This chapter analyses the efforts by Benin and other sub-Saharan African countries to raise tax revenue, in regard to structural characteristics, and explores possible determinants of, and the scope for, greater domestic revenue mobilisation and for tax policy and administration reforms. First, the tax effort in Benin remained relatively stable in 1980–2015, but Benin performed poorer (14th) compared to its neighbour Togo (5th). Second, there is evidence of a positive effect of government transparency and accountability, ‘control of corruption’, and political stability on tax effort. On the contrary, foreign aid is associated with low tax effort. Third, several strategies are investigated to reduce the tax gaps in Benin. If the tax policy seems relatively constrained by reference to the West Africa Economic and Monetary Unions Tax Directives, the Togolese experiment of switching to a semi-autonomous revenue authority may provide guidance to find some room to improve domestic revenue mobilisation. In particular, Benin should review the management of human resources in the tax and customs administrations, and the scope of derogatory regimes that generate tax expenditures.

This chapter devises a synthetic ordering of the factors identified as impeding long-run development in Benin, namely corruption, weak public management, opacity of public decision-making and policy implementation, and excessive informality. These institutional weaknesses are traced back to proximate and ultimate causes, while in the other direction the economic consequences of these weaknesses are unfolded. We identify the immediate causes as political instability, elite capture of key state functions, weakness of the state, and the possibility of easy but illegal rents. In turn, these causes are linked to five deep factors: (1) neo-patrimonialism with multiple oligarchs; (2) a multiple ethnic groups; (3) a geographical/neighbourhood landscape in which Benin appears as a small country that possesses a long border with its big neighbour (Nigeria); (4) a legacy of centralised management of key economic sectors, dating back to the French colonial period; and (5) the heavy presence of aid agencies. Policy reforms aiming at overcoming or circumventing these institutional problems are then discussed.

This chapter focuses on state coordination brought about by the relationship between central and local governments, using local tax collection as a practical example. The dominant fact discussed in this chapter is the vacillation of the Tanzanian government between deconcentration, with centrally appointed civil servants in charge of local affairs, and full devolution to local governments. An ambitious local government reform was voted through in 1998, but never fully implemented. Responsibility for the collection of the property tax has changed three times in the last decade. As capacity is clearly missing at a local level, tax collection should optimally be under the central government for the time being. It is suggested that oscillating responsibilities in the recent past reflect hidden rent-seeking competition between local politicians, central government tax collectors, and ruling party members. In effect, corruption has been observed with both central and local tax collection. An important conclusion that comes out of the chapter and the discussion by Jan Willem Gunning is the role of capacity in the design of institutional structures in developing countries.

This chapter uses a novel database on contractual arrangements between politicians, political brokers, and businessmen in Benin to investigate the way the nature of these arrangements depends on the level of political competition. We find that firms provide financial support to local and national politicians in exchange for policy concessions, direct budget support of firms, ‘favourable’ procurement auctions (bid-rigging), and various forms of state capture. In addition, while bid-rigging features constantly in politician–firm contracts, increased electoral uncertainty is associated with less demand for policy concessions and stronger preference for direct forms of state capture, that is, the appointment of firms’ agents or cronies to key government positions. In other words, electoral uncertainty could simultaneously contribute to democratic consolidation through political turnover, and to worse forms of corruption through state capture by business elites.

It is widely accepted that countries’ institutions play a major role in their economic development. Yet, the way they affect, and are affected by, development, and how to reform them are still poorly understood. In this companion volume, State and Business in Tanzania diagnoses the main weaknesses, root causes, and developmental consequences of Tanzania’s institutions, and shows that the uncertainty surrounding its development paths and its difficulty in truly ‘taking off’ are related to institutional challenges. Based on a thorough account of the economic, social, and political development of the country, this diagnostic offers evidence on the quality of its institutions and a detailed analysis of critical institution- and development-sensitive areas among which state-business relations rank high, even though the institutional features of land management, civil service and the power sector are shown to be also of prime importance. This title is also available as Open Access.

