it prevailed, undermining trust among people, has gained ground following the pioneering work of Nunn; see (2). Unfortunately, there is no firm evidence of this long-term impact in the case of Benin, which requires that confounding effects (such as ethnic diversity) are duly controlled for. As a first approximation, we would expect measures of trust to be of lower value for Benin than for African countries that did not suffer from the slave trade, at least on a scale corresponding to modern transatlantic commerce. Just to get a rough and preliminary idea, we compare Benin to three African countries that did not experience slave trading: Lesotho, Malawi, and Kenya. Kenya is probably the best comparator because, like Benin, it suffers from strong ethno-regional antagonisms. Employing data from the Afrobarometer (2011–2013 Round), we use several subjective indicators of trust and corruption, carefully distinguishing between interpersonal trust (Table 1.1) and trust in institutions (Table 1.2).

Table 1.1 Cross-country comparison of interpersonal trust: 2011–2013 Round (per cent)

	Benin	Lesotho	Malawi	Kenya
1. Do you think that most people can be trusted? Proportion of affirmative answers	32	5	20	9
2. Do you think that one must be very careful when dealing with other people? Proportion of agreeing people	68	94	80	90
3. Do you think that you should have no or little trust in your neighbours? Proportion of agreeing people	53	54	15	38
4. Do you think that you should have no or little trust in other people whom you know (other than relatives and neighbours)? Proportion of agreeing people	69	67	38	45

Source: Author’s calculation based on data from Afrobarometer.

Table 1.2 Cross-country comparison of trust in institutions: 2011–2013 Round (per cent)

	Benin	Lesotho	Malawi	Kenya
1. Do you have no or little trust in local government councils? Proportion of agreeing people*	41 (76)	40 (53)	13 (43)	59 (75)
2. Do you have no or little trust in members of parliament? Proportion of agreeing people*	48 (74)	32 (48)	31 (57)	47 (78)
3. Do you have no or little trust in courts of law? Proportion of agreeing people*	39 (45)	28 (19)	16 (18)	36 (28)
4. Do you have no or little trust in police officers? Proportion of agreeing people*	40 (70)	39 (65)	30 (69)	68 (63)
5. Do you think that all or most tax officers are involved in corruption? Proportion of agreeing people	54	19	27	40

Source: Author’s calculation based on data from Afrobarometer, World Value Survey.

* Between brackets are indicated the proportions of people who believe that all or most corresponding officers are corrupt.

What are the messages emerging from these two tables? First, in terms of interpersonal trust, Benin does not fare unambiguously worse, or better, than the three other African countries considered. Moreover, when we compare Benin with the rest of Africa in a regression framework, the ambiguity persists. More precisely, based on individual data, we compute regressions in which the dependent variable corresponds to each indicator, and the key explanatory variable is a dummy equal to one when the country is Benin and to zero when it is any other country belonging to the African continent. We also control for the gender, education, income, and residence (rural or urban) of the respondent. We then find that Benin exhibits relatively more interpersonal trust than other African countries when the first two questions mentioned in Table 1.1 are used as indicators, but relatively less trust when the last two questions are used.¹ This indicates that when the question of interpersonal trust is raised in rather abstract or general terms, the population of Benin is more confident than other African populations. But when the question is related to ‘concrete others’ (neighbours, relatives, etc.), the opposite is true. There are two possible interpretations here. First, the regression results can be taken as evidence that the population of Benin has more generalised trust, but less particularised trust, than other populations in Africa. Whether this is a superior outcome than the opposite situation is open to debate: if generalised trust is better for the operation of anonymous markets, particularised trust is critical for the smooth functioning of social networks that underlie many informal institutions in Africa. Second, and less advantageously, it could be said that Beninese profess more interpersonal trust when the question is raised in general terms, alludes to distant people, and refers to situations that have not been personally experienced, whereas they appear more suspicious as soon as the question makes concrete reference to known people and known situations.

Second, as far as trust in institutions is concerned, Benin appears worst only regarding courts of law (the difference with the second worst-ranked country is only one percentage point regarding members of parliament). Third, Benin fares worst, and neatly so, when asked whether judges or magistrates are corrupt (see the figures between brackets in question 3 of Table 1.2), or whether tax officials are corrupt (see question 5). Overall, Benin does not display a bright picture, but the situation is especially worrying with respect to the justice and tax collection systems.² Comparing Benin with the rest of Africa in a regression framework leads to the same conclusion in the sense that Benin’s people exhibit less trust in court magistrates and tax officials (questions 3 and 5 of Table 1.2). Yet, Benin performs relatively better if we look at trust in police officers (question 4). It also performs better if trust in institutions is measured by trust in local governments and members of parliament (questions 1 and 2).

The overall picture is therefore mixed. It appears bleaker, however, when the Afrobarometer data on trust are complemented by data from Transparency International’s Corruption Perception Index, which ranks countries according to the degree of perceived corruption in government and politics (corruption is defined as the abuse of public office for personal gain). Out of 176 countries evaluated in 2016, Benin ranked 95th, behind Senegal. Examination of the dynamics in the ranking over the period 2012–2016 points to slow progress: Benin’s score was 36 in both years, while Senegal moved from 36 to 64. The picture is again confirmed by firm surveys: as many as 84 per cent of companies consider corruption to be a major problem, with informal payments seemingly required for day-to-day operations such as requesting a telephone line and obtaining import documents or a trade licence (Benin, 2006, 2016; World Bank, 2016; MCA, 2012).

Let us now turn to dimension (3). Here, we would want to weigh the positive effect of a legacy of pre-colonial centralised state organisations against the negative effect of (French) colonisation. Under the former, Africans acquired some degree of administrative experience and skills in statehood, and it is a remarkable feat that the kingdom of Benin kept its polity intact until the very end of the nineteenth century. By then, the state-formation process was already well advanced in Benin (Fage, 2002, pp. 99, 270). Since the existence of more layers of hierarchy prior to contact with Europeans has been shown to be robustly associated with greater development today (Gennaioli and Rainer, 2007; Michalopoulos and Papaioannou, 2013, 2014), political history seems to favour development in the case of Benin. Under the latter, by contrast, Africans were submitted to a centralised and authoritarian system of government in which they became simple auxiliaries or, in the best cases, executive subordinates of French officers receiving their orders from a well-defined chain of command (Fage, 2002, pp. 410–12).³ It is only through assimilation, a formal process involving education in French schools, performing military service, formal forswearing of traditional and Muslim law and custom, and a minimum of French civilian employment, that locals could be elevated in the French colonial order. Only a tiny minority proved to be eligible. There are therefore grounds to believe that French colonisation undermined positive legacies of pre-colonial states in Benin, the kingdom of Dahomey in particular. Note that this line of argument goes against the idea that, compared to British rule, the legacy of French colonial rule is a positive asset for long-term development because the French colonial power encouraged state centralisation and strong bureaucracies, in addition to using French as a common official language and downplaying ethnic cleavages (Ali et al., 2019).

Factor (4) is probably the most indisputable long-term legacy that Benin can benefit from today. For many centuries, the country has enjoyed a well-organised trading system that is easily accessible from the sea, and fruitful trading relationships were established with the interior and with earlier European traders on the coast (Fage, 2002, pp. 106, 270). At times, like during the Benin kingdom (fifteenth and sixteenth centuries), the rulers felt so self-confident that they could choose to virtually cut the country off from contacts with Europe: ‘European trade was something it chose to do without’ (p. 236). A major impetus to trade came with successive waves of migrants from Yorubaland (in present-day Nigeria), particularly under the Ife and the Oyo empires during the sixteenth to eighteenth centuries. According to Fage, the Yoruba developed a remarkably strong sense of identity and cultural specificity, aided in this, somewhat paradoxically, by the fact that they were open to Christian missions, and hence to Western education, as early as the 1840s (p. 99). They became specialised in trade in the first part of the nineteenth century and quickly understood that an open society that fosters free competition and establishes links with the outside world can offer considerable opportunities for men of skill and initiative (p. 346). Moreover, the Yoruba have always provided an organic link to Nigeria, from which they originated, maintaining special relationships with the states of Kwara, Oyo, Ogun, and Lagos. (Other ethnic groups nurture persisting links with Niger, Burkina Faso, and Togo: the Maori with Niger, the Gourmantche of northern Benin with the eastern part of Burkina Faso, and the Adja with Togo.) What bears emphasizing is that Benin enjoys the presence of groups other than the Yorubas, which have well-established experience in trade and long-distance trade. Thus, the Waranga are caravan merchants from the Bariba northern group who have a long tradition in linking present-day Ghana and Burkina Faso to northern Benin.

To end this overview of the historical legacies of Benin, it is important to note that a tight interrelationship between slavery, commerce, and strong political organisation has always existed in West Africa (and in other parts of the continent), so it is meaningless to assess the impact of these three factors separately. The logic, which evokes the argument developed by Domar (1970) and Mathur (1991), has been succinctly put as follows by Fage (2002, pp. 268–70). People were scarce relative to land and other natural resources. Confronted with this situation, traditional village societies based on ties of kinship and subsistence agriculture were unable to take advantage of all the opportunities arising from growing external demands for scarce and valuable commodities such as gold, copper, and ivory. There were too few people to act as traders and carriers, as workers in the mines, to provide the political organisation and military force required for the safe transportation of goods, and to supply food and other support for those withdrawn from the subsistence sector to engage in these new activities. The solution lay in the creation of kings powerful enough to recruit labour and to extract tribute, and forced recruitment meant that ordinary men and women were converted into slaves, clients, or tributaries. In West Africa, some slaves were employed simply as agricultural labourers on the estates of kings and other Big Men. More generally, however,

they were regarded as additions to the social group headed by their master and, although they could never wholly escape the stigma of their slave origin, in course of time they and their descendants – especially if these came by marriage with a free member of the group – became integral parts of it, acquiring or inheriting property much like other members. At the lowest levels, then, they became members of the family unit. At the highest levels they could become trusted traders or soldiers or court officials.

(Fage, 2002, pp. 268–69)

The latter, rather paradoxical situation occurred when old slaves were considered reliable agents by their masters: their slave origin indeed meant that their authority was solely a reflection of their master’s authority, which they could not therefore usurp for themselves.

The main function of slaves thus consisted of relaxing the labour constraint that prevented kinship groups or large families from seizing upon valuable economic opportunities. With the forced mobilisation of labour came the growth of political authority, and both processes largely pre-dated the expansion of transatlantic slave trading, the main effect of which was to intensify them.⁴ If slaves could be exchanged for the desirable goods brought by long-distance travellers and even exported to distant lands in the Americas, the general pattern was different. They were less valued as traded goods than as a resource needed to produce goods for export, and to support the economic and political superstructures that trade required to flourish (Fage, 2002, p. 269).

II Ethnicity

As underlined in the previous subsection, ethnic diversity is a key feature of Benin’s socio-historical landscape. Here, we elaborate on this feature by supplying population statistics that allow us to have an idea of the relative importance of the main ethnic groups forming Beninese society. Afterwards, we examine whether there is a match between these population shares and political representation. We will then be ready to look in more detail into the recent political history of the country.

The Beninese population is made up of nearly 100 ethnic groups, the majority of which are found in the south and in the Atacora Mountains in the north-western parts of the country. During the 1961 demographic census, 47 ethnic subgroups were identified that were regrouped into 12 broad ethnic families. However, subsequent national censuses (in 1979, 1992, 2002, and 2013), although they counted around 56 ethnic subgroups, opted for a reorganisation into nine broad families only: Adja, Fon, Yoruba, Bariba, Dendi, Otamari, Yao, Fulani, and a residual category of other minority groups. Table 1.3 shows the evolution of population shares of Benin’s main ethnic groups between 1992 and 2013. The Fon (and related ethnic groups) clearly form the dominant group, followed by the Adja and the Yoruba, the two main migrant groups. In terms of dynamics, we see that the population share of the Fon has slightly decreased over the period considered, whereas that of the Fulani has significantly increased. We must nevertheless worry about the reliability of statistical records, since the Fulani are nomadic herders and it is quite possible that their movements into and out of the country may be very imperfectly measured, and that measuring problems have been (partly) corrected during recent years.

Table 1.3 Cross-country comparison of trust in institutions: Distribution of the population by ethnic group and growth rates, 2002–2013

	Relative shares of ethnic groups in the total population (%)			Growth rates of the population of each group (%)
	1992	2002	2013	2002–2013
Benin
Size	48,73,963	67,69,914	10,008,749	3.52
Ethnic groups
Adja and related groups	15.7	15.2	15.1	3.42
Fon and related groups	42.5	39.2	38.4	3.32
Bariba and related groups	8.7	9.2	9.6	3.92
Dendi and related groups	2.8	2.5	2.9	4.91
Yoa and Lokpa and related groups	6.2	7	4.3	−0.74
Fulani	3.8	4	8.6	10.81
Gua or Otamari and related groups	6.2	6.1	6.1	3.59
Yoruba and related groups	12.2	12.3	12	3.33
Other ethnic groups	1.2	1.4	0.9	−0.16
Foreign	0.7	2.1	1.9	2.57
Not declared	*	1	0.2	−10.81
Total	100	100	100

Source: Author’s calculation based on data from Institut National de la Statistique et de l’Analyse Economique du Bénin (INSAE), General Population and Housing Census (RGPH).

^*Percentage less than 0.1.

It is worth noting that among all the ethnic groups, three are widely distributed spatially: the Fon, the Yoruba, and the Adja are present in at least nine out of the twelve administrative departments into which the national territory has been divided. This means that major migrant groups are not heavily concentrated in some limited parts of the country. It is noteworthy, still, that in terms of population numbers the Yoruba are mostly present in the southern part of Benin; that is, close to the coast. This is consistent with their aforementioned specialisation in trading. On the other hand, the Otamari, who are agriculturists, are an important group inhabiting the north. The fact that they represent much less than 10 per cent of the total population reflects the low population density observed in that part of the country, as compared to the centre and the south.

Benin is characterised not only by ethnic but also by religious diversity. Catholicism and Islam are the two dominant religions and while Catholicism was the most important religion in the early 1990s, it was overtaken by Islam in 2013, probably as a result of higher fertility rates among Muslim populations. In 2013, about 53 per cent of the Beninese population declared their adherence to one of these two big monotheistic religions. Another interesting dynamic observation is the rapid rise of evangelical and charismatic churches, mostly from Protestant affiliations, and the displacement of traditional religions (mostly Voodoo) that they are causing. Finally, and not surprisingly, ethnicity and location, on the one hand, and religion, on the other hand, stand correlated. Most strikingly, people living in the north (the Otamari and the Fulani, in particular) tend to be Muslim, whereas those living in the south tend to be Christians of the traditional Catholic or evangelical Protestant type.

We have already mentioned, in general terms, the delicate issue of how ethnic diversity bears upon cooperation practices among the people of Benin, emphasising politics. We would therefore like to know how, in the specific case of Benin, politics is affected by ethnic diversity. Figures 1.1a–1.1d show how key political functions, heads of executive and ministerial jobs, have been apportioned to different ethnic groups over a forty-six-year period subdivided into two subperiods, 1960–1989 and 1990–2006. The overall picture is of a rather fair representation of the main ethnic groups and the main regions at the highest levels of power. The dominant group, the Fon, is under-represented at the level of the presidency but is well represented at the level of ministerial jobs. The Otamari, a group that is comparatively small nationwide but important in the north, has a disproportionate share of the allocations of the highest executive position. Finally, the Adja and the Yoruba, the two groups that are numerically dominant behind the Fon, are well represented among government members.

Figure 1.1a Political representation of main ethnic groups: Ethnicity of the executive, 1960–1989 (per cent)

Source: Author’s calculation based on data from Tossou (2010).

Figure 1.1b Political representation of main ethnic groups: Ethnicity of the executive, 1990–2006 (per cent)

Source: Author’s calculation based on data from Tossou (2010).

Figure 1.1c Political representation of main ethnic groups: Ministries, 1960–1989 (per cent)

Source: Author’s calculation based on data from Tossou (2010).

Figure 1.1d Political representation of main ethnic groups: Ministries, 1990–2006 (per cent)

Source: Author’s calculation based on data from Tossou (2010).

The question now is whether this situation reflects a political arrangement devised to ensure ‘ethnic peace’ and political stability in the country. The fact that Benin is widely regarded as a pioneer democracy in Africa (see, e.g. Fage, 2002, p. 536) could be related to a sense of compromise and respect for diversity, as epitomised in the distribution of power among dominant ethnic groups. An alternative interpretation of the facts is nevertheless possible: the distribution of power does not result from constitutional rule or an informal, non-official mechanism of power rotation, but is the outcome of a fierce struggle for power among contenders whose levels of strength are not too different and are variable over time. A careful look into the recent political history of Benin suggests that, unfortunately, the second interpretation is probably closer to the truth. The need for alternance has typically been brought to bear by political showdowns and secret dealings rather than through a transparent and well-accepted mechanism.

Before going into the details of the political history of Benin, an important remark deserves to be made. Despite the appearance of significant ethnic diversity, the socio-political life of Benin is structured around essentially four groups: the Adja-Fon, the Bariba, the Yoruba, and the people from the Atacora. However, and contrary to what this categorisation might suggest, it is not the tensions between those four groups that cause the most serious problems for harmonious social fabric in the country. What creates instability are the strong and deep-rooted divisions inside a single ethno-linguistic family, namely the Adja-Fon. More specifically, there is persistent hostility between the Fon of Abomey, the Goun of Porto-Novo, and the Mina-Adja coming from Mono.⁵ Sometimes the hostility dates back to the colonial period. This can be seen in the antagonism between the first two subgroups: the people of Abomey have never forgotten the treason of their ‘brothers’ from Porto-Novo who joined with the French colonial forces to conquer Abomey in the late nineteenth century.⁶ The internal divisions of the Adja-Fon group are reflected at the political level. Thus, the political configuration prevailing in southern Benin is determined by the fierce struggles between three groups – PRD–Porto-Novo, Renaissance du Benin–Abomey, and PSD–Mono – which are themselves the scions of old parties – the PRD of Apithy in Porto-Novo, the UDD of Ahonmandégbé in Abomey, and the Mono movement directed by Adrien Dégbéh. How the tensions between these three branches of the same family have been settled politically since the time of independence, whether in an authoritarian or a democratic setting, depends on the key refereeing role played by the other three ethnic groups.

III Landmarks In The Post-1944 Political History

To have a good grasp of the interactions between political institutions and economic development in Benin, three key periods in the country’s political and economic history need to be distinguished. Chronic political instability was the hallmark of the years 1944–1972, a Marxist–Leninist revolutionary regime ruled during the period 1972–1989, and the period from 1990 to the present has been characterised by a democratic renewal that soon became perverted by narrow links between state power and business interests.

A Political Instability before and after Independence: 1944–1972

Dahomeans began to take an active role in the modern political life of the country around 1944, at the time of the Brazzaville conference when France ruled out colonial self-government and instead decided that each colony would be given electoral representation in the French Assembly in Paris (Iliffe, 2007, p. 242). The first Beninese intellectuals, educated in French schools and universities (in Dakar and France), were assuming leadership in a national movement that was tainted by ethno-regionalism from the very start. The multiparty political system in place was highly unstable owing to intense personal rivalries between strong figureheads representing three main regions and their associated political legacies: the north (around Parakou) led by Hubert Maga, the centre (around Abomey) led by Justin Ahomadégbé, and the southeast (around Porto-Novo) led by Sourou Apithy. It is in this context dominated by personal confrontations and fragmented identities that the Republic of Dahomey was proclaimed in December 1958, the elections to the first National Assembly took place in April 1959 (where no party won a majority), the first presidential election was organised in July 1960, and the country’s independence was declared on 1 August of the same year after some seventy years of French colonisation. The newly elected president was Hubert Maga from the northern region, who obtained the support of the party standing for the central region.

As was the case in other newly independent French-speaking countries, the early rules governing elections ensured that nationalism took a predominantly constitutional form, and the transfer of power from France to its ex-colonies took place peacefully. This contrasts with East Africa, where violence played a crucial role, and with Congo, where the Belgians did not build representative institutions or governmental training before granting independence (Iliffe, 2007, pp. 255–56). In West Africa in general, and in Benin in particular, the new political elite thus chose to introduce a system of liberal democracy in line with the model used in France. The new constitution, adopted in 1959, was largely inspired by the French Constitution of 1958. It provided for a parliamentary system with a president at the head of the country, but also with a prime minister responsible to the parliament. Moreover, it set out fundamental rights for citizens, such as freedom of expression, association, and the press.

Unfortunately, the country’s first twelve years of independence were turbulent, marked as they were by the frequent alternation of military and civilian regimes. In fact, during the period between 1960 and 1972, Benin was at a stage of intense ethnic and regional tensions, social movements of varying levels of intensity, abuses of power of all kinds, political intrigues, and incessant disputes between the country’s three regional leaders. Unlike several newly independent countries in Africa, the Republic of Benin did not witness the emergence of a charismatic leader able to dominate the national political scene. Genuine Beninese citizenship hardly existed, as voting behaviour was primarily driven by powerful patron–client networks that were largely based on ethno-regional identity. Fragmented loyalties, adroitly manipulated by the political leaders, had the effect of fuelling instability and, in some cases, fostering violence.

Worker and student unions could perhaps have improved the situation by helping to transcend traditional identity feelings in the name of cross-cutting social interests. In practice, however, many union leaders were easily seduced or co-opted by the political Big Men, and unions gradually became convenient platforms from which ambitious people could opportunistically rise to positions of political responsibility inside the ethnically defined party machines. Any other tactic was met with harsh repression meted out by public authorities fearful of demonstrations that lay outside of their control. In the end, the co-option tactic prevailed, and trade unions largely ceased to be independent bodies in the country’s political landscape.

