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, Reference Fage2002, pp. 235, 266–67; Iliffe, Reference Iliffe2007, 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, Reference Iliffe2007, 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, Reference Alesina and La Ferrara2005); and (2) a lack of interpersonal trust due to the traumatic experience of slavery (as argued in Nunn, Reference Nunn2007, Reference Nunn2008). 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., Reference Mehlum, Moene and Torvik2006a, Reference Mehlum, Moene and Torvik2006b; Robinson et al., Reference Robinson, Torvik and Verdier2006).

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, Reference Esteban and Ray1994, Reference Esteban and Ray2008; Duclos et al., Reference Duclos, Esteban and Ray2004). 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).

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.Footnote 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.Footnote 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, Reference Benin2006, Reference Benin2016; 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, Reference Fage2002, 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, Reference Gennaioli and Rainer2007; Michalopoulos and Papaioannou, Reference Michalopoulos and Papaioannou2013, Reference Michalopoulos and Papaioannou2014), 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, Reference Fage2002, pp. 410–12).Footnote 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., Reference Ali, Fjeldstad, Jiang and Shifa2019).

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, Reference Fage2002, 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 (Reference Domar1970) and Mathur (Reference Mathur1991), has been succinctly put as follows by Fage (Reference Fage2002, 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,

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.Footnote 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, Reference Fage2002, p. 269).

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, Reference Iliffe2007, 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, Reference Iliffe2007, 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, Reference Meredith2005, 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 (Reference Meredith2005, 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, Reference Meredith2005, 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, Reference Meredith2005, 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, Reference Meredith2005, 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, Reference Meredith2005, 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, Reference Fage2002, 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.

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, Reference Sklar1979; Bates, Reference Bates1983; Bayart, Reference Bayart and Chabal1986, Reference Bayart1989; Booth, Reference Booth1987; Kennedy, Reference Kennedy1988; Boone, Reference Boone1992, Reference Boone, Migdal, Kohli and Shue1994; Platteau, Reference Platteau2009; De Waal, Reference De Waal2015).

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 (Reference Young, Berg and Whitaker1986) 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, Reference Young, Berg and Whitaker1986, 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 (Reference Shapley and Shubik1969) 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, Reference Corey-Boulet2019).

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.Footnote 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, Reference Corey-Boulet2019). 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.Footnote 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?

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.Footnote 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:

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.Footnote 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 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 (Reference Haile2018), zooms in on the most recent period (2006–2015) and provides more disaggregated data.Footnote 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.

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, Reference Haile2018). 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.

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 (Reference Igué and Soulé1992); De Melo and Ugarte (Reference De Melo and Ugarte2013); Golub (Reference Golub, Benjamin and Mbaye2012a) 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 (Reference Golub, Benjamin and Mbaye2012a) 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 (Reference Golub, Benjamin and Mbaye2012a, 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.Footnote 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).Footnote 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).

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.Footnote 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.Footnote 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.Footnote 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.Footnote 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.Footnote 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.Footnote 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.Footnote 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.Footnote 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.

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.Footnote 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.Footnote 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.Footnote ^23, Footnote 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.Footnote 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.Footnote 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.Footnote 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.Footnote ²⁸

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.Footnote ³⁹

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.Footnote ⁴⁰ External borrowing amounted to about 2 per cent of GDP.Footnote 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.Footnote 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.Footnote 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.

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

C Literacy and Education

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, Reference Prady and Sy2019).

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.

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.

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, Reference Houssa, Bourguignon, Bourguignon, Houssa, Platteau and Reding2019).

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.

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.Footnote 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.Footnote 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.

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.

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 (Reference Ianchovichina2009) identifies three sets of binding constraints.

B The 2016 IMF Growth Diagnostic

The Barhoumi et al. (Reference Barhoumi, Cui, Dieterich, End, Ghilardi, Raabe and Sola2016) 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 (Reference Ianchovichina2009) 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.Footnote 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:

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.