## 1benea2023002 ## Source details **Canonical URL:** [1benea2023002](https://www.imf.org/-/media/files/publications/cr/2023/english/1benea2023002.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2023/english/1benea2023002.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2023/english/1benea2023002.pdf.json) --- ### Mission overview and scope - Joint IMF mission (FAD, LEG, MCM) conducted a governance diagnostic at the request of the Minister of State, Minister of Economy and Finance of Benin. - Mission timeframe: diagnostic ran from June 7 to September 27, 2022; on-the-ground work in Cotonou from September 12 to 27, 2022. - Focus in line with the IMF’s 2018 Framework for Enhanced Engagement on Governance on macro-critical governance weaknesses and corruption vulnerabilities in: - contract execution and protection of property rights; - legal and institutional anti-corruption framework; - Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT); - financial sector supervision; - public finance governance (tax policy, tax and customs administration, public financial management). - Authorities requested recommendations to support the Government Action Plan (Programme d’Action du Gouvernement – PAG) 2021–2026. ### Context and cross-cutting findings - Political and demographic context: - Population: approximately 12 million inhabitants. - Coastline: 121 km. - Land borders with four countries stretching over more than 2,100 km. - Hosts the Autonomous Port of Cotonou. - President Patrice Talon elected 2016, re-elected 2021; legislative elections held January 8, 2023. - Economic structure and performance: - Economic activity concentrated in the South around the Port of Cotonou. - Informal sector employs 85 percent of the active population. - Benin among Africa’s top cotton producers. - Growth: +6.4 percent annually on average during 2017–2019. - Per capita GDP in 2021: US$1,428. - Since 2019, Benin has gained access to international capital markets. - Governance perceptions: - TI CPI score: 42 out of 100 (CPI average for 180 countries: 43; sub-Saharan Africa average: 33). - IIAG justice and rule of law score: 64.7 out of 100; rank: 10th in Africa on justice and rule of law. - Centralization of power since 2016, with expanded presidential staff involvement (Decree no. 2016-530; Decree no. 2022-248; Decree no. 2022-303). - Noted trade-off: centralization can speed reforms short term but risks bottlenecks and weak institutionalization of reforms. ### Executive summary — positive developments - Public finances: successful program budget implementation, fiscal transparency improvements, start of internal control and audit reform, creation of a Court of Auditors. - Tax policy: strengthened governance of tax expenditures; introduction in 2022 of a semi-dual personal income tax system. - AML/CFT: updated legal framework and adoption of an action plan following the GIABA MER. - Rule of law: accessibility of legislation, creation of a Commercial Court, development of e-procedures. - PFM digitalization: implementation of SIGFP in early 2022 and interconnection to the TSA. ### Executive summary — persistent weaknesses - Legal and institutional framework gaps (disciplinary powers, magistrate appointments), lack of transparency in specific procedures. - Institutional capacity constraints and resource shortfalls in justice and oversight bodies. - Heavy reliance on presidential leadership and Office of the President units limiting reform institutionalization. --- ### Rule of law, contract execution, and property rights — findings - Judicial capacity and resources: - Law provides for 28 additional courts; 17 operational. - Case backlogs reported (delays up to 18 months). - Insufficient funding for the judiciary; example: TCC annual operating budget (not including salaries) CFAF 52.124 million (equivalent to US$78,000) described as insufficient. - Commercial judiciary: - Commercial Court of Cotonou (TCC) operational since December 2017; provision for a Commercial Court of Appeal exists but not yet operational. - TCC indicates disputes up to CFAF 5 million (approx. US$7,500) are not eligible for appeal after judgment. - Property rights and land administration: - ANDF reports approx. 36 percent of territory covered by an online cadaster; cadaster coverage concentrated in 13 of Benin’s 77 communes. - Land Act: Law no. 2017-15 of August 10, 2017. - Generating new title deeds can take a year or more in some cases. - Notaries identified: 47 authorized notaries (list for 2018–2019); e-notaire system in place. - Draft bill pending to create a court specializing in land matters; moratorium on litigated real estate noted. - Transparency: - Law 2015-07 of March 20, 2015 provides public access to official records; many courts do not publish decisions online. ### Rule of law — prioritized recommendations - Strengthen judicial independence and impartiality (ST). - Operationalize the Commercial Court of Appeal and Specialized Land Court (ST). - Accelerate full digitalization and territory-wide coverage of the national cadaster (currently approx. 36 percent coverage; 13 of 77 communes covered) and expedite issuance of title deeds (MT). - Improve funding and operational support for the judiciary (example shortfall: CFAF 52.124 million for the TCC) (ST/MT). --- ### Legal and institutional anti-corruption framework — findings - Since 2020: repeal of 2011 anti-corruption law and elimination of the ANLC. - CRIET (created 2018) and the Economic and Financial Brigade (BEF) are central adjudicatory/enforcement bodies. - HCPC attached to the Office of the President is not operational; Article 7 of Law 2020-09 asserts High Commissioner independence but safeguards and appointment/end-of-term procedures need strengthening. - Gaps relative to UNCAC: insufficient whistleblower protection, no comprehensive conflicts of interest framework, asset declaration framework limited to President and ministers. - Public disclosure gaps: CRIET rulings and activity statistics not routinely published. ### Anti-corruption institutional recommendations - Revise the Penal Code to criminalize/supplement provisions on corruption in accordance with UNCAC (ST). - Revise conflicts-of-interest and asset declaration frameworks to: (i) specify assets/liabilities/interests subject to declaration (including beneficial ownership), (ii) extend obligations to close family members, (iii) make declarations public, and (iv) criminalize false/late/non-declaration (ST). - Revise whistleblower protection in alignment with international good practices (ST). - Operationalize the HCPC while strengthening its legal framework to ensure independence and consider transferring judicial police jurisdiction for corruption to it (ST/MT). - Increase transparency by publishing CRIET judgments and BEF activity statistics on a dedicated government website (ST). - Consider reforms to the High Court of Justice (HCJ) to address the existing parliamentary “double lock” (MT). --- ### Sanctions, magistrates, and transparency - Current process: IGSJ investigates; CSM (Article 128 of Constitution) rules as Disciplinary Council; CSM sole authority to recommend sanctions (demotions to dismissals); most serious sanctions result in an individual measure in the Council of Ministers. - Shortfall: facts underlying reprimands/demotions/dismissals not disclosed publicly; recommended minimum public disclosure for demotion/suspension/dismissal: (i) nature of allegation(s), (ii) summary of investigation, (iii) details of evidence. - Recommendation: balance transparency and privacy; consider anonymized decision publication as interim measure (ST). --- ### Company registry and commercial transparency - No publicly accessible searchable company register; CCIB maintains a database for banks’ due diligence but not public. - Suggested minimum contents for a public company register: legal structure; identities of directors and their other directorships; shareholding information; insolvency information; details of mortgages/security interests. - Recommendation: establish a public company register, continue title deed digitization, expand national cadaster to entire territory (MT). --- ### AML/CFT — findings - GIABA MER: noted legal improvements (new AML/CFT law, 2018 NRA, CRIET) but identified serious deficiencies across all pillars of effectiveness. - Action plan adopted in response to MER; risk of public listing by FATF for strategic deficiencies noted. - 2018 NRA identifies corruption as one of the most significant proceeds-generating crimes; other predicates: smuggling, tax fraud, cybercrime, human and drug trafficking. - CENTIF capacity: slight staff increase in 2021; IT and access to databases planned for 2022–2023; CENTIF preparing guidance on PEPs. - Decree 2022-350 designates CNCA as sectoral supervisor for EPNFDs (excluding gambling/casinos and real estate); CNCA expected to commence risk-based supervision in Q1 2023. - Real estate sector: high vulnerabilities due to informality; ANDF e-notaire database now allows notary verification; authorities aim to designate ANDF as AML/CFT supervisor in real estate and to expand ANDF database to include beneficial ownership. ### AML/CFT — targeted recommendations - Conduct thematic risk assessments of sectoral vulnerabilities and flows of corrupt proceeds; use findings to set policy/priorities (ST). - Strengthen risk-based supervision by increasing cooperation with regional supervisors, issuing national guidance for reporting entities, and developing risk-based tools for EPNFD supervision (ST). - Mitigate real estate money laundering risks by commencing risk-based supervision informed by sectoral assessment; require notaries to collect beneficial ownership information and transmit to ANDF; expand ANDF database for competent authority access and medium-term public access (ST/MT). - Create adequate legal basis for systematic collection and management of beneficial ownership information (APIEX proposed as collector), with verification/updating mechanisms and sanctions for noncompliance; publish in medium/long term (ST/MT). - Improve operational cooperation between CENTIF, BEF, and HCPC to share financial intelligence related to corruption and ensure systematic AML/CFT investigations across predicate crimes (ST). --- ### Financial sector supervision — findings and recommendations - Banking sector overview: - Banks account for over 90 percent of total assets. - 15 licensed banks; Benin accounts for about 9.6 percent of overall WAEMU banking sector assets. - Three WAEMU systemically important banks are from Benin. - Capital adequacy ratio end-2021: 13.6 percent (WAEMU: 12.6 percent). - Gross NPL ratio decreased from 16.2 percent at end-2020 to 12.5 percent at end-2021 (WAEMU average: 10.3 percent). - Small State-owned banks merged in June 2020; “La Poste” authorized in 2021 to provide banking services. - WAEMU FSAP 2022 governance concerns and recommendations: - Strengthen supervisory independence (modify CBU governance to insulate supervisory college from member States). - Strengthen enforcement and consistent use of sanctions; publish sanctions and apply monetary sanctions more frequently. - Reinforce CBU resources and capacity; continue IT investments and recruit specialized staff. - Avoid repeated stays of proceedings; use resolution and liquidation tools promptly for undercapitalized banks. --- ### Revenue mobilization and tax policy — findings - Tax pressure: around 11.2 percent of GDP (below WAEMU average of approximately 12.9 percent in 2021). - Tax expenditures: decreased from approximately 2.6 percent of GDP in 2019 to 1.7 percent in 2020. - Informality and taxpayer perceptions: - Unregistered production units: 56 percent report not knowing whether registration is mandatory. - Willingness to pay tax on activity: 76.1 percent not willing to pay. - Public perception: tax and customs administration agents perceived as most tarnished for prevalence of corruption: 72.2 percent. - Investments and incentives: - SEZs: legislation since 2017; only Glo-Djigbé (GDIZ) created thus far. - CDI reform 2020 with regimes A/B/C and special regimes; IS reduced rate for industrial legal persons at 25 percent (general rate 30 percent). - Weak enforcement: no observed fines or license withdrawals by CCI since CDI adoption; no CCI annual control report shared with IMF. - Tax policy governance: - UPF created September 2017; recommended to be attached to the MEF at ministerial level (MT) to separate tax policy from administration. - Recommendation to publish: (i) Investment Control Commission reports, (ii) full list of tax exemptions, (iii) list of SEZ-approved enterprises (ST). - Consider introducing an investment tax credit and simplifying incentive regime (MT). ### Tax and customs administration — key vulnerabilities and reforms - Proposed strategic priorities: - Improve setting of revenue targets via a three-step approach leading to adoption of the MTRS by end-September 2023 (as agreed under IMF program) (ST). - Strengthen human resource management: develop GPEEC tools, modernize pay and incentive policies, restructure performance evaluation (MT). - Advance computerization and reduce manual management: DGD centered on ASYCUDA World; DGI organized around SIGIBé; CIPE centers still largely manual, exposing over 80 percent of DGI taxpayers to manual processes. - Internet penetration: 67.53 percent; electricity access rate 36.5 percent (rural 10.4 percent; urban 64.9 percent). - Customs red flags and Nigeria trade corridor: - Identified red flags include suspicious low declared import values, false product descriptions, weak classification centralization, abuses of suspensive regimes, uncleared bonded transit, and uncontrolled exemptions. - Parallel informal economy with Nigeria fuels corruption and money laundering. - Proposed integrated strategy for standardizing trade with Nigeria includes mandatory computerized transit, departure/arrival scanners with AI image analysis, joint Beninese-Nigerian customs teams, mobile surveillance, and dissuasive sanctions for failure to use transit procedures. - Joint tax-customs approach: - Overcome silos between DGI and DGD; share active taxpayer files, VAT files, turnover of importing enterprises and shareholders; implement joint intelligence and control operations. - Operational example: restrict clearance of cleared goods for taxpayers with deactivated tax IDs or who import more than CFAF 50 million until tax situations are regularized. ### Tax/customs recommendations (selected) - Adopt MTRS to narrow the gap between fiscal potential and performance (ST). - Strengthen HRM in revenue agencies via GPEEC, pay modernization, and performance evaluation reform (MT). - Automate procedures as part of anti-corruption approach and measure digitalization impact on deviant behaviors; reduce manual management clusters; expand Internet and electricity access; guarantee IT integrity/security (ST/MT). - Improve customs vigilance over high-fraud operations; implement integrated transit strategy with Nigeria; define