These were not ideal conditions in which to design and implement public policies to promote national development. The instability of political rule made long-term planning impossible, while the existence of various centres of state power and the quasi-absolute control exercised by the three regional leaders over entire areas of the country complicated cooperation, coordination, and control. Consequently, political decisions related to development strategic choices and investments were often deferred, and the state apparatus was often unable to function. Discouraged by this malfunction of the political system, civilians were sometimes prompted to call on men in uniform to restore order.

For much of the period, the doctrine of socialism/collectivism was the official political ideology, thus laying the ground for the subsequent regime. An important element of socialist politics was the introduction of ‘collective fields’ in the early 1960s. Like in Nyerere’s ujamaa communities in Tanzania, a collective field was defined as the field of a village community managed under the responsibility of the village council and under the supervision of the rural departmental committee. This implied that the proceeds from crop sales accrued to the village budget. We know little about how effectively this doctrine was translated into fact, and whether it was equally endorsed by the three regional bigwigs. However, we can surmise that the simple fear or anticipation of its implementation would have discouraged private investment in agriculture.

B A Marxist–Leninist Revolution: 1972–1990

On 26 October 1972, Lieutenant-Colonel Mathieu Kérékou, from the northern region, undertook the sixth military state coup in Benin. Two years later, he became the new president of the republic, and officially opted for scientific socialism based on Marxism–Leninism as the political doctrine to guide the country’s development. This involved the nationalisation of production units and the development of collectivism, the creation of a single political party (the Parti de la Révolution Populaire au Benin, or PRPB), the creation of a single workers’ organisation, a single women’s and a single youth organisation, and a change of national flag. This period also saw the introduction of Marxist tenets into public discourse and official documents, with special emphasis on the leading role of the party, democratic centralism, and state economic interventionism, particularly in the agricultural sector, where massive investments were to be made in order to create food self-sufficiency. Fundamental freedoms were restricted, and a new constitution establishing the People’s Republic of Benin was drafted and adopted.

It is only when compared to the first twelve years of independence that the revolutionary period (between 1972 and 1989) can be said to have promoted relative political stability. There were, indeed, numerous attempts to overthrow the government, sometimes coming from military quarters themselves (January 1977). The turmoil was not surprising given the poor economic performance of the new regime, coupled with its propensity to nurture corruption and rent-seeking. Thus, a series of investigations into parastatal organisations revealed the same problem of top-down corruption and widespread inefficiency. According to Chris Allen (as cited in Meredith, 2005, p. 278): ‘The institutions were found to be hierarchical, authoritarian, and highly bureaucratic, leading to failure to perform essential tasks, to waste and inefficiency. The personnel, apart from being in many cases unqualified or ill-qualified, tended to be idle, undisciplined, arrogant and above all corrupt’. Fraud was especially pervasive in the banking sector, with dramatic consequences for the whole economy. As pointed out by Meredith (2005, p. 387), Kérékou and his cronies ‘had looted the state-owned banking system so thoroughly that nothing was left to pay the salaries of teachers and civil servants’. It is as a result of large unsecured loans awarded to members of his inner circle and the bogus companies they had set up that three state-owned banks went bankrupt in 1988. And, in an almost surrealist manner, his closest adviser, a Malian marabout known as Mohammed Cissé, took ‘the habit of sitting in the manager’s office at the Commercial Bank, transferring millions of dollars by telex to his bank accounts in Europe and the United States’. It is therefore not surprising that the draining of all liquid funds of the entire state banking and credit system eventually caused the disruption of all current business activities, whether in the production or trading sectors (Meredith, 2005, pp. 387–88).

Groups of citizens, civil society organisations, trade unions, and underground political parties started to express their growing frustrations about the suppression of freedoms, corruption, months of salary arrears, and deteriorating living conditions in the country. In January 1989, a student protest over unpaid grants triggered a general mobilisation against Kérékou’s regime that involved teachers, civil servants, workers, and church groups. The army did not keep quiet and was bubbling with plots. Unpaid soldiers did not hesitate to hijack shipments of banknotes sent in from abroad to alleviate the general economic crisis. Only Kérékou’s elite Presidential Guard, drawn exclusively from his northern ethnic group, remained loyal to the regime (Meredith, 2005, p. 388).

The regime was thus compelled to open up, especially because to the internal demonstrations were added external pressures from international financial institutions and donors in a context of relaxed geo-political relations at the world level (around the end of the Cold War). When Kérékou asked for Western aid to pay salary arrears, he was turned down. Under these mounting pressures, he abandoned Marxism–Leninism as an official ideology and, still expecting to manipulate events, proposed a national ‘Conférence des Forces Vives de la Nation’ to find a solution to the deadlock. That solution was to take the form of constitutional reform. Lasting nine days from 19 February 1990, the National Conference brought together 488 participants from all walks of life (business, professional, religious, labour, and political groups), including the so-called enemies of the revolution who were living in exile at the time.

Counter to Kérékou’s expectations, the conference proceedings, broadcast live on radio and television, consisted of a severe indictment of the venality and corruption of his regime. In a dramatic turn of events, ‘the delegates, presided over by Archbishop Isodore de Souza, declared themselves to hold sovereign power, suspended the constitution, dissolved the National Assembly, appointed a former World Bank official, Nicéphore Soglo, as prime minister of an interim government and laid down a schedule for elections’ (Meredith, 2005, p. 389). The National Conference adopted a new constitution on 11 December 1990, which re-established liberal democracy and the market economy in Benin. In 1991, in a presidential election considered free and fair by international observers, Kérékou – who had stayed on as interim president – was decisively defeated by Soglo. Unlike what his military background might have led us to expect, Kérékou accepted the voting verdict and ceded power to his political rival. As a result, Benin ‘became the first African state in which the army was forced from power by civilians and the first in which an incumbent president was defeated at the polls’ (p. 389).

C Democratic Renewal: 1990–2016

As soon as the Renouveau Démocratique (Democratic Renewal) was initiated, a series of intense and protracted struggles for power broke out between Africa’s Big Men and opposition groups determined to oust them. The rules of the old game were quickly restored, and key figures of the opposition, former ministers, and members of the elite were motivated less by democratic ideals than by their determination ‘to get their own turn at the trough of public power and money’ (Meredith, 2005, p. 389). Many Big Men were able to outmanoeuvre the opposition and remain in power, resulting in the disillusionment of many ordinary people with the Democratic Renewal and the oft-heard complaint that it had not changed political life in the country. Although there was certainly less repression and more possibilities existed to express dissent, the same elites (the ‘crooks’) were still in control (p. 390).

In this old game, all sides continued to rely heavily on erstwhile loyalties for support, as attested by the fact that in the 1991 election, northerners voted massively for Kérékou, while a very large majority of southerners voted for Soglo. Thus, neither ideology nor policy nor class mattered at election time. In the words of Meredith again: ‘After seventeen years of “northern” rule [under Kérékou], what many southerners had in mind was not so much the notion of Renouveau Démocratique as the need for alternance – a political changeover: their turn was due’. As for people in the north, Democratic Renewal meant that ‘hated southerners were in charge’ (pp. 389–90). It is both puzzling and revealing that Kérékou’s discomfiture in the 1991 election proved temporary. Five years later, in the 1996 presidential election, the people expressed their discontent with the austerity measures Soglo had adopted, and they voted the former dictator back into office (Fage, 2002, p. 536).

Looking over three decades of Democratic Renewal (1990–2017) and comparing that period with the years 1960–1972, there is no doubt that Benin has succeeded in creating a good measure of political stability in the sense that, until recently, state power has changed hands in a relatively smooth and peaceful manner (with a power shift occurring in half of the presidential elections). Regular elections (six presidential elections, seven legislative elections, and three local and municipal elections) have been held according to the constitution, even though their organisation sometimes suffers delays. Also, fundamental freedoms are well protected, and democratic institutions laid out in the constitution have been gradually put in place.

Behind the democratic institutions, however, an unhealthy game is being played in which Big Men or political patrons exploit identity politics and use their network-based leverage to promote their own economic and political interests. Because the patron–client networks do not strictly coincide with ethno-regional boundaries, and probably less so than before, the north–south divide is not the only fighting line around which the sharing of political spoils is decided. The fact of the matter is that powerful informal actors on the political scene are the leaders of subgroups of their own regional and ethnic entity, which often means clans or subclans. In vying for political influence, they seek alliances with other Big Men with whom they can define common interests, at least in the short or medium term. Political competition of a factional nature thereby ensures that coalitions made of different ethno-regional identities come to form the ruling government or the opposition.

D From 2016 Onwards: Towards a Regime Change?

The year 2016 appears to be a landmark in the recent political history of Benin. As a matter of fact, the presidential election that occurred in that year saw the victory of one of the most important businessmen in the country, Patrice Talon. His business career started in the provision of inputs for the cotton sector, where he quickly acquired a dominant position. His takeover of the cotton industry then proceeded with the creation of ginning factories at the time the cotton sector was liberalised in 1990 and later, and with the acquisition of the factories initially operated by the national company Société Nationale pour la Promotion Agricole (SONAPRA), which was dismantled in 2008. The former operation owed much to the support he offered to the election of President Soglo in 1991, and the latter to his support of President Yayi in 2006. Thereafter, thanks to his support for the re-election of Yayi in 2011, he was also able to secure the control of the Programme of Verification of Imports (PVI), an agency that assesses the value of imported goods. He thus gained considerable control over the Beninese economy and the corresponding rents.

As a result of a serious conflict with President Yayi shortly after his re-election, the PVI licence and a portion of the ginning factories were taken away from Talon’s control. The second measure was vindicated as being part of a move to re-nationalise the ginning and commercialisation of cotton. There are good grounds to believe that the conflict with President Yayi prompted Talon to stand as a candidate in the 2016 election, which he won with the support of a rival Beninese tycoon, S. Ajavon. In this instance, the business elite defeated the political elite in the political arena, most likely because the former was no longer able to control the latter through standard levers.

Soon after Talon took power, his business empire regained the PVI licence and the ginning factories, while the cotton sector was re-privatised. Talon’s grip on the cotton sector, the backbone of Benin’s economy, is almost monopolistic. As for his control over imports, it is equally strategic given the importance of Benin’s re-export activity towards Nigeria. On the political front, the rise of Talon to supreme power also constituted a breakthrough. First, as we explain in the next section, he decided to reorganise or rationalise the political landscape by drastically reducing the number of political parties. But he did it in a way that throws suspicion on his real intents, since the consolidation of political parties blatantly benefited him. Second, Talon has obviously adopted the style of ‘iron fist’ rule, which reflects his admiration for enlightened despotism. Whether this political system will cause a surge in Benin’s economic development is a crucial question that we address shortly, at the end of the next section.

In the following section, we elaborate on the characteristics of the post-Marxist political system of Benin, stressing the tight links between business and politics that lie at its heart.

IV Characterising The Political System Of Benin: Patrimonialism With Multiple Oligarchs

A General Considerations

Patrimonialism means that state power and private business interests are tightly interpenetrated, implying that a large portion of state resources are privately appropriated and rent capture is the main objective of political contenders. Accumulation of wealth is largely conditional upon access to political power. In the purest form of patrimonialism, the ruler does not make any distinction between the state budget and his private purse, which are merged for all practical purposes. In more common forms, he uses any possible stratagem to embezzle public money, distort public contracting, extort money and assets from private agents, and appropriate national resources or the rents flowing from them.

Patrimonial power may be conferred according to some pre-determined rule (such as dynastic rule) or through fierce competitive struggles. In the case of sub-Saharan Africa, as many political scientists have pointed out, these struggles oppose Big Men who are heads of factions mobilised around ‘natural groups’ (clan, tribe, ethnicity, common birthplace, etc.) or networks formed in the course of schooling, professional, or other significant life experiences. To accede to supreme power, a Big Man needs to buy or co-opt leaders of at least some other factions or cliques, especially in contexts of strong ethnic fragmentation. This requires him to be wealthy enough to finance the related expenses, which come on top of the demands of the people at various levels of his own patronage network. Unless he satisfies these demands, he risks losing clients or supporters to rival factions or networks (see, in particular, Sklar, 1979; Bates, 1983; Bayart, 1986, 1989; Booth, 1987; Kennedy, 1988; Boone, 1992, 1994; Platteau, 2009; De Waal, 2015).

What must now be added to this conventional analysis of the African state is the role of business. In the unregulated set-ups of weak states, in which there are no established (and well-enforced) rules constraining the behaviour of Big Men, businesspeople are eager to control key power holders up to the highest level (i.e. the presidency). The former want to be able to exert pressure on the latter, so they enact decisions aligned with their particular private interests. Because they are typically reluctant to occupy the front stage of politics, which carries all the risks associated with visibility and publicness, they favour more discreet positions. Their preferred tactic consists of financing the costs of the political career of a Big Man (or two) considered to be reliable, and in return they expect to be granted exclusionary privileges and other advantages that can be used to promote the expansion of their business ventures. Only if this tactic appears too risky, as a result of great political instability or high unpredictability of political outcomes, do they opt for a more direct pre-emption of state power that may lead them to apply for the highest political responsibility themselves.

Two additional points deserve to be made. First, in a context of weak governance, the control of the state apparatus requires the placement of many loyal men (and, possibly, women) at key positions. A system based on vertical but highly personalised relationships follows from this requirement. Young (1986) thus noted that abstract bureaucratic jurisprudence was no longer sufficient after independence, since ‘hostile cliques and conspiracies had to be pre-empted by ensuring placement of personnel at critical points in the state apparatus’. Their fidelity to the ruler ‘was not simply formal, but immediate and personal’. What rulers did was to construct ‘an inner layer of control – key political operatives, top elements in the security forces, top technocrats in the financial institutions – whose fidelity was guaranteed by personal fealty as well as by hierarchical subordination’. Affinity of community or kinship was the surest basis for such fidelity, although it was to be coupled with personal interest, ‘the most reliable collateral for loyalty’. The key principle followed by rulers was thus to ‘reward generously and impose severe sanctions for any weakening of zeal’. The consequence was that public resources became a pool of benefits and prebends, while dismissal from office, confiscation of goods, and prosecution were the punishments awaiting those guilty of ‘slackness in their personal fidelity’. In this way, holders of high office became clients of the ruler individually, whereas collectively they formed a service class (Young, 1986, p. 38).

Second, in most instances there are several Big Men or oligarchs interested in capturing state power. As already suggested, coalitions between two or more oligarchs are possible, since the payment of compensatory transfers is common practice in the kind of political system considered. Nonetheless, as shown by Shapley and Shubik (1969) in a celebrated paper, as soon as there are more than two players the feasibility of such (Coasian) transfers does not guarantee the existence of a stable cooperative equilibrium. In fact, a coalition may well be succeeded by a counter-coalition, itself followed by a counter-counter-coalition so that an infinite sequence of unstable agreements unfolds. This is true even when several (quite restrictive) conditions that the Coasian approach requires are fulfilled: zero transaction costs, credibility of promises, symmetrical information about the gains and costs of feasible coalitions, and so on. We therefore have solid ground on which to argue that political instability is an expected outcome when access to state power is managed in a purely decentralised manner; that is, with no superior rule of the game applying to the contenders. If the number of contenders is two, instability is still likely, but will then certainly result from the violation of at least some of the aforementioned restrictive conditions.

B The Case of Benin

The case of Benin fits remarkably well with this characterisation. We now explain why in more detail.

There are several successful businessmen competing for the control of state power in order to advance their particularised interests. They strike alliances that nevertheless appear to be continuously shifting, as a result of which politics is highly unstable and accusations of treason and corruption are commonplace.

Thus, on the occasion of the 2006 presidential election, Patrice Talon, until then quite a discreet businessman, chose to support Thomas Boni Yayi, who had been governor of the West African Bank for Development, at the expense of Nicéphore Soglo, previously a World Bank official. This choice was made despite Talon’s tight links with the Soglo family. His calculation was presumably that Yayi’s chances of winning the election were higher, therefore providing a more secure way to expand his control over the cotton sector (he became known as the ‘king of cotton’ among the people). The plan worked very well, since several of Talon’s competitors (foremost among whom was Sefou Fagbohoun) were eliminated at the behest of the newly elected president.

In the meantime, Sébastien Ajavon, another outsized businessman who accumulated wealth in the cross-border trade with Nigeria, threw his weight behind Adrien Houngbédji, the natural leader of the rich Ouémé region, who was defeated by Yayi. Ajavon nonetheless succeeded in becoming president of the powerful employers’ association (Association du Patronat), which made him Talon’s most prominent rival.

The next presidential campaign, in 2011, set the stage for an apparent about-turn on the part of Talon. The stakes seem to have been the management and control of the juicy rent opportunities opened by the new Programme de Vérification des Importations, or PVI. Talon made an approach to Ajavon and Houngbédji, thus betraying his alliance with Yayi, at least upon a first reading of the event. His tactic was more subtle, though, as it consisted of playing off Yayi against Houngbédji to extract from the former the concession that he was seeking. Once more, his political stratagem paid off, as he was awarded the contracts for Bénin Control (the new name of the PVI) as well as other highly profitable business deals. The big loser was Ajavon, who was indicted by Yayi for alleged tax evasion.

Surprisingly, only one year after the election, disagreements about the way of sharing the spoils of state power led Talon into a poisonous conflict with President Yayi (Yayi actually accused Talon of having attempted to poison him), following which he was forced into exile in France. In essence, Yayi found Talon too greedy. In this way, even though it was Talon who bankrolled two successful campaigns for Yayi, the two men became involved in what has been called ‘one of the more bizarre falling-outs in West African politics in recent years’ (Corey-Boulet, 2019).

Talon did not give up, however. He clinched a deal with Dossou, a businessman with interests in the railways, and with his old enemy Ajavon. Determined to return to his country and to retrieve his business privileges, he discreetly prepared his campaign for the presidential election of 2016. This move did not please Ajavon and Dossou, who considered it a violation of their tacit agreement, according to which supreme state power should remain in the hands of politicians. In reaction, Ajavon decided to apply as a candidate for the presidency himself. As a result, Benin’s two highest net worth individuals started to confront each other openly on the political terrain. The saga did not end there because, upon reflection, the two men understood that the priority lay in breaking Yayi’s system. Talon took the lead over Ajavon, but made heavy concessions that included reimbursement of all the state debts of Ajavon’s commercial companies. Talon became president, but quickly came to the conclusion that the demands of his partner-rival were impossible to meet. Ajavon responded angrily and in due course became the number one enemy of the regime.⁷

The end result of this succession of political moves and counter-moves is a triangular struggle between three Big Men or oligarchs: Yayi, Talon, and Ajavon. This struggle, which has come into the open through political contests, is devastating for the long-term development of the country, not least because it reinforces the idea that, behind the façade of parliamentary democracy, the key operators think only of lining their pockets rather than promoting national progress. Not surprisingly, any attempt to combat corruption is viewed as a partisan move by its initiator to crush political enemies and business rivals.

For instance, critics blamed President Talon for being selective and overzealous in his anti-corruption campaign. This applies to his initiative of creating the Court for the Punishment of Economic and Terrorism Infractions (CRIET in its French acronym), which has been used to prosecute figures like Ajavon (sentenced to twenty years in prison on drug-trafficking charges). It is therefore not surprising that the Court stands accused by the opposition of using trumped-up charges driven by political motives (Corey-Boulet, 2019). More generally, it is striking that when scandals are exposed and when the government demands audits that ultimately point to the responsibility of ministers and high-level public servants, those persons are barely punished and the money embezzled or unduly appropriated is not repaid.⁸ Such visible impunity provides an important reason for the lack of trust of the people of Benin in their judicial system.

According to expectations, Benin has been characterised by ‘anarchic multipartism’, as reflected in a proliferation of political parties. The number of political parties reached 200 in 2015, while it was only 36 about twenty-five years earlier. Combined with the rule of proportional representation, this situation has led to an unprecedented atomisation of the country’s political landscape. The question then arises as to how such ethno-political fragmentation squares with the aforementioned system of patrimonialism with multiple oligarchs. Two main points need to be made here.

First, the growing practice of ‘cross-party transhumance’ indicates that ethnic affiliation was not a rigidly defined, overwhelming criterion conditioning access to a particular political party. Joining a party or a political faction is obviously motivated by considerations from which self-interest is not absent and in which the personal qualities and winning chances of the leader play a non-negligible role.

Second, political parties tend to be regrouped into large federations for the purpose of supporting a particular candidate. Thus, the FCBE (Forces Cauris pour un Benin Emergent) is a collection of about forty small parties determined to back President Yayi. The political party Union fait la Nation, created in 2008, has attracted his opponents and gave its support to Adrien Houngbédji during the 2011 presidential election. Alliance Soleil (Sun Alliance) regroups parties from the north, with the exception of those allied with Yayi. The party of Ajavon (Union Sociale Libérale) is anchored in the Ouémé region, which forms his electoral basis. As for Talon, he eventually consolidated all his support bases into two major blocs. These blocs were the only ones sanctioned by the electoral commission in the 2019 parliamentary election, a decision that Talon justified by the need to avoid political fragmentation.

The important point is that political alliances struck in the form of confederations of parties continuously evolve according to the interests of the Big Men at their helm. If regional and ethnic affiliations play an undoubted role in the prevailing political alignments, then it is important to note that they are not the only factor at play.

