From Farm to Fashion: Benin's Path to Industrialisation

David Pilling has produced a truly superb case study for students of development economics - writing here in the Financial Times. A plain cotton T-shirt may seem like an ordinary item, but in Benin, a small West African nation, it symbolises the beginning of a new era. With an ambitious plan to transform its economy through industrialisation, Benin is striving to turn its vast cotton fields into the starting point for a thriving textile industry.

The Journey from Cotton Fields to Clothing Factories

Benin, with a population of 13 million, aims to do what few African countries have successfully accomplished: transform its raw materials into finished goods domestically. Instead of simply exporting raw cotton, Benin plans to harness the entire value chain — from growing and picking cotton to spinning, weaving, and stitching it into garments. As Ramakrishnan Janarthanan, chief development officer at Arise Integrated Industrial Platforms, puts it, “We want to capture the whole value chain.”

Historically, Benin has been trapped in a cycle of selling cheap raw commodities, like cotton, and importing expensive finished goods. Almost all of its cotton crop, around 300,000 tonnes annually, has been exported raw to countries like Bangladesh, which then transforms it into clothing for the global fast-fashion market. This process sees Benin missing out on over 90% of the value generated by the cotton trade.

Industrialisation, particularly in the textile and apparel industry, is viewed as one of the most accessible routes for economic development. Countries like the UK, Germany, Japan, South Korea, and China have used the textile industry as a launching pad for broader economic growth. Benin hopes to follow in these footsteps by creating a thriving manufacturing sector that provides jobs, reduces poverty, and fosters economic diversification.

Building a Manufacturing Base

The Glo-Djigbé Industrial Park, located near Benin’s commercial capital, Cotonou, is central to this transformation. Covering an area equivalent to 22 football fields, the park is home to a massive textile factory employing over 12,000 workers. The factory produces 50,000 kilos of fabric daily and aims to significantly scale up production over the coming years. This is part of a broader national strategy to quintuple Benin’s manufacturing capacity by 2030.

President Patrice Talon, a former business tycoon, is driving this industrial push. His administration has implemented pro-business reforms, streamlined bureaucracy, and improved infrastructure, making Benin an attractive destination for foreign direct investment. Since Talon took office, Benin’s economic growth has averaged above 6% annually, even during the COVID-19 pandemic, positioning it as one of Africa’s best-performing economies.

However, Benin faces significant challenges. The country’s manufacturing sector currently contributes only 10% to GDP, much of which is from artisanal production. Experts argue that scaling up the textile industry to process the entire cotton crop domestically would require attracting investment for about 25 new factories.

The Broader Context of African Industrialisation

Benin is not alone in its aspirations. Other African countries, such as Ethiopia, Mauritius, and Botswana, have embarked on similar journeys with varying degrees of success. Ethiopia, for instance, managed to build a shoe and apparel industry but faced setbacks due to political instability and the loss of tariff-free access to the US market. Mauritius leveraged its textile sector to transition from a low-income to an upper-middle-income economy, while Botswana ensured value addition in its diamond industry by negotiating better deals with companies like De Beers.

Critics, however, caution against overly optimistic expectations. Building a competitive manufacturing sector requires massive investments, strategic adjustments, and sustained commitment. As Arkebe Oqubay, who led Ethiopia's industrialisation drive, notes, “There is no single prescription you can read from a textbook. You need to be pragmatic.”

Despite these challenges, some economists see hope. Ha-Joon Chang, a South Korean economist, believes that manufacturing jobs are not disappearing, and there is still room for industrial growth in Africa. “There are stirrings. And ambition is the start,” he says, praising Benin for its determination.

For Benin to achieve its goals, it must overcome infrastructure deficiencies, reduce corruption, and ensure that it can compete on a global scale. As Gagan Gupta, CEO of Arise, which has invested heavily in Benin, notes, “In the end, you need to be able to produce competitively on a global scale. Otherwise, all this is just a good photo op.”

Glossary of Key Economic Terms

• Comparative Advantage: The ability of a country to produce a particular good or service at a lower opportunity cost than others.
• Economic Development: A process of improving the economic well-being and quality of life for a community or country, often through industrialisation and poverty reduction.
• Economic Diversification: The process of a country expanding its economy by producing a variety of goods and services, reducing dependence on a single sector or commodity.
• Economic Growth: An increase in the production of goods and services in an economy over time, typically measured by GDP.
• Exports: Goods and services produced in one country and sold to others.
• Industrial Parks: Designated areas designed and developed for industrial development, often with special infrastructure, incentives, and policies to attract investment.
• Industrialisation: The development of industries in a country or region on a wide scale, often considered essential for economic development and poverty reduction.
• Labour Productivity: The amount of goods and services produced per hour of labor, often used as a measure of efficiency in an economy.
• Manufacturing: The process of converting raw materials into finished goods through the use of labor, machinery, and tools.
• Poverty-Reduction: Efforts and strategies aimed at reducing the level of poverty in a population.
• Value-Chain: The full range of activities that firms engage in to bring a product or service from conception to delivery and beyond.

