EXECUTIVE SUMMARY
Benin transitioned to a democracy in 1990, enjoying a reputation for regular, peaceful, and, until 2019, inclusive elections. In 2019 and 2021, the government held legislative and presidential elections, respectively, neither of which was inclusive or competitive. In April 2021, President Patrice Talon was re-elected for a second, and pursuant to Benin’s constitution, final five-year term Elections-related unrest in 2019 and 2021 resulted in several deaths. Nonetheless, in January 2023, Benin held legislative elections that were peaceful and inclusive and saw the return of opposition in the National Assembly for the first time since 2019, as well as an increased number of women parliamentarians.
Benin’s overall macroeconomic conditions were positive in 2021, though growth declined compared to 2020. According to the World Bank, GDP growth increased from 3.8 percent in 2020 to 7.2 percent in 2021. The re-opening of the Nigeria’s border and the good performance of the agricultural sector resulted in this bump in economic growth. In December 2022, the National Assembly unanimously passed the government’s 2023 budget, which is based on economic growth remaining stable throughout 2023. The IMF projection for growth in 2023 is 6.2 percent, and the African Development Bank projects a growth rate recovery from 6.1 in 2022 to 6.4 percent in 2023 thanks to agriculture sector governance and improvements in public financial management. 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. As of May 2022, Fitch re-affirmed its B+/stable outlook for Benin’s sovereign credit rating. S&P and Moody’s rate Benin similarly as well.
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). However, the Government of Benin acknowledged that Russsia’s war of aggression against Ukraine disrupted the successful execution of the plan through supply chain gaps and inflation. Through the end of 2022 a limited number of public-private partnerships had been secured.
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 over 51,000 in 2021 from 13,000 in 2015.
The construction of a Special Economic Zone (SEZ), 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 Government of Benin 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. Approximately 35 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.
In December 2022, MCC signed the Regional Transportation Compacts with the Governments of Benin and Niger, with a grant of $202 million to Benin and $302 million to Niger. The regional program aims to reduce transportation costs along the Cotonou-Niamey trade corridor.
In June 2023 MCC will conclude a $391 million electric power compact that has spurred cost-reflective tariffs and attracted private investment into renewable power generation and off-grid electrification. The compact has funded new or rehabilitated substations and distribution lines that will quintuple the capacity of Benin’s electricity distribution grid and improve electric power reliability for millions of Beninese. Through the compact MCC is expanding the capacity and increasing the reliability of Benin’s power grid in southern and northern Benin. As two thirds of Benin’s population does not have access to electricity, the compact also includes a significant off-grid electrification project via a clean energy grant facility that supports private sector investment in off-grid power systems. Benin’s second MCC compact follows its first compact (2006-2011) which modernized the Port of Cotonou and improved land administration, the justice sector, and access to credit.
| Measure | Year | Index/Rank | Website Address |
|---|---|---|---|
| TI Corruption Perceptions Index | 2022 | 72 of 180 | http://www.transparency.org/research/cpi/overview |
| Global Innovation Index | 2022 | 124 of 132 | https://www.globalinnovationindex.org/analysis-indicator |
| U.S. FDI in partner country ($M USD, historical stock positions) | 2021 | USD 2 million | https://apps.bea.gov/international/factsheet/ |
| World Bank GNI per capita | 2021 | USD 1,350 | http://data.worldbank.org/indicator/NY.GNP.PCAP.CD |