That said, the rise of Talon to supreme power in 2016 could well prove to be a game changer in Benin. As pointed out in the previous section, this rise marked the defeat of the old political elite at the hands of the business elite, which was no more satisfied by the constraints placed on its expansion and ambitions. Since Talon has taken various measures to consolidate his power, the question arises as to how a more authoritarian rule will affect the country’s destiny. A priori, the profile of a president-cum-oligarch raises serious doubts about his ability to design enlightened policies that give priority to common good considerations. But it could be retorted that precisely because he exerts significant control over the economy and is very wealthy, the president-cum-oligarch can now pursue other ends that will promote his fame and reputation as a leader who rescued his country from stagnation and even pervasive corruption.

It is of course too early to form a judgement on such a thorny issue. Two facts tend to indicate that the combination of politics and business in a single figurehead ought perhaps to be given its chance in the specific context of Benin. For one thing, there is no denying that the new president has so far shown a determined willingness to launch important reforms and to establish clear priorities. Overall, these priorities go in the right direction, as they are addressing key constraints that hamper the country’s economic development. Especially worth singling out are the reforms of the education system (with an emphasis on the creation of technical schools and training institutions), plans for infrastructure expansion, and measures intended to diversify the economy in the sense of adding value to agricultural and raw material (e.g. cotton) products. Furthermore, a war against corruption has been declared and in just a few years the petty corruption that was so extensively observed under all the previous regimes (harassment and bribe taking by the police in particular) seems to have been significantly reduced as a result of drastic sanctions introduced by Talon. Such results can earn him popular support among ordinary people. Taking this into account, it remains to be seen how a president-cum-oligarch can surmount the numerous conflicts of interests that are bound to beset his rule. For example, how can a man who privately controls the customs end corruption in that vital part of the revenue collection system? And how can his monopoly position in key sectors of the economy (including oil distribution) be made to work for the general good?

V Conclusion

There are four main lessons to draw from this overview.

First, Benin has a historical legacy marked by the existence of a succession of pre-colonial kingdoms and mini-states. Often, several political units coexisted inside the country’s present-day territory, and they were typically stretched over neighbouring countries, Nigeria in particular. According to some recent research, this legacy of centralised polities should have a positive impact on Benin’s long-term development.

Second, Benin is characterised by the presence of multiple ethnic groups, some of which also live beyond the country’s borders. Ethnic fragmentation is not necessarily an impediment to development, especially if it helps escape situations of persisting opposition between two antagonistic groups, such as has been found in Rwanda and Burundi. If in the past politics has been largely defined by the north–south divide, today it appears to be the locus of competition between multiple factions that enter into shifting alliances. Consequently, political power does not belong to one group at the definite expense of the other groups. However, the fact that the contending factions tend to take a ‘winner-takes-all’ approach to power has the effect of raising the stakes of elections and promoting particularised privileges instead of policies aimed at the country’s long-term economic development.

Third, Benin has a long history of regional trade facilitated by direct access to the sea. Some ethnic groups, the Yoruba in particular, have over time developed skills and experience in all sorts of trading businesses, and their approach to life gives primacy to education and openness to the outside world. In a free market environment where ethnic antagonisms are not fuelled by cynical political leaders, the presence of entrepreneurial and outward-looking groups of people would act as a powerful driver of development.

Fourth, there definitely seems to be a critical problem with the justice and tax collection systems in Benin. People’s level of trust in the courts as well as the judges and magistrates is very low, and they tend to believe that the latter are often corrupt. People also tend to believe that tax officials are corrupt. These worrying findings should mitigate the optimism of those who praise Benin’s democratic system since the Democratic Renewal took place. In fact, a careful analysis of the way this system works in practice reveals that it operates as a patrimonial system with multiple Big Men or oligarchs, most of whom have accumulated big fortunes and see state power as an instrument to advance their economic interests. Impunity for embezzlement or undue appropriation of public assets or money, as well as the partisan character of accusations, nurtures popular discontent and anger against power holders. Moreover, the coalitions and counter-coalitions they form in pursuit of the control of state positions, whether vicariously or not, create a great political instability that further undermines long-term national development.

2 Exploring the Reasons behind Modest Economic Performance^*

Romain Houssa and Paul Reding

This chapter reviews Benin’s economic development performance, within its historical and institutional context as well as in recent years. Its aim is to identify the main economic challenges the country’s development is facing. How some of these challenges are linked to the characteristics of Benin’s economic, social, and political institutions will be examined at a later stage. This deeper analysis of particular aspects of the Beninese development challenges will be undertaken in several thematic chapters in the second part of this volume.

The chapter is organised in six sections. Section I focuses on the somewhat disappointing growth performance and the apparent lack of a powerful and sustainable engine of growth. Section II focuses on the two key sectors of the Beninese economy: cross-border trade (CBT) with Nigeria and production and export of cotton and other agricultural products. Section III considers the foreign trade context, highlighting the largely illegal CBT flows with Nigeria as one of its specificities. Section IV is devoted to macro-economic aspects, with emphasis on key issues in public finance and the financing of the economy. Section V concentrates on social aspects, achievements, and limitations of Beninese development. Section VI intends to identify the Beninese economy’s ‘binding constraints’ for which a deeper analysis is required.

I Growth Performance Over Time and Changing Economic Context

A Aggregate Growth

Benin’s growth performance has been relatively modest since independence. With an estimated US$3,161 gross domestic product (GDP) per capita (at 2017 international prices) in 2018, Benin ranks among the world’s poorest countries, just at the upper limit of the poorest 15 per cent. As can be observed from Figure 2.1, its real GDP per capita was only 72 per cent higher in 2018 than in 1960, reflecting a weak annual growth rate of 0.94 per cent. Total GDP growth has been considerably faster, but it bears emphasis that three-quarters of it have been amputated by the high population growth rate (2.85 per cent on average). As in other sub-Saharan African (SSA) countries, population growth continues to be an important challenge: while it is expected to decline slowly, it should still reach 2.5 per cent per year in 2030.¹

Figure 2.1 Benin’s GDP per capita: levels, absolute and relative to sub-Saharan Africa (1960 = 100), and growth rates, 1960–2019. LHS, left-hand side; RHS, right-hand side.

Sources: Author’s calculation based on data from World Development Indicators (WDI).

Benin’s growth performance from independence in 1960 to the present time closely matches the major changes in economic policy the country has witnessed under its successive political regimes. One can accordingly distinguish three main subperiods:

1 1960–1972: Post-Independence Instability

Political instability went hand in hand with low and very volatile growth during this period. GDP per capita grew by 1 per cent per annum, less than the average SSA country (2.26 per cent). The economy had essentially kept its colonial features with agricultural exports – mostly seed cotton– as the dominant activity and France as the main trading partner.

2 1973–1989: The Socialist Experience, the Ensuing Financial Crisis, and the Structural Adjustment Programme

During this period, the Marxist and military regime managed the economy through state control and central planning. The major industries and banks were nationalised and public involvement in the agricultural sector became important through government-owned enterprises. Economic growth was quite uneven because of both domestic and foreign causes.

Growth was weak in the early years (1973–1976) of the period, with a big drop in 1975 because of the oil crisis and a poor performance in the cotton sector. It then picked up, under the pull of large public investments and of strong demand from Nigeria. However, major macro-economic imbalances became apparent in the early 1980s, which quickly led to an unsustainable external public debt – 75 per cent of GDP in 1985 – and to the collapse of the whole banking system in 1989.

Amid the financial crisis, Benin had to request debt relief from its creditors and new external financing. In 1989, a Structural Adjustment financing agreement was set up with the World Bank, the International Monetary Fund (IMF), and other multilateral and bilateral donors. The macro-economic adjustment part of the package focused on reducing public spending and liquidating public enterprises. The correction was all the more severe because Benin’s fixed exchange rate commitment within the West African Economic and Monetary Union (WAEMU) prevented resort to a devaluation.

These severe shocks resulted in a dismal growth performance of Benin’s economy for the whole 1973–1989 period. A telling testimony to the severity of these shocks is that GDP per capita turned out to be at the same level at the end of the period as it was at the beginning.

3 1990 and after: Market-Oriented Reforms but Modest Overall Growth

Wide-ranging economic reforms were initiated in 1989 within Benin’s Structural Adjustment Programme (SAP). They ranged from liberalising trade, to lifting domestic regulations, to improving the performance of a downsized public sector, to restructuring the banking system.

Growth picked up again after 1990, and Benin even grew more rapidly than the average SSA country throughout the 1990s. Yet, it is difficult to assess to what extent this improvement was due to the liberalisation of the economy or to favourable external circumstances, including cotton exports and CBT with Nigeria at the end of the period.

Growth slowed down a bit after 2002, unlike in the rest of the region, and it became more volatile. Yet, a clear acceleration seems to have taken place over the last five years or so: the annual growth rate of GDP per capita achieved 2.5 per cent on overage, an unprecedented performance when compared to the last three or even four decades.

B Growth and Structural Change

Economic growth always comes with structural changes: some sectors increase their weight in total output while others, typically agriculture, recede. Structural changes also explain the growth of labour productivity, and thus of GDP per capita. Indeed, overall productivity gains result from both the reallocation of labour from least to more productive sectors of the economy and from productivity gains within sectors. This section analyses the structural changes that took place in Benin, as well as their contribution to growth. We proceed in two steps. First, we discuss briefly the results of a ‘growth accounting’ aggregate analysis that spans the 1970–2017 period. Second, we examine the relationship between aggregate growth and the sectoral structure of activity and employment. This sectoral analysis had to be restricted to the 1999–2017 period, and sometimes even a shorter period, due to limited availability of fully time-consistent data.²

The growth accounting analysis decomposes GDP growth into the contributions of the production factors, labour and capital, and of total factor productivity (TFP). Appendix 1 to this chapter presents this decomposition for the five decades since 1970. A striking result emerges, which is the contraction of the capital-per-capita ratio over the whole period since 1970. Capital only weakly contributed to growth, except in 1971–1980 (a period of substantial public investment) and in the very recent years when, at last, some capital deepening occurred again. It thus appears that, by and large, growth of GDP per capita, which largely coincides with labour productivity, has mostly resulted from TFP growth, at least since the 1980s. TFP growth appears to have more than compensated for the effects of the decline in capital intensity. It turns out, however, that the observed changes in TFP largely reflect the major changes that have occurred in the sectoral structure of the economy rather than autonomous productivity gains. This is what we argue in what follows.

To assess the extent of the structural changes, we first focus on broad patterns. Table 2.1 shows that the primary (mostly agriculture) and tertiary (services, broadly defined) sectors dominate Benin’s economy in terms of gross value-added at factor cost (GVA). The share of the primary sector has been decreasing over the whole period, but it is remarkable that it did so only recently, suggesting indeed the limited dynamism of the economy prior to recent years. The share of the tertiary sector has increased, another typical pattern of the development process. It now represents more than half of total GVA – that is, of GDP. At the same time, however, the share of the secondary sector (manufacturing, utilities, and construction) declined, which points to quite a worrying aspect of Benin’s development.

Table 2.1 Sector-based structure of GDP (per cent of value-added at current factor prices) and informality ratios

	1999–2003	2004–2008	2009–2013	2014–2017	Average
Primary	26.0	27.7	25.5	23.9	25.8
Informality ratio	1.00	1.00	1.00	1.00	1.00
Secondary	32.4	28.7	24.1	24.3	27.4
Informality ratio	0.66	0.69	0.67	0.61	0.66
Tertiary	41.6	43.6	50.4	51.9	46.9
Informality ratio	0.43	0.44	0.45	0.45	0.44
GDP (factor costs)	100.0	100.0	100.0	100.0	100.0
Informality ratio	0.65	0.67	0.64	0.62	0.65

Source: Author’s calculation based on data from Institut National de la Statistique et de l’Analyse Economique du Bénin (INSAE) for 1999–2015 and Ministère de l’Economie et des Finances (2017) for 2016/17 provisional data. The informality ratio is defined as informal over total value-added.

Table 2.1 also reports the large role played by the informal sector in Benin: two-thirds of GDP originate in the informal sector. The ratio is equal to unity in the primary sector, where all activity is recorded as informal. It is approximately constant in the two other sectors, but declines overall because of the falling weight of the primary sector. Altogether, however, the change in informality has been limited and concentrated in the recent period.

Table 2.2, adapted from Haile (2018), zooms in on the most recent period (2006–2015) and provides more disaggregated data.³ It combines GVA and employment data, from which it is possible to derive relative levels and changes in sectoral labour productivity. It also provides an interesting decomposition of the overall change in labour productivity.

Table 2.2 Structural changes in the Beninese economy and decomposition of changes in labour productivity, 2006–2015

	Sectoral structure of GVA and of employment (Empl.). Sectoral levels of labour productivity (LP)						Sectoral decomposition of change in aggregate labour productivity (Annualised percentage changes)
	2006			2015			Contribution of
	GVA	Empl.	LP	GVA	Empl.	LP	Structural change (inter-sectoral)	Productivity within sector	Total
Agriculture	26.9	59.4	0.41	22.3	42.1	0.52	1.02	0.69	1.71
Mining	0.5	0.1	5.31	0.4	0.1	4.47	0.00	–0.01	–0.01
Manufacturing	20.1	7.3	2.51	14.7	7.8	1.86	0.07	–0.60	–0.53
Utilities	0.4	0.2	2.33	1.1	0.2	5.95	0.01	0.08	0.09
Construction	7.8	2.3	3.16	8.0	2.7	2.93	0.11	–0.07	0.04
Commerce	13.5	19.1	0.64	13.5	28.7	0.46	–0.47	–0.53	–1.00
Transport	7.7	3.3	2.12	10.0	4.5	2.19	0.18	0.03	0.21
Finance	1.5	0.2	6.76	5.6	0.2	24.70	0.04	0.47	0.51
Other services	21.4	8.2	2.37	24.3	13.7	1.75	0.75	–0.83	–0.08
Total	100	100	0.91	100	100	0.98	1.73	–0.77	0.96

Source: Author’s calculation based on data from Haile (2018) – excerpts from text Table 3 and from Appendix Tables 1–3. The category ‘Other services’ includes public administration, education, health, real estate, renting and business activities, and community, social, and personal services. The data for GVA and employment (Empl.) are sectoral shares, in percentages; productivity levels (LP) are expressed in constant 2007 Communauté Financière en Afrique (CFA) franc (in millions)

On the GVA side, the table roughly confirms the conclusion of Table 2.1; that is, a recent drop in the share of agriculture, a slightly larger drop in manufacturing, and a continuous increase in services, with a surge in finance and to a lesser extent transport. The latter evolution is related to the surge in re-exports from Cotonou’s port after 2011, as will be shown later. On the employment side, the most noticeable change is the huge drop in the share of agriculture essentially in favour of commerce, other services, and, to a lesser extent, transport. Equally noticeable is the extremely limited change in the employment share of the other sectors, especially manufacturing.

This reallocation of output and employment across sectors entails strong changes in terms of sectoral productivity relative to the overall productivity gain – which proceeded at an annual rate a little below 1 per cent a year. Agriculture has seen its share in both GVA and employment decline, but the latter more significantly so. As a consequence, its productivity has substantially increased, while remaining among the lowest across sectors. This probably means that the sector has shed its ‘surplus workers’, those with very low productivity.

Manufacturing has kept a stable, relatively minor share in total employment. As its share in GVA has fallen by 5 percentage points, its level of labour productivity has fallen too, possibly indicating a change towards lower-productivity activities. This decline of labour productivity in manufacturing is also observed in other West African countries, but it is more pronounced in Benin (see Haile, 2018). Furthermore, as can be seen in the left-hand panel of Table 2.2, the sector’s absolute productivity went down in Benin at an annual rate of 3%. This significant downward trend is presumably due to a combination of factors, among which is insufficient competitiveness, possibly reflecting the lack of investment in physical and human capital noted earlier, as well as other constraints relating to the business environment and public infrastructure (see, e.g. Ministère de l’Economie et des Finances, 2019, pp. 28–33; see also Section 2.4).

The same major drop in labour productivity can be observed in ‘commerce’ and ‘other services’, which make up more than one-third of total GVA. As a matter of fact, labour productivity in the former sector had become lower than in agriculture by 2015, as if those surplus or low-productivity workers in agriculture who migrated towards commerce simply shared the value-added potential of this sector with the incumbents. The phenomenon is less pronounced in ‘other services’, which include the government sector where productivity is essentially assimilated to wages, higher than in the rest of the economy.

Outside agriculture, utilities, transport, and finance are the only sectors where productivity has not decreased. The latter two sectors most likely benefited from a surge in CBT with Nigeria and the re-export of imports arriving at Cotonou Autonomous Port. There is no doubt that this boosted the transport sector. It also boosted the finance sector through trade financing on the import side of re-exports to Nigeria.

The general picture that comes out of this evolution of the structure of output, employment, and productivity is rather worrying. While most of the limited overall productivity gain in Benin between 2006 and 2015 was due to labour leaving low-productivity agricultural activities to work in higher-productivity sectors, it has come at the cost of decreasing productivity in the latter. In other words, no sector could be really considered as a growth engine in Benin, except perhaps the financial sector, but with practically no impact on employment.

This view of economic growth in Benin appears fully consistent with the growth accounting exercise summarised earlier where TFP was found to be the main source of growth. It is clear that most of that TFP growth is attributable to net labour migration out of agriculture, with no autonomous productivity gains in the destination sectors.

The last columns of Table 2.2 show a decomposition of the aggregate productivity gain of the Beninese economy into two parts: first, the part attributable to changes in the structure of employment; and second, the part attributable to changes in within-sector productivity. The result is appalling and fully confirms the preceding conclusions. Per se, the reallocation of labour away from agriculture into commerce and other services contributed to an annual growth of overall productivity equal to 1.73 per cent. Yet, sectoral productivity changes contributed negatively, at an annual rate of −0.77 per cent to the change in overall labour productivity. While productivity increased in the agricultural sector, because of surplus labour leaving the sector, it decreased in other major sectors of the economy. Thus, the general picture is that of workers leaving the agricultural sector because there are better income opportunities elsewhere, but, as a matter of fact, essentially reducing income per capita in the destination sectors.

Benin’s economic development until the mid-2010s can be summarised by a dismal rate of capital accumulation, and the total lack of a growth engine able to push the whole economy forward. Instead, the little growth that has taken place over the last few decades seems more consistent with some income gain from CBT with Nigeria or cotton exports fuelling limited growth in demand for domestic services. In any case, it is doubtful whether the agriculture-cum-service model that seems to be the pattern of Beninese growth over the last decades can be the source of sustainable development. Strong productivity-enhancing strategies are needed.

II Leading Real Sectors: Achievements and Challenges

Cotton and CBT are the two leading sectors of Benin’s economy. Together they generate one-third of the country’s GDP, 13 per cent and 20 per cent for cotton and re-exports, respectively.⁴ Cotton also represents around 70 per cent of Benin’s total exports, excluding re-exports. Cotton is mainly exported to Asia, Europe, and the USA, whereas CBT involves importing goods from Asia and Europe through the harbour of Cotonou and later re-exporting them to neighbouring countries, in particular Nigeria. The leading role of cotton and re-exports is also evident from Figure 2.2, where a clear correlation emerges between GDP growth cycles and those in cotton exports and merchandise re-exports. Growth decelerates when cotton exports fall from 2000 until 2005, picks up temporarily when re-exports rise, before accelerating when both surge after 2011. A similar scenario can be observed with the 2015 recession and the following recovery.

Figure 2.2 Benin’s GDP per capita: exports of cotton and re-export of goods, in real terms, and GDP annual growth rates

Source: Author’s calculation based on Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO, 2019) balance of payments data; WDI for GDP growth and Consumer Price Index (CPI) data used to estimate real trade data.

Because of their crucial importance for Benin’s economy, the two following subsections will be devoted to an in-depth discussion of CBT and cotton production. The deep institutional factors and political economy aspects that characterise each sector will be further examined and assessed in dedicated chapters in this volume.

A Cross-Border Trade with Nigeria

Nigeria is the main recipient country of Benin’s CBT, accounting for more than 90 per cent of Benin’s re-export activities. The intense trade between the two countries stems mainly from differences in tariffs, trade restrictions, and subsidies. On the one hand, Nigeria uses tariff and non-tariff barriers as well as exchange controls to protect domestic industries in a number of economic sectors, including cars, textiles, cigarettes, and food items (see, e.g. Igué and Soulé (1992); De Melo and Ugarte (2013); Golub (2012a) for further discussion). Prices for these goods are consequently higher in Nigeria than in Benin, which abides by the lower WAEMU tariff rates. On the other hand, Nigeria, an oil-producing country, subsidises domestic petroleum prices, which are thus lower than formal prices in Benin. These important price differentials between Benin and Nigeria for certain categories of products are a strong incitement to circumvent Nigeria’s import tariffs and trade restrictions through smuggling operations across a long – and porous – border into Nigeria for Benin’s re-exports, and into Benin for Nigerian petroleum and some other products.

The context within which this trade operates is thus intrinsically one of informality and illegality. The import process of the goods intended for the Nigerian market is itself fully formal and legal. It is operated by formal firms, which trade with local and international contractors, borrow from formal banks, and pay income taxes. Related infrastructure, both public (port, customs) and private (parking lots for used cars, warehouses for other products), has been set up in an open and regular way. The unofficial (illegal) aspect of CBT with Nigeria occurs at a later stage when goods that benefited from low customs duties and taxes, because they were declared either for domestic use or for transit to other (landlocked) neighbouring countries, are smuggled to Nigeria. On the other hand, the smuggling of goods bought in Nigeria into Benin is of course utterly unlawful.

The unofficial nature of an important part of the re-exports makes it very difficult to rigorously document their size and estimate their economic impact. The most frequently cited estimate by Golub (2012a) is based on unofficial trade in used cars, which represents a large part of the total unofficial re-export trade to Nigeria. Extrapolating from these data to the whole trade, Golub (2012a, p. 215, 2012b, p. 1159) estimates that the contribution of re-exports to GDP is about 20 per cent and that it directly involves 50,000 people. Such a large estimated contribution of CBT to GDP seems out of proportion with the estimated effects on employment, however. Based on rough approximations described in Appendix 2 to this chapter, we feel that a 10–12 per cent contribution to GDP would be a more reasonable range of estimate.

