Overcoming Under-Development: Industrial Policy in Benin

Written by Camilo Pallasco-Prophette

Edited by Mehmet Yusuf Temur and Abigail Ng

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Benin’s contemporary statecraft constitutes an intriguing developmental experiment, reflecting promising defiance to systemic subordination through what has been described as an “intended industrial revolution” (1). With annual growth reaching 7.5% in 2024 – the highest since the 1990s – the World Bank estimates that poverty could decline by 9% by 2027 (2). What promises and challenges lie ahead for this small West African economy, and what lessons does Benin’s trajectory offer for economic development in Sub-Saharan Africa?

Context: Systemic Constraints from Cotton Monoculture and Financial Subordination.

As most post-colonial states, Benin was historically coerced into a peripheral position within the global economy through the French colonial experience. This structural subordination is reflected in its enduring reliance on cotton agriculture and exports. Under French colonial rule, administrators actively promoted cotton cultivation to supply the metropole’s textile industry, embedding the crop at the core of the national economy (3). The imposition of this monoculture entrenched a path-dependent economic development model, with cotton accounting for up to 65.7% of exports and approximately 13% of GDP in 2020 (4). Today, Benin alternates parity with Mali as Africa’s largest cotton exporter (5).

This productive dependence is worsened by monetary constraints stemming from Benin’s membership in the West African Economic and Monetary Union (WAEMU) and its use of the CFA franc, a colonial currency architecture that persists to this day. Pegged to the euro, the CFA franc provides a fixed exchange-rate and free capital mobility, significantly diminishing currency risk, thereby favouring Foreign Direct Investment (FDI) and capital inflows. However, this comes at the cost of monetary policy autonomy, which constitutes a traditional application of the monetary trilemma. Indeed, the peg means Benin is unable to devalue its currency to enhance export competitiveness, a constraint that is particularly detrimental in the context of dollar-denominated cotton markets. When the euro appreciates against the dollar, as in the current situation, Beninese cotton exports become comparatively less attractive, decreasing sovereign income.

Dynamics of the Beninese Cotton Sector.

From independence in 1960 until 1974, Benin’s cotton sector remained under the control of the French parastatal Compagnie Française pour le Développement des Fibres des Textiles. While the company actively encouraged cotton cultivation and its processing into lint, seed, and oil, it discouraged domestic textile manufacturing. Hence, higher value-added stages of the textile value chain remained externalised.

Following lieutenant-colonel Kérékou’s Marxist-Leninist coup in 1974, the sector entered a period of instability. State agencies, lacking sufficient financial and technical capacity, struggled to manage production efficiently, resulting in declining cotton production and low overall economic performance. In the 1990s, Benin’s democratic transition concurred with the liberalisation of the cotton sector under IMF-led Structural Adjustment Programmes. Cotton profitability improved during this period, aided significantly by the 1994 devaluation of the CFA franc (6). However, this adjustment came at a significant social cost as import prices doubled, diminishing citizens’ purchasing power.

By 1995, cotton input supply had been fully privatised. Notably, 46% of this market was captured by Patrice Talon, later nicknamed the “King of Cotton” (3). This concentration of economic power fostered a form of cotton-based state patrimonialism. Talon financed the electoral campaign of President Yayi Boni, who in turn granted him a 66.5% stake in the Société de Développement du Coton and control over the Programme de Vérification des Importations, responsible for import valuation (Ibid). Through this accumulation of political power, private wealth concentration, and external dependency, Benin remained unable to catalyse industrialisation and scale up global value chains. It is precisely these historical constraints that the current administration claims to confront through an assertive industrial policy.

Breaking Path-Dependency through State Capitalism?

            Patrice Talon’s election to the presidency in 2016 and his re-election in 2021 marked a turning point in Benin’s development strategy. Under the King of Cotton’s leadership, cotton production and exports reached record levels, sustaining an average annual growth rate of 6% between 2019 and 2023. This performance exceeded the WAEMU average of 4.5%, despite the shocks induced by Covid-19 and the war in Ukraine (7).

At the centre of this economic resurgence lies the 2018–2025 National Development Plan (NDP), which articulates three core objectives: strengthening economic foundations, promoting growth in support of development, and reclaiming the external environment (IMF Country Report, 2024) (8). The NDP is best understood as symptomatic of the emerging paradigm of “New State Capitalism” (9). This global economic configuration paradoxically results from the state’s subordination to market forces under the Washington Consensus, entrenching its role as “promoter, supervisor, and owner of capital” (Ibid). Benin’s strategy reflects this paradigm, granting the state a renewed mandate to engage in economic planning. Is State Capitalism enabling the long awaited ‘catch-up development’ stolen from Benin by history? While broadly encouraging, the nascent results are ambiguous.

Promoter, Supervisor, but partly Owner. 

Overall, Benin’s economic foundations have undoubtedly been strengthened. The state has emerged as an active promoter of capital accumulation through large-scale infrastructural investments, notably the refurbishment of the North-South “cotton road” and the modernisation of the Port of Cotonou (8). Similarly, the digitalisation of tax administration and business registries has stimulated aggregate private investment, which rose from approximately one-sixth to one-third of GDP between 2016 and 2023 (7).