joint tax-customs intelligence focus areas (ST/MT). --- ### Public financial management, procurement, and EEPs — findings - Procurement and control: - DNCMP controls procurement above thresholds ranging from CFAF 80 million to 500 million depending on service type; PRMPs and CCMPs exist. - Public procurement portal published PPMs of 294 contracting authorities (September 2022). - Procurement contracts are not systematically published; CMP provides only for final award notices (Article 87). - Independent audits by ARMP not carried out since 2017 due to lack of financial resources; IGF internal audits conducted sporadically. - E-procurement work ongoing since 2017 but not yet rolled out. - Procurement recommendations: - Make independent audits of high-stakes contracts systematic and publish audit reports (ST). - Establish a public procurement database and finalize e-procurement rollout (MT). - Transfer contract approval authority to contracting bodies and phase out DNCMP/DNCF participation in contract receipt committees (ST/MT). - State-Owned Enterprises (EEPs): - DGPED covered 191 EEPs at end-2021 (170 public institutions; 21 State-owned enterprises) and 39 State minority shareholdings. - Only 20 percent of EEPs produced financial statements in 2022. - Governance issues: absence of term limits for EEP executives, weak fiscal risk disclosure, lack of transparency on liquidations/privatizations. - EEP recommendations: - Limit term renewals for DGs in EEPs (ST). - Consolidate EEP sector vision and strengthen financial information in budget annexes (MT). - Produce and publish financial statements for all EEPs and disseminate information on dissolutions/liquidations (ST/MT). --- ### Internal/external audit and Court of Auditors (CdC) - Internal audit framework: - Decree 2018-396 establishes ministerial internal audit mechanisms (CMAI, internal auditor, CMMR); CRAIE adopted August 2018. - Implementation uneven; MEF more advanced; many ministries have small IMS teams (IGMs typical 2–4 staff). - Court of Auditors: - Legal framework largely provides autonomy and access to information, but CdC not yet fully operational. - CdC has not published a public annual report since 2018; has not fully carried out fiscal discipline mission. - Recruitment of advisers and auditors pending to operationalize CdC. - SIGFP and PFM digitalization: - SIGFP implemented in early 2022, integrating budget formulation, execution in PBB mode, and accounting; connected to TSA and central bank clearing. - SIGFP replaced SIPIBE, SIGFIP (medium mode), and ASTER since January 2022. - E-services developed: e-payment of taxes to TSA, mobile money for nontax revenue, online pay slips/pension files, computerized receipts. - Data warehouse recommended to aggregate PFM and non-PFM data for dashboards and audit support. - PFM recommendations: - Continue internal audit and control reform defined by Decree 2018-396 (Measure 29) (ST/MT). - Continue operationalizing CdC, recruit advisers and auditors (Measure 30) (ST/MT). - Continue SIGFP integration prioritizing SYGMAP/SIGFIP interfaces on tax/customs revenue and debt management (Measure 31) (MT). - Strengthen SIGFP internal control and audit components and enhance MEF data warehouse (Measure 32) (ST). --- ### Digitalization, IT integrity, and prerequisites - Status and challenges: - DGD centered on ASYCUDA World; DGI organized around SIGIBé; many modules expanded but CIPE centers still largely manual (over 80 percent of DGI taxpayers in manual environment). - Internet penetration: 67.53 percent. - Electricity access rate 2020: 36.5 percent (rural 10.4 percent; urban 64.9 percent). - New digital tools introduce IT security/integrity risks; authorities must protect IT assets from accidental and deliberate threats. - Preconditions for effective e-services: - Expand connectivity and reduce Internet costs. - Improve electricity access and reliability. - Implement whistleblower protections and enforce penalties irrespective of status. - Measure digitalization impact using ex ante and ex post indicators. --- ### Selected statistics and exact figures (preserved) - Population: approximately 12 million inhabitants. - Coastline: 121 km. - Land borders length: more than 2,100 km. - Informal sector employment: 85 percent of the active population. - Historical growth: +6.4 percent annually average 2017–2019. - Per capita GDP 2021: US$1,428. - CPI score: 42 out of 100. - IIAG justice and rule of law score: 64.7 out of 100; rank 10th in Africa. - Cadaster online coverage: approx. 36 percent; coverage concentrated in 13 of 77 communes. - TCC operating budget (not including salaries): CFAF 52.124 million (equivalent to US$78,000). - TCC appeal threshold: CFAF 5 million (approx. US$7,500) not eligible for appeal after judgment. - Banking sector: - 15 licensed banks. - Benin accounts for about 9.6 percent of WAEMU banking sector assets. - Capital adequacy ratio end-2021: 13.6 percent (WAEMU: 12.6 percent). - Gross NPL ratio: 16.2 percent end-2020; 12.5 percent end-2021 (WAEMU: 10.3 percent). - Tax pressure: around 11.2 percent of GDP (2021). - Tax expenditures: 1.7 percent of GDP in 2020 (previously approx. 2.6 percent in 2019). - Internet penetration: 67.53 percent. - Electricity access rate (2020): 36.5 percent (rural 10.4 percent; urban 64.9 percent). - Procurement control thresholds: CFAF 80 million to 500 million depending on service type. - DGPED coverage end-2021: 191 EEPs (170 public institutions; 21 State-owned enterprises) and 39 State minority shareholdings. - EEP financial statement production in 2022: 20 percent of EEPs produced financial statements. --- *Source: PREFACE, EXECUTIVE SUMMARY, and selected chapters and annexes from the Governance Diagnostic mission report for the Republic of Benin (IMF mission, June–September 2022), content unit 1benea2023002.* ### PREFACE ................................................................................................................ ### PREFACE ### Mission overview and conduct - At the request of the Minister of State, Minister of Economy and Finance of Benin, a joint mission by IMF Fiscal Affairs Department (FAD), Legal Department (LEG), and Monetary and Capital Markets Department (MCM) conducted a governance diagnostic between June and September 2022. - Following a virtual session in June, the mission traveled to Cotonou from September 12 to 27 to finalize the work. - The diagnostic mission timeframe (as stated in the Executive Summary) ran from June 7 to September 27, 2022. ### Meetings and institutional interlocutors - In the absence of the Minister of State, the mission met with Mr. Hermann Takou, Chief of Staff to the Minister. - The mission met with officials from the Ministry of Economy and Finance and the Ministry of Justice and Legislation, and representatives of: - the National Assembly Finance Committee, - the Supreme Court, - the Court of Auditors, - the High Court of Justice, - the National Financial Information Processing Unit. - At the end of the visit, findings were presented during a feedback meeting attended by all parties met. - The mission also met with Mr. Pascal Koupaki, Minister of State, Secretary General of the Office of the President of the Republic, and with Mr. Séverin Maxime Quenum, Minister of Justice and Legislation. ### Acknowledgements and focal points - The mission expressed gratitude to the focal points appointed by the authorities: - Mr. Prince Sohou, Assistant to the Chief of Staff of the Minister of Economy and Finance, - Mr. Zisson Facinou, Inspector General of Finance, - Mr. Zoul-Kifouly Lawani, Director of Planning, Administration, and Finance of the Ministry of Justice and Legislation. - The mission also thanked Mr. Younes Zouhar, IMF Resident Representative in Cotonou, and his staff for their support. ### Executive summary — purpose and scope - The diagnostic, in line with the IMF’s 2018 Framework for Enhanced Engagement on Governance, focused on macro-critical governance weaknesses and corruption vulnerabilities in: - contract execution and protection of property rights; - the legal and institutional framework for anti-corruption efforts; - Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT); - financial sector supervision; - public finance governance (tax policy, tax and customs administration, public financial management). - The authorities requested IMF assistance to analyze governance weaknesses and vulnerabilities to corruption and to provide appropriate and realistic recommendations to support the Government Action Plan (Programme d’Action du Gouvernement – PAG) 2021–2026. ### Executive summary — key findings - Political context: - The current President, Patrice Talon, re-elected in 2021, has made improving governance the first axis of PAG 2021–2026. - Progress achieved since 2016 in public sector performance, fiscal transparency, and accountability is noted, but sustainability requires institutional consolidation beyond strong presidential impetus. - Positive developments highlighted: - Public finances: successful program budget implementation, fiscal transparency, commencement of internal control and audit reform, creation of a Court of Auditors. - Tax policy: strengthening governance of tax expenditures. - AML/CFT: update of the legal framework and adoption of an action plan following the GIABA report. - Rule of law: accessibility of legislation, creation of a Commercial Court, development of e-procedures. - Persistent weaknesses and gaps: - Legal and institutional framework weaknesses and lack of transparency in specific procedures (e.g., disciplinary powers and appointment of magistrates). - Occasional lack of capacity or tools within institutions. - Reliance on presidential leadership and units attached to the Office of the President may limit institutionalization of reforms. ### Executive summary — sector-specific conclusions - Rule of law, contract execution, and property rights: - Progress: digitalization of land-related services and procedures underway; creation of a Commercial Court in Cotonou; ongoing creation of new courts. - Planned measures: creation of a specialized land court and a Commercial Court of Appeal. - Challenge: strong public perception of interference in the judicial system and of corruption among some judges; need for greater transparency in promotions and sanctions. - Legal and institutional anti-corruption framework: - Since 2020: repeal of the 2011 anti-corruption law and elimination of the National Anti-Corruption Authority (ANLC). - Current framework: adjudication through the Court for the Repression of Economic and Terrorism Crimes (CRIET, created in 2018), supported by the Economic and Financial Brigade (BEF). - Gaps: HCPC (High Commission for the Prevention of Corruption) attached to the Office of the President is not operational; repeal of 2011 law leaves gaps relative to international best practice, including insufficient whistleblower protection, no conflicts of interest framework, and no asset declarations framework extending beyond the President and ministers. - Suggested improvement: publication of CRIET rulings and activity statistics to strengthen authority and legitimacy. - AML/CFT: - Progress: recent mutual evaluation and adoption of an action plan to strengthen effectiveness. - Remaining needs: strengthen all pillars of the AML/CFT mechanism, improve transparency of legal entities and access to beneficial ownership information, and strengthen supervision of the real estate sector to limit laundering of proceeds of corruption. - Financial sector supervision: - Review: a desk review was conducted based on the 2022 WAEMU FSAP. - Core recommendations (aligned with WAEMU FSAP): increase the regional supervisor’s independence, ensure more consistent use of sanctions, and enhance resources and capacities to address banking sector vulnerabilities. - Revenue mobilization: - Governance vulnerabilities persist despite ambitious reforms. - Tax policy: need to publish Investment Control Commission reports, the full list of tax exemptions, and the list of SEZ-approved enterprises; publication of beneficiaries of tax breaks and regimes subject to agreements and rulings. - Tax and customs administration: strong perception of corruption remains a barrier to revenue development; mitigation through digitalization, human resource management reform, and improved tax and customs risk management. - Specific vulnerability: normalization of trade in goods with Nigeria requires targeted risk management. - Recommendation: adopt a Medium-Term Revenue Strategy (MTRS) to better determine fiscal potential and to measure effectiveness of revenue agencies. - Public financial management (PFM): - Progress recognized, including in the Open Budget Survey 2021 (May 2022). - Needs: fully reap benefits of transition to program-based budgeting (PBB) for accountability; finalize internal audit and control reform; make audit of high-stakes contracts systematic and publish results; finalize e-procurement and public procurement IT tools; improve supervision of State-owned enterprises and IT systems. - Urgency: swift operationalization of the Court of Auditors (created by 2019 reform) is a prerequisite for institutional credibility. ### Recommendations summary and implementation context - The diagnostic’s recommendations focus on macro-critical aspects that can significantly affect macroeconomic stability. - Implementation will require mobilization of capacities within government, strong political will, and support from technical and financial partners. - Detailed recommendations are provided in Annex I of the report; Table 1 (Summary of Key Recommendations) synthesizes principal measures, responsible authorities, and timetables. ### Table 1 — Summary of Key Recommendations (as presented) - 1 Rule of law and business climate - 1 Improve transparency surrounding judicial promotions and sanctions — Authority: MJL, CSM — Timetable: ST - 2 Operationalize the Commercial Court of Appeal and the Specialized Land Court — Authority: MJL — Timetable: ST - 2 Anti-corruption efforts - 3 Revise the Penal Code by introducing or supplementing provisions concerning the criminalization and repression of acts of corruption, in accordance with the United Nations Convention against Corruption (UNCAC) — Authority: MJL — Timetable: ST - 4 Revise the legal framework on conflicts of interest and that which pertains to asset declarations, in accordance with the UNCAC — Authority: MJL — Timetable: ST - 5 Operationalize the HCPC while working in parallel to strengthen its legal framework in order to ensure its independence and consider transferring to it the jurisdiction of the judicial police for acts of corruption — Authority: MJL, SGPR — Timetable: ST/MT - 3 Efforts to combat money laundering and the financing of terrorism (AML/CFT) - 6 Take measures to mitigate significant money laundering risks in the real estate sector — Authority: CNCA, CENTIF, ANDF — Timetable: ST/MT - 4 Tax policy - 7 Publish (i) Investment Control Commission reports, (ii) the full list of tax exemptions, and (iii) a list of SEZ-approved enterprises — Authority: MEF, APIEX — Timetable: ST - 5 Tax and customs administration - 8 Determine, in an objective and structured manner, the country’s fiscal potential and focus, through the future MTRS, on narrowing the gap between this potential and actual performance as an overall indicator for measuring the effectiveness of revenue agencies — Authority: MEF, DGI, DGD — Timetable: ST - 9 Strengthen human resource management within revenue agencies by: (i) adapting human resources to the strategic objectives of administrations through the development of forward-looking management of jobs, workforces, and skills; (ii) modernizing policies and motivators for agents; and (iii) restructuring the individual and collective performance evaluation system — Authority: MEF, DGI, DGD, Ministry in charge of the Public Service — Timetable: MT - 10 Improve tax and customs risk management to address specific vulnerabilities in the Beninese economy by: (i) exercising greater vigilance over customs operations with a high likelihood of fraud and collusion; (ii) putting in place an integrated strategy for standardizing trade in goods with Nigeria; and (iii) defining areas of strategic focus for a joint approach to tax and customs risk between the DGI and the DGD — Authority: DGI and DGD — Timetable: ST/MT - 6 Public financial management - 11 Make the audit of high-stakes public contracts by independent auditors systematic, publish audit reports on the website, and arrange follow-up on recommendations arising from those reports — Authority: ARMP — Timetable: ST - 12 Improve public procurement tools by (i) establishing a computer database on public procurement to improve turnaround times for the production of public procurement statistics and (ii) wrapping up e-procurement work — Authority: ARMP, DNCMP — Timetable: MT - 13 Produce and publish the financial statements of State-owned enterprises and disseminate financial information on liquidations/privatizations — Authority: DNPED — Timetable: ST/MT *Source: PREFACE and EXECUTIVE SUMMARY, Governance Diagnostic mission report for the Republic of Benin (IMF mission, June–September 2022).