BENIN Investment Guide
Openness to Foreign Investment
Many opportunities for foreign investments are linked to the privatization
process in which Benin has been engaged for the past several
years. The number of parastatals was reduced from 130 in 1980 to 27 in 1999. As
a result of privatization and civil service reform, public payroll jobs were
reduced to 31,503 in 1998. Recent privatizations have included the oil
parastatal (Sonacop), a cement company (SCO) and a brewery (Sobebra). However,
the privatization process has not been entirely transparent, particularly in
the case of Sonacop. Plans to privatize other parastatals, notably the
Government-run agricultural parastatal and cotton purchasing monopoly (Sonapra)
and the electricity and water company (SBEE), have stalled, although in June
2000, the GOB pledged that the Sonapra privatization would proceed, without,
however, providing details of a schedule for same. The Government requires that
Beninese nationals partly own privatized companies.
Many infrastructure renovation contracts are funded by grants or loans from the
World Bank or other international development banks. Some major contracts have
been signed already while several projects are still on the horizon. The
current investment code establishes the conditions required to obtain benefits
under different investment regimes and grants the investment control commission
at the Ministry of Industry extensive discretionary power. A major Government
construction project, for example, was recently awarded to a French company and
one company that lost the bid complained that the French company paid bribes to
get the project.
The tax reforms introduced in recent years largely remove the need for special
incentives to potential investors. The 1990 investment code was promulgated in
order to establish a simplified system readily accessible to all investors. In
recent years, the Government established a “processing office” (“Guichet
Unique” or one-stop-shop) at the Trade Ministry to help dispense with unnecessary
and time-consuming formalities facing investors. As a practical matte, many
investors complain that the investment code is difficult to implement in
practice because of inefficient, unmotivated, corrupt bureaucracy.
Currency Conversion and Transfer Policies
Benin is a member of the West African Economic and
Monetary Union (UEMOA/WAEMU). Its currency is the CFA Franc, which is issued by
the Central Bank of West African States (BCEAO). In order to stimulate economic
recovery, an adjustment of the exchange rate was implemented and the CFA Franc
was devalued by 50 percent on January
11, 1994. As of that date,
100 FCFA equal one French franc. One US dollar, at present, equals about F CFA
700 (June 2000). The conversion system does not set restrictions on international
transfers. The existing commissions taken on transfers were eliminated in 1990.
As of August 2, 1993, it is forbidden to buy CFA bank notes
outside of the franc zone. The Central Bank made this decision to stem capital
outflows from the West African Monetary Union. One unanswered and noteworthy
concern for investors is the long-term effect of the European union's euro on
the FCFA. Some investors are also concerned that another devaluation of the
FCFA could occur.
Expropriation and Compensation
As stipulated by law, any enterprise operating in Benin is guaranteed that the state will make no attempt to nationalize it.
The Government at this time is focused on continuing to privatize its
state-owned industries and has shown no indication of returning to the policy
of expropriation carried out prior to the establishment of democracy in 1990.
The President has spoken publicly and often about the importance of attracting
foreign investment. We are aware of no pending expropriation disputes involving
U.S. companies.
Dispute Settlement
The settlement of disputes pertaining to breach of contract, contract enforcement, claims, land title and related issues must be adjudicated in the civil courts. There is no separate commercial court system. Moreover, there is no system that consistently publishes decisions rendered by the courts. The backlog of civil cases often results in a wait of two or more years before matters proceed to trial. In recent years, judges have shown increasing independence and have ruled against Government interests. Judicial corruption remains an impediment to administration of justice. Corruption is less of a problem at higher levels, but businesses and other litigants routinely complain that corruption is widespread at the trial court level as well as at administrative hearings.
Performance Requirements and Incentives
Although the Government maintains a welcoming posture to foreign investors, we
are unaware of performance incentives per se targeting foreign investors. By
the same token, performance requirements are absent. Foreign investors have
generally not complained of discriminatory or preferential export or import
policies, although foreign businesses complain that they are held to higher
standards than Beninese businesses. For example, foreign companies are required
to adhere to social security and labor regulations, which are routinely ignored
or minimally followed by Beninese companies. One long established American
company has complained of discriminatory treatment in being refused permission
to establish a bonded warehouse for goods in transit. Foreign investors and
workers are not subjected to onerous visa or residency permit requirements.
However, delays in obtaining visa and residence permits are often lengthy.
Private Ownership Rights
The right to private ownership and investment exists in theory and practice.
Beninese law guarantees freedom of trade; choice of customers and supplies; the
right to move freely in all parts of the country; the right of foreign
employees and their family members to leave the country; and freedom from
Government interference in the management of private enterprises.
Protection of Property Rights
Secured interests in real and personal property are recognized and enforced. Benin's legal system protects and facilitates acquisition and disposition of all property rights, including land, buildings and mortgages. The Government respects intellectual property rights. In practice, however, bootlegged musical cassettes and CD's are widely available despite Government interdiction efforts. Land tenure remains a complicated question in many areas and it is sometimes difficult to transfer clear title to real property.
Transparency of Regulatory System
Although the Government has adopted a transparent policy to foster free
enterprise, bureaucratic red tape is a problem. Bureaucratic procedures are
insufficiently streamlined and are rarely transparent in practice. Trade
regulations derive from the French “Code de Commerce”. Although some trade
regulations are unique to Benin, most trade regulations are residual
French Colonial-period laws adopted in France between 1807 and 1960 (the date of Beninese independence). These
account for an excess f paperwork and countersignings by various ministries.