Since the unofficial CBT with Nigeria is very lucrative for the Beninese economy and since it generates significant tax revenues for the country, it is not only tolerated but even encouraged by the Beninese authorities. Yet, there are important downsides associated with it.

First, Benin has become very vulnerable to changes in economic conditions and trade protection policies in Nigeria. Concerning the latter, Nigeria has not only often changed import tariffs on protected goods, but has also recently closed its border with neighbouring countries, with dire consequences for the Beninese economy. Tellingly, almost half of the volatility of GDP growth in Benin is due to the volatility of the Nigerian economy, itself very much the result of the volatility of global oil prices. A regression of Benin’s GDP growth on the growth of household consumption in Nigeria over the 1980–2017 period suggests that a one standard deviation shock in the latter – not an infrequent event – produces a 1.3 per cent change in Benin’s GDP – a little less than half the standard deviation of GDP growth (see Appendix 3 to this chapter). This means that although Benin is not an oil-exporting country, it has acquired some of the features of the latter through its excessive dependence on trade with Nigeria.

Second, the smuggling of goods from Nigeria into Benin and the ensuing artificially low prices of these goods hamper the development of locally produced goods, like textiles and rice for example.

Third, the illegality inherent in most of the trade between Benin and Nigeria severely damages Benin’s public institutions because of the corruption, tax evasion, and possibly government capture that it entails. This is true at every level in the public sector, but the scale at which the unofficial CBT is organised necessarily implies high-level political connections on the part of the bigger operators, in both countries. The risk of political capture is also strengthened by the illegal practices associated with re-exports, as is evident from the political infighting involving big CBT players.⁵

Finally, the permanent tolerance, instead of repression, of fraudulent activities by the authorities does worsen the general business climate because low standards of honesty, compliance with the rule of law, and respect for the country’s institutions have spilled over to other sectors. Consequently, while illicit CBT benefits both countries, it also entails large costs and Benin needs to urgently rethink its development strategy, to make it less dependent on illicit CBT.

B Cotton Exports: Historical Heritage and Changing Organisational Structure

Cotton production is a major sector of Benin’s economy and the livelihood of one Beninese out of three depends on it. Cotton does not only play a major economic and socio-political role in the countryside, but forms the basis of more than half of Benin’s industrial production. It also accounts for about 60–70 per cent of export revenue (excluding re-exports) and 45 per cent of tax revenue (excluding customs revenue). Overall, cotton is estimated to account for 13 per cent of Benin’s GDP (MAEP, 2008). This number seems rather large, however, and a contribution within the range of 7–10 per cent seems more reasonable. Indeed, using the average ratio of Benin’s total exports relative to GDP of about 17.8 per cent in 1960–2016 and considering the 60 per cent share of cotton in Benin’s total exports indicated earlier, we arrive at an estimated GDP ratio of 10.6 per cent. Furthermore, if we take into account that the share of cotton in Benin’s total export revenue is probably overestimated and if we use instead the data from the Observatory of Economic Complexity (OEC, see https://oec.world), we find a ratio of cotton revenues to GDP of about 7 per cent, which is the value reported by the World Bank (2016).⁶

Beninese cotton production followed a bumpy expansion after independence until 1997, after which production plateaued for seven years. This period of stagnation was immediately followed by a sharp decrease in production in the years between 2004 and 2009, caused by a decreasing dollar price of cotton whose negative impact was further amplified by a persistent appreciation of the CFA Franc. As can be seen in Figure 2.3, this decrease has been particularly severe in Benin compared to its francophone neighbouring countries (Burkina Faso, Cote d’Ivoire, and Mali), suggesting that other country-specific factors have exacerbated the effects of the shock in Benin.

Figure 2.3 Performance of the cotton sector in Benin and West Africa

Sources: Author’s calculation based on data from Food and Agriculture Organization (FAO) Corporate Statistical Database (FAOSTAT). Benin’s data over the period 2016–2017 is obtained from INSAE and the Association Interprofessionnelle de Coton au Bénin (AIC) and is being updated in the FAOSTAT database. Note: West Africa (WA) is a simple average of data from Burkina Faso, Cote d’Ivoire, and Mali. Production is in tonnes, Area in hectares, and Yield is in percentage relative to the value of average yield in the other WA countries.

Benin’s cotton sector has indeed been characterised by excessive political interference since independence and has known long periods of instability, oscillating between private and public modes of governance. This instability was particularly severe after 1990, when the sector embarked on a failed process of liberalisation and privatisation. The causes of the failure are multiple: (1) political actors controlled the whole reform process and thereby made reforms vulnerable to regime changes; (2) liberalisation did not lead to competition, as officially intended, because the allocation of seed cotton was administratively decided and the procurement of seed cotton was not transparent; (3) the rules (e.g. about input quality assessment, input import and distribution, quotas of cotton seeds) were not considered credible since there were no clear enforcement mechanisms against those who violated them; and (4) the reforms were not appropriated or owned by the local authorities since they were undertaken at the behest of donors.

The huge instability of the cotton sector and the failure of reforms are further apparent from the high volatility and the lack of growth of cotton yields over time (Figure 2.3). The value of Benin’s yield lags on average four basis points behind that of other countries.

C Non-cotton Agricultural Exports: An Ancillary Driver of Growth?

Besides cotton, there is a wide variety of other crops, including cassava, maize, cashew, pineapple, palm oil, rice, and vegetable, that could be the basis of a dynamic agro-industrial export sector and even become altogether an ancillary engine of growth, along with cotton. Among those the case of cashew is particularly interesting. Its share in export revenues more than quadrupled in the period between 1995 and 2018, reaching 16.9 per cent at the end of the period (OEC). As a result, cashew has become the second most important contributor to Benin’s export revenue and accounts for 3 per cent of GDP.

Yet, different institutional shortcomings prevent Benin from fully capitalising on the rising world demand for cashew nuts (see www.nutfruit.org/industry) and utilising its natural advantage in cashew production in the central and northern parts of the country. Insecure land property rights (treated in depth in Chapter 7) and insufficient access to external finance have led to underinvestment, for example in the replacement of older trees. This is reflected in the low yields of cashew in Benin (356 kg/ha in 2019) compared to Nigeria (715 kg/ha) and Togo (1530 kg/ha) (FAOSTAT database).

In addition, high costs of electricity and the use of less advanced technology impair the competitiveness of processing firms. Coupled with poor organisation and integration of the actors operating in the sector, this has led to a situation where the bulk of raw cashew is exported essentially to Vietnam and India, instead of the markets of the buoyant advanced economies.

D Obstacles to the Development of the Non-agricultural Business Sector

The non-agricultural business sector, excluding CBT with Nigeria, accounts for around 45 per cent of Benin’s private sector. It has been characterised by slow growth over the whole period since independence. Four major growth constraints can be highlighted based on the two waves (2009 and 2016) of the World Bank Enterprise Survey data: (1) external finance constraints; (2) deficiencies in physical infrastructure; (3) informal competitors; and (4) difficulties firms face in dealing with public administration (taxes, customs, and trade regulations). Worryingly, these constraints are not only more severe in Benin than in the average SSA country, but they have also been increasing over time (Figure 2.4). This is particularly true for access to finance and electricity, which will be treated in more detail in the following two subsections.

Figure 2.4 Major constraints to private firms in Benin and sub-Saharan Africa

Source: Author’s calculation based on data from World Bank Enterprise Survey (various years).

1 Financial Constraints

The Beninese formal financial sector operates under the supervision of WAEMU and includes three categories of institutions: commercial banks, formal micro-finance institutions, and other financial institutions (e.g. pension funds and insurance companies). The informal system, on the other hand, does not have the capacity to finance any enterprise other than micro-businesses. It does so through numerous micro-finance institutions (MFIs), which altogether amount to a tiny share of the financial sector’s assets.⁷

According to existing reviews of the financial sector by the IMF (2016, 2018a and 2019), the weak lending performance of Benin’s banks could be explained by several institutional factors. The first relates to asymmetries of information and the poor management of credit risks, which increase borrowing costs. To alleviate this problem, a credit centralisation initiative was started by banks in 2013 to exchange information on borrowers, but this system does not function well.⁸ Private credit bureaus were also authorised in 2017, but the system is not yet operating. Second, there are weaknesses in banking supervision and regulation that undermine risk management in financial intermediaries and their performance. In some cases, long delays in banking dispute resolutions (due to corruption or bureaucratic inefficiency, for example) allow underperforming financial intermediaries to remain active for long periods of time, wasting resources in operating costs and undermining credit supply. Finally, there are important concentration risks. Credit is structurally concentrated on a very small number of large business groups (with a majority of activities linked to CBT with Nigeria). As a result, negative shocks in the trading sector, often originating in Nigeria, cause an important rise in the share of non-performing loans (NPLs), which ultimately makes borrowing more expensive for small and medium-scale borrowers. For example, a 1 per cent decrease in the Nigerian growth rate is associated with a 0.79 per cent decrease in the bank provisions-to-asset ratio in Benin (IMF, 2019, p. 42). In addition, Benin’s banks are indirectly much exposed to government’s laziness in meeting its payment commitments to the private sector, which affects business credit risks and makes lending to the private sector more expensive.

In addition to the factors already identified, bottlenecks in the judiciary and property sectors tend to discourage access to finance.⁹ On the one hand, serious flaws in the judiciary system, including low capacity in handling financial issues and complex and long litigation procedures, complicate contract enforcement and discourage access to credit for certain categories of borrowers. On the other hand, the poor quality of property titles – especially over land assets – due to uncertain status, long delays in registration, and the high cost of verifying property titles, constrains the use of land as collateral and thus reduces the use of bank credit.

The poor functioning of the banking sector has limited the banks’ capacity to lend to businesses and explains why the difficulty of obtaining external financing is the top structural constraint reported by private firms in the country. One out of three small and medium-sized enterprises (SMEs) in the 2016 World Bank Enterprise survey declared themselves to be suffering from involuntary exclusion from external financing. Furthermore, more than one-third of these firms attributed this to a lack of the proper collateral required by banks. Worryingly, these constraints have increased in recent years (from 2009 to 2016), which is surprising given that the financial sector has very much expanded over the same period – see Table 2.2. This may suggest that this expansion was directed more towards very specific activities, especially those linked to CBT.

2 Physical Infrastructure

A key problem that shackles Benin’s economic development is the dearth and low quality of transport, electricity, and telecommunications infrastructure. Following the IMF (2018a, pp. 31–32), Benin scores systematically below the average SSA country according to an indicator meant to measure the overall quality of infrastructure. It indeed lags the average SSA country in terms of access to electricity, use of internet, public health, education, and transport infrastructures. But Benin performs well and sometimes even slightly better than other SSA countries in terms of access to treated water, mobile access, and port infrastructure.¹⁰

Concerning the electrical energy infrastructure, only one-third of the total population has access to electricity, which is slightly below SSA averages, according to WDI data. Benin’s energy consumption (KWh per capita) is well below the SSA’s and lower middle-income countries, about one-fifth and one-seventh, respectively. Also, electricity rates are generally higher in Benin and the quality of services – for instance frequency of outages – is worse than in other African countries.¹¹ To circumvent the failures of the electricity network Beninese companies have resorted to private substitutes (e.g. generators) that put a strain on their costs.

The supply and use of the Internet remain low in Benin, with only 11 per cent of the population using the Internet in 2015 versus 21 per cent in SSA countries (WDI). Progress in the adoption of information and communication technologies (ICT) turns out also to be remarkably slow compared to other African countries. This low use of internet services in Benin can be explained by (1) the lack of telecommunications infrastructure, although this may be compensated by easy access to the 3G and 4G mobile networks; (2) the low availability of new technologies; (3) the high costs of the various services; and (4) the low quality of the connection and related services.

The development of roads, water, and telecommunications is a critical factor for the competitiveness and growth of an economy. Following the most recent World Bank logistics performance index, the quality of Benin’s trade and transport infrastructure is slightly above the averages for SSA and lower middle-income countries, and rose steadily from 1.89 in 2007 to 2.50 in 2018.

The structural and multifaceted deficits in physical infrastructure in Benin raise the question of the factors that could explain this situation: is it a deficit in the public investment effort or a lack of efficiency of the latter? This will be briefly taken up later when discussing public spending.

III The Foreign Trade Context

A word of caution is necessary before discussing external trade issues for Benin. As reported in the previous section, Benin has vibrant CBT with Nigeria that is for a large part illegal. These large informal flows are not recorded in Benin’s official export and import data, making interpretation of the latter difficult since part of imports are re-exported and not used in the domestic economy. However, BCEAO has since 2019 updated external trade statistics for Benin that adjust official data in order to account for the ‘unofficial’ export and import flows.¹² We use these adjusted data to discuss the aggregate trade flows, but primarily focus on the official data to document the structure and composition of foreign trade flows.

A Parallelism between Exports and Imports

Figure 2.5a reports total (adjusted) exports and imports of goods and services, together with estimated re-exports and GDP growth for the 1990–2019 period. Three main points stand out:

Figure 2.5a International trade and real exchange rates: Exports and imports of goods and services, re-exports of goods, and GDP growth

Sources: Author’s calculation from BCEAO website for exports and imports (balance of payment data); WDI for growth.

First, there is a strong parallelism between exports and imports since the re-exports, official and unofficial, must necessarily have been imported in the first place.¹³ The dynamics of exports are indeed strongly driven by re-exports, especially since the early 2000s (Figure 2.5a).

Second, there is relatively high volatility in the export and import GDP ratios. This can also be partly explained, since 2004 at least, by the characteristics of CBT and the dependence it entails on positive or adverse developments in the Nigerian economy, as noted earlier.

Third, the balance of goods and services shows a sizeable and persistent deficit throughout the period, with an average of 6.7 per cent of GDP. Despite strong growth in exports since 2004, no reduction in the gap was achieved. We return in the next section to the issues this raises for the sustainability of Benin’s development.

B Composition of Exports and Imports of Goods and Services

The export and import data provided by BCEAO mostly combine official data with estimated unofficial re-exports and imports.¹⁴

Concerning the status of re-exports relative to domestically produced export goods, one could hold that, as these goods are all imported, they are of no major concern for the domestic economy. Indeed, if this activity only consisted of organising the transit of goods, it would not be recorded as merchandise exports and imports. However, re-exports involve significant value-added by domestic residents to the imported goods. This is especially the case in Benin, where CBT is a key driver of re-exports. The latter involve the supply of transport and warehouses, as well as of wholesale or even retail trade services, for an amount that is far from negligible even though not readily observable and imperfectly known, as discussed in Section 2.1. Under these conditions, it is indeed justified to consider re-export as the export of services originating in the domestic economy, with of course a huge import component.

Re-exports’ value-added is however intrinsically much lower than that of Benin’s other exports, for similar gross values, and focusing on the former’s large share in total adjusted exports would not do justice to Benin’s other (official) exports, and underestimate the latter’s importance for the economy.

Cotton products (mostly raw cotton) dominate (official) merchandise exports, with a 57 per cent share in 2017–2018, followed by cashew nuts (14 per cent). Palm products, gold, meat, fruit, metal, and petroleum products, though less important (about 2–3 per cent each), contribute to diversifying Benin’s export base.¹⁵ The shares of exported products do however vary greatly from year to year.

Exports of services (other than re-export activities) also matter, accounting for an average of 3.4 per cent of GDP for 2010–2019. Travel represents slightly more than a third of export service receipts, indicating that tourism is also a potential driver of the country’s development.¹⁶

As already mentioned, merchandise imports evolve, because of re-exports, in parallel with exports. This is reflected in their composition, dominated by food products (e.g. rice for re-export to Nigeria). Imports of services outweigh exports of services, mostly because of freight and insurance expenditures related to the import of goods though the port of Cotonou.

The contribution of net exports to growth is thus dependent on re-export activities whose large gross volume compensates for the low per unit value-added, on agricultural products, cotton and non-cotton, and on tourism. The growth contribution of net exports could be improved if the high potential of non-cotton agriculture and of tourism, which both account for high domestic value-added, could be exploited.

C Real Exchange Rates

The last external trade issue that merits discussion is competitiveness. Although there are many facets to competitiveness, we focus on the relative price component and use the real exchange rate as an indicator.¹⁷ Since Benin is on a fixed peg with respect to the Euro and since Benin is a price taker on the international market, its price competitiveness is heavily impacted by the exchange rate of the Euro vis-à-vis other currencies, especially the US dollar and those of Benin’s Asian trade partners.¹⁸ Note that price competitiveness with its WAEMU and Communauté Economique et Monétaire d’Afrique Centrale (CEMAC) African trading partners is not directly influenced by changes in nominal exchange rates as these countries are also on a peg with the Euro.

The multilateral index of Benin’s real exchange rate indicates a real appreciation of the CFA Franc until 2008, followed by a continuous depreciation (Figure 2.5b). The appreciation period coincides with the long-lasting appreciation of the Euro against the US dollar (2001–2008), while the depreciation reflects both the reversal of the Euro–US dollar nominal exchange rate and the low rate of inflation that Benin managed to achieve relative to its main official trading partners.

Figure 2.5b International trade and real exchange rates: Multilateral and bilateral CFA Franc–Naira real exchange rates

Sources: Author’s calculation for the real multilateral exchange rate based on data from IMF that were retrieved from the Federal Reserve Bank of St Louis data bank; for the real CFA Franc–Naira exchange rate: Central Bank of Nigeria and Macrobond database.

As Benin is exclusively a price-taking economy, these changes in the Euro–US dollar exchange rate have led to ample fluctuations in local currency cotton prices and thus in producers’ profit margins. Accordingly, the observed evolution of exports very broadly reflects the trend in the multilateral real exchange rate. During the period of continued real appreciation up to 2006, the GDP ratio of exported goods declined (see Figure 2.5a) before increasing again slowly in parallel with the real depreciation.¹⁹

But Benin’s multilateral real exchange rate only imperfectly reflects actual changes in the country’s price competitiveness, since it is based on official trade statistics and official nominal exchange rates, while a large part of Benin’s trade is informal. We therefore decided to also analyse the real exchange rate between the CFA Franc and the Naira, Nigeria’s currency.²⁰ The evolution of the bilateral real exchange rate with Nigeria combines a trend of persistent real depreciation with, around this trend, several periods of large real appreciation shocks. The real depreciation trend is the result of Nigeria’s CPI inflation being systematically higher than Benin’s and a depreciation of the Naira–CFA Franc rate that falls short by about half of this differential. The short-term real appreciation shocks reflect episodes of large, and often sudden, depreciations of the Naira, mainly as a result of the abrupt fall in oil prices.

These large swings in the bilateral real exchange rate had a significant impact on Benin’s economy. Re-exports declined by about 20 per cent during the two real appreciation shocks of 2009–2010 and 2015–2016. Whether, and to what extent, these declines are due to a loss of price competitiveness is difficult to assess. The drop in real incomes in Nigeria following the large depreciation shocks indeed had an additional, and probably stronger, demand-reducing effect. Accordingly, it appears that the declines in volumes can largely be attributed to the spill-over effect of the decrease in Nigerian demand, a result of the depreciation of the Naira and of the direct income effects of the oil shock. Price competition may probably matter more on the import side of the CBT, where Nigerian products directly, and intensively, compete with domestic ones. The 2015–2016 depreciation of the Naira, for example, led to massive exports of Nigerian products to Benin, at very competitive prices (Ministère de l’Economie et des Finances, 2016, pp. 20–21).

To conclude, as a price taker on international markets and as a member of a monetary and customs union whose external exchange rate is a hard peg, neither exchange rate nor trade policies are in the hands of Benin’s authorities. This represents a key constraint on their policy options, a constraint reinforced by the vulnerability to exchange rate shocks originating from Nigeria, an important partner in official and unofficial trade. As a matter of fact, the only option for Benin to have some control of the competitiveness of its tradeable goods is to keep the evolution of its nominal domestic prices and wages in check. Given that, for low-income countries, wages in the public sector often play a leading role in the dynamics of wages and prices in the private sector, public wage policy may be one of only a limited number of instruments that the authorities can resort to.

IV Financing the Economy and the Public Sector

Benin has been structurally highly dependent on external resources. As documented in the preceding section, exports are far from permitting the Beninese economy to get even close to economic independence. Aggregate spending is systematically above national income. There is an overall – that is, private and public – propensity to consume averaging almost 0.9 over the last twenty years. As a result, a third of investment expenditures has to be covered by foreign resources. Domestic government revenues are sometimes insufficient to pay for recurrent expenditures, and still less for public investments. Private-sector savings and the flow of foreign direct investment fail to fully finance private capital accumulation. Without a sizeable volume of foreign aid, the Beninese economy would not be able to grow or even function.

This section goes briefly over these macro-economic issues, which directly determine the space for development and most crucially the sustainability of Benin’s current development model. Three issues are considered in turn: the consumption bias in aggregate spending; the efficiency versus resource constraint in the public sector; and foreign assistance dependency.

A Consumption Bias in Aggregate Spending

Figure 2.6 shows total expenditures (absorption) relative to GDP since 1990, in agreement with the current 2015-based National Accounts methodology that implied some rescaling of aggregates before this date.²¹ Total expenditures are the sum of domestic household consumption, of government final consumption, and of total, private and public, gross capital formation (investment). The first striking observation that highlights the acute dependency of the Beninese economy on foreign financing is that total absorption always significantly exceeded GDP (on average by 8 per cent over 1990–1998 and 6 per cent over 1999–2019). The three successive SAPs Benin underwent over the 1989–1999 period tamed absorption for several years – it was at 128 per cent of GDP in 1981 – but the effect did not last, and absorption surged again towards the end of the 1990s and remained high thereafter.