* ### 1. Benin is a quite densely populated country, with approximately 12 million inhabitants, ### 1benea2023002 - 1. Benin is a quite densely populated country, with approximately 12 million inhabitants, ### Geographic and political overview - Population: approximately 12 million inhabitants. - Geography: - 121 km coastline. - Land borders with four countries, including Nigeria, stretching over more than 2,100 km. - Hosts the Autonomous Port of Cotonou (one of the largest ports in West Africa alongside Lagos and Abidjan). - Security and politics: - Country described as rather stable and secure despite a recent rise in attacks by armed extremist groups in the northern part of the country across the borders with Niger and Burkina Faso. - President Patrice Talon elected in 2016 and re-elected in 2021. - Legislative elections held on January 8, 2023. ### Economic activity and structure - Regional concentration: - Economic activity concentrated in the South around the Port of Cotonou. - Pandemic and recovery: - Suffered from the COVID-19 pandemic and closure of the border with Nigeria; recovering since 2021. - Labor and sectors: - Informal sector employs 85 percent of the active population, particularly in services and agriculture. - Benin is one of Africa’s top cotton producers, along with Mali. - Growth and income classification: - Steady growth before COVID-19: +6.4 percent annually on average during the period from 2017 to 2019. - Placed in the lower-middle-income country category in 2020 (based on 2019 figures). - Per capita GDP in 2021 was US$1,428 (source: World Bank). - Capital markets: - Since 2019, Benin has gained access to international capital markets. ### Governance, corruption perceptions, and institutional dynamics - Corruption perceptions and assessments: - Perceptions of corruption are widespread (2019 AFRISTAT study and international rankings, including Transparency International and the Mo Ibrahim Foundation). - The TI Corruption Perceptions Index (CPI) gives Benin a score of 42 out of 100 (100 representing the lowest level of perceived corruption). - CPI comparison: almost in line with the average score of 43 for the 180 countries analyzed by the CPI. - Regional comparison: average of 33 out of 100 for sub-Saharan Africa, where 44 out of 49 countries scored below 50. - A “White Paper” on corruption prepared in 2020–2021 by the staff of the Office of the President and by the National Anti-Corruption Authority has never been published and remains confidential. - IIAG and rule of law: - Ibrahim Index of African Governance (IIAG) places Benin among top ranked countries in Africa on justice and rule of law. - Benin ranks 10th in Africa on the justice and rule of law index. - Score: 64.7 out of 100. - Centralization of power: - Governance has been highly centralized since 2016, with expanded presidential staff involvement in major government entities and executive appointments. - Specific centralizing measures: - A unit in the Office of the President analyzing a large number of draft ministerial and prefectural orders has been in place since 2016 (Decree no. 2016-530 of August 24, 2016; amended by Decree no. 2022-248 of April 20, 2022). - A unit in charge of monitoring and overseeing municipal management created within the Office of the President in 2022 (Decree no. 2022-303 of May 25, 2022). - Policy orientation: - Government Action Program (Programme d’Action du Gouvernement – PAG) 2016–2021 implemented monitoring mechanism coordinated by the Inspectorate General of Finance (Inspection Générale des Finances – IGF). - PAG 2021–2026 places governance and rule of law at the center as the first pillar, divided into “Strengthening democracy and rule of law” and “Consolidating good governance.” - Risks and trade-offs: - Centralization can speed reforms short term but carries operational risks: possible bottlenecks, obstacles to development of internal capacities in ministries and institutions. - A healthy separation of powers and concerted executive, judicial, and legislative efforts are emphasized to reduce opportunities for corruption. ### Legal and prudential framework for economic development — scope and objectives - Section covers four areas for assessments and recommendations: - (i) the legal framework for fighting corruption; - (ii) the legal framework for promoting transparency, rule of law, and the legal principles governing the business climate; - (iii) the fight against money laundering and the financing of terrorism; - (iv) financial supervision. - Objective: improving governance in these four areas to attract private investment and promote efficiency in public spending. ### Rule of law and business climate — Contractual rights - Judicial capacity and resources: - Law provides for creation of 28 additional courts, 17 of which are operational. - Case backlogs reported (delays of up to 18 months). - Insufficient funding for the judicial system; some judges forced to work on personal laptops and personal email accounts. - Commercial Court of Cotonou (Tribunal de Commerce de Cotonou – TCC) referenced an annual operating budget (not including salaries) of CFAF 52.124 million (equivalent to US$78,000), described by the court as insufficient. - Perceptions of judicial independence and fairness: - Constitution (Article 125) provides for judicial independence, but concerns over political interference and corruption in the judiciary are widespread. - Sources note vested interests likely influence protection and enforcement of contractual rights; perception that outcomes may depend on identity of parties. - The report emphasizes the need to intensify commitment to strengthen independence and impartiality of the judiciary under the PAG 2021–2026. - Commercial judiciary: - TCC established and fully operational since December 2017; divided into three sections. - Provision for creation of the Commercial Court of Appeal was made in July 2016 law but is not yet in effect; appeals from TCC currently heard in the standard Court of Appeal which lacks specialized expertise. - TCC indicated disputes up to CFAF 5 million (approx. US$7,500) are not eligible for appeal after judgment is rendered; disputes above this amount may be appealed under Beninese law. - Recommendation: operationalize the Commercial Court of Appeal promptly and ensure its independence. ### Rule of law and business climate — Property rights - Modernization and digitalization: - National Land Agency (Agence Nationale du Domaine et du Foncier – ANDF) reports approx. 36 percent of Benin’s territory covered by an online cadaster (details such as land plot size, legal boundaries, identity of legal owner available). - Cadaster coverage concentrated in urban areas: covering only 13 of Benin’s 77 communes. - Benin’s electronic national cadaster: https://cadastre.bj (as reported). - Legal framework: - Property rights guaranteed in the constitution and codified in the Land Act of 2017 (Law no. 2017-15 of August 10, 2017). - Systemic weaknesses: - Coverage incomplete; land disputes account for a majority of court cases (consensus among international observers). - Generating new title deeds remains cumbersome; in some instances obtaining new deeds can take a year or more. - Notaries: - ANDF identified 47 authorized notaries in Benin (list for 2018–2019). - Role: agents of the State in land transactions; the profession has begun modernization with online processes (E-Notaire: https://enotaire.andf.bj/). - Planned measures: - Draft bill to create a court specializing in land matters pending review with the National Assembly. - A moratorium on real estate subject to litigation freezes activity pending resolution, contributing to commercial gridlock. ### Rule of law and business climate — Accountability and transparency - Access to information: - 2015 law provides for public access to all official records (Law 2015-07 of March 20, 2015). - Secretariat General website allows access to legislation and summaries of weekly Council of Ministers meetings (https://sgg.gouv.bj/documentheque/lois/). - Some courts (TCC and the Supreme Court) publish judgments online, but many courts’ decisions are not available online and the process for obtaining copies is not well-known. ### Findings and recommended priorities (as reflected in the text) - Strengthen judicial independence and impartiality to improve investor confidence and contract enforcement. - Operationalize the Commercial Court of Appeal and ensure its independence to secure appeal capacity for commercial disputes. - Accelerate digitalization and territory-wide coverage of the national cadaster (currently approx. 36 percent coverage; 13 of 77 communes covered). - Expedite issuance of new title deeds to reduce transaction delays (noted delays in some cases up to a year or more). - Complete creation of a court specializing in land matters to address backlog and moratorium-induced gridlock. - Scale up funding and operational support for the judiciary (e.g., address reported annual operating budget shortfalls such as CFAF 52.124 million for the TCC). - Balance the short-term benefits of centralized decision-making with the need to build sustainable institutional capacity and preserve separation of powers. *Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1benea2023002.pdf* ### 21. In terms of sanctions imposed on magistrates, the system in place seems likely to ### 21. In terms of sanctions imposed on magistrates, the system in place seems likely to reconcile the accountability of judges and the guarantee of independence ### Sanctions, transparency, and magistrates - The MJL informed the mission there is “zero tolerance” for judicial misconduct (whether related to corruption, or otherwise). - Judges suspected of wrongdoing are investigated by the Inspectorate General of Legal Services (Inspection Générale des Services Juridiques – IGSJ), which refers reports to the Superior Council of Magistrates (Conseil Supérieur de la Magistrature – CSM). - The CSM’s role is enshrined in Article 128 of the Constitution: “The Superior Council of Magistrates shall rule as Disciplinary Council of the Magistrates.” - The CSM has the sole authority to recommend sanctions against judges. Penalties range from demotions to outright dismissals. The most serious sanctions give rise to the adoption of an individual measure in the Council of Ministers. - Shortfall: the MJL stated that facts underlying a judge’s reprimand are not disclosed to the public once the final decision is rendered—this lack of transparency may fuel suspicions of personal or political vendettas. - Recommended minimum public disclosure for any demotion, suspension, or dismissal: - (i) the nature of the allegation(s) made; - (ii) a summary of the investigation; and - (iii) details of the evidence. - The MJL confirmed CSM is considering how to balance transparency and privacy; one option is publishing and regularly updating a collection of anonymized decisions on the Internet. - Example cited: a Council of Ministers decision referring to the demotion of a judge (Minutes of the Council of Ministers meeting of Sept 22, 2021) discloses no reasons or motivations. ### Company registry, commercial transparency, and land administration - The business environment lacks an easily searchable company register. - The Chamber of Commerce and Industry of Benin (Chambre de Commerce et d’Industrie du Bénin – CCIB) reported a database of key company information exists for banks’ due diligence but is not publicly available. - Benin currently does not have a register of companies accessible to commercial actors for key company information. - Suggested contents of a future public register of companies should include, at minimum: - (i) the legal structure of the company (corporation, limited liability company, etc.); - (ii) identities of company directors and other directorships held by them; - (iii) shareholding information; - (iv) insolvency information; and - (v) details of mortgages and other security interests registered against companies. - Benefits of a coherent register: avoid conflicts of interest and promote greater transparency. ### Recommendations (as listed in source) - Improve transparency as concerns the promotion and punishment of magistrates (ST) - Operationalize the Commercial Court of Appeal and the Specialized Land Court (ST) - Make progress with regard to transparency by (i) establishing a company register, (ii) continuing to digitize all title deeds, and (iii) expanding the scope of the national cadaster to the entire territory (MT) *Source: Excerpt from PDF chapter 1benea2023002 — sections 21–40 on judicial sanctions, company register, and legal and institutional anti-corruption framework.