Benin Economic Review

Economic Analysis of Investment Opportunities and Business Environment

This article aims to describe the business environment as well as the main investment opportunities in Benin. The final purpose of this article is to show the real potential of the country in terms of investment opportunities. The first part will address the country’s main facts and describes its social and economic context (A). The second part is devoted to the strength and weakness of Benin’s investment climate (B). The third will discuss the main investment opportunities in Benin (C).

Even if Africa remains the least developed continent of the world, a substantial economic change has operated over the 2001-2009 period with a global 5.3% GDP growth 1 , which places the continent among the most developing regions in the world. In the long term, Africa will integrate the globalized economy and reduce the gap existing between rich countries and Least Developed countries (LDC’s). Obviously, emerging countries are opening the path to a rapid economic development and Africa, one of the geologically richest areas of the world, will have to face the challenge of follow them on the way of development. This development will have to use these assets to manage a sustainable development based on the increase and the diversification of its production, the development of its inner markets, the secure of its political context and the distribution of the wealth created. In the medium term, Africa will have the financial means to take an active part to the globalized economy, notably considering the increase of raw materials prices. This year, for the first time in the world’s history, developing and emerging economies will contribute to 50% to the world’s GDP. In 2030, developing countries will represent 60% of the world’s GDP. Obviously, Africa will appear in this new repartition as a major actor considering that countries like China, India and Brazil have acknowledged the importance of developing African markets in a strategy of developing their own market outlets.

Within this global framework, West Africa constitutes a specific economic and geopolitical area. Indeed, it is largely dominated by the Nigerian economy which has a huge population (158 Millions) and a high GDP (206 billions $ – 370 billions $ PPP) 2 , compared to other African countries. Nonetheless, Nigerian per capita income remains low and oil revenues, which only benefit to 25% of the population, dominate the economy. In this sense, GDP growth in oil-rich countries does not constitute a real indicator of development and this indicator has to be used with caution.

Benin recorded a 4.1% growth rate over the 2001-2009 period, slowed down by the world economic crisis of 2009 making the GDP fall to an average of 2.5-3% until today. Compared to its powerful neighbor, Nigeria, Benin is a small economy dominated by agriculture and trade. Except from offshore oil prospecting and some mineral deposit, the country is almost natural resources free. However, the country still appears as a major actor in the region’s development considering its development strategy based on agriculture development, industrialization and services sector development, which will contribute to foster regional trade. Indeed, the country bets on the regional development, pulled by the Nigerian demographic and economic growth, to develop its economic potential. The relative low level of natural resource in the country is in the meanwhile a drawback and a blessing for this country considering the major political troubles that often affect natural resources rich African countries. In this sense, Benin must serve as a secure platform for international investment to dispatch imported to Nigeria and landlocked countries, to offer services related to Nigerian economic development and to export agriculture products.

By Quentin