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» 26.03.2010 - Growth slowed down in Benin
» 15.07.2009 - Benin flood victims visited by ECOWAS
» 08.04.2009 - EU blacklists Benin airlines
» 18.04.2008 - Benin secures tourism investment
» 20.03.2007 - Benin President comments on assassination attempt
» 03.04.2006 - President-elect pledges change "with God's blessing"
» 03.03.2006 - Underfinanced Benin election promises change
» 29.01.2004 - Beninese government tries its judges for corruption

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Economy - Development | Politics

Who is to blame for Benin's economic crisis?

Misanet / IRIN, 9 August - Benin sounds like an investor's dream in an otherwise troubled West African region: a stable and peaceful democracy respecting human rights closely following World Bank economic policies. Nonetheless, the economy is retracting. The government blames trade partners, the opposition points to incompetence while experts say officials are filling their pockets while President Kérékou is still in power.

Nobody in Benin doubts that this small country is in economic crisis. The price of maize, the country's staple food, has doubled in recent months and the government openly admits that its tax revenues have fallen well short of expectations.

Government suppliers often have to wait months for payment, only to find that cheques bounce. And civil servants live in constant fear that the government will no longer be able to pay their salaries at the end of the month.

Already the government has fallen behind in paying fringe benefits to hospital workers and pensioners and has told members of parliament that it can't afford to buy them new official cars. And with less money in circulation, Benin's nearly seven million inhabitants are feeling the pinch.

About 20 of the 110 shops selling brightly coloured-cotton print cloth on the Avenue Delorne in the commercial district of the commercial capital, Cotonou, have closed since the beginning of this year. And with fewer customers to sell to, a further 60 are in the process of closing down, said Jonas Sossouhounto, the leader of Benin's textile workers' union.

- There is no money left, bemoaned Christine Ajavon, who sells hair extensions for women in the city's Dantokpa market. "I used to sell up to 500,000 CFA francs (US$ 900) of goods per day, but now I am lucky to be able to get 20,000 CFA (US$ 36)."

But somehow, people have to find the cash to pay for food that is streaking up in price before the new season's harvest starts coming on the market in September. "You can't eat what you want any more, everything is too expensive. You can only try to fill your belly," complained Laurette Zannou who had been shopping at a Cotonou market. "Even maize, our main food, has gone up from 100 CFA (18 US cents) to 200 CFA for a (1 kg) scoop," she added.

Nigerian trade restrictions
The government of President Mathieu Kérékou blames the economic crisis on trade restrictions imposed by Benin's giant neighbour Nigeria and on US and European cotton subsidies, which depress Benin's potential earnings from its main export crop.

But opposition politicians and independent economists blame corruption and incompetence at the top levels of government, which, they say, are prompting foreign donors to withhold aid money.

The one thing everybody agrees on is that the government's bold forecast of seven percent economic growth in 2004, made last November, is not going to be met. Senior finance ministry officials publicly admitted last June that the target would be missed, but they didn't set a new one.

Cotton accounts of half of Benin's annual export earnings of around US$ 400 million. And trade with Nigeria has always been a major factor in Benin's economy, although much of it has traditionally consisted of smuggled goods. Nobody denies that it has been tough going on both fronts.

The major western powers have recently made mild concessions to the West African cotton producers in world trade talks, but it could be years before substantive cuts in subsidies to European and North American cotton farmers take effect.

And Nigeria has lately proved an irascible and difficult neighbour to deal with. Nigerian President Olusegun Obasanjo has become increasingly irritated with the smuggling of cheap Nigerian petrol and stolen cars into Benin and the flow of other contraband goods in return. Over the past year he has cracked down hard.

In August 2003, President Obasanjo simply closed his country's 700 km-long border with Benin for a week before agreeing to meet Kerekou to discuss the problem in the Nigerian border town of Badagry.

At this summit, the President of Benin meekly agreed to step up border security and fast track the extradition of known smugglers and criminals back to Nigeria. Those promptly arrested included one notorious dealer in stolen vehicles who had resold a car which had been hijacked in Lagos from President Obasanjo's own daughter.