* ### 41. The effective operationalization of the HCPC should go hand in hand with legal ### 41. The effective operationalization of the HCPC should go hand in hand with legal ### HCPC independence, operationalization, and powers - The legal framework for the HCPC should guarantee the absence of any political interference. - Article 7 of the 2020-09 law asserts the independence of the High Commissioner, but further safeguards are essential: - An appropriate procedure for the High Commissioner’s appointment and the end of his term. - Guaranteed independence from the Office of the President. - Consideration: giving the anti-corruption agency judicial police powers could be considered. - Rationale: anti-corruption agencies are likely to hold senior officials and institutions accountable when they are independent of the government and empowered to freely tackle corruption allegations. - Note: Its jurisdiction was expanded in 2021 to crimes against women. ### High Court of Justice (HCJ) and accountability of political figures - In 20 years, the HCJ has yet to effectively hold political figures accountable. - Constitutional design and practice: - The HCJ is a special court with jurisdiction to try the President and members of Government for high treason and other crimes committed while in office. - Opening an investigation requires a majority vote of two-thirds of the National Assembly; investigation conducted by magistrates from the indictment division of the Court of Appeal of Porto Novo. - After investigation, Parliament must hold a new vote with the same two-thirds majority to allow the HCJ to begin the trial. - This “double lock” has never been broken in 20 years. - The public and civil society play no role in initiating prosecution or contributing to proceedings. - Reform considerations: - Remedy the imbalance between “ordinary” Beninese—brought before the CRIET—and top political figures—tried by the HCJ. - Possible measures: allow referral by the general public and end the parliamentary “double lock.” - Authorities are aware of the need for reform; the principle is enshrined in the PAG 2021–2026, though exact terms remain to be determined. ### Recommendations on anti-corruption legal framework and institutions - Revise the Penal Code by introducing or supplementing the provisions concerning the criminalization and repression of acts of corruption, in accordance with the UNCAC (ST) - Revise, pursuant to the UNCAC, the legal framework on conflicts of interest and that which pertains to asset declarations, particularly for political figures and high-ranking officials, by: - (i) revising the legal framework to specify the assets (including when the declarant is the beneficial owner), liabilities, and interests subject to declaration, - (ii) requiring close family members of any declarant to also be subject to the obligation to declare assets, - (iii) making the filed declarations publicly available, and - (iv) making the failure to declare assets, late submission, or erroneous declarations a criminal offense (ST) - Revise the legal framework applicable to the protection of whistleblowers in alignment with international good practices (ST) - Operationalize the HCPC while working in parallel to strengthen its legal framework to ensure its independence and consider transferring to it the jurisdiction of the judicial police for acts of corruption (ST/MT) - Adopt appropriate measures to enhance the effectiveness of the HCJ and enable for criminal liability of the President and ministers (MT) - Increase transparency by publishing on a dedicated government website: - (i) the final judgments rendered by the CRIET and related statistics, - (ii) the statistics on arrests and activities carried out by the BEF, and - (iii) any other anti-corruption information produced by government agencies that may be relevant to the public (ST) ### AML/CFT: overview and assessment - GIABA Mutual Evaluation Report (MER) findings: - Noted improvements: promulgation of the new AML/CFT law, adoption of the National Risk Assessment (NRA) in 2018, establishment of CRIET in 2018. - Identified serious deficiencies across all pillars of effectiveness: lack of risk-based supervision of designated non-financial professions, insufficient use of financial intelligence, low prosecutions for AML/CFT, ineffective confiscation mechanisms, limited international cooperation. - Authorities adopted an action plan in response to the GIABA MER. - Risk of inaction: potential public listing by the Financial Action Task Force for strategic AML/CFT deficiencies, with potential pressures on correspondent banking relationships and cost of borrowing. - The 2018 NRA identifies corruption as one of the most significant proceeds-generating crimes in Benin; other key predicate crimes: smuggling, tax fraud, cybercrime, and human and drug trafficking. - Recommendation: conduct a more granular, thematic risk assessment of sectoral vulnerabilities and trends in flows of corrupt proceeds; inform policy and resource allocation; exploit synergies between AML/CFT and anti-corruption frameworks (e.g., CENTIF coordination with anti-corruption agencies, complementarity between asset disclosure and PEP requirements). ### Preventive measures, supervision, and reporting - MER observations: - Wide inconsistencies in understanding of risk, application of preventive measures, and reporting of suspicious transactions in the financial sector. - Banks face challenges collecting beneficial ownership information and identifying domestic PEPs. - Nonbank financial institutions face greater difficulties implementing AML/CFT controls. - Low coverage and frequency in supervisory engagement. - Actions suggested: - CENTIF should enhance cooperation with regional supervisors and explore joint action. - CENTIF should issue regular guidance on preventive obligations to help reporting entities apply AML/CFT controls and improve suspicious transaction reporting. - CENTIF is preparing guidance on PEPs for financial institutions. ### Designated nonfinancial businesses and professions (EPNFDs) - Serious weaknesses in compliance by EPNFDs with AML/CFT obligations. - Authorities report some improvement due to training and awareness. - Decree 2022-350 of June 22, 2022: - Designates the National Committee for the Coordination of AML-CFT Activities (CNCA) as sectoral supervisor for all EPNFDs, excluding gambling and casinos and real estate. - CNCA is being established and expected to commence risk-based supervision in Q1 2023. ### Real estate sector vulnerabilities and reforms - High vulnerabilities due to informality and previous absence of oversight. - Reforms underway to reduce informality: - Digitalizing the cadaster. - Requiring notaries to handle all real estate transactions. - ANDF’s new “e-notaire” database allows notaries to verify land ownership information online during real estate transactions; database accessible to CENTIF and other competent authorities upon request to the ANDF. - CENTIF coordinating a risk assessment of the real estate sector. - Authorities aim to designate the ANDF as the AML/CFT supervisor in real estate. - Remaining priorities: - Upskill ANDF staff to commence AML/CFT risk-based supervision in 2023, with short-term priorities informed by the sectoral risk assessment. - ANDF could expand its database to include beneficial ownership information for legal entities holding property in Benin. - Short-term: ensure ANDF databases are fully accessible to competent authorities. - Medium-term: move towards greater publication of real estate and land ownership data (legal and beneficial owners). - Role of notaries: - Notaries are obliged entities under the AML/CFT law, but implementation has been virtually nonexistent according to the MER. - Authorities report a mild increase in suspicious transaction reporting by notaries due to awareness and training. - Recommendation: require notaries to collect beneficial ownership information during land transactions involving legal entities and transmit it to the ANDF for inclusion in its database. ### Beneficial ownership information - Law enforcement has access to basic company information, but access to beneficial ownership information is challenging. - CENTIF actions: - Conducting a risk assessment on misuse of legal entities. - Convening a workshop with APIEX, the TCC, the Chamber of Commerce (CCIB), the DGI, and the National Agency for the Identification of Persons to deliberate on reviewing the legal framework to collect beneficial ownership information and make it accessible to law enforcement. - CENTIF preliminarily indicated APIEX would be responsible for collecting beneficial ownership information. - Recommended measures: - Establish an adequate legal basis for systematic collection and management of beneficial ownership information with mechanisms for verifying and updating information and sanctions for failure to file or false reporting. - Make such information accessible to competent authorities and publish it in the medium-long term. - Interim sources: - Leverage beneficial ownership data published in public procurement (e.g., pandemic-related government contracts) and ANDF-held data pending a comprehensive database. ### Enforcement capacities and cooperation mechanisms - CENTIF enhancements: - Slight increase in staff in 2021, with further resource augmentation expected in 2022–2023, including IT systems for improved access to other competent authorities’ databases. - Authorities report high levels of cooperation between CENTIF and law enforcement agencies like the BEF. - MER notes low levels of information exchange between CENTIF and the ANLC. - Recommendation: set up appropriate channels for cooperation between CENTIF and the ANLC’s successor, the Office of the HCPC (e.g., memorandums of understanding on information exchange, access to databases, regular meetings). - AML/CFT investigations and prosecutions: - Authorities report an increase in investigations and prosecutions since the GIABA onsite visit, with enforcement primarily focusing on self-laundering. - Statistics show an increase in money laundering prosecutions since operationalization of CRIET, but AML/CFT prosecutions remain low compared to total predicate offenses. - Authorities estimate corruption is the most common predicate offense in money laundering investigations, but systematic investigation extent cannot be determined without statistics. - Obstacles: lack of an agency to manage seized and confiscated assets; limited cross-border cooperation from regional counterparts. - Preliminary recommendations: improve cooperation between the BEF and other law enforcement agencies to ensure systematic AML/CFT investigations across predicate crimes and establish mechanisms for seized asset management. ### AML/CFT specific recommendations (summary) - Conduct a thematic risk assessment of sectoral vulnerabilities to corruption and trends in flows of corrupt proceeds both within the country (to sectors like real estate, extractive industries, etc.) and outside of Benin. Ensure findings inform policy and institutional priorities (ST) - Strengthen risk-based supervision by: - (i) increasing cooperation with regional AML/CFT supervisors, - (ii) seeking better compliance from reporting entities through the regular publication of national guidelines, - (iii) developing risk-based tools for EPNFD supervision (ST) - Mitigate money laundering risks in real estate by: - (i) commencing risk-based supervision in real estate informed by the sector risk assessment, - (ii) improving preventive measures by notaries and their cooperation with public authorities, - (iii) expanding the ANDF database to include beneficial owners accessible to competent authorities, with medium- and long-term objective of public access to legal and beneficial owner information (ST/MT) - Improve beneficial ownership transparency by: - Establishing legal basis for collection by the APIEX, ensuring full accessibility for competent authorities with publication as a medium/long-term objective, and mechanisms for verification, updating, and discrepancy reporting; leverage public procurement publication of beneficial owners (ST/MT) - Improve cooperation between AML/CFT law enforcement agencies by: - (i) encouraging the BEF to systematically investigate money laundering where predicate offenses are involved, - (ii) ensuring greater cooperation between CENTIF and the HCPC to proactively share financial intelligence related to corruption, - (iii) formulating the future regime on asset declarations and obligations applicable to politically exposed persons (ST) ### Financial sector supervision — overview and banking sector statistics - Benin’s financial sector supervision is mainly conducted by regional supervisors at the WAEMU level. - The section draws on findings of the 2022 Financial Sector Assessment Program (FSAP) for the WAEMU and does not make recommendations specific to Benin. - Overview of Benin’s banking sector: - Banks account for over 90 percent of total assets. - The sector comprises 15 licensed banks, accounting for about 9.6 percent of overall WAEMU banking sector assets; four of the largest banks are pan-African banks. - Three of WAEMU’s systemically important banks are from Benin. - Capital adequacy ratio of Benin’s banking sector was 13.6 percent at end-2021, slightly higher than WAEMU’s 12.6 percent. - Preliminary gross non-performing loans (NPL) ratio for Benin’s banking sector decreased from 16.2 percent at end-2020 to 12.5 percent at end-2021, still higher than WAEMU’s average at 10.3 percent. - Two small State-owned banks, which reported losses and capital shortfalls in recent years, merged in June 2020. - Recent authorization (2021) for “La Poste” to provide new banking services (e.g., “Post Mobile Banking”) aims to leverage the postal network to enhance access to financial services. - Prior to the COVID-19 pandemic, Benin’s banking sector was shallow and vulnerable, limiting its ability to support credit to the private sector and economic growth. *Source: 1benea2023002 - 41. The effective operationalization of the HCPC should go hand in hand with legal* ### 57. Recent IMF reports ### 57. Recent IMF reports ### Banking sector resilience and vulnerabilities - Regional authorities took supervisory measures to rebuild banks’ capital buffers and move towards implementation of Basel II/III and IFRS 9 standards. - Significant efforts over the past two years have fostered resilience, but vulnerabilities remain and further structural reforms are necessary. - Persisting vulnerabilities: - Many measures were taken to decrease banks’ NPLs, but this ratio is still among the highest in the WAEMU. - Most banks have recently conducted recapitalization plans to comply with new prudential capital requirements, but a few small banks (representing 5 percent of banking sector assets) failed to meet the minimum capital requirements at end-December 2021. - The banking sector continues to suffer from relatively high credit concentration among a small number of clients. ### WAEMU FSAP 2022: main findings on governance and supervision - The FSAP found an ambitious regulatory reform consolidated the