Yet, constrained by limited fiscal capacity, the state has been compelled to heavily rely on foreign capital and free capital flows facilitated by the monetary peg to finance its ambitious NDP. This dynamic is reflected by the establishment of a Special Economic Zone (SEZ) operated as a joint venture with the Emirati firm Arise IIP. Structured around a 65:35 equity split in favour of the private partner, the SEZ concentrates the gains of productivity growth in the hands of transnational capital rather than domestic equalitarian distribution (3). The IMF has indeed highlighted Benin’s overall weak spillover absorption capacity (7) as little of the increased levels of technological knowledge which have come thanks to this project, have been transferred elsewhere.

As such, the extent to which the NDP genuinely ‘reclaims the external environment’ is debatable. Benin’s economic upscaling remains largely driven by market-oriented statecraft, shaped by fiscal reforms and a monetary regime that prioritises FDI inflows. Between 2016 and 2023, private investment was heavily stimulated, increasing manufacturing value-added by 3% between 2018 and 2024 (10). Yet the distributional outcomes of this growth are deeply uneven, as poverty rates remain salient domestically. While the Northern cotton-producing Atacora region recorded a 53.1% poverty rate, it is only 16% for the Southern industrial and export-oriented Ouémé region (11).

Moreover, economic informality continues undermining development. Approximately 94% of the non-agricultural workforce remains employed in the informal sector (12), limiting effective taxation and perpetuating informal cross-border trade, particularly through its porous border with Nigeria despite its closure in 2019 (7). Benin’s economic development is further distorted through the monetary structure from the CFA franc, whose value remains misaligned with WAEMU’s economic fundamentals, weakening export competitiveness (13). Hence, predatory monetary structures and economic informality constitute two nodal obstacles which remain to be tackled by the empowered 21st century market-actor state.

Challenging International Hierarchy – but Upholding Domestic Ones?

All-in-all, Benin’s industrial policy represents a rare and ambitious developmental experiment with significant potential. Estimates suggest that domestically transforming all cotton into apparel could add $12 billion to Benin’s $17 billion economy (1). Progress in infrastructure, global value chain integration, and export diversification has been impressive. Yet serious fallacies remain regarding the social distribution and long-term sustainability of this growth model.

While Benin shows signs of ‘flirting’ with state capitalism, the monopolistic organisation of the cotton sector has begot a political system characterised by patrimonialism, “in which the accumulation of wealth is contingent upon political power, and the interests of state authority and private business are deeply intertwined” (3). In this sense, the capitalist state, rather than state capitalism per-se, appears to remain the dominant paradigm. Indeed, Benin shows more signs of pursuing market-oriented policy rather than disciplining capital. Further, this statecraft operates within powerful structural constraints, including global market hierarchies and a restrictive monetary order. As global trade enters an era of intensified “external shocks” (14), Benin’s capacity to build value chain resilience and durable economic sovereignty will be tested. Hickel et al. (2022) argue that strengthening regional solidarities is essential for preserving industrial and fiscal sovereignty among the emerging economies which are attempting to integrate into the globalised economy (15). Benin signals encouraging efforts in this direction, as it returned to WAEMU’s internal capital market in November 2025 after a two-year hiatus (16). By issuing 100 billion CFA franc bonds, it aims at financing further industrialisation and lay the foundations for a regional impetus of solidary developmental cooperation (Ibid).

Ultimately, the success of Benin’s current developmental efforts will depend on its ability to overcome three key conundrums. First, channeling foreign investment and industrial policy in such a way that sufficiently stimulates its productivity to absorb the output value constraints imposed by the CFA franc. Second, deploying sufficient statal agency to discipline the market’s ‘animal spirits’, which are susceptible to diminish national economic sovereignty and equalitarian wealth distribution. Third, and most contentiously, limiting the capital-based patronage relations within the state apparatus which bias developmental statecraft towards benefitting portfolio growth rather than socioeconomic prosperity for its people. Much will depend on the outcome of the May 2026 election, as constitutional term limits prevent Patrice Talon from pursuing a third term (17).

Bibliography:

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2: World Bank (2025): “Benin Economic outlook 2025: Raising domestic revenue mobilization while protecting the poor” – World Bank Group. Benin Economic outlook 2025: Raising domestic revenue mobilization while protecting the poor

3: Honfoga et.al (2023) : “State Capture and Rent Seeking in Benin” – Cambridge University Press. State Capture and Rent-Seeking in Benin

4: SikaFinance (2022): “Le coton rapporte chaque année plus de 300 milliards FCFA au Bénin” – SikaFinance. Le coton rapporte chaque année plus de 300 milliards FCFA au Bénin 

5: Kohan Textile Journal (2025): “Africa’s Cotton Sector in 2025: Mali leads top producer amid resilience and risk”. – Kohan Textile Journal. Africa Cotton Production 2025 – Top Producers and Outlook

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11: World Bank (2024): “Benin Poverty and Equity Brief: October 2024.” – World Bank Group. documents.worldbank.org/en/publication/documents-reports/documentdetail/099932001032536652

12: Kiaga and Leung (2020): “The Transition from the Informal to the Formal Economy in Africa.” – International Labour Organisation. wcms_792078.pdf 

13: IMF (2005): “Benin: Request for a Three-Year Arrangement Under the Poverty Reduction and Growth Facility.” – International Monetary Fund. Benin: Request for a Three-Year Arrangement Under the Poverty Reduction and Growth Facility—Staff Report; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Benin; IMF Country Report 05/288; July 22, 2005

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