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Benin
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Situation and Cooperation
The transition from socialist one-party rule to democracy was a peaceful one, and was seen as setting an example in Africa. In the recent past, however, the impetus for reform in Benin has declined. The public financial management system in particular is inefficient, poorly transparent and lacks a pro-development orientation.
Benin is economically dependent on its neighbours. According to estimates, 80 to 90 per cent of the country's foreign trade is with Nigeria. Although Benin is only weakly integrated into the global financial market, since 2007 the international economic and financial crisis has indeed had a negative impact on this small West African country.
In autumn 2009 Benin had to ask the International Monetary Fund (IMF) for support in order to avoid national bankruptcy. In June 2010 an assistance programme was approved for Benin worth 110 million US dollars. To overcome the crisis the Beninese government has adopted a rigid austerity policy encompassing all sectors. Urgently needed investment in social sectors such as education and health are therefore not possible at present. This is impacting negatively on poverty reduction.
Through the port of Cotonou, Benin has become a transit country for goods heading to Burkina Faso, Niger and Chad. This port town is in fact home to the largest market for second-hand cars in all of West Africa. Benin's industrial sector is not particularly well developed and focuses mainly on cement production and cotton ginning. More than two thirds of the population work in agriculture. Benin's population is growing rapidly, with an ever increasing number of people having to earn their living off the land or in the informal services sector in one of the country's few large cities. Those working in the informal sector have few opportunities for switching to the formal sector.
Benin is making efforts to attract foreign investors to the country, pointing to its stable political situation and its membership in regional economic organisations. Benin is a member of the Economic Community of West African States (ECOWAS) and the West African Economic and Monetary Union (UEMOA). Nevertheless, the country does not have an attractive investment climate. In the World Bank's Doing Business Report 2011, which analyses the business climate worldwide, Burundi ranks 170 out of 183 states. Potential investors are deterred by corruption, legal uncertainty, a slow and inefficient bureaucracy, and the lack of infrastructure, particularly in the energy and telecommunications sectors.
Benin ranks 110 out of 178 countries on the 2010 Corruption Perceptions Index (CPI), as published by the non-governmental organisation Transparency International.
Poverty reduction
Despite huge efforts on the part of donors in the last few years, it has not been possible to reduce poverty in Benin to any great extent. High population growth of more than 3 per cent hampers many of these efforts. Around one third of the population lives below the poverty line. According to the 2010 Human Development Index (HDI) Benin ranks 134 out of 169 countries. Benin is thus one of the world's least developed countries (LDCs).
Starting in 1999, the government of the country initiated a series of national programmes aimed at implementing its poverty reduction policy. In April 2007, Benin adopted its second poverty reduction strategy paper (Stratégie de Croissance pour la Réduction de la Pauvreté, SCRP). This reinforces the government's determination to combat hunger, poverty and AIDS, and to tackle illiteracy, environmental pollution and discrimination against women. A third SCRP that updates the strategy was presented in 2010. The draft has not yet been officially adopted.
Reducing poverty substantially despite the high population growth rate would require an economic growth rate of at least 7 per cent. In recent years, though, the growth rate has fluctuated between 3 and 6 per cent; in 2009 it stood at only 2.5 per cent.
The transition to a market-oriented economy has not yet taken place – many important companies in the electricity, telecommunications, cotton and shipping sectors have not yet been privatised. Reforms have been formulated but have yet to be implemented. President Boni Yayi has the goal of lifting Benin out of poverty and turning it into an emerging economy. There are plans for far-reaching privatisation of state-run companies by the end of the decade.
A hindrance to Benin’s economic aspirations is the dependence of its foreign trade on cotton. Cotton accounts for some 20 per cent of export earnings. Heavily subsidised cotton farming and export activities conducted by some industrialised countries, above all the USA, exert a downward pressure on world market prices, pushing them well below the production-cost level. In 2010 Benin's cotton exports fell by almost 28 per cent. In order to become more competitive Benin has launched a process to reform the cotton sector involving the private sector.