prudential base during the past five years and established conditions for further strengthening of banking supervision. - Institutional reforms clarified authorities’ control mandate, strengthened legal autonomy, and expanded powers over sanctions and corrective measures. - A new banking law established an overarching framework for banking supervision, made supervision more proactive and risk-based with gradual implementation of the Basel II/III framework. - Four circulars on corporate governance, risk management, internal control, and compliance were upgraded in 2017 and imposed stricter regulatory requirements on banks. ### Identified governance vulnerabilities and FSAP recommendations - Institutional recommendations: - Enhance supervisory independence. - Strengthen enforcement. - Reinforce supervisory resources and capacity. - Specific recommendations regarding the CBU: - Strengthen the CBU’s independence from member States by modifying the annex to the Convention governing the CBU to institute independence of the CBU’s supervisory college from member States. - Explicitly enunciate the principle of independence prohibiting CBU members from receiving instructions from external entities (including member States) in the annex to the CBU’s governing convention. - Require State representatives in the CBU supervisory college to serve in a non-voting capacity or amend the college’s composition to increase representation of members nominated by the WAMU Council of Ministers (CM) based on professional qualifications. - Remove the CM’s appellate jurisdiction over CBU decisions; make the WAEMU Court of Justice the sole appellate jurisdiction for decisions rendered by the CBU’s supervisory college. - Sanctions and enforcement: - The FSAP underlined the need for more consistent use of sanctions to address noncompliance with prudential rules in a timely manner. - Findings: sanctions seem not strict enough toward entities that violate prudential requirements over extended periods, particularly minimum capital requirements; the CBU tends to rely repeatedly on unpublished written censures and on stays of proceedings. - Recommendations: publish sanctions to enhance effectiveness; use monetary sanctions more frequently; avoid repeated stays of proceedings in the same case; apply resolution and liquidation tools promptly to address undercapitalized and nonviable banks. - Resources and capacity: - Continue strengthening resources and capacity of the CBU and its secretariat. - Despite recent recruitment, resources remain insufficient. - Secretariat General teams are experienced and qualified but need further capacity to respond to a changing banking sector landscape, including rising complexity and stronger presence of cross-border groups. - Continued IT investments are needed to optimize and automate the off-site supervision toolkit. ### Progressing in revenue mobilization — tax policy overview - Substantial reforms in recent years improved tax policy governance in Benin. - Introduction in 2022 of a semi-dual personal income tax system (following FAD recommendations) should lead to revenue gains, greater transparency, and lower management costs. - For small individual entrepreneurs, a simplified tax regime based on turnover, the single business tax (taxe professionnelle synthétique – TPS), replaced a negotiation-based regime in 2015. - Reform of the Investment Code (CDI) in 2020 tends to foster simplicity and transparency in tax expenditure procedures. - Two courses of action to strengthen tax policy governance: - Tax expenditure design, management, and evaluation. - Institutional anchoring for tax policy development. ### Tax expenditure design, management, and assessment - Benin is among the best tax expenditure managers in the subregion: - A detailed report on tax expenditure is published annually as an annex to the budget and contains detailed information on each tax expenditure, covering all taxes and specifying the reference rate, the tax base, the tax liability threshold, and the taxpayers targeted. - A TaxPolicy Unit (Unité de politique fiscale – UPF) has undertaken work to better understand the impact of tax expenditure. - With ECOWAS support (through PATF), the 2021 report includes an assessment of the impact on market prices of VAT exemptions for rice, gas for domestic use, and the first tranches of the water and electricity consumption tariff for individuals. - Transparency improvements: - No new agreement outside the code granting tax and nontax benefits to investors in Benin has been signed since 2016. - Main conventions outside the code approved in the past (notably with telephone operators) are no longer in force. - Recording and tracking of VAT and customs duty exemptions improved since 2017 through a pro forma revenue system (recettes d’ordre), which: - Provides direct and transparent recognition of tax expenditures from these exemptions. - Enables better monitoring of individual allocations and helps curb abuse such as exempt purchases in excess of contract exemptions or fraudulent resale. - Remaining priorities and structural challenges: - Streamlining tax expenditure remains a priority to reduce complexity and distortions. - Total tax expenditures decreased from approximately 2.6 percent of GDP in 2019 to 1.7 percent in 2020. - Multitude of corporate tax (IS) rates leads to significant administrative costs. - SEZs and exemption regimes under the CDI can cause issues with profit transfers between exempt and nonexempt activities. - IS exemption for agricultural activities complicates tax compliance when agricultural product processing activities are exempt. - Investment incentives under the CDI pose a structural challenge. ### Box 1 — Investment Incentive Regimes (summary) - SEZs and CDI regimes: - Since 2017, Benin legislation allows creation of SEZs; only one created thus far is Glo-Djigbé (the “Glo-Djigbé Industrial Zone” or “GDIZ”). - Investors approved under the SEZ regime have access to exceptional tax benefits, including exemption from customs duties, VAT, and other indirect duties and taxes on most inputs; exemption from all taxes for exports; and a total IS exemption. - The 2020 CDI sets out three “basic” regimes (A, B, and C) granting identical tax benefits in the investment period, including near-total exemption from import duties and taxes on materials, tooling, utility vehicles intended for production, and spare parts. - Operating period benefits: exemption from IS, profit-based tax installments, flat-rate minimum tax, business license tax, and exemption from employer salary contribution (versement patronal sur salaire – VPS) at levels varying by regime and invested amount. - Investment period length is subject to negotiation; operating-phase benefits range from 5 to 17 years depending on regime and zone. - Two “special” regimes apply to investments in strategic economic activities or sectors (agroindustry, agriculture, digital technology, health, and technical and vocational training). - Additional incentives for start-ups: - New enterprises: reduction in IS and business profit tax amounting to 25 percent for the first two fiscal years and 50 percent for the third fiscal year. - Innovative ICT start-ups with turnover not exceeding CFAF 100 million are exempt from IS and VPS for the first two years of activity, followed by a 50-percent reduction in those taxes for the third year. - IS rates: - Legal persons with industrial activity (except extractive industries) are subject to IS at a reduced rate of 25 percent, compared to the general rate of 30 percent. ### Monitoring, enforcement, and transparency of investment incentives - The 2020 CDI reform improved monitoring of licensed enterprises: - The decree enforcing the CDI establishes annual control in the investment phase by the Investment Control Commission (Commission de contrôle des investissements – CCI) (Article 11), as well as fines and withdrawal of licensing for noncompliance (Article 15). - CDI licensing granted in two ways: (i) licensing for the investment phase (exemptions from indirect duties on imports of capital and construction goods); (ii) operating-phase license granted at end of investment phase depending on actual investment amount. - Conditionality of benefits on actual investment amount should limit abusive receipt of benefits for overstated projects. - Weak enforcement observed: - Sanctions for noncompliance with licensing conditions seem rarely, if ever, imposed; no fines or license withdrawals observed since CDI adoption in 2020. - No CCI annual control report was shared with the IMF. - CCI secretariat duties are carried out by APIEX (Article 12), which reviews licenses, complicating independence of control and running counter to best practice of separate control and benefit-granting mechanisms. - Transparency recommendations: - Systematically publishing individual licenses under the CDI is good practice and should be extended. - The government’s Secretariat General publishes individual licensing decrees specifying beneficiary identity, regime granted, and list of equipment and construction goods exempt from indirect duties. - Best practices should also include (i) an updated, comprehensive list of licenses (likely on the APIEX website), and (ii) publication of future CCI reports. - High transparency requirements should be enforced for activities in new SEZs; all licenses obtained by SEZ companies must be published and include names of beneficial owners. - Consideration for medium term: - Implement an investment tax credit as a central component of a simplified investment incentive regime, interoperable with systems in the subregion (e.g., Rwanda), eliminating ex-ante selection and approval and aligning with international efforts to reduce tax competition via a global minimum tax. ### Institutional aspects of tax policy - Creation and role of UPF: - The UPF within the DGI created in September 2017 is a major step forward, focusing tax policy debate on independent data analyses and facts, including production of tax expenditure reports in cooperation with DGDDI and MFRE. - Recommended institutional change: - Attach the UPF directly to the Ministry of Economy and Finance (MEF) to: - Establish strict distinction between tax/customs administration (DGI, DGD) and tax policy. - Bring the UPF closer to the Office of the Minister of Economy and Finance and extend analysis scope to all ministerial bodies involved in tax policy. - Resolve management disconnects where DGD representatives must go through DGI chain of command rather than approach UPF directly. - Better balance investment promotion with safeguarding tax revenue; the creation of the Interministerial Investment Promotion Committee in February 2021 reflects a predominance of investment promotion objectives. - Reduce the risk of UPF prioritizing DGI interests over overall tax-system coherence. - Ensure that transfer of UPF safeguards human resources, procedures, continuity, and career development of existing staff. ### Recommendations (as presented) - Publish: - (i) Investment Control Commission reports, - (ii) the full list of tax exemptions, and - (iii) a list of SEZ-approved enterprises (ST). - Introduce an investment tax credit as a central component of a simplified investment incentive regime (MT). - Attach the UPF at the ministerial level to the MEF (MT). *Source: 1benea2023002 - 57. Recent IMF reports (PDF chapter/section).* ### 77. This chapter identifies tax and customs system vulnerabilities that can result in poor ### This chapter identifies tax and customs system vulnerabilities that can result in poor governance or corruption and proposes solutions to limit their adverse impact. ### Background and recent reform developments - Major reforms implemented to improve governance in tax and customs operations include: - Creation of the National Committee to Combat Smuggling and Human Trafficking. - Codification of user rights and obligations (General Tax Code, Customs Code, Taxpayers’ Charter, Practical Guide to Duties and Taxes, Customs Procedures Manual, etc.) and strengthening of administrative remedy mechanisms (Valuation Committee, Reconciliation Committee, Tax Committee, etc.). - Codification of administrative powers (Tax Procedure Code, Code of Ethics and Professional Conduct, ISO certification, etc.) with graduated sanctions and procedures guaranteeing the right to a fair hearing for the DGI and the DGD. - Introduction of results-based management methods and publication of strategic plans and performance reports to promote transparency and accountability. - Strengthening of internal audit, inspectorates, and introduction of external audit (IGF). - Streamlining of procedures: simplifying tax forms, segmenting taxpayers (DGE, CIME, and CIPE) and customs users (authorized economic operators, etc.), introducing at-source withholding, adapting procedures to small taxpayers, and making transactions paperless. - Ongoing adoption of the accrual accounting system. - Modernization of risk management (creation of a unit dedicated to risk management and quality, progressive design of a central risk register, and a strategy for identifying, assessing, and mitigating risks). - Use of customs and tax administration diagnostic assessment tools (TADAT). - Collaboration between the DGD and two companies, Bénin Control and Webb Fontaine, for improved revenue security (document-based inspections at destination, stricter transit management, strengthened risk management and investigation functions, improved operator information via the website). - Decree and legal references noted: - Decree 2021-68 of February 17, 2021, on the powers, composition, organization, and functioning of the Interministerial Investment Promotion Committee. ### Key findings on revenue performance and compliance - Tax pressure and structural factors: - Taxation rate around 11.2 percent of GDP, below the WAEMU average of approximately 12.9 percent (2021 data). - Contributing structural factors include: - Narrow tax base and significant tax expenditures: 1.7 percent of GDP in 2020. - High dependence of revenue mobilization on international trade and sensitivity to external market disturbances and relations with Nigeria. - Regional tax competition eroding the tax base (particularly between various ports in the subregion). - Informality and taxpayer willingness (AFRISTAT study): - Unregistered production units in Benin: 56 percent (WAEMU: 54.1 percent) report not knowing whether they must register. - 21.1 percent (WAEMU: 25.3 percent) think registration is not mandatory. - 17.1 percent (WAEMU: 9.2 percent) believe registration steps are too complicated. - Willingness to pay tax on activity: 76.1 percent (WAEMU: 67.1 percent) stated they were not willing to pay; 19.5 percent (WAEMU: 26.2 percent) responded favorably to the principle; 4.4 percent (WAEMU: 6.7 percent) already pay tax on their activity. - Public perception of corruption: - Tax and customs administration agents perceived as most tarnished for prevalence of corruption: 72.2 percent (compared to police 65.4 percent; judges/magistrates/judicial staff 69.7 percent; deputies and members of Parliament 69.1 percent). ### Strategic priorities proposed - Four priorities to improve governance in tax and customs operations: - (i) Improve the setting of tax and customs revenue targets. - (ii) Make progress in human resource management. - (iii) Advance the use of computer technologies to fight corruption. - (iv) Step up efforts to combat tax and customs fraud. ### Setting overall revenue targets — findings and recommended approach - Current practice: - Tax projections are largely empirical: based on previous years’ figures weighted by GDP growth rate, inflation, and impact of new tax measures. - Rudimentary methods likely explain inconsistency between claimed good performance relative to budgetary targets and persistently low tax pressure. - Recommended three-step structured approach to set revenue targets: - Step 1: Define a theoretical framework for assessing public expenditure financing needs. - Existing planning instruments: National Development Plan (PND) 2018–2025; Government Action Program (PAG) 2016–2021; Growth Agenda for Sustainable Development (PC2D) 2018–2021. - Financial evaluation: studies estimate the cost of expenditures required to achieve the SDGs by 2030 at around 21.3 percent of GDP. - Public expenditure financing strategy pillars: (1) streamlining current expenditure; (2) improving public investment effectiveness; (3) implementing a new legal PPP framework; (4) substantially increasing tax and customs revenue. - Step 2: Determine the country’s untaxed tax potential (tax gap) in aggregate and by tax; identify sectors and taxpayers at risk and methods to address those risks. - Step 3: Establish the level and pace of reduction of the untaxed potential and include annual reduction targets in the MTRS. - Program timing: - The medium-term revenue strategy (MTRS) slated to be adopted by end-September 2023 under the terms of the program concluded with the IMF can serve as the preferred vehicle for this approach. ### Human resource management (HRM) — gaps and reforms - Legislative and programmatic advances: - Customs: Law 2020-17 of July 3, 2020; Order 4480 of August 19, 2015; MADAO project—describe recruitment conditions, career management, training, and gradual implementation of GPEEC tools. - DGI: Provisions of Law 2015-18 of September 1, 2017, on general status of the public service (articles 108 and 109) govern recruitment and employment to limit fraud and foster transparency. - Main HRM issues and recommended actions: - Increase HRM decision-making autonomy for revenue agencies in recruitment, training, remuneration, evaluation, and career management. - Develop GPEEC tools to align workforce quantitatively and qualitatively with strategic objectives and to manage demographic trajectories and mission changes driven by computerization and specialized unit needs. - Modernize pay policies and motivators: - Include all pay components, particularly incentive plans, on pay slips and in the budget. - Award bonuses and incentives according to objective, transparent criteria known in advance (stemming chiefly from job descriptions). - Gradually phase out financing of incentive plans through direct collection of fines and penalties to avoid distortions in control and collection activities. - Overhaul the performance evaluation system to include measurable indicators across productivity, responsiveness, efficiency, service quality, technical skills, and scope of responsibilities. - Aim for revenue agencies to become employers of choice through individualized pay structures, career opportunities more focused on expertise, improved working conditions, more room for initiative and innovation, and alignment between objectives and professional values. - Implementation constraint: - Reconciling renewed HRM needs with general public service rules is a major problem and requires further specific work beyond this report’s scope. ### Computerization and anti-corruption measures - Status of digital systems: - DGD application architecture centered around ASYCUDA World; DGI organized around SIGIBé; both expanded to make procedures paperless and increase data sharing. - Annex IV provides an overview of this architecture. - Expected anti-corruption benefits of computerization: - Reduction of opportunities for corruption in repetitive operations. - Increased transparency reducing discretion and enabling detection of anomalies and outliers. - Preventive detection via network surveillance and individual monitoring. - Public awareness to empower resistance to arbitrary treatment. - Creation of complaint channels leading to actions and punishments. - Dissuasion by disseminating information on reported cases. - Promotion of ethical attitudes through public engagement and online discussion. - Typology of anti-corruption integrity technologies (examples provided in source): - e-Government Services and Digital Public Services (examples: Open system (South Korea 1999), JAGA App (Indonesia 2016), Sema! Piga Ripoti (Kenya 2013)). - Crowdsourcing platforms (example: ipaidabribe.com). - Whistleblowing platforms (examples: GlobaLeaks (Italy), BKMS (Germany)). - Transparency platforms (examples: WhatDoTheyKnow, Alaveteli). - News reporting platforms (examples: K-Monitor (Hungary 2007), Nikorupciji.org (Ukraine)). - Blockchain technologies (examples: TruBudget (KfW, Germany), Blockchain-based land registry system (Georgia)). - Preconditions for effectiveness: - Computerization is not fully effective against corruption unless conditions are met, including adequate protection for whistleblowers and a firmly enforced penalty system applied irrespective of political, economic, or social status. - Implement a system to measure the impact of digitalization on deviant behaviors using ex ante and ex post indicators during rollout of applications and modules. *Source: Mission (chapter content).* ### 100. Reducing the remaining clusters of manual management as much as possible is also ### Reducing the remaining clusters of manual management as much as possible is also important. ### Digitalization, access, and prerequisites for e-services - Small business taxpayer centers (Centres des Impôts des Petites Entreprises – CIPE) are still operating without the use of a computer system, leaving a significant proportion of DGI taxpayers (over 80 percent) in a manual environment. - Internet penetration in Benin is considerable (67.53 percent), but a not insignificant proportion of the population remains without Internet access and is cut off from e-services. - National electricity access rate for 2020 was 36.5 percent, including 10.4 percent for rural areas and 64.9 percent for urban areas. - Policy emphasis: increase connectivity, reduce Internet access costs, and address lack of reliable access to electricity to enable e-services uptake. ### IT system integrity and security - New digital instruments expose vulnerabilities in computer system integrity and security. - Public authorities must equip themselves to protect IT assets (computers, servers, network components, databases, etc.) against accidental (flood, fire, earthquake) and deliberate (virus, hacking) threats. ### Improvements to tax and customs risk management — context and priorities - Good governance in revenue must account for Benin-specific circumstances: the weight of international trade and logistics (“storage economy”) and the length and porosity of borders—particularly with Nigeria—requiring close cooperation between tax and customs administrations. - Three priority progress points: - (i) greater vigilance over operations with a high likelihood of fraud and collusion; - (ii) implementation of a specific strategy to deal with the flow of undeclared goods between Benin and Nigeria; - (iii) a comprehensive and coordinated approach to tax and customs risk based notably on an appropriate intelligence strategy. ### Customs: red flags and control capacity - Need to strengthen capacity to spot red flags in operations with a high likelihood of fraud and collusion; customs staff require appropriate tools, training, and internal controls to prevent collusion. - Examples of red flags identified by the mission: - Declared import value: Less-than-container-load (LCL) cargo from Asia with an unusually low value; Declared value for products carrying the bulk of revenue not cross-checked with external data. - Product descriptions: Highly suspected false descriptions to benefit from preferential tariffs and taxes; Classification of merchandise in tariff nomenclature insufficiently centralized in the specialized unit. - Suspensive duty and tax regimes: Temporary admission according to overly flexible rules or without clearance for past transactions; Uncleared bonded transit operations; Non-optimal bonded warehouse control. - Exemption from duties and taxes: No suitable program for monitoring compliance with exemption conditions for imported products, particularly regarding the use of these products following customs clearance. ### Parallel economy with Nigeria and integrated strategy - The flow of goods between Benin and Nigeria not declared to Customs or incorrectly declared is a major ongoing problem; large volumes of goods transit through the Cotonou port before crossing the border informally or fraudulently. - This parallel economy likely fuels corruption and money laundering. - An integrated strategy to return to orthodox practices must consider social and economic impacts, foreseeable resistance to change, and competition between West African ports. Key elements of the proposed integrated strategy for standardizing trade with Nigeria: - Use of the international transit customs procedure: - Establish a mandatory computerized and digitalized procedure for customs transit between the Cotonou port and a customs office (or a reduced number of authorized offices) in Nigeria with a single customs declaration, an absence of bulk breaking at the border, and a direct computer link between the Beninese customs office and the Nigerian office or offices for automated clearance. - Strengthen controls using departure and arrival scanners and a comparative analysis of systematic images using artificial intelligence and, for necessary physical inspections, joint Beninese and Nigerian customs teams. - Establish a duty collection fast-track in case of missing goods and a procedure for investigating those responsible. - Prevention and punishment of undeclared flows: - Develop and enforce dissuasive customs sanctions for the non-use of the transit procedure for border crossings. - Put in place mobile customs surveillance operations and strategy for the border area, ensuring optimal geographic and time coverage. - Activate seamless coordination of the anti-smuggling strategy and operational command between the two administrations (like the National Committee to Combat Smuggling mentioned earlier, created in Benin). - Other actions: - Eliminate so-called “adjusted” import values and fully implement the WTO Agreement on Customs Valuation. - Implement a framework with Nigeria to monitor progress and cease unilateral border closures. - Engage in discussions with ECOWAS to align the practices of countries likely to be indirect stakeholders (Togo, Ghana, and Niger, in particular). ### Joint tax-and-customs approach and intelligence - Silos between administrations must be overcome to implement a comprehensive, coordinated approach to tax and customs risk. - DGI and DGD should jointly determine objective indicators to define the risk level for each operator whose activity falls under both administrations and assess the degree of control or facilitation to apply. - Intelligence shortcomings in collecting, enriching, and using tax intelligence are a major impediment; these challenges are also largely shared by the customs administration. - Strategic thrusts of a joint approach include: - Assessment of individual operator risk by identifying objective indicators to determine overall (tax and customs) risk level. - Fraud prevention: DGI to provide access to (1) the active taxpayer file, (2) the file of taxpayers subject to VAT; and (3) the annual turnover of importing enterprises and their shareholders to facilitate customs risk assessment and identification of shell companies. - Identification of cases of tax and customs fraud via sharing of risk management methodology and reconciliation/joint analysis of declarations to detect significant discrepancies. - Joint tax-customs control to increase effectiveness over (1) “bulk” imports, (2) enterprises whose financial statements show smuggled supply risks, and (3) the value and age of investments giving rise to the tax credit. - Operational example: taxpayers whose tax identification numbers have been deactivated or who are importing more than CFAF 50 million in goods (the VAT trigger threshold) will only be given access to their cleared goods after they settle their tax situation. ### Recommendations (as presented) - Determine, in an objective and structured manner, the country’s fiscal potential and focus, through the future MTRS, on narrowing the gap between this potential and actual performance as an overall indicator for measuring the effectiveness of revenue agencies (ST). - Strengthen human resource management within revenue agencies by: (i) adapting human resources to the strategic objectives of administrations through GPEEC development, (ii) modernizing policies and motivators for agents, and (iii) restructuring the individual and collective performance evaluation system (MT). - Include the automation of current procedures in a comprehensive anti-corruption approach by (i) developing a system to measure the impact of digitalization on deviant behaviors; (ii) reducing the remaining clusters of manual management as much as possible; (iii) implementing “e-services” prerequisites for users through the expansion of Internet use and access to electricity; and (iv) guaranteeing the integrity and security of IT systems (ST/MT). - Improve tax and customs risk management to address specific vulnerabilities in the Beninese economy by: (i) exercising greater vigilance over customs operations with a high likelihood of fraud and collusion; (ii) putting in place an integrated strategy for standardizing trade in goods with Nigeria; and (iii) defining areas of strategic focus for a joint approach to tax and customs risk between the DGI and the DGD, based in particular on the appropriate use of tax and customs intelligence (ST/MT). *Source: Mission (excerpts from the provided IMF chapter).