Benin is located in West Africa. It shares its border with Nigeria on the West, Togo on the East, and Burkina Faso and Niger on the North. It gained its independence from France on 1 August 1960. Its constitutional capital is Porto-Novo and its seat of government is Cotonou with 12 Administrative divisions. Benin’s strong points are its strategic location, the country has access to the Atlantic Ocean in the South and serves as a major transport hub for trade with countries in the West African interior including Mali, Niger, and Burkina Faso coupled with sharing a border with Nigeria, Africa’s leading economy.
Investing In Benin - Benin FDI
Benin Republic has an estimated population of 12.9 million comprising mostly of younger population less than 25 years which makes up about 65.9 percent of the population, those in the age bracket of between 25 to 64 years makeup about 31.7 percent of the population and above 65 years age group makes up about 2.4 percent of the population. The average population density is estimated at 108 inhabitants per square kilometer. It is one of Africa’s largest cotton producers and rich in the production of cashews, Palm Oil, peanuts, etc.
It has consistently achieved robust Gross Domestic Product compound growth in the past 5 years. The Benin Republic offers port services through its privately managed port which accounts for approximately 60 percent of its Gross Domestic Product. Its currency is the CFA franc which is pegged to the euro and has maintained a stable inflation rate over the past years. The country leads the continent in industrial output as it is responsible for 40 percent of Africa’s total output and 45 percent of the continent of total mineral production. It generates over 50 percent of Africa’s electricity.
The following sectors are growth sectors for investment in the Benin Republic: Digital Economy and Information and Communication Technologies (ICT), Animal husbandry and fishing, Tourism and Handicrafts, Mines and Hydrocarbons, Tertiary Sector Education, Commerce Service, Transport and Logistics, Construction and building materials sectors. Foreign Direct Investment Stocks in the country reached 2.8 billion dollars at the end of 2020. Benin's strong points when it comes to investment are its strategic location.
Benin is located in West Africa. It shares its border with Nigeria on the West, Togo on the East, and Burkina Faso and Niger on the North. It gained its independence from France on 1 August 1960. Its constitutional capital is Porto-Novo and its seat of government is Cotonou with 12 Administrative divisions.
It is the multiparty Presidential Republic with a President sitting as both the Head of State and government. It runs a unicameral national assembly as the legislative arm of the government. The official language is French but other popular local languages include Fon and Yoruba. Christianity and Islam are the predominant religions along with other traditional religions. The legal system is modeled after French civil law and some customary law. It has an area size of 0.11 million square kilometers.
Benin’s strong points are its strategic location, the country has access to the Atlantic Ocean in the South and serves as a major transport hub for trade with countries in the West African interior including Mali, Niger, and Burkina Faso coupled with sharing a border with Nigeria, Africa’s leading economy.
Benin Republic has an estimated population of 12.9 million comprising mostly of younger population less than 25 years which makes up about 65.9 percent of the population, those in the age bracket of between 25 to 64 years makeup about 31.7 percent of the population and above 65 years age group makes up about 2.4 percent of the population. The average population density is estimated at 108 inhabitants per square kilometer.
In terms of human development indicators, The country has a life expectancy of 63.3 years for Women and 59.6 years for Men. It achieved universal primary education with a 97.2 percent Primary enrolment rate in 2018 and an overall literacy level of 42.4 percent as of 2018.
Broad Economic Overview of Benin Republic
Benin is stable democracy having achieved political stability in the past 20 years and its economy is heavily reliant on re-exportation and agriculture. It is one of Africa’s largest cotton producers and rich in the production of cashews, Palm Oil, peanuts, etc. It has consistently achieved robust Gross Domestic Product compound growth in the past 5 years.
Benin Republic offers port services through its privately managed port which accounts for approximately 60 percent of its Gross Domestic Product. Its currency is the CFA franc which is pegged to the euro and has maintained a stable inflation rate over the past years.
The main export of Benin Republic includes Cotton, palm products, seafood, shea butter, Cashews, textile, etc. The country's major imports include petroleum products, foodstuffs, and consumer goods.
Investment Opportunities in Benin Republic
Benin has taken several initiatives to attract foreign investment, particularly in the electricity production sector. It recently implemented new reforms to boost investment. Part of the reforms includes the simplified process of business creation, a strengthened legal and judicial framework to secure investments, a legally secure PPP framework, the introduction of multiple tax incentives to support private investments, etc.
The country is seeking to improve its agricultural productivity, develop its agriculture value chains for cashews, pineapple, cassava, corn, rice, meat, and milk and improve its electricity and Port infrastructure.
