Benin report - Institut Africain de la Gouvernance

CHAPTER FIVE: CORPORATE GOVERNANCE__________________________________________________________________________considerable revenue from state coffers. Informal trade seems to representabout one-quarter of all exports, particularly to Nigeria 38 .565. Trade, particularly with Nigeria, contributes to expanding the trade sector inBenin and provides customs revenue for the state. Indeed, goods in transitthrough Benin are often imported legally, but re-exported in an informalmanner. It is estimated that nonofficial re-exports account for 6% of GDP andcontribute one-third of customs revenue (World Bank, 2005). However, thesere-export operations are also associated with informal imports and the sale ofproducts on the Beninese market (including oil products). This constitutesunfair competition by informal operators who avoid all regulations and taxes.566. The poor mounting of bids in the public sector is another source of fraudulentpractices. In fact, the terms of reference of public contracts are not oftenrealistic and do not take into account the importance of the contracts inquestion or the situation of the possible bidders. By trying to standardise andscrupulously respect the procedure, some officials neglect the nature, specificsor simply the size of the contracts in question. This excessive formalisationleads to aberrations like the one observed by a stakeholder who affirmedhaving spent 2 million CFA franc to prepare a bid document (three certifiedbalance sheets, different testimonials and commitments, etc.) for participationin a public contract which, in the final analysis, involved a transaction of 5million CFA franc.567. Criticisms levelled against the informal sector. According the 2005 WorldBank report on the investment climate in Benin, about 82% of enterprises inthe trade sector consider competition from the informal sector as a „major‟ or„very serious‟ problem. In addition, nearly 84% of firms in the trade sectorconsider themselves as competing directly with the informal sector. Theestimated market share of informal firms in the trade sector is high (about43%). The main advantages of informal firms, according to informalenterprises in the trade sector, are that they pay less or no tax at all (97.7% ofthe firms), do not apply the directives (93%), and sell inferior quality or fakeproducts (78%).568. According to some stakeholders, it is not rare to find a formal enterprise in thecentre of a network of informal entities. This would enable them to participatein public procurement without necessarily being obliged to register all theeconomic operations of their network/group. Furthermore, some publicenterprises or organisations within the country are sometimes obliged toprocure supplies from the informal sector and to regularise their situation by„finding‟ invoices. This is particularly true when the entity in question doesnot have suppliers in the formal sector. These transactions are not withoutbenefits, since the prices charged by the informal sector are attractive, even fora public enterprise. Paradoxically, transactions of these enterprises in theinterior of the country – which does not deal with the informal sector – aretherefore prejudiced in terms of their competitiveness.38 French Embassy in Benin, Economic Mission. Le commerce extérieur béninois en 2002, 2003.http://www.commerceexterieur. gouv.fr/économie/documents.asp.197