At the same time, Nigeria slapped a ban on the overland import of a wide variety of goods from Benin. The list included vehicles of all description, second hand fridges and air conditioning units, sorghum, millet, wheat flour, vegetable oils, cement and frozen chickens. Many of these items had previously been imported through the port of Cotonou and then trucked overland to the Nigerian border, just 50 km to the east.

Sharp decline in customs revenues
Last May, Benin's Finance Minister, Gregoire Laourou, blamed a dramatic slowdown of trade with Nigeria and stiffer competition for transit trade to the landlocked countries of the Sahel from the port of Lomé in neighbouring Togo for a dramatic fall in customs revenues.

One source in the customs department told IRIN that the government had been counting on customs revenues of 200 billion CFA (US$ 360 million) this year to help finance public spending of 550 billion (US$ 1 billion). However, but by mid-year, considerably less that 100 billion CFA (US$ 180 million) of taxes on imports and exports had flowed into the finance ministry's coffers, he noted.

Why the fall in customs revenues should be so steep remains unclear, given that the slowdown has been much more modest in Benin's trade in goods in transit for another country. The overall tonnage of goods passing through the port of Cotonou fell by just seven percent during the first six months of this year to 2.07 million tonnes from 1.92 million during the same period of 2003, according to official statistics.

Transit trade with Nigeria was little changed at 141,000 tonnes, the figures showed. The drop in freight volumes was mainly due to an 18 percent fall in transit trade with landlocked Niger. But at 307,000 tonnes, Niger remained the port of Cotonou's biggest overseas customer.

"The government should not try to deceive us"
- The government should not try to deceive us, said Sacca Lafia, a parliamentary deputy of the opposition Union for Social Democracy (UDS) party. "In November 2003, the minister of finance spoke right here in the assembly of four percent economic growth in 2003, rising to seven percent in 2004."

- Then, six months later he comes back to talk about a budget deficit, she added. "For me his arguments about trade goods banned by Nigeria don't hold water. Other countries like Togo and Burkina Faso have no border with Nigeria. How do they manage to get by?" she asked.

One government financial controller, who asked not to be named, told IRIN that the border restrictions imposed by Nigeria were just a drop in the ocean. "The real problem is elsewhere," he told IRIN. "Everyone is preparing in their own way for the presidential elections of 2006. The men in power have been hovering up money and transferring it abroad fraudulently and in massive quantities."

One way this was being done was through the over-invoicing of imports, he said. This allows importers to buy more foreign currency from the bank than they actually need to purchase the goods being brought into Benin. The balance is simply stashed away overseas or used for other unauthorised transactions.

He gave examples. "In my checks, for example, I have found that a box of Palmida soap [imported from France] has apparently been acquired for 20,000 CFA (US$ 36) only to be resold for 4,800 CFA (US$ 9) on the local market," the financial controller noted.

President Kérékou, who is now 77, is banned by the constitution from standing for a third term. There is therefore a widespread perception that many of his close associates are stuffing their pockets while they can.

A former army major, Mr Kérékou seized power for the first time in a 1972 coup and hung on until 1989, when he was forced out by a civilian revolt his rule. But the man who has transformed himself over the years from a Marxist-Leninist into a born again Christian and free marketeer, made a comeback through the ballot box in 1996. He was re-elected for second term in 2001.

Now, unless President Kérékou manages to amend the constitution - a possibility that is already being talked about - the man who has led Benin for most of the past 32 years, faces definitive retirement in two years time. President Kérékou faces a ban on remaining in power on two counts. Firstly the constitution bans him from serving a third consecutive term and secondly it stipulates that no presidential candidate may be older than 75.

Meanwhile computer engineer Octave Nougbode, like many of Benin's honest businessmen, is still waiting for his government money. "I did a 700,000 CFA (US$ 1,300) contract for the economic affairs section of the finance ministry in December 2003," he told IRIN.

- It wasn't until 21 July that I was asked to come and pick up my cheque, which was dated 19 July, he said. "Then, to my surprise, the bank called me up to say the cheque had bounced."

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