The following sectors are also growth sectors for investment in Benin Republic: Digital Economy and Information and Communication Technologies (ICT), Animal husbandry and fishing, Tourism and Handicrafts, Mines and Hydrocarbons, Tertiary Sector Education, Commerce Service, Transport and Logistics, Construction and building materials sectors.
Impact of Foreign Direct Investment In Benin Republic
According to the United Nations Center For Trade And Development 2021 World Investment Report 2021, Foreign Direct Investment inflows declined from 218 million dollars in 2019 to 176 million dollars in 2020, following the economic crisis triggered by the Covid-19 pandemic. On the other hand, the stock of Foreign Direct Investment in the country reached 2.8 billion dollars at the end of 2020. The National Infrastructure Development Plan, which contains a series of private-public partnerships, should help boost Foreign Direct Investment in Benin. The main investors in the country are France, Nigeria, Brazil, the Ivory Coast, and Senegal.
The other main foreign investing countries are other European countries and Canada. Benin government has implemented new reforms to foster investment. These include creating a unified regulatory framework for public-private partnerships, a single business registration desk as well as multiple tax incentives to support private investments. Moreover, the Talon administration initiated a process to modernize public procurements’ provisions and revise fees to transfer state-owned lands.
The tax regime in place is also simplified to favor micro and small enterprises. It can be seen as a Synthetic Professional Tax. Moreover, the country spent more on its cotton industry and has invested to modernize port and transport infrastructures. However, Corruption, poor quality of infrastructure, and problems related to the electricity supply limit the country's potential attractiveness.
Benin's strong points when it comes to investment are its strategic location. The country has access to the sea and shares a border with Nigeria, Africa’s leading economy, its role as a trade hub for second-hand vehicles imported from Europe and resold throughout Western Africa, and the fact that it is one of the most democratic nations in the African continent. Benin has taken several initiatives to attract foreign investment, particularly in the electricity production sector such as creating a Presidential Investment Council. An online platform for providing information to investors has also been put in place.
In World Bank's 2020 Doing Business Report the country has been ranked 149th worldwide, for the ease of doing business. This represents a slight improvement from the 2019 edition in which it was ranked 153rd. According to the report, Benin improved the reliability and transparency of the land administration system by publishing official statistics on land transactions and land disputes for the previous calendar year and committing to deliver a legally binding document within a specific time frame (Doing Business).
What to consider if you invest in Benin includes the country's location and its membership in the UEMOA and ECOWAS, political stability, reduced formalities for investors with a beneficial Investment Code customs and tax benefits available on the Industrial Free Zone, a steadily growing economy, the launch of a 15 billion dollars five-year Government Action Plan of 2016 to 2021, a series of business incentive reforms such as the fight against corruption or the creation of Special Economic Zones aiming to improve the business climate a large number of business and investment opportunities.
Weak Points Several factors still hinder the country’s attractiveness: high risk of corruption a poor business environment (Benin ranked 149th out of 190 countries in the 2020 Doing Business report by the World Bank) poor quality of infrastructure and problems related to the electricity supply high poverty rate the impact on activity and tax revenues of Nigeria’s economic policy decisions the terrorist threat from neighboring Nigeria (Boko Haram) dependence on the cotton industry high government gross debt (41.8% in 2020 - IMF).
Let's take a look at some of the government measures to Motivate Foreign direct investment in the country. The government of Benin is actively trying to improve the country’s business environment and attractiveness to foreign investment. Benin has created the Agency for the Promotion of Investments and Exports, replacing the three former structures to facilitate investment queries. Furthermore, it launched an online window making business registration processes easier and exclusively digital. A new law to facilitate public-private partnerships has been enacted and is expected to attract additional Foreign Direct Investment.
Furthermore, the government launched a very ambitious 15 billion dollars five-year Government Action Plan for 2016 to 2021, structured around 45 major projects, 95 sector-based projects concentrated in infrastructure, agriculture and agribusiness, tourism, health, and education, and 19 institutional reforms. In 2016, Benin passed a law establishing a commercial tribunal of the first instance and a commercial appellate court, in order to speed up the settlement of business-related disputes.
The country’s Investment Code allows for the creation of Free Trade Zones and establishes incentives such as tax reductions for investors. However, at the moment, out of the three FTZs established in the country, only the one located near the Nigerian border is active. Depending on the size of the investment, free trade zone investors may benefit from reduced tax liability on profits, and duty-free on imported inputs including raw material and equipment exported finished products, or imported industrial equipment for up to one year from the date of business registration.
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Conclusion
Benin is located in West Africa and shares its border with Nigeria on the West, Togo on the East, and Burkina Faso and Niger on the North. Benin has been ranked 149th for the ease of doing business in the World Bank's 2020 Doing Business Report.
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