Figure 2.6 Structure of absorption, 1990–2019 (per cent of GDP)

Source: Author’s calculation based on data from WDI; series in percentage of Benin’s rescaled GDP.

Considering the composition of absorption, the first noticeable feature is the relative size of household final consumption expenditures, which remained close to 80 per cent from 1999 until 2006, before sliding down to 68 per cent in 2019. This raises two questions: why such a high propensity to consume; and why the slide?

A country comparison indicates that the Beninese consumption ratio over GDP has in general been higher than in the average low-income or SSA country over the last twenty years. It is however difficult to find a convincing explanation for this beyond that of differences in national account methodologies for measuring household consumption, an aggregate whose measure is often particularly imprecise.²² In line with this, the three available household surveys do indeed report an average per capita real consumption that is about 30 per cent lower than the national account data.^{23, 24} One can however expect that the evolution of the consumption ratio reasonably describes actual trends in consumption patterns.

A second feature of the absorption picture is, precisely, the slide in the household consumption ratio.²⁵ Various factors could explain the decline in the household consumption ratio since 2006. First, the deep deflationary shocks in Benin in 2008–2009 and 2015–2016 caused by the reversal in oil prices and its effect on the Nigerian economy may have increased precautionary savings and thus participated in the decline of the consumption ratio.²⁶ It is however doubtful that this argument can explain the persistent decrease of this ratio over the whole period since 2006. A more fundamental factor may be at play. As further discussed in the last part of this chapter, inequality has been on a rapidly increasing trend in Benin. Increased inequality in income distribution and its effects on aggregate consumption patterns is most likely one of the factors behind the observed fall in Benin’s household propensity to consume.

Government consumption has reached a largely constant 10 per cent share of GDP since the mid–2000s, after a downward adjustment in the 1990s. This level is in line with those observed for most WAEMU members, slightly higher than for the average SSA country – once Benin’s recent rescaling of national accounts has been accounted for.

The share of gross capital formation in GDP has exhibited marked changes over the last thirty years. After a strong rise in the early 1990s following the transition back to a market economy, the ratio steadily declined until 2006, before clearly picking up again from 2013 on, reaching a 25 per cent average over the last years. Taken over the whole period, Benin’s investment-to-GDP ratio of 17 per cent was not only below what was observed elsewhere in the region but, most importantly, it proved too low to prevent the capital-to-labour ratio from declining, endangering the growth of per capita income, as discussed earlier. The strong rebound of investment over the last seven years is thus a welcome positive development. Given the significant structural change Benin is confronted with, a sustained level of both public and private investment is indeed a sine qua non for improving growth performance through increased productivity.

The combined high-level consumption of households and government in Benin for a time coincided with a retreat of capital expenditures, up to the late 2000s. These trends have been reversed since, consumption receding in favour of investment. These structural changes in absorption have been eased by Benin’s access to external financing. Not only has past investment been less constrained by consumption expenditures thanks to external financing, but the recent rise in investment could also be financed despite an insufficient increase in domestic savings. The extent to which this persistent, and seemingly easy, access to external finance has provided Benin with the indispensable resources to redeploy its economy, and not invited or sustained excess spending, is a legitimate but delicate question. To gain some insight about it, we focus next on two closely related aspects: how constrained resources are for the public sector and how efficiently they are managed; and which financing channels could Benin mobilise to sustain this structural recourse to external financing.

B Efficiency versus Resource Constraint in the Public Sector

With total spending close to 15 per cent of GDP (17 per cent in the last five years) and a large proportion of formal employment, the Beninese government is a major economic actor.²⁷ However, it is an actor that does not have the means for the crucial role it is expected to play. On the one hand, the observed imbalance between government domestic savings and investment translates into a recurrent budgetary deficit and thus a strong public finance constraint. On the other hand, Benin’s mobilisation of domestic resources appears to be low, and both government revenue and spending exhibit significant inefficiencies. These latter come at a high cost at a time when foreign grants and loans are trending downwards, even raising the issue of sustainability of basic public services.

Table 2.3a provides an overview of the government’s resources, spending, and deficit financing over 2002–2019.²⁸

Table 2.3a Benin’s domestic and external accounts, 2002–2019 (per cent of GDP): Government revenue, expenditures, financial balance, and debt

% of GDP	2002–2004	2005–2007	2008–2010	2011–2013	2014–2016	2017–2019
Direct taxes	2.7	2.6	2.5	2.3	2.7	2.6
Indirect taxes	7.9	8.1	8.9	8.6	7.5	7.6
of which: VAT	4.4	4.5	4.9	4.7	4.1	4.7
of which: Customs duties	2.6	2.8	2.9	2.9	2.7	2.1
Total taxes	10.6	10.7	11.4	10.9	10.1	10.2
Social contributions	0.0	0.2	0.3	0.4	0.4	0.4
Non-tax revenue	0.6	1.1	0.7	0.6	1.4	2.7
Total domestic revenue (excl. grants)	11.2	11.9	12.4	11.9	11.9	13.3
Recurrent expenditures	9.1	9.6	10.0	9.3	12.1	11.3
Savings (excl. grants)	2.1	2.3	2.4	2.5	–0.1	2.0
Investment expenditures	4.0	4.4	4.8	4.6	4.2	5.4
Budget deficit (excl. grants)	1.9	2.1	2.3	2.1	4.4	3.4
Grants	1.1	1.6	1.5	1.2	0.5	0.9
Total revenue	12.3	13.6	13.9	13.1	12.5	14.2
Total expenditures	13.1	14.1	14.8	14.0	16.3	16.7
Budget deficit (incl. grants)	0.8	0.5	0.9	0.9	3.8	2.6
Government debt	25.2	16.5	19.4	20.0	29.7	40.6

Source: Author’s calculation based on data from IMF Government Financial Statistics, World Economic Outlook, and Regional Economic Outlook for SSA databases; WDI; United Nations University – wider government revenue database for revenue categories up to 2013. For later period, World Bank (2018, Table 2, p. 17) and author’s own estimates based on data from Ministry of Finance. The information on statutory tax rates is taken from IMF (2018b) and World Bank (2018).

1 Revenues

Tax revenues are in the range of 10–11 per cent of GDP, globally constant over the 2002–2019 period, notwithstanding the 2016–2017 weaker performances and the recent recovery. Benin’s tax-to-GDP ratio was assessed by the IMF as below that of comparable developing countries, including SSA countries.

Indirect taxes represent the bulk of tax revenues, with direct taxes representing only 24 per cent of the total, broadly in line with WAEMU and low-income SSA countries and a direct consequence of the degree of informality of the economy. Value-added tax (VAT) represents the largest part of indirect taxes, followed by custom duties. The latter are proportionally higher in Benin, possibly as a reflection of the oversized imports for re-export²⁹ On the contrary, revenue from excise taxes are proportionally lower, largely a consequence of the loss of tax revenue due to the fraudulent import of Nigerian fuel products.³⁰ Property taxes and other taxes on goods and services also account for only small parts of tax revenues.³¹

Foreign grants have represented quite a variable share of total government revenue over the period and are on a decreasing trend. This makes the issue of enhancing domestic resource mobilisation all the more acute for Benin. Such a policy can a priori be pursued by raising tax rates. Yet, the uniform VAT rate applied by Benin (18 per cent) is already the maximum rate allowed by WAEMU. Furthermore, while excise tax rates are lower than in WAEMU, custom tariffs are constrained by the common external tariff imposed by Benin’s membership in the ECOWAS customs union. Statutory corporate tax rates are also already relatively high (30 per cent in 2018), and the progressive personal income tax system features marginal tax rates up to 45 per cent.³² In short, increasing statutory tax rates is not really a viable option for Benin, as it would in addition reinforce the incentives for tax evasion. However, enlarging the tax base and enhancing the efficiency of tax collection have the potential to unlock a significant amount of resources and should therefore be given a high priority on Benin’s authorities’ policy agenda.

Various studies concur in pointing out that Benin underperforms in raising domestic tax revenues, relative to comparator countries. Following the World Bank (2018), Benin’s VAT C-efficiency ratio³³ (41 per cent) was below the regional average in 2014 and started to decline afterwards, reaching a low 31 per cent in 2016. The C-efficiency ratio for corporate income tax is also particularly low (10 per cent). Both indicators point to huge scope for improving tax revenue. However, such straightforward efficiency measures can only offer a relatively blunt assessment, as they do not take into account the structural factors that shape a country’s capacity to collect taxes.

Caldeira and Rota-Graziosi address more thoroughly these efficiency aspects of Benin’s domestic resource mobilisation in Chapter 6 of this book. They find that several factors account for the unsatisfactory level of VAT revenues: the high degree of informality in economic activity, weak compliance and fraud encouraged by insufficient audit capacity of the fiscal administration and amplified by corruption, and large tax exemptions, VAT exemptions alone representing 61 per cent of total tax expenditures in 2016.³⁴

2 Expenditures

Total government spending has averaged 14.8 per cent of GDP over 2002–2019, with about two-thirds devoted to current expenditures and close to one-third to public investment. Recurrent expenditures have stayed broadly constant, around 9.5 per cent of GDP until 2014, before experiencing a rise in the recent period. The wage bill is the largest item (44 per cent on average), followed by current transfers (32 per cent), expenditures on goods and services (17 per cent), and interest on debt (6 per cent). Current transfers comprise spending on education and social services, pensions and scholarships, transfers to local authorities, as well as subsidies to government agencies and state enterprises.³⁵ Many of these transfers also finance wages, making public wage and employment policy a key determinant of current expenditures. The latter policy, however, has suffered from significant inefficiencies. A telling sign of this is that the public wage bill has most often been proportionally higher than the average WAEMU country (Lundgren, 2010; Ndoye, 2015). Since 2008 at least, it has also systematically been above the WAEMU convergence criterion.³⁶ A weakly controlled public wage bill threatens the sustainability of public finances and/or risks a crowding out of needed spending on social transfers or of capital expenditures. Recent steps have been taken by the authorities to mitigate these risks by improving control over the wage bill.³⁷

Public investment in physical infrastructure is a key factor of development, not least because it is complementary to private investment. As has already been seen, Benin faces in this respect significant infrastructure gaps, in terms of both availability and quality. Public investment has averaged 4.6 per cent of GDP in 2002–2019, with some variability. It accounted for a third of total government expenditures, with a large part (40 per cent) of it financed by external sources. According to the IMF (2020a), Benin’s public investment, relative to GDP, was on average higher that in WAEMU and SSA countries over 1990–2015. Yet, as documented by this IMF study, Benin’s stock of public capital significantly decreased between 2000 and 2015, a result of a lack of new investments and insufficient maintenance of existing infrastructure. It is therefore the inefficiency of investment more than its volume that is at the root of Benin’s low quality of infrastructure. The IMF (2020a) study also points out that the efficiency of investment is substantially limited by institutional weaknesses in the evaluation and selection of investment projects. Improving governance relating to the public investment cycle is an important challenge, especially given the government’s recent move towards significantly scaling up public investment, through budgetary funding and through partnerships with the private sector.

3 Financial Balance

The Beninese government’s domestic resources were insufficient to cover its expenditures year after year over the 2002–2019 period (see Table 2.3a). The budget deficit excluding grants averaged 2.7 per cent over the period. Grants, on a declining trend, were never sufficient to avoid a globally negative financial balance and the public debt thus increased over the whole period, bringing the total central government debt-to-GDP ratio from 19 per cent in 2013 to 42 per cent in 2019. Most of the increase in debt has been financed at non-concessional terms, mostly on the domestic and regional markets, thus involving enhanced interest rate and refinancing risks.³⁸

To contain the risks resulting from unfavourable debt dynamics, Benin needs to improve domestic resource mobilisation and keep its public expenditures in check. As discussed in the two preceding subsections, this can be achieved without sacrificing development goals by giving strong priority to increasing the efficiency of both tax collection and expenditure management.

C Foreign Assistance Dependency

The external position of Benin is described with some detail in Table 2.3b. This essentially combines saving and investment expenditures of the private sector and the government and shows how the observed gap between domestic savings and investment is financed by the rest of the world.³⁹

Table 2.3b Benin’s domestic and external accounts, 2002–2019 (per cent of GDP): Financing flows of the economy and external debt

% of GDP	2002–2004	2005–2007	2008–2010	2011–2013	2014–2016	2017–2019
(1) Gross domestic savings	8.6	6.7	7.2	10.4	13.6	19.9
(a) Private sector	6.5	4.4	4.7	7.9	13.7	17.9
(b) Public sector	2.1	2.3	2.4	2.5	–0.1	2.0
(2) Gross domestic investment	15.1	13.8	14.7	16.9	20.1	25.3
(a) Private sector	11.1	9.4	10.0	12.3	15.9	19.9
(b) Public sector	4.0	4.4	4.8	4.6	4.2	5.4
(3) Income from abroad (net, primary, and secondary)	1.5	2.7	1.6	1.3	1.3	1.2
(4) External funding needs [(2) + (3) – (1) = current account deficit]. (4) External funding sources [(5) + (6) + (7)]	4.9	4.4	5.9	5.1	5.2	4.3
(5) Capital transfers (net inflows)	1.3	6.5	1.2	1.8	1.4	1.4
of which: Debt forgiveness	0.5	5.3	0.1	0.0	0.0	0.0
(6) Foreign Direct Investment (net inflows)	0.7	1.6	1.6	1.8	1.6	1.3
(7) Other financial liabilities (net, increase) and use of reserve assets	2.8	–3.7	3.1	1.5	2.2	1.5
Memo items
(8) External debt stocks	30.9	14.8	13.6	16.3	18.0	24.9
(9) Official development assistance (net flows)	5.8	5.6	6.9	5.4	4.2	4.5

Source: Author’s calculation based on data from IMF Balance of Payments data for items (3)–(7); WDI for items (2), (8), and (9). Items (1b) and (2b) from Table 2.3a. Items (1) and (1a) are deducted as residuals, to insure consistency between funding needs and sources.

Investment expenditures systematically exceed domestic savings for the government, but also for the private sector. The latter is responsible for the largest part of the overall imbalance between 2002 and 2013, while the government takes the largest share in the deficit over 2014–2019 as a result of increased spending. Migrant remittances and foreign grants significantly reduce Benin’s total domestic savings imbalance, but the current account deficit (item 4 Table 2.3b) remains significant, 5.4 per cent of GDP on average.

The contribution of foreign direct investment towards closing the financing gap is a modest 1.5 per cent of GDP on average. To cover the remaining funding needs, Benin has thus to rely on capital transfers from donors and on external borrowing. The former represented a rather constant resource flow of 1.5 per cent of GDP, except in 2006 when a large public debt write-off was recorded.⁴⁰ External borrowing amounted to about 2 per cent of GDP.⁴¹ Most borrowing abroad is in the form of public or publicly guaranteed debt. External non-guaranteed private-sector debt is minimal.

The increase in borrowing has resulted in a progressive increase in the external debt-to-GDP ratio over the last years up to its 2019 level of 27 per cent. At first this level might not appear alarming compared to its previous crisis level of 87 per cent in 1994 and given that almost all external debt is currently at concessional terms with multilateral development agencies or bilateral lenders.⁴² Yet, Benin’s external dependency should not be minimised, since future official development assistance (ODA) might not be as forthcoming as in the past. Indeed, ODA clearly appears to be on a declining trend.⁴³ At around 5 per cent of GDP over the last ten years, it is well below the 10–15 per cent levels witnessed in the 1990s. Should this trend persist, Benin would face increased external financing constraints. Current account deficits at levels observed in the past would then need to be financed at non-concessional terms, at higher and possibly fast-increasing costs – assuming of course that access to international financial markets could be maintained.

Benin’s development policy should thus give the highest priority to guaranteeing the sustainability of its external debt and, more broadly, to decreasing its foreign financing dependency by curtailing its current account deficit, grants excluded. In this respect, crucial future challenges include expanding the export base, cutting or rationalising public spending, increasing public investment, and tax collection efficiency.

V Benin’s Social Challenges

Benin is confronted with a number of social challenges that hinder the improvement of the well-being and quality of life of its population, including demographic pressures, poor health care and quality of education, as well as persistent poverty and inequality.

A Demographic Pressure

As emphasised in Section 1, population growth is still very high in Benin, on average 2.8 per cent per year in 2005–2018. While it is not significantly different from that of other SSA countries, it is largely above the growth rate of other developing regions. This high level of population growth can be explained by the high fertility rate, which was still at five children per woman in 2018. Poverty and low education levels appear to be the main driving forces behind that rate.

High population growth poses a number of challenges for Benin’s economic development. First, it requires the private sector to create more jobs in order to absorb a growing labour force, especially given the high proportion of young people, typical of a fast-growing population. Current economic growth trends would imply that the majority of newcomers would have to turn to low-productivity jobs in the informal sector. Poor-quality jobs for a high proportion of the youth may have a high social and even political cost, as they may lead to increasing inequality and grievances. Avoiding this outcome requires increasing the volume and/or the efficiency of investment so as to put the level of physical capital per worker on a positive trend. Second, high population growth puts pressure on the government to scale up public services in health and education.

B Persistence of Poverty and Rising Inequality

1 Poverty Incidence

The incidence of poverty at the national level is high: the poverty headcount ratio (the percentage of population unable to cover their basic food and non-food subsistence needs) exceeds 40 per cent, the exact value differing between institutions depending on the value they set for the poverty line.⁴⁴ Also, their assessment of the evolution of poverty over time is contradictory. Following the World Bank (2017), poverty declined between 2010 and 2015, whereas INSAE’s estimates indicate the opposite, again reflecting differences in poverty lines and methodology. In both cases, however, the change is limited. On the other hand, more recent estimates by INSAE suggest a slight drop by 2019 (see INSAE, 2020).

The infrequency of household surveys measuring poverty is responsible for the relative ambiguity of available evidence on poverty and prevents us figuring out the long-run trend of poverty. For the 2010–2015 comparison it turns out that 2015 was an exceptional year during which Benin experienced a severe recession because of the drop in oil prices and its consequences for the Nigerian economy and CBT activity. On that basis, we would thus expect poverty to be more pronounced during that year. At the same time, GDP per capita remained 9 per cent above 2010, the year of the previous household survey. These two opposite circumstances explain why the change in poverty has been limited during that period and why different methodologies lead to different conclusions about the direction of the change. Poverty would probably have been lower in 2015 if not for the recession. That the change between 2015 and 2019 is also limited is more worrying, as precisely the opposite bias should have been observed. This suggests that recent economic growth in Benin has not been very inclusive.

The preceding remark on the somewhat exceptional role of the 2015 recession in explaining a poverty headcount lower than what could have been expected raises another point. This is that the country does not have well-established safety-net systems that can be rapidly activated in times of crisis.⁴⁵

In contrast with monetary poverty indicators, the headcount of non-monetary poverty⁴⁶ slightly decreased over the period 2011–2015 (INSAE, 2018). It is also smaller than the monetary poverty headcount. In both cases, the explanation of the difference is that non-monetary poverty includes several deprivations that do not change or even keep improving in times of recession. This would be the case for instance for school attendance, child mortality, and the presence of some assets in the household.

2 Inequality

Income inequality in Benin is both high and increasing. In a little more than ten years between 2003 and 2015, the Gini coefficient is thought to have surged from 0.39 to 0.48, a very high level even by SSA standards and a very large jump. This casts some doubt on the comparability of the household surveys behind these measures. Even though such an increase remains consistent with the limited upward or downward changes in the monetary poverty headcount discussed earlier, it would suggest that the severity of poverty has enormously increased, with the bottom 40 per cent of the population seeing their real expenditures per capita plummeting by around 20 per cent.⁴⁷ Although it is not to be excluded that poverty became more severe, it is difficult to imagine that such a fall would not cause major social and political turbulence.

Thus, even though probably much overestimated, inequality has escalated since the turn of the millennium. Therefore, it can be confidently said that growth in Benin has not been inclusive, to put it mildly: the gains from growth have disproportionately accrued to the top of the living standard distribution. This is confirmed by the most recent estimate of monetary poverty that found little change between 2015 and 2019, although based on a different source (see INSAE, 2020).

C Literacy and Education

1 Literacy

Benin’s record of literacy achievements is close to catastrophic, as it ranks today among the worst performers in the world (World Bank WDI). Literacy rates in Benin are much lower than those estimated for SSA (30 in Benin vs 63 in SSA in 1979). This reflects primarily the low priority that was long put on education, a situation that fortunately changed some time ago (a literacy rate of 61 in Benin vs 76 in SSA in 2018). Even though the first results of these changes have become apparent in the last decades, the gap with the average SSA country remains large: around 15 percentage points whatever the population group being chosen, even the youth.

If it ever were needed, this last observation shows the utmost importance for Benin of enhancing its education system, both by broadening its population coverage and by improving its performance. Also worth noting is the significant and persisting gender gap in literacy achievements, although this gap has somewhat decreased for the youth in recent years (82 for males vs 52 for females in 2018).

2 Primary Education

The situation regarding primary school enrolment differs from the situation for literacy. In this area Benin’s progress has been impressive, at least if one concentrates on the enrolment rate. The latter has increased from 40 per cent in 1990 to 96 per cent today, overtaking the SSA average.⁴⁸

The question must nevertheless be raised as to whether rapid growth in enrolment and even completion rates⁴⁹ has been obtained at the price of a deterioration in the quality of schooling. Benin does indeed lag significantly behind other SSA countries regarding the pupil–teacher ratio⁵⁰ and the proportion of repeaters among enrolled primary school pupils.⁵¹ More worryingly, learning outcomes are low, not to say dismal in some cases, and have shown no significant improvements since 2005.⁵² Taken together, these findings may explain the still relatively high proportion of illiterate people among the youth.

