Benin has undergone vast political and economic transformations over the past several years. However, economic reforms have occurred more unevenly than political transformation. Although the basic institutional framework for a market economy has been increasingly strengthened and Benin is considered one of the most stable democracies in Africa, the economy remains dominated by the informal sector. The government's commitment to combating corruption and attracting investment has resulted in a number of laws, regulations and measures to improve the business climate, although several obstacles to attracting foreign investors remain. The most important obstacle, according to many observers, is the widespread corruption in the country, both petty (facilitation payments and small bribes) and grand (government, contracts).
Positive developments in relation to corruption and investment:
- The institutional setup for fighting corruption is quite well-established and Benin's anti-corruption strategy is seen as successful by many international observers.
- The government has established a one-stop shop in order to simplify procedures for starting up companies, registration, tax declaration and import licensing, thereby aggregating all the formalities facing a new investor in one place: the Guichet Unique within the Centres des Formalités (CFE) under the Chamber of Commerce and Industry (in French). However, the effectiveness of this one-stop shop has been mixed, and many investors continue to complain that the ineffective and corrupt bureaucracy is making the investment code difficult to implement in practice.
- Benin ratified the United Nations Convention against Corruption in 2004 and established the General Inspection of the Government (l'Inspection Générale de l'Etat, IGE) in 2006 with the aim of combating corruption within the public sector.
- President Yayi Boni installed a toll free line linked directly to the presidency providing a means for citizens to report corruption whenever witnessed in their everyday lives.
- The parliament of Benin passed a new anti-graft law in August 2011 binding public officials to declare their assets when assuming and leaving office.
Risks of corruption:
- Property rights, although adequately defined, are not safeguarded in practice due to corruption.
- Foreign investors should note that bribery regularly occurs in relation to several business procedures, including obtaining water connections, construction permits and commercial licences. The bribes demanded are reported to be especially high for foreign companies due to their alleged 'capacity to pay'.
- Most companies expect to give gifts in order to secure government contracts. Many observers note that public procurement and contracting procedures in Benin are highly corrupt.
- Tax and customs and excise laws are not always enforced uniformly and without discrimination as corruption and bribery can be used to influence the application of these laws.