Benin flag Benin: Investing in Benin

Foreign direct investment (FDI) in Benin

FDI in Figures

According to the UNCTAD World Investment Report 2021, FDI inflows declined from USD 218 million in 2019 to USD 176 million in 2020, following the economic crisis triggered by the Covid-19 pandemic. On the other hand, the stock of FDI reached USD 2.8 billion at the end of 2020. According to UNCTAD’ Investment Trends Monitor, global FDI flows rebounded strongly in 2021, but FDI flows to African countries (excluding South Africa) rose only moderately. The National Infrastructure Development Plan, which contains a series of private-public partnerships, should help boost FDI. The main investors 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 a series of 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 modernise public procurements’ provision, and to revise fees to transfer state-owned lands. The tax regime in place was also simplified to favour micro and small enterprises (Synthetic Professional Tax). A Presidential Investment Council was created and an online platform for providing information to investors was put in place. Benin's strong points 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. In World Bank's 2020 Doing Business Report (latest 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). Corruption, poor quality of infrastructure and problems related to electricity supply limit the country's potential attractiveness.

 
Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 218174242
FDI Stock (million USD) 2,4212,8312,845
Number of Greenfield Investments* 535
Value of Greenfield Investments (million USD) 1,61543226

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 
Country Comparison For the Protection of Investors Benin Sub-Saharan Africa United States Germany
Index of Transaction Transparency* 7.0 5.5 7.0 5.0
Index of Manager’s Responsibility** 1.0 3.5 9.0 5.0
Index of Shareholders’ Power*** 5.0 5.5 9.0 5.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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What to consider if you invest in Benin

Strong Points

Among the factors that make Benin an attractive destination there are:

  • the countries 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 USD 15 billion five-year Government Action Plan (2016-2021)
  • 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 neighbouring Nigeria (Boko Haram)
  • dependence on the cotton industry
  • high government gross debt (41.8% in 2020 - IMF).
Government Measures to Motivate or Restrict FDI
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 in order 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 FDI. Furthermore, the government launched a very ambitious USD 15 billion five-year Government Action Plan (2016-2021), 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 FTZ 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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Latest Update: July 2022

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