Germany is supporting these efforts. Acting on the BMZ's behalf, the GIZ and DEG are for instance promoting the Cotton Made in Africa initiative, which was launched by the Aid for Trade Foundation set up by the German entrepreneur Michael Otto. This public-private partnership is supporting the ecologically and socially sound production and marketing of cotton in northern Benin. A corresponding label provides a guarantee that products have a positive effect on development, and raises the market share of these products in purchasing countries such as Germany.
Among the major challenges facing the government is improving the education system. Around 60 per cent of Benin's people are illiterate. Primary school attendance has been free of charge since the start of the 2006/2007 school year. This innovation has significantly increased the school enrolment rate, which has now reached 100 per cent. One in five children drops out of primary school, however. Most of them are girls. Moreover, considerable improvements still need to be made when it comes to the quality of school and vocational education. Germany, along with other donors, is assisting Benin in the implementation of its national education plan. The country has a realistic prospect of achieving the Millennium Goal of "education for all".
Development potential
The Beninese economy is dependent on agriculture and the services sector. The agriculture sector is very important when it comes to poverty reduction, as it generates some 40 per cent of the country’s gross domestic product (GDP). Benin has no natural resources.
The government of Benin is aware that it is still not sufficiently tapping into the available potentials and it has therefore developed a new agriculture strategy. The main objective is to boost agriculture sector performance in order to guarantee the Beninese population's food security, support economic and social development, and thus reduce poverty more effectively.
There are numerous non-governmental organisations in Benin whose work is respected by the government. In 2010 the organisation "Freedom House" rated Benin as one of only a few African countries to guarantee full political freedom. However, in its 2010 Freedom of the Press Index the organisation rated Benin as only "partly free".
Priority areas of German cooperation with Benin
At the government negotiations in October 2010, Germany pledged a total of 70 million euros for development cooperation with Benin for the period 2010 to 2012. Of this, 45 million euros was for Financial Cooperation and 25 million euros for Technical Cooperation.
Agreement was reached with the government of Benin on the following priority areas of development cooperation:
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Decentralisation and municipal development
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Agriculture
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Integrated water resource management, water supply and sanitation
In addition to these priority areas, Germany is also engaged in the fields of macroeconomic advisory services, primary education and energy supply.
Decentralisation and municipal development
France, the former colonial ruler, has left many traces in Benin. State structures, for instance, are centralistic in keeping with the French model. However, reforms to remove these centralist structures have been ushered in. Decentralisation forms a major part of the current process to reform the country's administration.
In late 2010 the government officially brought the National Decentralisation and Deconcentration Policy (PONADEC) into force. This policy for the first time assigns key competences to the prefectures, particularly in the fields of basic education, health and water supply. The overarching goal is to effectively support poverty reduction and to establish modern, efficient local government. So far, though, the municipalities have not been allocated sufficient funds that would enable them to properly manage their new tasks. They are currently in the process of developing their own sources of income, such as local taxes and rates.
As part of Financial Cooperation, the establishment of market squares and halls as well as municipal administration buildings has been promoted through an infrastructure fund for mid-sized towns. In the future, where possible all investment in local government will be channelled through the national fund for municipal development (FADeC). This fund is designed to provide financial equalisation between the central, prefectural and municipal levels. It is financed both by the Beninese government and by various international donors. In 2010 Germany harmonised its position with that of the other FADeC donors, and standard criteria for paying into the fund were adopted.
These funding activities are being complemented by the delivery of advisory services to the prefectures by German Technical Cooperation experts. The experts are for instance training staff in the supervisory control of municipalities. To enable civil society to develop at the municipal level more easily and in more diverse ways, training measures on decentralisation, and on civil and human rights, are being held in cooperation with local non-governmental organisations on a continuous basis.
