Solid growth, sustained investment, a controlled deficit and debt. The government’s action program (PAG) and austerity measures have kept the country on course since 2020, and even achieved unexpected results. However, the street is grumbling.
Benin’s performance in 2020 was quite “respectable”, with growth of 3.8 per cent, one of the highest in Africa, at a time when sub-Saharan Africa was shrinking by 1.6 per cent. We expect growth of 5.51% in 2021 and 6.49% on average from 2022,” said Arthur Minsat, chief economist for Africa at the Organisation for Economic Co-operation and Development (OECD).
Debt, the budget deficit and inflation remain contained, albeit rising. “This growth is driven by trade and infrastructure projects, especially in transportation, which are boosted by the relative macroeconomic and political stability of the government, which has been very proactive with its national infrastructure development plan.”
Early repayment of debt
Indeed, how not to pay him the homage which is due to him because of his prize list is impressive.
In January 2021, Benin’s Minister of Finance, Romuald Wadagni, raised 1 billion euros through two bond issues in euros. One with a duration of eleven years at a rate of 4.875% for 700 million euros, and the other with a duration of thirty-one years at a rate of 6.875% for 300 million euros. This proactive management of the public debt is the line of conduct of the Minister, who never wanted to finance his economy through a moratorium on the country’s debt, but through the credibility acquired by honoring the commitments to be able to borrow in the very long term and at favorable rates.
As in 2019, this second Eurobond issue allowed, in November 2021, a reprofiling of Benin’s debt, that is to say, an early repayment of debts previously contracted on less favorable terms, which will allow a saving of 36 billion CFA francs (54.9 million euros), a sum that will be reinjected into the government’s water, health, energy and education programs in order to achieve the Development Goals (SDGs) targeted by the United Nations.
Stable outlook
The government has also reorganized the tax system for small and medium-sized enterprises (SMEs) by shortening the payment period for their receivables from 60 days to 30 days. On December 8, the National Assembly adopted a new general tax code, separating for the first time in the country’s history the rules of assessment and tax procedures. This new code will improve relations between the tax administration and taxpayers, and will introduce incentives for SMEs, especially for those developing in the digital sector.
This proactive approach has earned Benin the approval of the Fitch rating agency, which has twice raised the country’s rating to B+ with a stable outlook. The 3.8% growth rate, the good cotton harvest and the continuation of the government’s investment program bode well for the future.
THE ENGINES OF GROWTH HAVE BEEN SERVICES AND ESPECIALLY AGRICULTURE, WHILE PRIVATE INVESTMENT HAS ALSO GAINED MOMENTUM
The United Nations Commission on Trade and Development (UNCTAD) applauded it for allowing businesses to be set up electronically within hours. Add to that the fact that the United Nations Sustainable Development Solutions Network (SDSN) ranks the country 86th, just behind Côte d’Ivoire, up from 153rd in 2017.
Understandably, the International Monetary Fund (IMF) agreed to send a mission to Cotonou at the request of the government in late November to prepare a new aid program. “Since 2016, the drivers of Beninese growth have been services and especially agriculture. On the aggregate demand side, private investment has gained momentum,” analyzes Nathalie Picarelli, World Bank senior economist for Benin. The numerous reforms carried out by the government in the mobilization of tax revenues and the control of the budget deficit have enabled the country to tackle the health crisis in a good position to rebound.
In September 2022, the international institution signed a $700 million financing agreement with the country. Supporting the Government of Benin’s Action Program, this agreement will make it possible to meet urgent financing needs, preserve macroeconomic stability and contribute to the achievement of the Sustainable Development Goals through improved access to basic public services and a better government presence in vulnerable areas.
Massive informality
There remains the great challenge of productivity. “Labor productivity has grown slowly at a rate of 1.2 percent per year for the past decade, given the size of the informal economy. The government is aware of the importance of developing the private sector to remedy this, and has focused on developing upstream sectors, such as digital and electricity, but also on improving the quality of the workforce with new TVET [technical and vocational education and training] programs proposed by UNESCO,” adds Nathalie Picarelli.
The massive informality that plagues the Beninese economy has had the advantage of allowing it to largely overcome the closure of the border with Nigeria in 2020. Indeed, analysis of cross-border movements via cell phone landmarks showed that the commercial smuggling traffic that the blockade was supposed to combat had continued to move away from the checkpoints. The big loser was the Beninese state, whose customs revenues collapsed when official traffic stopped.
“OUR CITIES HAVE BECOME MORE BEAUTIFUL, BUT THE PEOPLE ARE NOT HAPPY AND THE STREET IS COMPLAINING”
Will the signing of an agreement between the Beninese government and the Rice Producers Association of Nigeria (Rifan) on November 24, 2021, help Benin increase its rice production to 1 million tons by 2024, and process and market it? The answer to this question will determine the end of the conflict between the two countries over the more or less unfair competition that Benin’s rice exports inflict on Nigerian rice farmers.
“We must recognize that our president has reformed more than his predecessors. He has a clear vision of what he wants to do for the country. Our cities have become more beautiful. From this point of view, progress is undeniable,” says John Igué, former Minister of Industry and SMEs, Professor Emeritus of Geography at the University of Abomey-Calavi and founder of the Regional Analysis and Social Expertise Laboratory (Lares). President Talon wanted to put order in the informal sector and control corruption,” he says. In doing so, he deprived civil servants of the parallel activities that supplemented their income. He has locked up everything. People are not happy and the street is complaining.”
