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Benin

Executive Summary

Benin transitioned to a democracy in 1990, enjoying a reputation for regular, peaceful, and, until recently, inclusive elections. In 2019 and 2021, the government held legislative and presidential elections, respectively, which were not fully inclusive nor competitive. Elections-related unrest in 2019 and 2021 resulted in several deaths. In April 2021, President Patrice Talon was re-elected for a second, and pursuant to Benin’s constitution, final five-year term.

Benin’s overall macroeconomic conditions were positive in 2020, though growth declined compared to previous years. According to the World Bank, GDP growth slowed from 6.9 percent in 2019 to 3.8 percent in 2020. Most of the slowdown in 2019 and 2020 was driven by the COVID-19 pandemic and Nigeria’s partial closure of its borders that lasted from August 2019 to December 2020. In December 2021, Benin’s National Assembly unanimously passed the Government of Benin (GOB) 2022 budget, which projects economic growth to accelerate to seven percent in 2022, higher than estimates from multilateral institutions. The IMF projection for growth in 2022 is 6.5 percent, and the African Development Bank projects a growth rate recovery from 4.8 in 2021 to 6.5 percent in 2022 if Covid-19 is brought under control. Port activity and the cotton sector are the largest drivers of economic growth. Telecommunications, agriculture, energy, cement production, and construction are other significant components of the economy. Benin also has a large informal sector. The country’s GDP is roughly 51 percent services, 26 percent agriculture, and 23 percent manufacturing.

In January 2022, the Talon administration released its second government action plan (French acronym-PAG) estimated at $20.6 billion. The PAG lists 342 projects (half of which are carried forward from the Talon administration’s first PAG covering 2016-2021) across 23 sectors. With the goals of strengthening the administration of justice, fostering a structural transformation of the economy, and improving living conditions, the projects are concentrated in infrastructure, agriculture and agribusiness, tourism, health, energy, telecomuncation, and education.  The government estimates that full implementation of the PAG will result in the creation of 500,000 new jobs and a leap in national economic and social conditions. The government intended that 48 percent of the PAG be funded through public funds and the remainder through public-private partnerships (PPPs). Through the end of 2021 a limited number of public-private partnerships had been secured. Government critics allege that the Talon administration is using the PAG in part to channel resources and contracts to administration insiders.

Benin continues efforts to attract private investment in support of economic growth amidst reports of high-level corruption among government insiders and occasional failure to respect foreign investment contracts. The Investment and Exports Promotion Agency (APIEX) is a one-stop-shop for promoting new investments, business startups, and foreign trade. In 2020, APIEX worked with foreign companies to facilitate new investments, though some companies reported that the agency was under-resourced and hamstrung by bureaucratic red tape in other agencies and ministries. APIEX reported that business creation increased to 40,000 in 2020 from 13,000 in 2015. The construction of a Special Economic Zone, located at Glo-Djigbé, is also a major component of the second PAG. Located 30 miles north of Benin’s capital Cotonou, the Glo-Djigbé Industrial Zone (GDIZ) is currently in the works under the direction of Benin’s Industry Promotion and Investment Company (SIPI), a public private partnership. The GDIZ is structured such that the GOB owns a 35 percent stake in it with the the Mauritanian-Singaporean firm Arise Integrated International Platfoms (Arise-IIP) owning 65 percent. Glo-Djigbé seeks to transform numerous locally produced agricultural products and high-tech goods for export. Though no businesses have started operating in GDIZ yet, approximately 25 have signed contracts to begin operations there, including Oryx and JNP (both petroleum services); NKS (cashew processing), Groupe Aigle (cotton processing), and SIDDIH (pharmaceuticals). The GDIZ is expected to increase Benin’s GDP by $7 billion over the next decade and boost export revenues.  The primary target markets will be the United States, the European Union, and other African countries. The GDIZ covers 1,640 hectares with 400 hectares being developed currently.

Benin’s second MCC power compact, valued at $391million entered into force in June 2017. This compact aims to strengthen the national power utility, attract private sector investment into solar power generation, and fund infrastructure investments in electricity distribution as well as off-grid electrification for poor and unserved households. It is also advancing policy reforms to bolster financing for the electricity sector and strengthen regulation and utility management. Through the compact MCC is expanding the capacity and increasing the reliability of Benin’s power grid in southern and northern Benin. As two thirds of Benin’s population does not have access to electricity, the compact also includes a significant off-grid electrification project via a clean energy grant facility that supports private sector investment in off-grid power systems. Benin’s second MCC compact follows its first compact (2006-2011) which modernized the Port of Cotonou and improved land administration, the justice sector, and access to credit.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 78 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 96 of 132 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2019 USD 2 million https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 USD 1,280 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

8. Responsible Business Conduct

In general, government policies and public tenders are made public online and in the newspapers. Anti-corruption and human rights NGOs and activists are active in Benin, though their ability to report misconduct and violations of good governance has weakened under the Talon administration. The government-funded agencies in charge of monitoring business conduct include the High Commission for the Prevention of Corruption (HCPC), the Court of Accounts, the National Financial Information Processing Unit, and the National Commission on Systems and Freedom.