It was to be expected that quality would be affected by the surge in enrolment. Yet, Benin has already for several years been close to universal enrolment and it is time for quality to catch up.

3 Post-Primary Education

Progress in secondary education enrolment over the last years has been still more impressive and, to some extent, a consequence of higher primary completion rates. The enrolment rate has doubled since 2004 to reach 59 per cent today, compared to only 43 per cent on average in SSA.

As the number of students who are completing primary education increases, so does the pressure on secondary, vocational, and tertiary education. Yet, it is noticeable that it is not the same for boys and girls, the latter lagging significantly behind when moving up the education ladder. Furthermore, as in primary education, quality does not follow. Rapid expansion of enrolment strains resources and negatively affects the quality of education.

The situation is comparable for tertiary education. Enrolment rates have roughly doubled since the early 2000s to reach 10 per cent today, which is significantly above the SSA average. An additional issue in the case of higher education is the relevance of the curriculum, together with the fields of knowledge covered. There is a huge enrolment imbalance in favour of social sciences over technical curricula. This creates a mismatch between the competencies of candidates for a job and those actually required by employers.

4 Education-Sector Reforms

The low quality of basic education and its considerable variation between different parts of the country (particularly between the north and the south) are clearly matters of serious concern. If bringing most kids to school may reasonably come before improving quality, unfortunate policy decisions in educational matters were taken in the past that were detrimental to educational outcomes. In particular, teacher training schools in Benin were discontinued at some stage during the 1990s, causing a severe, long-lasting shortage of teachers in many parts of the country, particularly in the north. There, outsized classes (reaching up to 120 pupils), teacher absenteeism, and substitution of poorly trained teachers for the missing qualified staff attained unprecedented levels, with all the adverse long-term effects that can be easily imagined.

How could such a deterioration occur while an ambitious structural reform of the education sector, initiated in 1989, was under way?⁵³ This was not so much because the reform proved inconsistent with the fiscal restraint imposed by the macro-economic adjustment. Rather, it was due to the lack of training and upgrading of government staff made necessary by the reform (African Development Bank, 2003, pp. 13–14, 17).⁵⁴ Paradoxically, at a time when money available for education had been reduced and efforts should have been directed to more efficient use of it, the lack of teaching staff caused the allocated budget not to be fully used – the utilisation rate was lower than 60 per cent at the end of the 1990s. It was in this already difficult context that President Boni Yayi introduced reforms in 2000–2008 to lower/suppress tuition fees at the various levels of education. These reforms caused an explosion of enrolment, leading to a further erosion of the teacher-to-student ratio and further deterioration in quality.

D Health-Care Issues

Even though it was halved in the last thirty years, neonatal and infant mortality remains very high in Benin. The neonatal mortality rate was still 32.5 and the infant mortality rate 63.1 per 1,000 live births in 2016, somewhat above the SSA average. Malnutrition among children under 5 (stunting) not only remains higher than elsewhere in the region, but has worsened over the past thirteen years (DHS, 2013). As would be expected, stunting and wasting are of greater concern in rural areas.

The overall quality and efficiency of health-care delivery systems clearly need to be improved. The World Bank (2015a) notes that the government’s food and nutrition reform programme has suffered from weak institutional arrangements, reflected in various disjointed, small-scale sectoral components housed in the Agriculture, Health, and Family Affairs ministries. It is also striking that, in 2016, doctors’ wages were higher in Benin than in other SSA countries with better-performing health-care systems (Prady and Sy, 2019).

VI Conclusion

Benin faces several crucial economic and social challenges. They are the result of multiple factors that have hampered its development.

The challenges Benin is facing are as follows:

1. 1. Benin’s GDP per capita growth has been unsatisfactory over the last decades. The high population growth rate, which is expected to persist for several years, requires much higher and sustained growth. The nature of structural change that has occurred in Benin until now does not, however, bode well in this respect. It has mostly been characterised by a passive adjustment to the decline of the agricultural sector, with labour moving into informal activities or being absorbed by low-productivity sectors, mostly by (petty) commerce. The within-sector productivity growth has also been generally low, even regressing in the manufacturing and services sectors. Globally, capital deepening has been absent. As a result, aggregate productivity growth has been weak.

   Low within-sector productivity growth is due to poor factor accumulation, both in terms of human and physical capital, misallocation of resources implying efficiency losses, and slow technological change. For instance, much of the recent educational progress in Benin has been in the form of rising gross school enrolment. The quality of education was not raised and may even have deteriorated. Moreover, there is a large mismatch between the supply of higher education and the skill requirements of formal enterprises that could raise overall productivity. In the same way, compared to most SSA countries, Benin displays large infrastructure and efficiency gaps in key sectors, like electricity, transport, health, and telecommunications. Private capital accumulation is also discouraged because of low returns on private activities caused by an inadequate and unreliable business environment, whether for formal firms or informal producers, including family farms. The last few years have seen an acceleration of growth, some capital deepening, and some productivity increase. Yet, no clear sign of a change of regime in the development of the economy is visible, so that this change may be the result of particular external circumstances.

2. 2. Benin’s economy is poorly diversified and concentrated on risky activities, either subject to short-run price fluctuations or offering uncertain long-run growth perspectives. Indeed, its agriculture is heavily focused on cotton exports, making the economy vulnerable to swings in international commodity prices and in real exchange rates. Growth in the cotton sector has also been constrained by institutional instability and political interference. Efforts to develop non-cotton agricultural exports have not yet resulted in sizeable trade flows. The other key opportunity exploited by Benin has been re-exports, with Nigeria, its giant neighbour, as the main focus. The aim was to capture this country’s huge, oil-rent-financed, domestic demand for goods subject to Nigeria’s tariff and non-tariff barriers. This strategy has developed into a mostly unofficial and illicit CBT activity, operated by a network of informal operators present on both the re-export and the import-smuggling fronts. This CBT activity served Benin well, contributing to about 10–12 per cent of its GDP, according to our estimates. It has, however, clear downsides. It nurtures not only informality but also corruption, tax evasion, and political capture, as evidenced by the involvement of a few well-connected big actors in this trade. This activity also distorts incentives to develop legal domestic and more productive activities and crowds out resources that could be invested in them. Last, but not least, it is vulnerable to – and in some way hostage to – changes in Nigeria’s trade protection policies as well as border control practices, as evidenced by the recent closing of the border unilaterally decided by Nigeria. Benin is thus clearly in need of a sustainable export development strategy, one that is focused on a diversified export base and can foster formal trade networks.

3. 3. Benin’s high degree of informality in economic activities acts as a strong constraint on its development strategy. Informal firms are on average less productive as they use less capital and operate on a lower technology level. Informality deprives the public sector of valuable fiscal resources, putting a drag on valuable economic and social public expenditures. Because informal firms operate outside a legal framework, the resulting lack of a level playing field also hampers the emergence of a dynamic network of formal firms.

4. 4. Benin’s public-sector performance is below its potential. This is the case for its domestic resource mobilisation. Inefficiencies in tax collection, a consequence of several institutional weaknesses (informality, corruption, lack of transparency, poor enforcement…), deprive the public sector of much-needed resources. The management of public expenditures also suffers from inefficiencies, resulting in low quality of investments in key infrastructures or in misallocations of resources in spending on, for example, education and health. The persistent gap between total government resources, grants included, and total expenditures could be reduced by improving the efficiency of revenue collection and expenditure management, without sacrificing development goals, with the benefit of keeping the build-up of public debt in check.

5. 5. Benin displays a persistent and extensive need for foreign resources, ODA in particular. The sustainability in the medium and long term of such structural dependency on external concessional financing is a major concern, particularly when access to the latter at past levels is not necessarily guaranteed for the future, especially at a time of ‘aid fatigue’ among donors. This is all the more true for an economy that has not yet really started carrying out the structural transformation that would significantly reduce this dependence. It is also vital for Benin to keep open access to external funding as an insurance in times of duress, when it is hit by external shocks affecting its two leading sectors, cotton and re-exports, the more so because monetary policy is limited, with Benin being a monetary union member with a fixed peg to the Euro. A key challenge is thus to guarantee the sustainability of its external debt by reducing its structural dependence on foreign financing, particularly on costly non-concessional flows.

For an economy without extractive resources, Benin needs a re-orientation of its development strategy: towards activities that offer better returns than traditional activities based on raw agricultural products, and towards viable long-term trade relations that fully exploit the country’s regional comparative advantages, instead of keeping the focus on the illicit and informal CBT with Nigeria. To achieve this re-orientation, Benin needs to deal with the different, but very much intertwined, challenges already noted. Various policies can be figured out to address them. However, the question is not so much the nature of these policies as whether the most adequate ones will actually be adopted by the political decision system, and whether they will then be effectively implemented. Both issues in turn depend upon the institutional context of policy making and management.

The characteristics of these institutions, and their strengths and weaknesses in addressing Benin’s development challenges, will be investigated in depth in the remainder of this volume. Before this, however, it will be useful to look at what is known about precisely these institutional strengths and weaknesses.

3 Quality of Institutions Lessons from Quantitative and Qualitative Evidence

Romain Houssa and François Bourguignon

This chapter aims to identify the institutional areas that most constrain Benin’s economic development, relying on expert opinion as it appears in databases that provide international comparisons of institutional and related indicators, or as can be gathered locally through a dedicated survey. Section I of this chapter is devoted to systematic comparisons of Benin with other countries. Section II describes the survey carried out for the present study with a selected sample of decision makers in various areas and occupations in Benin. Section III synthesises the main lessons to be drawn from the preceding exercises and examines their degree of consistency with the conclusions of several growth diagnostic studies recently conducted on Benin.

I Benin’s Institutional Quality in an International Perspective

Three international databases will be used to compare Benin’s institutional quality with that of other countries. The first is the Quality of Government (QoG) database (Teorell et al., 2018). This is probably the most complete database available related to institutions. It comprises more than 2,000 indicators from more than 100 sources. Many fewer indicators are systematically available for low-income or lower middle-income countries – which are those that can be used as meaningful comparators for Benin. Nevertheless, there are still close to 200 indicators for such countries. In a previous use of that database (Bourguignon and Libois, 2018), a clustering analysis has been employed to summarise this set of indicators into six synthetic indicators, based on the proximity of the inter-country profile of the original indicators they comprise.

The second database is the Worldwide Governance Indicators (WGI). This also relies on a wide collection of original databases. Instead of using a statistical method to aggregate all the individual indicators present in those databases, the aggregation is done a priori by broad governance areas and then the first principal component is extracted from country observations, which makes it possible to summarise the differences across countries in a single indicator of the quality of governance in that area (Kaufmann et al., 2010). Six indicators covering different governance areas are derived in that way.

The third database is simply the Country Policy and Institutional Assessment (CPIA) indicators gathered annually by World Bank staff, re-aggregated in five broad clusters.¹

Benin’s institutional quality, as described by these three sets of synthesised indicators,² is compared against two groups of developing countries: neighbouring countries in Central and West Africa, and a group of countries that have performed better than Benin in terms of gross domestic product (GDP) per capita over the past decades despite being initially at a comparable level.³ Ideally, the comparison of institutional quality should refer to that initial stage, to see whether countries that initially had better governance overall did better in a subsequent period. Such a historical comparison is possible (although somewhat problematic) with the WGI database, but not with the others.

A Benchmarking Benin against Neighbouring Countries

Benin shares direct borders with four countries, namely Togo, Burkina Faso, Niger, and Nigeria. We were, however, unable to include Niger and Togo in our comparison due to lack of data. We instead included other countries in the same geographical area: Cameroon, Côte d’Ivoire, and Ghana. Figures 3.1a–3.1f compare the institutional performance of Benin and its neighbouring countries using the three databases described earlier, and at different points of time for WGI and CPIA.

Figure 3.1a Governance synthetic indicators: Benin and its neighbours, 2015–2016. The reported figures represent simple averages of the scores for each country for the QoG indicators in 2015 and 2016

Source: Author’s calculation from QoG database.

Figure 3.1b Governance synthetic indicators: Benin and its neighbours, 2018. The reported figures represent the score for each country for the WGI in 2018

Source: Author’s calculation from WGI database.

Figure 3.1c Governance synthetic indicators: Benin and its neighbours, 2005. The reported figures represent the score for each country for the WGI indicators in 2005

Source: Author’s calculation from WGI database.

Figure 3.1d Governance synthetic indicators: Benin and its neighbours, 1996. The reported figures represent the score for each country for the WGI in 1996

Source: Author’s calculation from WGI database.

Figure 3.1e Governance synthetic indicators: Benin and its neighbours, 2016–2017. The reported figures represent simple averages of the scores for each country for the CPIA indicators in 2016–2017

Source: Author’s calculation from CPIA database.

Figure 3.1f Governance synthetic indicators: Benin and its neighbours, 2005. The reported figures represent simple averages of the scores for each country for the CPIA indicators in 2005–2006

Source: Author’s calculation from CPIA database.

Even though the synthesised indicators constructed based on the three databases often have similar names (Figures 3.1a–3.1f), they do not necessarily cover the same concepts. This would be the case for the indicator entitled ‘control of corruption’. In the QoG database, this indicator is combined with the equal implementation of the law, which is part of the ‘rule of the law’ in the WGI and the CPIA. Likewise, human rights in the QoG refer to personal liberties, but also to the provision of public services to individuals, including education, health care, or social assistance, something that is behind the ‘people’ label in the CPIA database. Other indicators are conceptually closer to each other even though they have not been given the same name. This is the case for ‘business environment’ (CPIA), ‘regulatory quality’ (WGI), or ‘private-sector competitiveness’ (QoG). This is also the case for ‘government effectiveness’ (WGI), ‘administrative capacity’ (QoG), and ‘public management’ (CPIA). The same can be said of ‘democratisation’ (QoG) and ‘voice and accountability’ (WGI).

With the precaution required by this heterogeneity of indicators attached to different databases, we now examine the kind of differences in the quality of institutions they suggest exist between Benin and neighbouring countries.

The convergence across databases is stronger than may be apparent at first sight. Three synthetic indicators appear at least twice as relative weaknesses in the 2015–2016 data: business environment (QoG and CPIA), government effectiveness (QoG, CPIA), and control of corruption (QoG and WGI). On the side of the relative strengths of Benin, voice and accountability and human rights are unanimously better than in the comparator countries, the same being true of political stability in WGI or the absence of conflict and violence in the QoG.

The lack of full convergence in areas that seem to be well defined across the three databases may seem surprising. As mentioned earlier, however, the concepts behind the corresponding synthetic indicators may differ. For instance, new policies to control corruption may be praised in the CPIA corruption indicator, whereas other databases focus on the fact that the level of corruption remains unchanged. Likewise, some indicators may stress structural obstacles in ‘doing business’, like insufficient infrastructure, whereas others will put more emphasis on the government’s attitude towards business. The cost of relying on synthetic indicators is precisely that it is not possible to get into this kind of detail, this being the reason why an institutional diagnostic must necessarily go beyond this kind of aggregate analysis.

The comparability over time of the WGI is somewhat uncertain because the number of databases used to build them has substantially expanded over the last two decades. Yet, the relative position of countries along the various indicators should not be too greatly affected by this problem. From that point of view, no noticeable change in the ranking of Benin took place over these two decades, except for ‘regulatory quality’ (i.e. business environment), where Benin tends to progressively lag behind Ghana and Burkina Faso over time.

The comparability over time of the CPIA governance quality indicators is probably better than for WGI because they are supposedly based on a homogeneous methodology. There, the most noticeable change is again the worsening of the business environment both in absolute terms and relatively to neighbouring countries.

Overall, the appraisal of the quality of institutions in Benin through aggregate indicators and the comparison with neighbouring countries points to three weaknesses: the control of corruption, the business environment, and public management. Benin does not exhibit the worst performance in these areas at any point in time, as Cameroon and Nigeria most often lie behind it. However, it is generally the case that Benin does not do as well as Ghana, which dominates all the other countries in 2015–2016 according the WGI, or as well as Burkina Faso. Over time, moreover, it would seem that regress rather than progress is observed in the business environment.

B Benchmarking Benin against Better-Performing Developing Countries

We now compare Benin with five developing countries whose level of economic development was similar to Benin in the early 1990s, but that have had higher per capita GDP growth rates over the past twenty-five years and have now become substantially richer than Benin. These are Bangladesh, Cambodia, Lao, Vietnam, and Tanzania. Figures 3.2a–3.2f present the comparison using the same three sets of indicators in the same periods as in Figures 3.1a–3.1f. Of course, the profile of Benin in all radar charts is the same. What matters now is how Benin compares to those countries that were able to grow faster, both today and in the past at a time when all of the countries were at a comparable level of GDP per capita.

Figure 3.2a Governance synthetic indicators: Benin vs better-performing countries, 2015–2016. The reported figures represent simple averages of the scores for each country for the QoG indicators in 2015 and 2016

Source: Author’s calculation from QoG database

Figure 3.2b Governance synthetic indicators: Benin vs better-performing countries, 2018. The reported figures represent the score for each country for the WGI in 2018

Source: Author’s calculation from WGI database

Figure 3.2c Governance synthetic indicators: Benin vs better-performing countries, 2005. The reported figures represent the score for each country for the WGI in 2005

Source: Author’s calculation from WGI database

Figure 3.2d Governance synthetic indicators: Benin vs better-performing countries, 1996. The reported figures represent the score for each country for the WGI in 1996

Source: Author’s calculation from WGI database

Figure 3.2e Governance synthetic indicators: Benin vs better-performing countries, 2016–2017. The reported figures represent simple averages of the scores for each country for the CPIA indicators in 2016–2017

Source: Author’s calculation from CPIA database

Figure 3.2f Governance synthetic indicators: Benin vs better-performing countries, 2005. The reported figures represent simple averages of the scores for each country for the CPIA indicators in 2005–2006.

Source: Author’s calculation from CPIA database

Looking first at the three radar charts in Figures 3.2a–2c, the common feature is that, in comparison to these better-performing countries, Benin does not do well in public management and private-sector competitiveness. Except for this, Benin turns out to be quite comparable to the other countries when considering the WGI. It even performs relatively well on corruption. The latter advantage is still more pronounced with respect to the CPIA indicators. Overall, it would thus seem that, paradoxically, better-performing countries do systematically worse than Benin on that account.

Things are a bit different with the QoG database. There, Benin’s control of corruption appears to be among the worst. In the QoG database neighbouring countries’ control of corruption are also worse than they appear according to the WGI and CPIA indicators, confirming the different understandings of the concept of ‘corruption control’ in the various databases. The same is true of business environment in the QoG database, where Benin performs rather worse than comparator countries, whereas it ranks at or close to the median in the other databases.

Another somewhat surprising result is the underperformance of Benin according to the ‘people’ indicator in the CPIA database. The point here is that, under the general heading of social inclusion and equity, that indicator puts a great weight on education. The interpretation to be given to the gap observed for Benin is therefore that fewer or lower-quality public efforts are devoted to human capital accumulation. Better-performing countries have invested more than Benin in that institutional aspect of development. This was not systematically the case when the comparison was with neighbouring countries.

Looking now at the radar charts for earlier periods, Benin’s human capital gap is fully confirmed on the CPIA for 2005. It is also noticeable that over the last decade or so Benin has lost the comparative advantage it initially enjoyed in its business environment relative to better-performing countries. This finding raises the issue of whether initial institutional advantages, as measured by the kind of synthetic indicator used here, are responsible for the faster development of these countries, or whether it is their development that created such advantages.

One reaches the same conclusion when looking at the three WGI charts. Clearly, Benin was, roughly speaking, doing better than other countries in 1996. In particular, its radar profile dominated that of Bangladesh, Cambodia, and Tanzania in all areas. If it had not been for corruption, it would also have dominated Lao and Vietnam. Paradoxically, however, all of these countries grew much faster than Benin in the subsequent twenty years.

C Conclusion on International Comparison

What lessons may be drawn from this review of available international governance and institutional synthetic indicators? The first must be the lack of convergence of indicators from different databases that are nevertheless supposed to cover comparable areas. This discrepancy can only be explained by heterogeneous conceptual definitions, but it also casts some doubt on the true meaning of any single synthetic indicator of the type so frequently used in the cross-country development literature. Being analytically more rigorous would require using much more precise indicators, but this would increase the number of indicators to be used and would add to the inconclusiveness of the analysis.

Second, concerning Benin, the three potential sources of institutional weakness revealed by the analysis are the control of corruption, a business environment that is possibly less favourable than that in other countries, and efficiency issues in public management (although cross-country differences were rather small on that latter account). Another important weakness seems to lie in the public investment in ‘people’, most likely due to an underperforming educational system.

These are extremely general conclusions and, therefore, of limited use for policy makers. Remedying this would require getting into more detail to try to identify what exactly is making the business environment unfavourable or public management ineffective. As mentioned earlier, however, multiplying the number of dimensions of this type of international comparison would quickly render any results impossible to interpret. Other approaches must be developed to make use of the general indications delivered by the preceding analysis. Such approaches are pursued in the rest of this chapter and the accompanying chapters of the diagnostic.

II A Survey of Experts’ Opinions on Benin’s Institutional Quality

The goal of this section is to derive further insights about the quality of institutions in Benin on the basis of opinions obtained from decision makers in the private and public sectors, as well as from civil society, who are directly exposed to these institutions. An opinion survey has been conducted with a sample of such people. The questionnaire was adapted from the one applied in a similar study in Tanzania to fit the reality of Benin. In the following paragraphs we first describe in some detail the methodology of this survey, before analysing its results and then underlining the lessons to be drawn in terms of institutional strengths and weaknesses of development in Benin.