* ### 119. With the implementation of the PBB and the decentralization of the expenditure ### 1benea2023002 - 119. With the implementation of the PBB and the decentralization of the expenditure ### Organization of public procurement and institutional roles - The MEF National Directorate for Public Procurement Control (Direction Nationale du Contrôle des Marchés Publics – DNCMP) performs control and supervision of public procurement above thresholds ranging from CFAF 80 million to 500 million, depending on the type of service. - The DNCMP oversees a network of public procurement control units (cellules de contrôles des marchés publics – CCMP) placed with contracting authorities. - Specialized procurement bodies have been created in each ministry and institution: person responsible for public procurement (personne responsable des marchés publics – PRMP) and their permanent secretariat. - PRMPs are operational, appointed from a pool of executives with specific training and/or proven experience in public procurement, and are appointed by the president of the institution or the minister. PRMPs and their collaborators can be subject to sanctions by the ARMP; these sanctions appear on the red list published on the ARMP website. ### Transparency, information disclosure, and digital access - The DNCMP public procurement portal provides contracting information, including procurement plans (plans de passation des marchés – PPM); in September 2022, the PPMs of 294 contracting authorities were published on the public procurement portal. - The ARMP website allows anyone to file a complaint online; appeal decisions (subject to legal deadlines) and sanctions imposed are published on the site. The ARMP website contains a red list of excluded individuals and enterprises; the most recent list is dated July 2022. - Current gaps identified: - Absence of an exhaustive database shared with the ARMP limits understanding of the public procurement process from award to contract execution. - Procurement contracts are not published under the CMP, which provides that only final award notices are to be advertised (Article 87 of the CMP). - At the time of the mission, the most recent statistics on the public procurement portal dated to 2018 and covered only DNMCP government contracts; statistics for 2019 to 2021 have since been completed and published. - A draft contract format for publication was developed to replace the final award notice. ### Contract validation, decentralization, and accountability - Despite decentralization of expenditure authorization since early 2022, for contracts under DNCMP jurisdiction the public procurement validation process remains centralized with MEF officials; MEF still ultimately approves government contracts. - Ministers and institution presidents retain the power as main authorizing officers in their ministry or institution, and responsibility for the service performed lies with the authorizing officer according to the new program budget accountability framework. - Government contract receipt committees include three MEF directorates: National Financial Control Directorate (Direction nationale du contrôle financier – DNCF), National Directorate for Public Procurement Control (DNCMP), and Directorate General for Material and Logistics (Direction générale du matériel et de la logistique – DGML). Only the DGML may sit on these committees as its main task is State assets management. - An internal control mechanism involving the authorizing officer is likely to strengthen accountability. ### Audit function and recent practice - Independent audits of government contracts by the ARMP have not been carried out since 2017 due to lack of financial resources. - Since 2018, only internal audits have been conducted sporadically by the Inspectorate General of Finance (Inspection Générale des Finances – IGF); only a few internal audits could be conducted and these are reported in IGF audit reports, which include a public procurement section and are transmitted to the ARMP for follow-up as needed. - The independent audit function assigned to the ARMP needs strengthening for greater effectiveness and timeliness of anti-corruption efforts, and must be coupled with better monitoring of implementation of audit recommendations. Box 8 — Excerpts from the ARMP audit report on Université d’Abomey-Calavi (UAC) procurement procedures (Fiscal Years 2016 and 2017) - Fiscal year 2016: - Of seven contracts awarded following an open call for tenders, six followed regular procedures or regular procedures subject to noncompliance and one followed a procedure for which the auditor is unable to express an opinion. - Auditor’s conclusion: Favorable opinion. "We believe that the majority of procedures were conducted in compliance with the regulations in force." - Fiscal year 2017: - Of nine contracts audited, four procedures were declared unsuccessful; the consultant expressed opinions on five contracts. - Of the five contracts and amendments reviewed, five followed regular procedures or regular procedures subject to noncompliance. - Auditor’s conclusion: Favorable opinion. "We believe that the majority of procedures were conducted in compliance with the regulations in force." - The audit was conducted in accordance with International Standards on Auditing (ISA), ISAE 3000, Law no. 2009-2 of August 7, 2009, and related implementing decrees and orders. The auditor states independence and that obtained audit evidence provides a sufficient and appropriate basis for opinion. ### Monitoring, statistics, and e-procurement - Weaknesses: - Monitoring of government contracts, advertisement of procurement contracts, and production of related statistics remain weak. - Procurement contracts are not published due to CMP provisions limiting advertisement to final award notices; this hampers transparency. - Timely availability of public procurement statistics has been a challenge; portal statistics were outdated to 2018 at mission time but 2019–2021 statistics have since been completed and published. - E-procurement: - Work on e-procurement has been ongoing since 2017 but e-procurement has yet to be rolled out. - E-procurement bundles software solutions for online purchases and supplies and aims to increase transparency, broaden participation, contribute to anti-corruption efforts, and improve visibility and service feedback. ### Recommendations (Public Procurement) - Systematize the independent audit of high-stakes government contracts based on DNMCP control thresholds (CFAF 80 million to 500 million, depending on the type of goods or services), publish audit reports on the site, and arrange follow-up on the recommendations stemming from these reports (ST). - Improve public procurement tools by: - establishing a computer database on public procurement to improve turnaround times for the production of public procurement statistics; and - wrapping up the e-procurement work (MT). - Transfer contract approval authority to contracting bodies and phase out participation by the DNCMP and the DNCF in contract receipt committees (ST/ MT). ### Supervision of State-Owned Enterprises (EEPs): scope and coverage - Legal framework updated and unified in 2020 aims to improve EEP performance; it includes public institutions (offices and agencies) and permits opting for private-law accounting and financial rules; finance directors are subject to accreditation by the MEF. - The MEF Directorate General of the State Portfolio and Denationalization (Direction générale du portefeuille de l’Etat et de la dénationalisation – DGPED) supervises EEPs and produces an annual report. - According to DGPED 2021 activity report: the DGPED covered 191 EEPs at end-2021, of which 170 were public institutions and 21 were State-owned enterprises, as well as 39 State minority shareholdings. - Of the 170 public institutions, 100 generate their own resources and 70 exclusively receive subsidies to operate. ### Fiscal risk reporting and performance arrangements - Fiscal risks tied to the EEP sector are gradually being incorporated into main budgetary documents; following the 2021 FTE, financial transfers between public administrations and State-owned enterprises are presented in the DPBEP. The DPBEP also presents all financial resources of public institutions. - Assessment of global risks related to the EEP sector must be consolidated and improved in fiscal risk analysis documents attached to the annual initial budget bill. - The State has a draft participation strategy pending validation, with eight performance contracts signed with some EEPs at end-2019. The linkage between DGPED performance mechanism and the PBB performance framework (performance contract) has yet to be fully thought out with the DGB. ### Governance, transparency, and accountability issues in EEPs - Key governance challenges: - Limitation on the term of office of EEP executives is absent; this can be an obstacle to good governance. - Comprehensiveness and quality of information in State budget annexes need enhancement. - Evaluation of the need to maintain public institutions that do not have own resources is required. - EEP accountability oversight needs strengthening. - Improvement of EEP internal control and accounting systems is necessary. - Publication for citizens and partners of information on EEP wind-ups, denationalizations, transformations, and transfers is lacking. - Data and disclosure gaps: - In 2022, only 20 percent of EEPs produced financial statements out of the 200 entities within the scope of the DGPED (all structures combined in 2022). - Budget documents produced with the budget bill do not reflect EEP sector performance and offer little visibility on human and financial resources. - EEP wind-up operations lack transparency and are not advertised to citizens and civil society; selection of a liquidator currently rests with the DGPED DG and publicity on ultimate beneficiaries of liquidation/dissolution operations is absent. ### Recommendations (EEP sector) - Limit the number of renewals of terms of office served by DGs in EEPs (ST). - Continue to develop a consolidated vision of the EEP sector and the associated budgetary risks by strengthening the financial information in annexes to the draft budget (MT). - Produce and publish the financial statements of all EEPs and widely disseminate information on the dissolutions and liquidations of State-owned enterprises and public institutions, particularly to civil society (ST/MT). ### Internal and external audit and control — internal audit framework - Internal and external audit and control functions are central to accountability and are increasingly important in the transition to the PBB. - Legal framework for internal audit: - Decree 2018-396 establishes an internal audit mechanism within each ministry consisting of an internal audit ministerial committee (comité ministériel d’audit interne – CMAI) and an internal auditor responsible for the ministry’s OCOA (IGF or Ministerial Inspectorate General – IGM). - The Ministerial Risk Control Committee (Comité ministériel de maitrise des risques – CMMR) leads ministerial internal control, oversees the establishment of a ministry risk map, and produces an internal control report. - An interministerial linkage is ensured by the IGF, which coordinates implementation, provides methodological tools, and trains IGMs. - The State internal audit reference framework (cadre de référence de l’audit interne de l’Etat – CRAIE) was adopted in August 2018. - Implementation challenges: - Progress is uneven across ministries: the mechanism is more successful within the MEF (IGF staff 15) than in other ministries (IGMs typically 2 to 4 staff). - Ministerial internal control is still emerging; few ministries have made significant progress in risk mapping. - Capacity development is needed to phase in reforms and gradually align with international standards; deviations exist in practice (e.g., lack of clear separation of internal audit and inspection functions). *Source: Excerpts from the IMF country report chapter on public financial management reforms, procurement, EEP supervision, and audit in Benin.* ### 139. The Court of Auditors (Cour des comptes – CdC) is the external auditor of the public ### The Court of Auditors (Cour des comptes – CdC) and PFM Digitalization ### Court of Auditors (CdC): status and recommendations - Findings: - The CdC is the external auditor of the public sector and the supreme audit institution for public finance. - A recently implemented legal framework provides for a largely adequate level of autonomy and sufficient access to information. - The CdC prepares and approves audit plans, which contain audits initiated by the CdC and audit work imposed by law (particularly the budget law execution report and the general declaration of compliance). - The CdC is not yet fully operational: - Has yet to formally adopt and disseminate, in a transparent manner, a compendium of the professional external audit standards it applies. - Since 2018, neither the new institution nor its predecessor has published a public annual report, reducing visibility to the general public and Parliament. - Is not carrying out its fiscal discipline mission yet, affecting manager accountability and sanctions for wrongdoing. - External audit function remains at a very preliminary stage of practical implementation, relative to international standards. - CdC staff size is still small; recruitment of advisers and auditors is supposed to be completed very soon and can give the institution new momentum. - Recommendations: - Continue to implement the internal audit and control reform defined by OCOA Decree 2018-396 (ST/MT) - Continue to operationalize the Court of Auditors, particularly by recruiting advisers and auditors (ST/MT) ### PFM digitalization: progress, functionality, and governance benefits - Purpose and benefits: - PFM digitalization is an important driver of actors’ financial transparency and accountability, fostering good governance. - Goals: provide faster, timelier, and more accurate information for decision-making; increase efficiency of management tools and processes. - By automating controls, ensuring traceability of actions, and eliminating interpersonal contacts, digitalization limits opportunities for corruption and misappropriation and improves services to citizens. - Progress achieved in Benin: - Implementation of the integrated public financial management system (système intégré de gestion des finances publiques – SIGFP) in early 2022, incorporating budget formulation, budget execution in PBB mode (expenditure), and accounting. - Interconnection of the SIGFP to the central bank clearing system linked to the Treasury Single Account (TSA). - Development of e-procedures in areas of PFM vulnerability (e-payment of taxes, e-receipt for the Treasury, online reporting of corruption, etc.). - SIGFP functionality and integration: - By integrating the three main PFM functions—formulation, budget execution, and accounting—the SIGFP ensures reliability of financial information, traceability of actors and transactions, and information security. - Since January 2022, SIGFP replaced three prior applications: SIPIBE, SIGFIP (medium mode), and ASTER. - SIGFP connected to the TSA through applications interfaced with the Central Bank’s payment system ensures payment traceability, including a single point of validation of expense payments at the Government Treasurer General level. - Payments are