Benin Electricity Access Scale-up (BEAS) Project

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Benin is a lower-middle income country with significant economic growth but persistent poverty levels. Bordered by Togo, Nigeria, Burkina Faso, and Niger, Benin has a 121-kilometer-long coastline on the Gulf of Guinea and a population of close to 11.5 million (2018) spread over 114,760 km2 of land. Despite being the 4th fastest growing economy in Sub-Saharan Africa (SSA) with growth averaging 6.7% in 2017-2019, poverty remains high at 46% in 2018. The country’s high population growth rate (3.5% per year over the previous decade) is an added challenge in increasing GDP and reducing the poverty rate, but despite that, Benin reached low middle-income status in early 2020 for the first time in its history. However, the economic shock of the COVID-19 pandemic is likely to result in a regression to low-income status. The Government of Benin (GoB) has oriented its development strategy toward the acceleration of structural transformation for sustained and inclusive high growth. Benin’s structural transformation process is constrained by an unproductive agriculture sector, a small manufacturing sector and an informal services sector. Aiming to reverse these trends and achieve the Sustainable Development Goals (SDGs) by 2030, government policies have put renewed emphasis on enabling private sector investment with initial reforms focused on improving the business climate, strengthening governance and fiscal management, and enhancing social service delivery. More recently, GoB has turned its attention to supporting investments in the development of productivity-enhancing infrastructure. Benin will hold a national election on April 11th. The incumbent party is currently expected to be re-elected and there is low risk of violence disrupting the vote.Prior to the COVID-19 outbreak, economic growth in Benin was buoyant. In 2019, real GDP growth reached 6.4% despite Nigeria’s unilateral border closure that weighed down on trade and growth. This acceleration was mainly driven by booming cotton production and strong construction and port activity following a series of reforms that improved port management and facilitated trade. As the two economies are closely linked, Nigeria’s decision to unilaterally close the shared border in August 2019 reduced the annual real GDP growth by 0.3% in Benin, but this was cushioned by the better- than-expected performance in the first half of the year. In 2019, the fiscal deficit declined due to continued effort on domestic revenue mobilization and debt-to-GDP stabilized for the first time in five years.Despite steady, robust economic growth over the past two decades, poverty in Benin remains widespread owing to limited growth in per capita terms (only 1.6% on average during 2006–16). While the poverty levels remain high, the overall level is declining. World Bank estimates suggest that US$1.9 a day (2011 PPP) poverty declined from 50% in 2015 to 46% in 2018. Non-monetary poverty indicators have improved over this period as well. Inequality is estimated to be moderate based on consumption aggregates, with a Gini index of 48% in 2015. Female-headed households experience lower levels of poverty (28% compared to 38% for male-headed ones) but comprise only 23% of all households and generally women suffer from a lack of economic opportunity and are under-represented in high-level decision-making positions. The education and health sectors account for a significant share of public expenditure (23% and 7%, respectively, on average). Greater public spending efficiency and a more equitable geographical distribution of resources would pave the way for lower poverty rates and more inclusive growth.Benin has a Gender Inequality Index (GII) of value 0.613, ranking it 148 out of 162 countries in the 2018 index and below the Sub-Saharan average of 0.573. The GII reflects gender-based inequalities in three dimensions – reproductive health, empowerment, and economic activity and indeed in Benin only 7.2 percent of parliamentary seats are held by women, and 18.2 percent of adult women have reached at least a secondary level of education compared to 33.6 percent of their male counterparts. In addition, economic opportunities are less accessible to women with their participation in the labour market at 69.2 percent as compared to 73.3 for men. Benin has very low greenhouse gas emissions but is highly vulnerable to the impacts of climate change. Benin accounts for 0.05 percent of global emissions but is ranked 168th out of 188 as less resilient countries in terms of its vulnerability and readiness to climate change impact in Notre Dame Global Adaptation Initiative (ND-GAIN)’s 2018 country index. The climate and disaster risk screening indicate that Benin has a high risk of river and urban floods, water scarcity, extreme heat and wildfires. An increase in the frequency and severity of extreme weather events would inflict a heavy toll in human lives and welfare, with a high risk of damage to the country’s scarce and valuable capital. In addition, mean annual temperature is projected to rise by over 2°C by mid-century. The poorest, marginalized and most vulnerable households and communities will be hit the hardest, as income and health shocks will drive them deeper into poverty. Infrastructure assets including electricity transmission and distribution network can be vulnerable to both chronic and acute climate hazards. According to the World Bank’s Lifelines report, the cost of disruption to power sector due to natural shocks was about 2.17 percent of GDP in 2019. Benin was among the first hit by the pandemic in SSA but has managed to avoid a major outbreak of COVID-19. The first known COVID-19 case was reported in March 16, 2020. By the end of March, the country had recorded fewer than 100 cases, but swift containment measures were immediately put in place to contain and mitigate the spread of the virus. These measures were lifted by mid-May. The COVID case count in Benin has mostly remained controlled, with very few new reported cases between August 2020 and February 2021. However, following an increase in COVID cases across SSA, Benin has seen an outbreak since February that has led to the highest reported daily new cases (479 on 15th February). There have been a total of 6,071 confirmed cases (75 COVID19 deaths) as of March 5th, 2021. . The number of cases per million people remains low (51). The COVID19 crisis has compromised recent economic and social gains and exposed the vulnerabilities of Benin’s growth model. Measures to contain the spread of the pandemic impaired commerce, transport, and hospitality-related activities and exposed the country’s economic reliance on Nigeria and the concentration of exports in traditional products like cotton and cashew nuts (the share of agriculture in the GDP remains stable at 25 percent). Recognizing the economic threat posed by COVID19, the government introduced a National Response Plan that goes beyond the containment of the health crisis. It also aims at mitigating the economic impact of COVID-19 on private consumption and investments through a mix of cash transfers, delayed payments for utilities, temporary tax exemptions for targeted groups, deferred taxes, credit to small business, and other measures.There is reason for optimism that Benin will escape the worst downsides of the COVID crisis. Benin is expected to recover gradually, with growth rebounding to 5.0 percent in 2021, and progressively reaching 6.5 percent in 2023. Private consumption and exports should drive the recovery, pushed by higher commodity prices, and positive growth in Nigeria, which reopened its border with Benin in December 2020. In per capita terms, however, Benin will not achieve pre-COVID 19 levels in the next two years given its population growth and growth remaining below potential.In Benin, the Government Acton Plan (GAP), 'Revealing Benin', for 2016-2021 establishes GoB priorities for economic and social development