Living standards in Benin have remained low over the last decades because of sustained demographic pressures and the absence of a growth-enhancing structural transformation. Its two leading sectors have not been engines of sustained growth. The cotton sector has been constrained by institutional instability and political interference. Cross-border trade with Nigeria has nurtured informality but also corruption, tax evasion, and political capture. Adjustment to the decline of the agricultural sector has been passive, its labour migrating to informal activities and low-productivity sectors. Capital deepening is absent, and misallocation of resources has resulted in efficiency losses and slow technological change. Weaknesses in domestic resource mobilisation and inefficiencies in expenditure management have prevented the government from addressing key challenges of economic and social development, like providing good-quality physical infrastructure, significantly improving the performance of the education and healthcare systems, or fighting persistent poverty and inequality. Benin needs to reorient its development strategy and deal with its specific institutional weaknesses.

It is widely accepted that countries’ institutions play a major role in their economic development. Yet, the way they affect, and are affected by, development, and how to reform them are still poorly understood. In this companion volume, State and Business in Tanzania diagnoses the main weaknesses, root causes, and developmental consequences of Tanzania’s institutions, and shows that the uncertainty surrounding its development paths and its difficulty in truly ‘taking off’ are related to institutional challenges. Based on a thorough account of the economic, social, and political development of the country, this diagnostic offers evidence on the quality of its institutions and a detailed analysis of critical institution- and development-sensitive areas among which state-business relations rank high, even though the institutional features of land management, civil service and the power sector are shown to be also of prime importance. This title is also available as Open Access.

In Benin, top businesspeople not only capture the economy but also the executive, and possibly legislative power. This book develops a comprehensive analysis aimed at identifying and reducing the institutional constraints that impede Benins rapid, sustainable, and inclusive development. The research reveals a chain of causality between four main categories of institutional weaknesses in Benin, namely corruption, inefficiencies in governance, opacity in public decision-making, and excessive informality in the Beninese economy. These institutional weaknesses are traced back to proximate and ultimate causes. The immediate causes include political instability, elite capture of key state functions, weakness of the state, and the possibility of easy but illegal rents. In turn, these causes are linked to deep-rooted underlying factors such as the nature of the political game, essentially neo-patrimonialism with multiple economic and/or political Big Men, but also geographical or ethnic factors. We elaborate on policy reforms aiming at overcoming or circumventing these institutional problems.

Modern states rely on the quality of their civil service. In the case of Tanzania, this chapter points to four key weaknesses: capacity, motivation and conduct, political interference, and resources and tools. Capacity and resources clearly depend on the level of economic development. From an institutional point of view, motivation and political interference play the most important role as they ultimately define the rules according to which the civil service, the political apparatus, and the private sector interact. The chapter maintains that the main factor behind these two weaknesses is the relationship betwwen civil servants and politicians, and recommends unplugging the civil service from political patronage through a transparent system of performance evaluation and promotion to senior positions, as well as a strengthening of the role and power of the Civil Service Commission. It also recognises that such a reform is unlikely to succeed unless supported by top politicians. While concurring with the need for this kind of reform, Jan Willem Gunning stresses in his comments the necessity to consider the political economy and the way in which compensation can be sought for losers.

This chapter sets the scene for the Institutional Diagnostic exercise by presenting the main geographical, demographic, and recent historical features of Tanzania, emphasis being put on the latter aspects. It proves crucial in understanding where Tanzania’s development stands today, as well as the recent disruption in Tanzanian politics caused by the presidency of Magufuli and his premature death.

This chapter seeks to first empirically establish the relationship between countries’ market failures and their level of infrastructure spending. It then seeks to test the most likely explanations for Chinese foreign spending based on explanations relating to FDI from Western MNCs. Notably, the results do not yield convincing results that these variables can account for Chinese foreign spending patterns. This finding supports the need for a novel approach to Chinese foreign spending in the context of the Belt and Road Initiative.