They also militate against the move towards one-stop-shop approach while
fostering opportunities for corruption. In the early 1990's the Government
enacted a series of reforms aimed at modernizing trade regulations. Many labor
laws, however, remain holdovers from the Marxist era and serve as impediments
to private enterprise, despite revamping of the labor code in 1998.
Political Violence
Benin is a democracy by any measure. Its third legislative elections were
conducted peacefully on March
30, 1999 with widespread
voter participation. Political violence is extremely rare, although there were
isolated incidents of clashes between political partisans in the moths
preceding the legislative elections. There are no nascent insurrections or
other politically motivated violent activities. Beninese from all walks of life
and in all regions feel free to express political views, without fear of
reprisal from the Government. More than one hundred political parties are
registered. Benin enjoys friendly relations with its neighbors.
Ordinary crime is low, even in urban areas, although rising crime rising crime,
especially property crime, is a national preoccupation.
Corruption and Crime
Benin has laws, regulations and penalties aimed at
combating corruption. The President and the Reformist Finance Minister have
targeted corruption within and without Government. Concrete results in brining
culprits to book, however, remain modest to date. The President has established
special task forces to tackle Government corruption and the Finance Minister
has launched efforts to dissuade and punish civil service corruption, including
bribery, actual prosecution and punishment is extremely rare. Nonetheless,
high-level Government willingness to combat corruption appears sincere, as
exemplified by the actions of the current Minister of Finance, Bio Tchane.
These are expected to yield results in coming years. Efforts to battle
corruption by civil society, notably the Catholic Church, have also had some
positive effect in influencing public attitudes. The creation of a Transparency
International (TI) Branch in Benin with U.S. seed money has had a positive effect in elevating the profile of this
critical problem in the public eye.
Some U.S. firms operating in Benin have identified corruption as a major obstacle to
direct investment. Businesses note that corruption is endemic and an
unavoidable aspect of doing business in Benin. Corruption at the Port of Cotonou is an impediment to exporters and importers alike. Foreign businessmen
complain that establishing a business requires numerous bribes; examples
include civil servants at the State-owned telecommunications parastatal (OPT)
who demand a bribe before granting a phone line. Labor ministry inspectors
reportedly demand a bribe to monitor union elections.
Labor
Unskilled labor is widely available but adequately trained, skilled labor is in
short supply in many areas, including engineering and accounting.
The Government adheres to international labor standards and fully recognizes
the right to form unions and engage in collective bargaining. The labor
movement, especially civil service unions, has actively opposed privatization.
The Government adopted a new labor code in 1998 aimed at increasing flexibility
regarding hiring decisions, eliminating the need for prior authorization from
the Labor Directorate for employee dismissal, and consolidating labor
regulations currently dispersed in various texts. As a practical matter,
however, Benin's labor practices contain many
inefficient practices hearkening back to the Marxist era. Foreign companies who
dismiss employees for unsatisfactory performance are absolutely sued. Foreign
companies also claim that labor inspectors hold them to a higher standard than
Beninese firms. Child labor is widespread and the GOB, although not formally
permitting this practice, makes little effort to suppress it.
International Investment Agreements
Benin has a bilateral investment agreement with France but none with the United States. With respect to investment protection, Benin has concluded agreements with several European
countries including:
• Germany; October 10, 1993 agreement pertaining to the mutual encouragement and
protection of investment capital.
• Great Britain; November 27, 1987 agreement for the protection of British investments in Benin.
Benin is also a signatory of various multilateral
agreements for investment protection, including the Multilateral Security
Agency and Convention for the international Settlement of Investment Disputes.
Moreover, the repatriation of assets and profits is free in Benin.
Foreign Trade Zones
There is a free trade zones in the port of Cotonou for Benin's landlocked neighbors (Burkina Faso and Niger). Foreign importers have complained, however, that port corruption makes it difficult to benefit from this entity.
Foreign Investment Statistics
Most of the foreign investment that has entered Benin since 1990 has been through acquisition of interests
in privatized companies. Following are examples of companies sold in part to foreign
investors, listed by name, activity, price and buyer:
• Sobetex (textile) – 282 million CFA – by Schaeffer (French)
• Manucia (Tobacco) – 1.3 billion CFA – by Rothmans International
• Sonaci (cement company) – 4.2 billion CFA
– by Scancem (Scandinavian)
• SCB (cement company) – 1.1 billion CFA – by Amida (French)
• Le Beninoise (brewery) – 7.8 billion CFA – by Catel-BGI (French)
• Sotraz (public transportation) 42 million CFA – by SEG (French)
Principal foreign investors in Benin hail from France, other European countries and Canada.
Taxation
The corporate income tax rate is 38 percent for most companies, and 58 percent
for petroleum and mining companies. Those enterprises exempt from income tax
include agricultural credit unions and mutual associations. If reinvested
within three years, capital gains are exempt from tax.
Stock Market
The Bourse Regionale des Valeurs Mobilieres (BRVM) was opened in September 1998
to serve as a regional financial market for the member-states of the West
African Economic and Monetary Union (UMOEA), which includes Benin, Burkina
Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo. At inception, the BRVM listed 35
companies on its exchange.
Listing requirements include: a share capital of CFAF 200-500 million; 15-20
percent public ownership; five annual reports; balance sheet.
The BRVM has computerized trading with satellite links. Trading occurs on
Mondays, Wednesdays, and Fridays. Trading is now decentralized so that
member-countries can trade simultaneously from their national bourse via
satellite links.
For more information on the
Bourse Regionale des Valeurs Mobilieres, see URL: http://www.brvm.org
Sources: International Monetary Fund (Country Watch): http://www.imf.org