Integrated water resource management, water supply and sanitation
Only around 60 per cent of the urban population in Benin currently have access to safe drinking water. In rural regions only around 50 per cent have such access. Many in rural regions draw their drinking water from open wells, which is often contaminated. Only around 34 per cent of the urban and 17 per cent of the rural population have access to sanitary facilities.
The goal agreed with partners in Benin is to make a significant improvement to the quality of drinking water and hygienic conditions by the year 2015, and to provide at least 75 per cent of the population with reliable access to drinking water. This is an entirely realistic target, because the German contribution alone will rectify the remaining problem of undersupply in around 23 per cent of cases, and provide an additional 433,000 inhabitants with drinking water.
A new priority area strategy paper for the water sector was adopted at the end of 2008. It focuses on upgrading management skills both at national and municipal level, as well as on improving access to sanitation. Germany is also cooperating with other donors on several basket funding measures to improve drinking water supplies in urban and rural environments.
The aim of the water supply programme is to expand and improve the technical infrastructure. A uniform, country-wide model has been devised for this purpose in close consultation with all the relevant players. It is demand-oriented and seeks to promote a sense of responsibility among the end users while also striving to safeguard the efficiency and sustainability of investments.
Water pipes are being renewed and extended in numerous towns. New pumps are also being installed. Water is distributed at central standpipes, where public information is also provided on the links between contaminated water and disease. New foot- or hand-pump-operated drilled and dug wells are being installed in villages and damaged wells repaired. Sanitary facilities are also being constructed – up to now many villages have had no such facilities. The new state water company is receiving support for the efficient planning of drinking water supplies and the regulation of water quality testing. Benin’s women in particular will benefit from the improved provision of these services, since they are traditionally responsible for their family's water supply.
Agriculture
The agricultural sector is the pillar of Benin's economy and indeed is regarded as crucial to growth and development in Benin's new poverty reduction strategy. German engagement in this sector aims to boost agricultural performance country-wide (in a way that is sensitive to environmental and climate-related issues), and reduce poverty within the population. This means raising agricultural productivity and competitiveness. It also includes promoting the diversification of agricultural exports, which have so far been largely confined to cotton, to make Benin more competitive on regional and international markets.
Germany is supporting farmers in producing products such as rice, cotton and cashew nuts not only in order to meet their own needs, but also for market. The processing of agricultural produce is generating new jobs in the private sector, thus creating additional sources of income, mainly for women. Municipalities are being on advised on how they can support small farmers, for instance by maintaining access roads or building local warehouses. Newly established and simple rural cadastres are regulating rights of ownership and use in villages, and preventing conflicts between the various user groups.
Particular emphasis is placed on environmental and climate issues in Beninese-German cooperation. To promote sustainable agriculture, measures must be designed from the outset to protect and conserve resources. When agricultural productivity is increased, higher yields can be obtained without having to expand the area under cultivation. This reduces the pressure generated by agriculture on numerous protected areas, and helps conserve biological diversity.
Germany has been supporting the Pendjari Biosphere Reserve in the north of the country since 1996. The population was successfully incorporated, thereby creating an exemplary model for the population of West Africa in regard to the administration and utilisation of the protected area. In cooperation with the International Union for Conservation of Nature (IUCN) an environmental fund is being set up to maintain the Reserve in the long term. In future, additional funding will also come from sustainable tourism.
Debt relief
Benin submitted its preliminary Poverty Reduction Strategy Paper in June 2000 and reached the decision point for the HIPC Initiative the following month. The government adopted the full PRSP in September 2002. In March 2003 Benin reached the completion point under the enhanced HIPC Initiative. As a result, Benin had around 460 million US dollars of debt cancelled. Germany also cancelled the repayment of all bilateral debt.
In 2006, under the Multilateral Debt Relief Initiative (MDRI) Benin had debts of 1.1 billion US dollars cancelled, which was equivalent to around 25 per cent of its gross domestic product. It is envisaged that the funds made available as a result will be used to increase expenditure on education, health, infrastructure and agriculture.
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