9. Corruption

Benin has laws aimed at combatting corruption and has made progress combatting the most common forms of corruption, but work remains in rooting it out. The new HCPC is the lead government entity on corruption issues and has the authority to refer corruption cases to court. The HCPC has the authority to combat money laundering, electoral fraud, and economic fraud in the public and private sectors. Benin’s State Audit Office is also responsible for identifying and acting against corruption in the public sector. The CRIET processes cases related to economic crimes, which include corruption. In 2018, the National Assembly approved the lifting of parliamentary immunity of a small number of opposition parliamentarians accused of corruption or embezzlement during their past positions in former governments.

Bribery is illegal and subject to up to 10 years’ imprisonment, but enforcement remains inconsistent.

Beninese procurement law allows for open and closed bid processes. Contracts are often awarded based on government solicitations to short-listed companies with industry-specific expertise, often identified based on companies’ commercial activities conducted in other overseas markets. The government often uses sole sourcing for projects, including for PAG implementation, and in these cases does not publish procurement requests before selecting a vendor. Foreign companies have expressed concerns about unfair treatment, biased consideration, and improper practices specific to the process of selecting short-listed companies.

Benin is a signatory of the UN Anticorruption Convention and the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions.

10. Political and Security Environment

Benin transitioned to a democracy in 1990, enjoying a reputation for regular, peaceful, and, until recently, inclusive elections. In 2018, the National Assembly adopted, and the government implemented stringent rules for political parties to qualify to participate in legislative elections. In 2019 and 2021 the government held legislative and presidential elections, respectively, neither of which was fully competitive. The National Assembly is currently made up exclusively by two pro-government parties. Elections-related unrest in 2019 and 2021 resulted in several deaths. In April 2021, President Patrice Talon was re-elected for a second and final five-year term, pursuant to Benin’s constitution. The largest security issues facing Benin are the threat of terrorism spilling across its porous northern borders and piracy offshore in the Gulf of Guinea.

11. Labor Policies and Practices

The government adheres to internationally recognized rights and labor standards. Benin’s constitution guarantees workers’ freedom to organize, assemble, and strike. Government authorities may declare strikes illegal if they are deemed a threat to public order or the economy and may require those on strike to maintain minimum services. In 2018, the Constitutional Court reinstated a law prohibiting public employees in the defense, health, justice, and security sectors from striking. A 2018 law limited strikes to a maximum of 10 days per year for private-sector workers and public employees not covered by the existing ban. Approximately 75 percent of salaried employees belong to unions. Unions are obliged to operate independently of government and political parties. Benin’s labor code, as revised in 2017, is favorable to employers.

The World Bank official unemployment rate for Benin in 2020 was 2.54 percent, though estimates of actual unemployment figures are significantly higher. Unskilled and skilled labor and qualified professionals are generally available. Nearly 90 percent of youth between the ages of 15 and 29 work in the informal sector. The standard legal workweek is 40 hours and payment of overtime is allowed.

In 2017, the government adopted a law enshrining the framework for private sector and government employment, termination of employment, and placement of labor in Benin.  The law sets a maximum limit of three to nine months’ salary (calculated using the last 12 months of salary) to be paid to an employee in case of abusive termination of employment or layoffs.  If fired for cause (not including a crime or crimes), an employee with a minimum of one year on the job is entitled to receive two months’ salary as severance pay.  The law also allows for multiple renewals of limited term contracts. Under the former law, private companies who dismissed employees for unsatisfactory performance were routinely sued.

Benin’s Ministry of Economy and Finance reported in 2012 (the most recent year available) that the informal sector contribution to the country’s annual GDP rangeds between 60 and 70 percent. Additionally, according to a 2020 International Labour Organization report, 95 percent of businesses operating in Benin are estimated to be in the informal economy.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) 2018 $14,262 2020 $15,650 www.worldbank.org/en/country/benin
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2020 $2 BEA:   https://www.bea.gov/international/di1usdbal
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A N/A N/A BEAhttps://www.bea.gov/international/di1fdibal
Total inbound stock of FDI as % host GDP N/A N/A 2020 18.6% UNCTAD: 

https://unctad.org/topic/investment/world-investment-report

* Source for Host Country Data: Recent GOB data not available

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward $3,429 100% Total Outward $541 100%
France $1,219 35.54% France $146 26.98%
India $420 12.24% Togo $81 14.97%
Nigeria $381 11.11% Niger $72 13.30%
 China PR: Mainland $342 9.97% Côte-d’Ivoire $65 12.01%
 Côte d’Ivoire $215 6.27% Gabon $45 8.31%
 “0” reflects amounts rounded to +/- USD 500,000.

14. Contact for More Information

Political and Economic Section
U.S. Embassy, Boulevard de la Marina, Cotonou
00229-21300650
Elliot Repko and Marius Lotsu: RepkoEM@state.gov and LotsuML@state.gov

Investment Climate Statements
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