Retrieval Questions for A-Level Students

1. What strategies is Benin employing to transform its economy through industrialisation?
2. Why is the textile industry considered a key entry point for industrialisation in developing countries?
3. What challenges does Benin face in achieving its industrialisation goals?
4. How does Benin's approach to value-chain management differ from its previous economic practices?
5. What lessons can Benin learn from other countries that have successfully industrialised?

Overview of Key Economic and Development Indicators for Benin

Benin, a small West African country, has shown significant promise in recent years in terms of economic growth and development. However, it remains challenged by structural constraints and socio-economic vulnerabilities. Here’s a brief overview of Benin’s key economic and development indicators based on official data sources:

1. Gross Domestic Product (GDP)

• GDP (Current US Dollars): As of 2023, Benin's GDP is approximately $17 billion. This reflects modest growth compared to other countries in the region, but it indicates progress given Benin's small economic base.
• GDP Growth Rate: Benin's economy has shown robust growth, with an average annual growth rate of 6% over the past several years, even during the COVID-19 pandemic. This makes it one of the fastest-growing economies in West Africa.

2. GDP Per Capita

• GDP Per Capita: Benin's GDP per capita is around $1,400 (current US dollars), placing it in the lower-middle-income category. This figure illustrates the country's ongoing challenges with poverty reduction and income inequality.

3. Poverty Rate

• Poverty Headcount Ratio: Approximately 38.5% of Benin's population lives below the national poverty line, according to the most recent data from the World Bank. This underscores the need for inclusive economic policies that target poverty reduction and improved living standards.

4. Human Development Index (HDI)

• HDI Score: Benin has a Human Development Index of 0.525 (2021), ranking it 166th out of 191 countries globally. The HDI reflects low levels of education, healthcare, and overall living standards, highlighting significant room for improvement.

5. Unemployment Rate

• Unemployment Rate: The unemployment rate in Benin is estimated to be around 1.6%. However, this figure can be misleading due to a high prevalence of informal employment, where many people work in low-wage, unskilled jobs without social protection.

6. Inflation Rate

• Inflation Rate: Inflation in Benin has remained relatively moderate, around 2.8% as of 2023. This is within the acceptable range set by the West African Economic and Monetary Union (WAEMU), to which Benin belongs.

7. Trade and Exports

• Major Exports: Benin's main exports are cotton, cashew nuts, and crude oil. Cotton is the most significant export, contributing to over 40% of total export revenue. Efforts to process cotton domestically aim to increase value-added exports.
• Export Destinations: The top export destinations for Benin include India, Bangladesh, China, and Vietnam.

8. Foreign Direct Investment (FDI)

• FDI Inflows: Benin has attracted increasing foreign direct investment, especially in infrastructure, textiles, and agriculture. FDI inflows were $274 million in 2022, reflecting growing investor confidence in the country’s economic reforms and development potential.

9. Industrialisation and Manufacturing

• Manufacturing Value Added: Manufacturing contributes about 10% to Benin's GDP, most of which is artisanal rather than formal industrial manufacturing. The government aims to increase this share to 25% by 2030 through strategic investments in sectors like textiles and agro-processing.

10. Labour Productivity

• Labour Productivity: Labor productivity in Benin remains low compared to global standards. The average productivity per worker is significantly below the world average, reflecting the need for skills development, better infrastructure, and enhanced technology adoption.

11. Infrastructure and Access to Services

• Electricity Access: Around 42% of the population has access to electricity. The government has been working on improving infrastructure, including power and transport networks, to support industrialisation efforts.
• Internet Penetration: Internet usage remains relatively low, with an estimated 15% of the population having regular access, underscoring a digital divide that could hamper development in the digital economy.

12. Life Expectancy

• Life Expectancy: The average life expectancy at birth in Benin is 62.8 years. Health challenges, such as infectious diseases and limited access to quality healthcare, contribute to this relatively low life expectancy.

13. Education and Literacy

• Literacy Rate: The adult literacy rate in Benin is approximately 42.4%. Although primary school enrollment has increased significantly, there remain gaps in secondary and higher education, which impact the country's overall human capital development.

14. Governance and Ease of Doing Business

• Ease of Doing Business: Benin ranks 149th out of 190 countries in the World Bank’s Ease of Doing Business Index (2020). The government has implemented several reforms to improve the business environment, such as simplifying business registration processes and reducing bureaucratic hurdles.

15. Foreign Aid and External Debt

• Foreign Aid: Benin receives substantial foreign aid, primarily from multilateral institutions like the World Bank and the African Development Bank, and bilateral donors, including France and the European Union.
• External Debt: Benin's external debt is about 30% of GDP, which is considered sustainable. However, careful management is needed to avoid potential debt distress.