A Methodology

The survey of experts’ opinions about Benin’s institutional performance was developed in collaboration with Analysis for Economic Decisions, a Belgian consultancy, and a local team led by the director of Benin’s National Institute of Statistics and Economic Analysis, under the close supervision of the authors of the present chapter. The methodology included three main steps: questionnaire, sampling, and survey implementation.

1 The Format of the Questionnaire

The questionnaire was adapted from a similar survey carried out in Tanzania – see Bourguignon and Libois (2018), after translation into French and modifications required by the Benin context. Questions that were irrelevant to Benin were excluded, and new questions were added based on insights from the first chapters of this volume and a workshop with key decision makers that took place in August 2017 in Cotonou. A number of questions were also reformatted so as to facilitate communication during interviews. Finally, the questionnaire was coded into Survey CTO, allowing it to be implemented on tablets.

The format of the questionnaire is somewhat original. It was initially conceived to cover most economic, political, and social institutional issues. As it was too long for a single respondent, and because all respondents would not be knowledgeable in all areas, a flexible format was adopted, where respondents would choose the areas they would focus upon. By doing so, however, they would reveal at the same time their opinion about the strength of the institutional constraints on development in the various areas they could choose from.

Practically, the questionnaire consists of ten subsets of questions, each one corresponding to a broad institutional area: political institutions, law and order, ease of doing business, public administration, and so on. The list of areas appears in the working paper version (Houssa and Bourguignon, 2019). First, respondents were asked to indicate which three of the ten institutional areas they saw as including the most constraining factors for Benin’s economic development. Second, they were asked to give a relative weight to these three critical institutional domains, where a high value assigned to an area indicated that it is more detrimental to Benin’s economic development. Then, respondents had to answer those questions in the questionnaire that came under each of their three critical area headings, plus a fourth area chosen randomly in order to make sure that all questions in the questionnaire would be answered a minimum number of times.

2 Sampling

The survey team developed a sampling strategy that relied on a demand-side/supply-side approach to analysing institutions. First, public or private entities – firms, public administrations, agencies, political parties, trade unions, and so on – were identified, some of them being involved in setting or managing institutions, whereas others were simple users of those institutions in their customary activities. Then, respondents were selected within these entities, preferably among senior managers or deputies.

The sample comprises 396 respondents across five key groups of entities/experts, summarised in Table 3.1: public administration, judiciary, executive and legislative bodies, donors, civil society, and the private sector. Each group was further divided into subgroups with possibly a different relationship to similar institutions. For instance, the private-sector group includes three subgroups: formal firms, informal firms, and financial institutions; and public administration includes sectors like education, health, or utilities.

Table 3.1 Overview of the sample

Category	No.	%	Category	No.	%
Public sector: total	131	33	Members of parliament	23	6
Public administration	92	23	Members of other constitutional bodies (supreme court, auditor general, …)	27	7
Agriculture, commerce, industry	19	5	Trade unionists	3	1
Energy, water, mining	6	2	Donors	9	2
Economy, finance, development	19	5	Civil society	24	6
Education	11	3	Academics	10	3
Health	9	2	Think-tanks and charitable organisations	4	1
Infrastructure, transport, communications	14	4	Media	10	3
Sport, culture, tourism	8	2	Private sector	170	43
Foreign relations	6	2	Formal private firms	82	21
Law and order	15	4	Large firms and their associations	49	12
Judiciary	7	2	Medium firms	10	3
Military	4	1	Small firms	6	2
Police	4	1	Micro firms	17	4
Other administrations	24	6	Finance	12	3
Executive	7	2	Banks and their associations	6	2
Retired ministers	11	3	Micro-finance institutions	6	2
Local administrations (départements)	6	2	Informal firms	76	19
Political institutions	62	16	Total	396	100
Local politicians (communes)	9	2

Source: Author’s calculations.

Two methods were used to select entities in each subgroup: an arbitrary selection and a random sampling approach. Arbitrary selection was used to select entities in official sectors; that is, public administration, political institutions, civil society, or donors. Geographical diversity (départements and communes) was also taken into account as much as possible.⁴ A random sampling approach was implemented to select entities within the private-sector subgroups – except for the financial sector, where specific executives were arbitrarily selected, for the same reason as in the public sector; that is, the reduced number of entities to be considered.

Two specific strategies were used to randomly select formal and informal private firms. On the one hand, a database (Déclarations Statistiques et Fiscales, which includes 5,361 firms) was used to randomly select around eighty formal firms according to firm size, after stratifying the universe by size, but irrespectively of economic sector of activity. On the other hand, seventy-five informal firms were randomly selected after stratifying by sector of activity and geographical area. The random selection was made by enumerators who had been assigned a location and a field of activity.

3 Survey Implementation

The survey was implemented between December 2017 and early February 2018. Map 3.1 displays the locations of respondents’ entities.

Map 3.1 Geographical origins of respondents’ entities

Source: Authors’ calculations

The map shows that respondents are spread across the country. However, it turns out that the Atacora département is not represented in the sample. Also, there is an over-concentration of respondents in the southern (Ouémé, Atlantique, and Littoral) and north-eastern (Borgou) parts of Benin – the départements where most of the arbitrarily selected entities are located. In particular, the city of Cotonou in the département of Littoral is home to many of the firms and governmental entities. It must be kept in mind, however, that the objective of the survey is to poll not the Beninese population, but people with some knowledge and experience of the way various types of institutions function in Benin.

The stratification by type of occupation and geographical areas reflecting this choice does not necessarily fit the geographical distribution of the population. The sample of respondents is not representative of the Beninese population. In the sample, 84 per cent have a university degree and 27 per cent have studied abroad. They are in their mid-40s on average, and most of them have a family. Perhaps because of the education bias, Christians are over-represented in comparison with the whole population. If there is no strong bias in terms of ethnicity, there is in terms of gender: the sample is strongly dominated by males (82 per cent). This feature reflects the gender distribution among senior managers in Benin. As a matter of fact, the only sector where a gender balance holds is among respondents operating in the informal sector (see more detail in Houssa and Bourguignon, 2019).

B Empirical Results

This section summarises the information derived from the expert opinion survey. This is done into two steps. First, we analyse responses to the question that three broad institutional areas, among the ten areas listed in Table 3.2, are the most constraining for the development of Benin overall. Second, we gain a deeper understanding of the reasons behind those choices by analysing the responses to the specific questions that come under each broad area heading.

Table 3.2 Broad institutional areas by perceived weaknesses

	Total			First choice		Second choice		Third choice
	No.	%	Rank	No.	%	No.	%	No.	%
A. Political institutions	201	16.9	2	170	42.9	17	4.3	14	3.5
B. Law and order, justice, and security	126	10.6	4	40	10.1	63	15.9	23	5.8
C. Public administration	230	19.4	1	76	19.2	110	27.8	44	11.1
D. Ease of doing business	133	11.2	3	32	8.1	53	13.4	48	12.1
E. Dealing with land rights	127	10.7	4	29	7.3	48	12.1	50	12.6
F. Long-term and strategic planning	85	7.2	7	12	3	38	9.6	35	8.8
G. Market regulation	83	7	7	15	3.8	39	9.9	29	7.3
H. Security of transactions and contracts	21	1.8	10	2	0.5	8	2	11	2.8
I. Relations with the rest of the world	63	5.3	9	6	1.5	9	2.3	48	12.1
J. Social cohesion, protection, and solidarity	119	10	6	14	3.5	11	2.8	94	23.7
Total	1188	100		396	100	396	100	396	100

Source: Author’s calculations.

1 Perceived Institutional Constraints by Broad Areas of Functioning of Institutions

The ‘total’ row in Table 3.2 reports the number of times each broad institutional area appeared among the three most critical areas for Benin’s development mentioned by respondents. Two areas strongly dominate the others: the functioning of public administration, followed by the functioning of political institutions. Together, they account for one-third of all opinions. Some way after them comes a group of four other areas that each account for about 10–11 per cent of the total choices: law and order, justice, and security; ease ofdoing business; land rights; and social cohesion, protection, and solidarity. The four remaining areas – market regulation, long-term and strategic planning, security of transactions and contracts, and relations with the rest of the world – seem to be less critical. This may be because they are seen as corresponding to more technical aspects of institutions, and therefore were probably more distant from the preoccupations of respondents.

Equally interesting is the order of appearance of each institutional area in the choice of three areas by the respondents. It can be seen in Table 3.2 that political institutions was mentioned by 43 per cent of the respondents as their first choice, followed by public administration, which also dominates the second choice. The third choice is dominated by social cohesion, protection, and solidarity. This result must be interpreted negatively, though. Indeed, that area (social cohesion, protection, and solidarity) appears to be of less importance in comparison with areas (e.g. areas B, D, and E) that have more or less the same total number of mentions, but that were mentioned more frequently as the first and second choices.

The preceding ranking is changed only marginally when the weights respondents associated with the institutional areas they selected are accounted for. Political institutions and public administration remain strongly dominant. As a matter of fact, the average weight given to the institutional areas by those respondents who mentioned them as an obstacle to development is quite uniform, except, interestingly, for political institutions, which again dominates the others. The same results were obtained when respondents were asked to reveal their willingness to pay for improving those institutions they found most critical for development (see more detail in Houssa and Bourguignon, 2019).

Respondents are expected to have heterogeneous views about institutional weaknesses. In order to gain insights into this issue, a number of mechanical regressions were run where a dummy variable defined by whether a broad institutional area was seen as critical or not was regressed on some characteristics of respondents, namely being a Beninese national; being a woman; managing a large, medium, or small firm; and being employed in a financial institution.

These regressions are shown in Table 3.A.1 in the Appendix to this chapter. Among the noteworthy results is the fact that large and formal firm operators tend to have less distrust than other respondents with respect to political institutions – perhaps because they know better how to deal with them. The other side of the coin is that, more than others, they find that the business environment, including market regulation or the security of contracts, is an impediment to development. This attitude is still more prevalent among respondents working in financial institutions. More surprisingly, women also share this view; that is, they place less emphasis on political institutions and more emphasis on business, possibly because they tend to be over-represented among small and micro entrepreneurs. As far as nationality is concerned, it is not clear that the distinction is meaningful given the tiny minority of foreigners in the sample. Not surprisingly, foreigners overvalue the business environment whereas nationals give more importance to land rights.

2 Interactions between Formal and Informal Institutions

In a society where tradition very much matters, it was considered interesting to ask respondents about whether traditional institutions could be a good substitute for imperfectly working formal institutions, particularly those institutions dealing with business relationships, for instance security of contracts (Dhillon and Rigolini, 2011). In this regard, respondents had to choose out of five informal institutions those they considered to be a good substitute for imperfectly working formal institutions: religious leaders, traditional authorities, networks, other personal relations, and cultural masking traditions established during the pre-colonial period and backed by spiritual forces.⁵

The responses suggest that the dominant informal response to institutional weaknesses are not the traditions inherited from pre-colonial times, but essentially private networks and, to a lesser extent, traditional and religious leaders. This result was not unexpected given the rather high average educational level of the sample. Yet, the fact that a significant proportion of respondents mentioned traditional and religious leaders is evidence that formal institutions regulating interpersonal economic relationships are not fully established in Beninese society, possibly because of the survival of traditional means of solving this kind of problem.⁶

3 In-Depth Perceptions of the Quality of Institutions in Benin

We now go one step further by exploiting the detailed questions asked of the respondents in connection with the three broad areas they chose, and a randomly selected one. The full list of questions may be found online.⁷ For the sake of simplicity, however, we shall not deal with these questions directly. We shall rather list the main lessons that can be learned from the answers. Before doing so, however, we must address some methodological issues in the identification of weaknesses and strengths revealed by the answers to the questionnaire.

The response to all questions was coded on a Likert scale ranging from 0 to 4: 0 defined as ‘not at all’, 1 as ‘little/low importance’, 2 as ‘neutral’, 3 as ‘a lot’, and 4 as ‘extremely’. In addition, respondents were allowed to reply with ‘I do not know’ when they could not provide relevant answers to a question. Note that some questions were asked in a negative way – for example, ‘To what extent does corruption constrain business?’ – whereas others were asked in a positive way – for example, ‘How well do you think local communities understand aspects of the land law that concern them?’ To make responses comparable across the questions, the answers were re-coded to the negative, so that all low response values can be interpreted as institutional weaknesses, and high values as strengths.

The full questionnaire is very rich, as it includes more than 400 questions – even though the typical respondent had to answer roughly half of them; that is, those in the areas he/she chose. To synthesise the answers, a number of methodological choices have to be made.

Weaknesses and strengths are defined by average Likert scores below 1.5 for the former and above 2.5 for the latter. These cut-offs were defined on the basis of the distribution of average scores across all questions shown in Figure 3.3a, which exhibits discontinuities at these values. Note, however, that relying on average scores raises the issue of how to interpret responses with neutral opinions; that is, those with scores equal to 2.⁸ Is it a truly ‘neutral’ response or a quick way to get rid of a question one cannot really answer? To take this ambiguity into account, questions were ranked in accordance with both their average score and that score after eliminating the 2-scores. However, the difference between the two rankings was marginal. The same was found when considering only the proportion of scores strictly below 2 for weaknesses and strictly above 2 for strengths.

Figure 3.3a Average scores: Distribution of average scores

Source: Author’s calculations.

A first consistency check of this methodology of handling the answers to the various questions in the questionnaire consists of checking whether the scores of the questions under the heading of the ten broad institutional areas fit the average ranking done by respondents in the first part of the interview. This is done in Figure 3.3b.

Figure 3.3b Average scores: Frequency of questions by score levels

Source: Author’s calculations.

The first block on the left-hand side of Figure 3.3b simply shows the relative frequency of questions across broad institutional areas in the questionnaire. For instance, about 30 per cent of all questions fall under the heading of ‘political institutions’. However, it must be kept in mind that some questions appear under various headings. For instance, a question on the corruption of tax collectors would appear under both public management and ease of doing business.

The two other blocks of the right-hand panel of Figure 3.3b are more interesting. They show the same frequencies, but now restricting the universe to questions whose average score is below 1.5 (i.e. weaknesses) in the middle block and above 2.5 (strengths) in the right-hand block. What is interesting here is that the relative weakness of the broad areas is now slightly modified in comparison with the direct ranking operated by the population of respondents.

It is still the case that public management is considered to be the weakest area, since the frequency of questions with an average score below 1.5 is higher than the frequency of all questions in that area – and of course the frequency of questions with scores above 2.5 is lower. Yet, the second weakest area now appears to be the ease of doing business, for which the same pattern holds. By contrast, political institutions, which were considered practically as bad as public management in the direct ranking (i.e. when no detail was given to the respondents about what precise issue this area was covering), now would be more on the positive side: this area shows relatively more questions with high scores and fewer with low scores. This means that asking people about institutional weaknesses and strengths without first making them aware of what each area actually covers may be misleading. In the case of Benin, there are of course severe weaknesses in the way the political institutions work, but respondents also point to very positive aspects, so that, overall, their opinion is certainly not as negative as when asked whether ‘political institutions work well or badly’ without further detail. This is not true, however, of public management and doing business, which are still considered to be major institutional weaknesses.

Three other areas show some reversal of opinion when detailed aspects of the institutional area are given to respondents. The first is social cohesion, protection, and solidarity, where questions with high scores strongly dominate, and long-term planning, where the opposite is the case. In the former, the problem may come from the fact that the title of the area comprises different concepts and it is not clear which one dominated in the mind of respondents when first confronted with it. It is possible, for instance, that they may have put more emphasis on social protection, which they consider to be a weakness, and then realised when faced with the detailed questions that this area was also about traditional solidarity among people, which they considered to be a strength. For ‘long-term and strategic planning’, it is also probable that the understanding of that label was modified when respondents realised what it referred to. The third area that appears weaker than it was initially is land rights, where the frequency of low-score questions is twice that of questions about land rights overall.

In summary, the more detailed questionnaire showed some change in the ranking of broad institutional areas by relative weakness or strength. The main weaknesses revealed by the questionnaire are public management and ease of doing business, but, of course, it is now necessary to obtain deeper insights by focusing on individual questions and examining in more detail those with the lowest and highest scores. This is done in the next sections, which look successively at the revealed institutional weaknesses and strengths.

4 Perceived Weaknesses of Institutions

Instead of analysing one by one all the questions in the questionnaire that received an average score of less than 1.5, we list in what follows the main lessons that can be learned from them. Because the questions address a large range of issues, this approach allows for a more detailed diagnostic of institutional weaknesses than simply ranking broad institutional areas, as was done earlier. Tables 3.3a and 3.3b report the results for institutional weaknesses and strengths, respectively.

Table 3.3a Selected examples of detailed institutional performance: weaknesses^a

Questions on weaknesses	Average score
To what extent is corruption an obstacle to business development?	0.73
Do you think the Haute Cour de Justice is able to impose the respect of the constitution?	0.76
What is the degree of corruption linking the media and politicians?	0.82
What is the degree of political corruption (vote buying, illegal campaign funding, bribes)?	0.83
Does the government discuss the budget seriously with the civil society?	0.87
To what extent do land transactions involve corruption in local communities?	0.9
How much would you say the press and the media are independent from political influence?	0.96
Do you trust the Haute Cour de Justice to impose the legal rules of the game on the main political and economic actors?	0.98
To what extent are public procurement procedures fair and transparent?	0.98
In your view, is poverty reduction a priority for political parties?	0.99
What is the degree of corruption in the relationship between public administrations and Beninese companies?	1
To what extent is the reliability of economic aggregates like GDP growth, the current account balance, or inflation discussed in parliament, in the media, and in the civil society?	1.15
How seriously are public accounts audited?	1.18
To what extent are political dissensions obstacles to the implementation of public policies and reforms?	1.22

Source: Author’s calculations.

^a Recall that scores are redefined depending on the question, so that a low score denotes an institutional weakness. For instance, if the answer to the first question ‘To what extent is corruption an obstacle to business development?’ is ‘very much so’, and thus a Likert score of 4 is applied, it is redefined as 0 in agreement with the fact that this denotes a major obstacle to development. The reported score is the average 0/4 Likert scores after eliminating scores equal to 2.

Table 3.3b Selected examples of detailed institutional performance: strengths^a

Question on strengths	Average score
Does the state discriminate among citizens in regard to accessing administrative services, justice, security, public school, health-care centres, etc.?	3.6
To what extent is the army or the police involved in politics?	3.29
In your opinion, is wage discrimination with respect to religion or ethnicity frequent in the private sector?	3.17
How free do you feel people are to form associations of a religious, ethnic, professional, or political nature?	3.11
Did the one-stop shop policy recently implemented in public administration improve doing business?	2.91
In view of religious, traditional, or ethical norms, how free is the Benin state about policies and reforms in education, health, social services, and economic policy?	2.9
How strong is the national sentiment in Benin?	2.87
Are traditional solidarity links effective in supporting people in need in rural areas?	2.8
How repressive do you feel the Benin state is?	2.74
Do you think that present reforms in the anti-corruption policy will lift constraints on development?	2.7

Source: Author’s calculations.

^a Recall that scores are redefined depending on the question, so that a low score denotes an institutional weakness. For instance, if the answer to the first question ‘Does the state discriminate among citizens in regard to accessing administrative services, justice, security, public school, health-care centres, etc.?’ is ‘very much so’, and thus a Likert score of 4 is applied, it is redefined as 0 in agreement with the fact that this denotes a major obstacle to development. The reported score is the average 0/4 Likert scores after eliminating scores equal to 2.

Without doubt, corruption is the theme that appears most frequently among the questions that obtained the lowest average scores among respondents. It affects practically all aspects of political and economic life in Benin: the political system, the relationship between business and the public administration (rigged procurement) or the judiciary system, the electoral system (vote buying), land rights, or complicity between politicians and the media. Corruption is seen as responsible for several key dysfunctions in the political, judicial, and economic spheres.

Another problem that is frequently mentioned, which also relates to corruption, or more exactly the difficulty of controlling it, is that the official rules of the political game, namely the constitutional rules, may be violated without the entities supposed to punish such behaviour taking action. The Constitutional Court, the Supreme Court, and the Haute Cour de Justice, whose jurisdiction is the illegal behaviour of the executive, are generally found to be permissive or passive, the same being true of the parliament. It is quite possible, however, that this opinion among the respondents was strongly influenced by the debate at the time the survey was taken about several decisions by the incoming president, which some felt were in contradiction with the constitution (see for instance Hessoun, 2017).

The lack of transparency of state decisions and state action is another theme that attracts low scores. For instance, the criticism is made that no public discussion takes place about the execution of the budget or National Accounts, that the financial results of public and semi-public companies are not made public and not debated, that most decisions by the executive are taken in an opaque way, and that few evaluations are made of policies.

A theme that is of importance is the understanding that citizens have of the law and the rules of the game. There was a single question addressing this issue in the questionnaire and it referred to land law. The general opinion in this respect was that local communities have a poor understanding of the law and cannot use it to protect themselves against illegal practices that would take the control of some land away from them.

Concerning state-owned companies, their efficiency and management were severely criticised by respondents. This was especially the case for the company responsible for the production and distribution of electricity.

Two additional points that are apparent in the responses to the questionnaire are worth stressing. The first is the low average score for the question about whether poverty reduction could be considered as the main objective of policy making in Benin. The second is the view that dissension does exist within the executive itself. Here again, however, it may be the case that the low score for that question was influenced by some specific event that took place during the time of the survey or a little before – despite the fact that respondents were explicitly asked to base their answers on the way they saw politics, economics, or the working of the administration over the ten years preceding the survey, rather than basing it on current events and debates.

