BACKGROUND
U.S. Secretary of State John Kerry recently called the Republic of Benin “a democratic leader in West Africa,” noting that its friendship with the United States is “based on common interests and values…to promote good governance and economic development, regional stability, and the empowerment of vulnerable populations.” Sitting between Nigeria and Togo, Benin stretches over 400 miles from north to south, with a population of almost 10 million. It is a stable democracy and a member of the Economic Community of West African States (ECOWAS).
As in many developing countries in Africa, the main source of energy is biomass, firewood and charcoal, followed by petroleum products and electricity. While the October 2013 discovery of oil off the coast of Benin may help to ease fluctuations in fossil fuel prices there, the country has huge and largely untapped energy potential which presents excellent investment opportunities that could be not only lucrative, but also improve the socioeconomic development and well-being of the population.
The Beninese populace, until very recently, has been subject to almost daily mandatory power outages due to domestic energy shortages, reliance on imported electricity for 85 percent of national needs, and the lack of a nationwide interconnected power infrastructure. Benin’s democratically elected President, Dr. Thomas Boni Yayi, a former head of the West African Development Bank (WADB) and the current president of the ECOWAS, the monetary zone that uses the CFA Franc currency, has highly prioritized the reduction of foreign power dependence and the increased supply of affordable quality energy in both urban and rural areas. His goal after his election in 2005, and particularly since his re-election in 2010, is to ensure that everyone in Benin has access to electric power, with as much as possible being domestically generated. President Yayi’s strategy has been to leverage private investment, multilateral lending institution financing, government funding, and public-private partnerships to greatly increase production capacity and delivery throughout the country.
POWER PRODUCTION
The Government of Benin has embarked on many large-scale infrastructure projects in the power sector over the past several years, utilizing a combination of government and private funding and multilateral loans and grants to finance new or updated infrastructure in order to greatly increase Benin’s domestic power production. Its success thus far has been remarkable, and can be a model to other African countries facing energy and capital shortages.
Private investment has financed the construction of a 5 MW solar plant in the northern city of Kandi, and in October 2013, President Yayi signed a memorandum of understanding with the Dangote Group for it to invest about $300 million in a 200 MW coal-fired power plant in Benin. In signing the MOU, President Yayi emphasized the importance of private investment in the Beninese power sector, and Mr. Dangote, the richest man in Africa, noted the excellent investment opportunities in Benin.
DELIVERY OF AND ACCESS TO POWER
While the production of electricity is crucial, delivering that power to over 50 percent of the population located in outlying rural areas is necessary for economic growth and the reduction of poverty. Thus, Benin is attempting to ensure increased and sustainable access to power by extending the electrical grid to places that were previously unreachable. One example currently underway is a project to bring reliable power to 66 rural localities by extending the power grid. Of those localities, 21 have already been reached. There are two other projects to connect 105 additional villages to the grid; collectively they are almost 70 percent completed. This ongoing work to extend distribution grids has been funded by the Government with the assistance of WADB and ECOWAS.
Additional projects to deliver power throughout the country include the construction in Benin’s largest city, Cotonou, of underground lines to transport energy; the extension of distribution networks in outlying areas around Parakou, the third largest city in the country; the interconnection of 10 cities that lacked permanent electricity with two major northern cities, Nikki and Kandi; and the rehabilitation of blackout and protection equipment in substation plants throughout the country.
To ensure supply in case of shortages in domestic production, a project jointly financed by the African Development Bank, the West African Development Bank (WADB), and ECOWAS, connected the power grids of Benin and Nigeria in 2007, and in 2010, a $44 million interconnection of Benin with Togo was completed.
Private initiatives to exploit renewable energies are being implemented in Benin by companies including Helio International, Euro Negoce Benin, Germany’s Telefunken, Risun Solar France, Soleil Energy, Citelum IMEX International, Interco Services and AF Power, all of whom have signed partnership agreements with the Government.
OTHER ENERGY INVESTMENT OPPORTUNITIES
In addition to investments in the electrical energy sector in Benin, there is huge potential for other opportunities in energy production such as hydroelectric (Benin has major rivers and an Atlantic coastline), solar, wind, biofuel, and natural gas. The discovery of 87 million barrels of oil off Benin’s coast in October 2013, in addition to the 110 million barrels already found, provides new business development potential in the immediate future. According to South Atlantic Petroleum of Nigeria, which found the new oil field, active production of 7500 barrels per day will start in 2014, increasing to 20,000 barrels per day in 2015. Further exploration for oil continues on Benin’s shoreline by SAPETRO and other private companies. Benin plans to use its share of the oil profits to continue infrastructure development, and there is no doubt that public-private partnerships and private investment will play a large role in this development.
To encourage foreign investment, Benin has been steadily improving business conditions. In 2011, President Yayi spearheaded the passage of strong anti-corruption legislation, and a single-window business creation office was established in early 2012, greatly decreasing the time required to start a company. Reforms are underway in the investment, competition, property and customs areas, and the port of Cotonou is being developed to handle greatly increased traffic. Incentives and other privileges are available to companies that invest locally and create jobs. GDP is forecast to grow 4.5 percent in 2013, while inflation is forecast at 2.8 percent. In July 2012, the International Monetary Fund, assessing Benin’s macroeconomic situation, hailed the Government’s sound budget management. The civil unrest existing in many other African countries is simply not present in Benin, even while freedom of the press, religion, speech and assembly are virtually unfettered.
Benin will continue to encourage and nurture public-private partnerships as a major tool in its efforts to improve conditions for its people, provide investment opportunities from abroad, and remain a stable foothold for democracy in Africa.
