Benin report - Institut Africain de la Gouvernance

CHAPTER FIVE: CORPORATE GOVERNANCE__________________________________________________________________________569. The informal sector gets legitimised by the difficulties the state is having inestablishing an adequate institutional framework for the survival anddevelopment of enterprises, as well as by the place it occupies in theeconomy 39 . Other factors giving it legitimacy are the dazzling success of sometraders 40 , the low prices charged, and the jobs it created. Yet, the informalsector is accused of being at the same time:At the root of the shortfall in the state‟s revenues and a fiscal burden forthe formal sector. Even if it is largely supported by players in the formalsector, this accusation ignores the complex interplay between the tax rateand tax base, and presupposes that the state accords greater importance tothe collection of taxes than to the growth of the economy (in its twoaspects, formal and informal).The source of unfair competition. This criticism is levelled against publicsector enterprises and also those which, in the private formal sector,receive aid from the state. In reality, the formal and informal sectors do notgenerally have the same clients and do not use the same resources. Theresult is that where there is competition, it is rather between the formaleconomy and the underground economy 41 .Noncompliant with the legislation governing working conditions, respectfor the environment and spatial planning.A cause of the invasion of the national market by foreign products,especially from Nigeria.An obstacle to the development of the industry, which is also affected bythe reduced size of the local and subregional market and by overproductionseen in Nigeria 42 .Box 5.2: Difficulties of the informal sectorLow profitability (compared to the high profitability of the underground economy) due to alack of resources, training and information. Players in the informal sector do not benefitfrom the economies of scale or from the flexibility that should be associated with theirsmall size.Management problems: these players lack resources (which, eventually, are notreinvested in the enterprise), prefer the short-term, and make no distinction between theaccounts of the enterprise and those of the owner.Confusion between the informal sector and the underground economy, and thepossibilities opened to the latter. This implies that efforts should be concentrated on the39 68% of GDP according to INSAE (2004).40 Notably the famous „Mamas Benz‟, who are traders in the market and have become rich throughpetty trading and informal activities.41 Marchand Geneviève, 2005, L’économie informelle au Sénégal. Logique de fonctionnement dequelques entreprises informelles à Saint-Louis. Doctoral Dissertation : University of Laval.42 Nigeria‟s market of nearly 120 million inhabitants and its economic potential are not comparablewith those of its neighbours.198