carried out according to the cash flow plan managed by a dedicated Committee. - E-procedures and transparency enhancements: - MEF-developed e-services include electronic payment for tax revenue arriving directly in the TSA, payment of nontax revenue via mobile money (fees for examinations and competitions, penalties for offenses, etc.), computerized issuance of receipts, and portals allowing agents or pensioners to access pay slips or pension files online. - These e-services help reduce opportunities for corruption and embezzlement. - Interfacing SIGFP with other systems: - Interfacing improves reliability by running controls based on unified repositories; use of APIs increases reliability. - Examples: interface with debt computer system will make debt transaction accounting more reliable within SIGFP; interface with State agent payment management system will improve reliability of budget execution of staff costs. - PFM decision-making could be supported by reliable data from multiple computer systems. - Integrating control and audit into the computer system: - Onboard controls ensure reliability of entered/incoming data, exhaustive processing, and integrity of repositories; configurable control plans are integrated. - Integrating audit functions provides tools for traceability of data, processes, and actors, and facilitates data extraction and multicriteria queries. - Example: an external auditor like the CdC could quickly view all dates related to payment of a batch of expenditure authorizations, with average lead time calculations from commitment to payment, enabling investigation of unusual timing. - Data warehouse role: - Aggregates data from multiple computer systems (PFM data, environmental, social, and geographic data, population data, etc.). - Offers options for storing important data and powerful multicriteria query tools. - Preferred tool for dashboards and monitoring management and performance indicators. - Facilitates communication with citizens by cross-referencing technical information with other data. - Recommendations: - Continue to integrate the SIGFP by prioritizing interfaces with integrated systems for procurement, tax and customs revenue management, debt management, and payroll management for State employees - Strengthen the internal control and audit component of the SIGFP and enhance information in an MEF data warehouse ### Annex I: linkage to the detailed recommendations table (selected PFM entries) - Relevant measures and objectives (as listed in the detailed table of recommendations): - Measure 29: Continue to implement the internal audit and control reform defined by OCOA Decree 2018-396 — IGF, IGM, CMAI, CMMR — Objective: Establish a true culture of internal audit and control within government and make it operational — Timetable: ST/MT - Measure 30: Continue to operationalize the Court of Auditors, particularly by recruiting advisers and auditors — CdC/MEF — Objective: Enhance transparency and accountability in public finances — Timetable: ST/MT - Measure 31: Continue SIGFP integration by prioritizing the SYGMAP/SIGFIP interfaces on tax and customs revenue and debt management — DSI, DG IT units within MEF — Objective: Ensure financial data integrity and consistency — Timetable: MT - Measure 32: Strengthen the internal control and audit component of the SIGFP and enhance information in an MEF data warehouse — DSI, DG IT units and business line actors within MEF — Objective: Strengthen onboard controls and accessibility to financial data, particularly with a view to their use by the risk management mechanism (internal control) and internal (ministerial IG/IGF) or external audit — Timetable: ST *Source: IMF country report content unit 1benea2023002 - 139–146, annex entries 29–32 and associated text.* ### Annex II. Definitions of Governance and Corruption According to ### Annex II. Definitions of Governance and Corruption According to the 2017 IMF Policy ### Definitions and scope - Governance: "the institutions, mechanisms, and practices through which governmental power is exercised in a country, including for the management of public resources and the regulation of the economy." Includes country-level processes and institution-level structural arrangements. Described as an inherently neutral term. - Good governance: normative concept recognizing that the quality of governance affects effectiveness and efficiency in achieving desired outcomes. The Guidance Note encompasses governance and "good governance" but a single review cannot examine the Fund’s work across all these broader areas. - Corruption: "the abuse of public office for private gain." This definition: - Is consistent with the United Nations Convention against Corruption (UNCAC). - Focuses on abuse by public stakeholders; fraudulent acts exclusively by private citizens are not covered, except where private actors facilitate or initiate corruption (for example, offering a bribe). - Includes acts that do not result in direct financial gain (e.g., abuse due to political interference). - Can apply to perversion of the law-making process where legislators' decisions are motivated exclusively by private interests ("state capture"). ### Relationship between governance, good governance, and corruption - Governance and good governance are broader than corruption; a country can have poor governance without significant corruption (e.g., ineffective, inefficient, or inequitable policies and institutions). - Presence of corruption generally indicates shortcomings in good governance. - Systemic corruption is identified as having particularly pernicious effects on economic performance; addressing it requires broader governance improvements (transparency, accountability, balanced regulation, effective institutions). - Promoting good governance is presented as the most durable way of addressing systemic corruption. ### References in the policy context - The 2017 IMF policy on the Fund’s role in governance and corruption issues laid analytical foundations for current IMF policies; relevant policy documents and guidance are cited within the annex text. - UNCAC Article 19 on abuse of functions is explicitly referenced in the definition context. ### Characterization of systemic corruption (reference point) - Cited definition from the May 2016 IMF Staff Discussion Note (SDN / 16/05): systemic corruption occurs when "corruption is no longer a deviation from the norm, but is manifested in a pattern of behavior" and is "omnipresent and organized, affecting a variety of levels of government and practiced by bureaucrats and politicians in nearly every ministry." ### Annex III. National Integrity System (NIS) Assessment — key findings and recommendations - Assessment methodology: TI-developed NIS methodology with 13 "pillars"; each pillar assessed on: (i) capacity to function; (ii) internal governance rules (integrity, transparency, accountability); (iii) role in contributing to national governance integrity. Score range 0–100 with categories: 0–20 very weak; 21–40 weak; 41–60 moderate; 61–80 strong; 81–100 very strong. - Assessment period: conducted from February to July 2016; provides overview of practices over 2011–2016. - Main findings: - Overall integrity level was between low and medium: 7 out of the 13 pillars had scores between 21 and 40; the other 6 pillars had scores between 41 and 60. - Corruption could be considered "systemic, downplayed, and tolerated," necessitating a radical break with past practices. - Anti-corruption efforts were plagued by a lack of political will; increased efforts between 2011 and 2016 had no measurable impact on curbing corrupt practices. - Justice was the most fragile pillar with a score of 24/100; judiciary faced constraints in human, material, and financial capacities preventing timely delivery of justice nationwide. - Key recommendations from the 2016 NIS: - Provide the human and financial resources needed for the proper operation of Benin’s judicial system; - Make anti-corruption efforts a priority for political parties, Parliament and the Executive Branch; - Apply or supplement the legal framework on whistleblower protection, conflicts of interest, asset declarations, and right of access to information and administrative documents; - Strengthen criminal chains focused on tracking down corruption offenses by revising the Penal Code and the Code of Criminal Procedure and by creating two offices for the collection and management of assets and proceeds of corruption; - Support reform of the National Anti-Corruption Authority (ANLC) including: organic law making the ANLC a constitutional institution; creation of a supervisory board; recruitment through a call for applications for the top position within the ANLC. - Implementation note: Beninese authorities reviewed implementation under the Inspectorate General of Finance; on some points actions deviated significantly from recommendations, notably the elimination of the ANLC. ### Annex IV. Selected provisions of the Penal Code on corruption and related offenses (penalties preserved exactly) - Corruption (Article 335): - Imprisonment: "five (05) years to ten (10) years" - Fine: "equal to three times the value of the agreed promises or things received or requested, without the said fine being less than two hundred thousand (200,000) CFA francs" - Interference with official duties (Article 337): - Imprisonment: "five (05) years to ten (10) years" - Fine: "one million (1,000,000) to five million (5,000,000)" - Applies when using physical force, threats, intimidation or other means to interfere with justice or law enforcement in relation to enumerated offenses (including corruption of foreign public officials, misappropriation, illicit use of public property, influence peddling, false declaration, corruption in private sector, corruption in public procurement, corruption in recruitment of civil servants, concealment). - Influence peddling (Article 358): - Imprisonment: "one (01) year at least and five (05) years at most" - Fine: "the fine provided for in Article 344 of this code" - Harsher penalty if the guilty party is among persons referred to in Article 369: imprisonment "two (02) years at least and ten (10) years at most." - Aiding or yielding to solicitation (Article 359): punished by same penalties as for the corrupt person, whether or not coercion or corruption took effect. - Corruption in public procurement (Article 341): - Imprisonment: "five (05) years to ten (10) years" - Fine: "equal to three times the value of the agreed promises or things received or requested, without the said fine being less than two hundred thousand (200,000) CFA francs, or only one of these two penalties" - Penalizes officials voluntarily failing to comply with legislative or regulatory provisions guaranteeing freedom of access and equality of candidates in public contracts; tenderer punished as an accomplice if aware of violation. - Corruption related to international public officials (Article 342): - Imprisonment: "five (05) years to ten (10) years" - Fine: "equal to three times the value of the agreed promises or things received or requested, without the said fine being less than two million (2,000,000) CFA francs" - Corruption within the private sector (Article 344): - Imprisonment: "two (02) years to five (05) years" - Fine: "equal to twice the value of the proceeds of corruption, without the said fine being less than five hundred thousand (500,000) CFA francs" - Covers promise/offering/giving or solicitation/acceptance of undue advantage by persons directing or working for a private sector entity to act or refrain from acting in breach of duties. - Abuse of power and whistleblower protection (Article 375): - Imprisonment: "five (05) years to ten (10) years" - Fine: "at least two million (2,000,000) CFA francs, without this fine exceeding five million (5,000,000) CFA francs" - Covers intentional abuse of functions to obtain undue advantage; revealing identity or address of whistleblowers or a witness; staff of corruption prevention bodies revealing information known in the course of duties (except where law authorizes whistleblowing). ### Annex V. Main DGI and DGD computer applications (selected listings) - DGD applications: - ASYCUDA World: interconnection of "80 percent" of customs units and implementation of goods verification program - E-SAD interface: digitalizes submission of declarations and supporting documents - E-receipt: online collection and direct payment transfer to Treasury accounts - SIGMAT: interconnection for customs transit management in the region (Niger, for the time being) - MMTE: automated management of stock accounting for stores, container terminals, warehouses, customs depot - Implementation of the port single window and the foreign trade single window - "Mobile control" application for en route control of customs documents - Dispute management application for complete management of dispute proceedings - DGI applications: - SIGIBé: automated and integrated management of all tax functions and operations - E-services: online filing and payment by taxpayers - RFU and LOGIL: registration and payment of local taxes - Mobile Tax: online filing and payment of the motor vehicle tax - GESEXO Web: management and monitoring of exemption applications - E-registration: facilitates pre-settlement, online payment of duties, assignment of citations to acts - CFISC: data exchange between the DGI, the DGD, the DGB, and the DGTCP - SYGMEF: certification of invoices issued and centralization of data within the DGI ### Annex VI. Tax intelligence management within the DGI — shortcomings and detectable noncompliance - Identified shortcomings in tax intelligence management: - Lack of a formalized intelligence management strategy; - Insufficient digitized information collected in real time; - Existence of information not stored in the system; - Insufficient digitized external data accessible in real time; - Insufficiently exploited collection potential; - Filing and payment data for small segments not centralized; - Insufficient large-scale cross-checking of available information; - Data analysis and production of intelligence on a large scale incomplete and not automated; - Specific deficiencies related to data automation; - Insufficient contact details for registered taxpayers. - Cases of tax noncompliance that could be detected with better intelligence: - VAT collected at source by authorized bodies not remitted; - Unregistered economic agents conducting commercial operations; - Economic agents conducting commercial operations unknown to the DGI; - Suppliers subject to VAT not remitting the VAT collected; - Taxpayers not subject to but charging VAT; - Enterprises considered inactive conducting business operations; - Chronic or occasional defaulting taxpayers; - Undervaluation of items declared by taxpayers (turnover, purchases, imports, etc.). *Source: 1benea2023002 - Annex II. Definitions of Governance and Corruption According to* --- _Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1benea2023002.pdf_