Reported development bottlenecks also include the dominant informal sector, Benin’s dependency on Nigeria, labour market nominal wage rigidity, and the frequent strikes in the public sector. All these constraints generate high costs for businesses and undermine competitiveness. However, it is not clear that they refer to institutional weaknesses strictly speaking.

5 Perceived Strengths of Institutions

Strengths are supposed to be revealed by questions with a score above 2.5; that is, a majority of respondents having selected the top value on the Likert scale. The main points that arise from reviewing these questions are the following.

High levels of respondent satisfaction mostly centre on five domains, which are not always fully consistent with perceived institutional weaknesses. These are (1) civil liberties; (2) a sense that the state enjoys some autonomy in policy making; (3) some trust in recent reforms; (4) a feeling of improvement in the ease of doing business; and (5) national pride.

On civil liberties, respondents expressed satisfaction with respect to the freedom given to people to form associations in practically all areas, from religion to politics. Equally important was the feeling of limited religious, ethnic, and political discrimination in recruitment and wage practices in the private sector. The lack of discrimination in access to public services – schools, health facilities, justice, or security – was also highly valued. Consistent with these civil liberties, the lack of state repression was also stressed by respondents.

The autonomy that respondents feel the Beninese state enjoys with respect to social, traditional, ethnic, and religious norms, or with respect to the army and the police, is certainly an advantage over some other countries. Yet, this feeling may not be fully consistent with the importance of corruption so strongly emphasised among key institutional weaknesses. In other words, autonomy does exist with respect to some norms and some specific actors, but it is probably more limited when dealing with big business or some other vested interests.

The prevalence of corruption among the perceived institutional weaknesses of Benin was such that it is somewhat surprising that respondents tend to trust announced anti-corruption reforms. Or is it precisely because corruption has reached such a critical level that experts tend to agree on the need to fight it effectively? The confidence expressed in the positive impact of aid, or at least on the absence of the crowding-out effect of aid on domestic savings, is also unexpected at a time when aid effectiveness is increasingly open to doubt. Yet, one may understand why such a point of view prevails in an economy where aid represents between 6 and 8 per cent of gross national income.

Recent reforms seem to have improved the way business feels about the business environment, even though it was seen earlier that there were still many causes of dissatisfaction. The one-stop window for formalities and the shortening of registration delays were sources of satisfaction for business-oriented people among the respondents. The low probability of violent events or worker strikes in the private sector was also felt to be a positive aspect of the business environment.

Finally, the feeling of belonging to a national community may not be easily related to the broad institutional areas that have been discussed in this chapter. That it appears with a strong score in the questionnaires despite the ethnic diversity of the country is a positive sign: the probably of conflict and violence is therefore reduced, which should be favourable to business and long-term public planning.

6 Perceived Opinion on Recent Reforms

Several reforms were recently initiated by the Talon administration, some of them with the ambition of improving the institutional framework of Benin’s development. Respondents were initially asked to answer questions based on their knowledge and experience over the preceding ten years, which is mostly before the Talon administration came to power. This was done in order to have a picture of expert opinion on Beninese institutions that would not be biased by the debate about the most recent reforms. Because of this, it seemed interesting to ask the experts briefly about these reforms, to check whether their views would differ.

Four types of reform were launched by the new administration. The first consisted of moving activities initially under the responsibility of civil services to agencies formally outside the public sector. Their mission is the same, but they escape some of the constraints of operating in the public sector, thus making them potentially more effective. For instance, agencies were created to manage the construction of schools and health centres, and others were created to replace the public company Société Nationale pour la Promotion Agricole (SONAPRA), which was responsible for agricultural promotion, rural development, and price stabilisation; another agency was created to manage water projects, and so on. These are potentially major reforms. It is of course too early to evaluate the reforms’ impact, but it is interesting to note that survey respondents were essentially either neutral or ambivalent with respect to them. Indeed, the average score for the questions about these reforms was very close to 2, and roughly 40 per cent of respondents either reported 2 or did not answer the question.⁹

On a more positive side is the recent law that strengthens the land reform undertaken over recent years, and in particular the land titling operation launched in 2013 with the help of the US Millennium Challenge Account programme. One problem with the ongoing reform, however, is that a land title does not provide a definitive right until after five years, and it may be contested during this entire period. Indeed, several such contestations have taken place, and financial institutions that use land for collateral have experienced losses. As a result, they have become reluctant to accept land with temporary rights as collateral. To address this issue, the Talon administration passed a new law in late 2016 that gave landowners definitive rights. Survey respondents supported this reform, more strongly it should be said than they considered land rights to be an obstacle to development.

The present administration is implementing several actions against corruption. With an average score above 2.5 – and with less than 25 per cent neutral or undecided responses – respondents perceived these actions to potentially have a positive impact. Such an attitude is fully consistent with the emphasis put by respondents on the very negative influence of corruption on development.

Another action that gathered approval among the survey respondents was the reform of the power sector and the likely unbundling of the activity of the state monopoly in this area, Société Béninoise d’Energie Electrique. This, again, is in agreement with the negative opinion of respondents about the management of state-owned companies.

7 Response Heterogeneity

To complete the analysis, we now examine whether average scores in the population of respondents hide strong differences across specific groups, in which case the conclusions just obtained should be somewhat qualified. The way to proceed is simple. It consists of testing the statistical difference between the answers of different groups of respondents. To be consistent with the strategy used earlier, the emphasis is put on those cases where strengths and weaknesses, as defined by an average score, respectively, above 2.5 or below 1.5, are present in particular groups of respondents but disappear when considering the whole population. This analysis is performed on three subgroups: women vs men, formal firm managers vs other respondents, and financial managers vs other respondents.

Table 3.4 illustrates the procedure for the women/men dichotomy (for results on other subgroups se Houssa and Bourguignon, 2019). Questions appearing there are ranked according to the degree of statistical significance of the difference in average scores between the two groups. Two situations arise. The first case is where men are strongly positive in their answer and women much less so, so that the general average scores are in the neutral interval (1.5, 2.5). This is the case for the confidence that men seem to have in political institutions like the Supreme Court or in the discussion of the budget in the parliament. The other case is women being strongly negative but men being neutral, so that, again, the overall average score is in the neutral interval. This occurs for the question on the autonomy of trade unions, for instance, or the question on the constitutionality of some government actions. Of course, there are also cases where the difference between men and women is significant but on the same side, so that the overall average score is little affected. This is the case for the question on familiarity with land laws, for which both men and women were negative but to varying degrees.

Table 3.4 Top issues with significant differences between men and women

Question	Average score for women	Average score for men	T-stat
How truthfully and seriously is economic policy (e.g. fiscal policy, taxation, trade, etc.) debated within the government and in parliament?	1.97	2.73	3.87
To what extent do you think that the Haute Cour de Justice, the Constitutional Court, and the Supreme Court effectively enforce compliance with the formal rules of the constitution?	1.53	2.57	3.73
How reliable (in terms of realism, consistency, coverage, degree of detail, coherence) is the budget?	1.35	2.19	3.28
To what extent do you share the view that foreign aid improves the quality of economic policy	0.96	1.74	3.22
To what extent are trade unions autonomous vis-à-vis majority political parties?	0.83	2	3.16
How familiar are you with Beninese land law, i.e. the Land Acts?	0.92	1.5	3.13
To what extent do parliament and the executive function according to the constitution?	1.32	2.21	2.97

Source: Author’s calculations.

The question does arise as to why opinions may differ between men and women on such crucial issues as whether political actors behave according to constitutional rules. A possible explanation is that many women in the sample of respondents operate in the informal sector of the economy and may not have the same familiarity with this kind of issue. Also, they may not have the same level of education as other respondents. If this explanation is correct, then the constitutionality of political action in Benin should be added to the list of the country’s institutional strengths.

The same analysis with respect to formal firm or financial institution managers also reveals clear differences in information sets. For instance, financial managers had more concerns than other respondents about issues related to land and involving formal companies in urban areas, or about the ability of the judiciary system to resolve corruption problems. Not surprisingly, they were more satisfied with banking regulation. Formal firm managers, on their side, were more sensitive to the lack of government transparency on subjects related to economic policies and the budget. Except for this, differences with other respondents were more a matter of intensity than direction, the same being true of financial managers.

C The Main Lessons from the Opinion Survey: Summary

Although corruption cannot be considered an ‘institutional area’, it clearly appears in the opinion of the respondents as a major cause of institutional weaknesses across the board. It is certainly behind the low opinion expressed in the survey about public management, the dissatisfaction with the business environment, and the doubts expressed about the functioning of the political system. Corruption is felt to be present everywhere in the economic and political system.

This emphasis on corruption illustrates the fact that the kind of opinion survey undertaken for this study of Benin’s institutions, like the international comparisons based on synthetic indicators in Section I of this chapter, provides more information on what people and experts feel works well or not so well, than on the dysfunctions or the positive role of institutions per se. Corruption is certainly a plague in Benin, but its effects are not necessarily well identified.

Concerning the broad institutional areas, public administration is found to be the weakest link in the functioning of the Beninese economy and society, without it being completely clear what does not work there, except for the deleterious effect of corruption. For instance, no strong opinion was expressed on civil servants – except for their frequent strikes – or the organisation of the whole sector. What is clear, however, is the way this perceived weakness of the public administration is behind the dissatisfaction with the business environment, which is another strong message of the survey. As far as political institutions are concerned, answers to the questionnaire show some ambivalence, with respondents expressing some confidence in the way the system works and in current reforms, while at the same time, here again, pointing to the harm done by corruption.

Other weaknesses stressed by the opinion survey include the lack of transparency with regard to state actions. This may be the reason why no clear view about the state’s dysfunctions was expressed in the survey responses. Opacity makes evaluation difficult, except perhaps when results are directly apparent, as is the case with state-owned companies – in the power sector in particular.

On the positive side, there was broad agreement on civil liberties and the state being free of the influence of religion or traditional culture. Such circumstances doubtlessly should be favourable to private initiative and unbiased policy making. Yet, there is some lack of consistency here between this perceived autonomy of the state, on the one hand, and the sense of the detrimental effect of corruption, on the other.

Overall, the expert opinion survey is a bit disappointing in the sense that it does not point to well-defined obstacles to development arising from the working of institutions in Benin. A possible reason for this may lie in the heterogeneity of opinions depending on where respondents stand in the workings of the economic and political system. This is apparent when comparing the answers of formal firm or financial organisation managers and those of other respondents. Strong perceptions in opposite directions by different groups of respondents may tend to neutralise each other. Table 3.A.1 in the Appendix to this chapter illustrates that heterogeneity by showing how the direct choice of critical broad institutional areas in the first stage of the survey differed across selected groups of respondents.

III Institutional Implications of ‘Growth Diagnostics’ and Similar Exercises

To end this review of insights into the way institutions in Benin may create obstacles to the country’s development, we now briefly review the potential institutional implications of ‘growth diagnostics’ exercises that have been conducted in Benin in the spirit of the Hausmann et al. (2005) methodology over recent years.

Two studies of this type have been completed over the last ten years or so: the first by Ianchovichina (2009) for the World Bank and the second for the International Monetary Fund by Barhoumi et al. (2016). The former is rather complete but a bit old, as it essentially refers to the period 1996–2006. The latter is more recent, but less complete. A related report was released more recently by the World Bank (2017b); this presented a Systematic Country Diagnostic for Benin built upon a different methodology than growth diagnostics. We summarise the main findings of these studies in the following paragraphs, insisting on the points that are directly related to the working of institutions. We also complement them with some of the results of the World Bank (2009, 2016) Enterprise Surveys based on a sample of firms operating in Benin, as these provide further interesting evidence on some of the points raised in the preceding studies.

A The World Bank 2008 Growth Diagnostic

The growth diagnostic approach relies on a simple model of optimal growth leading to a set of key determinants of growth performance. Considering these determinants one by one, the objective is then to determine the extent to which they are constraining the development of a country in a given time period.

Referring to the decade ending in the mid-2000s, Ianchovichina (2009) identifies three sets of binding constraints.

1 Poor Quality of Infrastructure

As of 2008, Benin displayed infrastructure deficiencies in different areas. Notably, power supply (in quantity and quality) was the leading constraint on business, as most firms had to bear the cost of installing their own power-generation capacity. In the same way, poor services in railway and roads undermined Benin’s geographical advantage to serve landlocked countries (Burkina Faso and Niger) to its north. Moreover, lack of adequate rural roads, poor logistics in transport and storage facilities, as well as deficiencies in water management and irrigation impeded progress in agriculture and the agrobusiness industry.

2 High Risks on Return Appropriation: The Tax Issue

In the Investment Climate Assessment of 2004, used in the World Bank growth diagnostic, firms reported difficult challenges in dealing with the tax administration: a complex tax system coupled with high tax rates, a heavy bureaucratic burden, and corruption. In the same way, they reported serious problems in the judicial administration: long and costly litigation procedures in resolving conflicts, especially in land and financial markets, and, there too, a high level of corruption. These were considered as strong deterrents to business dynamism.

3 Poor Quality of Human Capital

Although the availability of skilled labour did not appear to be a binding constraint in 2008, it was noted that Benin was lagging in terms of the quality of education, so that it was felt that human capital could become a constraint in the future. This is still the case today. A recent comparative analysis among ten francophone African countries¹⁰ shows that primary school pupils in Benin are performing worse in reading and mathematics than those in peer countries (PASEC, 2014).¹¹ Moreover, significantly low learning competencies are found for children in rural areas, as well as those from poor families. This limits inclusive growth and has certainly contributed to the rise of inequality over the past years.

The World Bank 2008 growth diagnostic also noted that, by 2005, the pressure on land was mounting. If the utilisation rate of land was still well below full capacity in the north of the country, this was not the case in the south. For instance, the utilisation rate of cultivable land in the département of Ouémé was reported to be 96 per cent.

As can be seen, several of these binding – or potentially binding – constraints identified in 2008 are related to institutional issues that have been mentioned in the opinion survey completed for the present study.

B The 2016 IMF Growth Diagnostic

The Barhoumi et al. (2016) study, completed ten years later, is not as comprehensive. It focuses on the way investment may be scaled up in Benin. The binding constraints that it identifies echo those identified by Ianchovichina (2009) and the opinion survey analysed earlier in this chapter. Of special importance in that study are the infrastructure constraint, especially in the power sector, and the tax system, which is seen as being responsible for lower tax revenues and therefore an impediment to the scaling-up of investment. Concerning the tax system, the diagnostic insists both on the complexity of the system, but also on the inefficiency of the tax collection apparatus, which leads to many firms simply not paying taxes, either legally through loopholes or illegally through corrupt practices. The reason why the tax/GDP ratio of Benin is comparable to that in other sub-Saharan African countries is essentially because of the relative importance of customs duties on re-exports in the direction of Nigeria.

C The World Bank 2017 Systematic Country Diagnostic

The Systematic Country Diagnostic (World Bank, 2017b) replaced the old Country Assistance Strategy documents in the relationship between the World Bank and low-income countries. It is the analytical background document for the preparation of the Country Partnership Framework (CPF). In the case of Benin, the last CPF was signed in 2018, for the 2019–2023 period.

The Systematic Country Diagnostic 2017 identified the following areas of weakness for the development of Benin, and therefore pathways of action within the CPF: infrastructure, with emphasis this time on transport and logistics in order to capitalise on the port of Cotonou; informality, caused by the illegal nature of cross-border trade with Nigeria; service delivery, especially in the education sector; and the need for developing more effective social safety nets. In addition, the Government of Benin committed in the final version of the CPF to enhancing its efforts in improving public management, and governance more generally.¹²

Again, several of these areas match some of the conclusions derived from the opinion survey carried out for the present study, especially those concerned with public management, infrastructure, and, implicitly, corruption, since this is what is behind the commitment to better ‘governance’. From that point of view the Systematic Country Diagnostic and CPF are quite clear – it is said in the opening remarks:

The political economy [of Benin] is characterised by a concentration of powerful interests and a resulting uneven playing field, weak institutions, poor governance, and incidents of corruption. As elaborated in the SCD [Systematic Country Diagnostic], Benin’s potential for achieving the twin goals [i.e. poverty reduction and shared prosperity] has faltered for several reasons, including those related to political economy: low levels of trust between economic agents, weak institutions, and poor governance.

(World Bank, 2018, p. 3)

If such an official document, endorsed by the government, is so clear, it may be surprising that the respondents to the survey analysed in the preceding section were shyer in their evaluation of Benin’s institutions. The reason has probably to be found in the mechanical format of the questionnaire, which in some cases did not allow respondents to express their deep convictions.

D The 2009–2016 World Bank Enterprise Surveys

Although there was no diagnostic attached to them, it seems interesting to check the Enterprise Surveys carried out by the World Bank, to see whether their findings match the binding constraints identified by the preceding growth diagnostics. The answer is that they do. In the various types of information collected by these surveys, the largest differences between Beninese firms and firms in other sub-Saharan African countries appear under the following headings:

• Corruption: bribery incidence declined between 2009 and 2016 and is lower in Benin than in other sub-Saharan African countries, but Benin very much dominates other countries in terms of gifts given to get government contracts, construction permits, or a favourable judgement in court.

• Infrastructure: power supply is much lower and outages are more frequent in Benin than in other sub-Saharan African countries; moreover, the situation has been getting worse since 2009.

• Informality: seen as a major source of unfair competition by formal firms, again more in Benin than in the rest of sub-Saharan African. The same applies to tax rates and the tax administration.

Summing up, the growth diagnostic exercises conducted in relation to Benin over the last decade or so are rather convergent in pointing to several key weaknesses that have clear institutional roots: intense corruption, inefficient public management (including infrastructure, service delivery and, especially, the tax administration), and a high level of informality.

IV Conclusion

This chapter reviewed expert opinions on the quality of institutions in Benin and the way this could affect the country’s development performance. Three types of evidence were considered: synthetic indicators available in cross-country databases; a specific opinion survey carried out among local decision makers of different types and engaged in different activities; and analysis of the institutional implications of binding economic constraints identified in several recent growth diagnostic exercises. These various sources converge in pointing out several institutional weaknesses that impede the acceleration of development in Benin, even though they may not always agree on the severity of these institutional constraints.

Corruption is unanimously seen as the most serious impediment to the good functioning of institutions and a favourable development context. Corruption is found to affect practically all sectors of the economy at all levels of responsibility. This is recognised by both the respondents to the opinion survey and the authors of growth diagnostic exercises. Comparison with other countries in the region or countries that have outperformed Benin over the last decades is less conclusive. If Enterprise Surveys find that, from the point of view of business, the situation in Benin is substantially worse than in the average sub-Saharan African country, country-by-country comparison leads to different conclusions. The degree of corruption in Benin, as can be appraised through synthetic indicators, turns out to be roughly comparable to that in neighbouring countries. Corruption might be even less serious than in several countries that grew faster than Benin over the last twenty years, this being true today as well as ten or twenty years ago. Such findings may reflect the conceptual imprecision of synthetic corruption indicators, but they also call for a more nuanced analysis of the effects of corruption on the development of a specific country.

Weak public management is the second unanimously recognised source of hindrance in the process of development. Of course, this may partly be the consequence of corruption. Here too, the cross-country difference in synthetic indicators of the quality of public management across countries is not strongly unfavourable to Benin. Yet, some sectors are singled out as particularly weak by survey respondents and analysts. Three of them are repeatedly singled out. The tax system is found to be complex and the tax administration grossly inefficient in collecting tax revenues, with clear adverse consequences for the dependency of Benin on foreign finance. The power sector, run by a state-owned monopoly, is found to perform badly due to weak or ineffective regulation. Finally, if the delivery of social services, especially education, is found to have made progress in quantity, this is not the case for quality. Benin underperforms in relation to other sub-Saharan African countries by a wide margin and, from that point of view, lags very much behind the countries that grew faster, from roughly the same initial level of income, over the last twenty years.

The opacity of government policy making to the public, very much stressed by survey respondents, is probably to be imputed to weak public management, but it is also a sign of deficient political institutions, generally regarded as weaker than in other sub-Saharan African countries. From that point of view, however, survey respondents are somewhat ambivalent. On the one hand, many of them tend to trust constitutional institutions and are confident of the success of some current reforms. On the other hand, most also agree that the whole system is deeply corrupt and, because of this, often dysfunctional. Such a severe judgement even appears in the opening remarks of the official CPF, a document signed between the Government of Benin and the World Bank.

Available statistics show that informality is more developed in Benin than in the average sub-Saharan African country. Growth diagnostic analyses suggest that informality has a cost in terms of tax revenues, job precariousness, and lack of control over the economy. This is not a point that appears strongly in the opinion survey, perhaps because of the presence of a substantial group of informal firm managers in the sample. It is not a dimension of institutions that appears explicitly in the synthetic indicators provided by international databases. Yet, the reason why informality is more developed in Benin is clear: it is more the result of the importance of the illegal cross-border trade with Nigeria than it is the result of some specific institutional failure. However, its consequences for the functioning of institutions are serious.

A last area deserves mention, even though it was not prominent as such in the opinion survey and was not explicitly covered by the synthetic indicators: it is the way land allocation is managed. One of the growth diagnostic studies mentions that land is becoming scarce in the southern part of the country, so that managing it efficiently will become more and more crucial in the future. As in other sub-Saharan African countries, land operations raise difficulties in Benin because of the uncertain status of ownership and the legacy of customary practices. A reform was passed in 2013 that, according to the opinion survey, is complex and does not really resolve the sources of land conflict. Land laws and their implementation reveal institutional weaknesses whose economic consequences may be considerable in the future, especially in a country with a comparative advantage in agriculture.