Benin: The First OHADA Member Country to Implement the Status of Business Starter (entreprenant), a Simplified and Free Legal Regime that Seeks to Promote the Migration of Micro and Small Enterprises from the Informal Sector to the Formal Sector
Micro and small enterprises can henceforth register at no charge and enjoy several benefits so as to create more jobs and alleviate poverty
Cotonou, 5 May 2015. The Government of Benin, through the Ministry of Public Policy Evaluation, Promotion of Good Governance and Social Dialogue, in collaboration with the World Bank Group, officially launched the “Status of business starter” in Benin.
The “status of business starter” is a new simplified and free legal regime which is opened to every natural person exercising a civil, commercial, craft or agricultural activity who wishes to register at the Trade and Personal Property Credit Register (RCCM). It aims primarily to promote the registration of economic operators of the informal sector in a bid to ease their integration into the formal sector and allow them access to banking and finance services. Following the data provided by the General Enterprises Census (RGE2) of 2008, some 135 795 (98.5%) of surveyed companies are in the informal sector against 2,068 (1.5%) only in the formal sector. In addition, it is estimated that 90% of the population works in the informal sector, which represents 60 to 70% of GDP.
According to Mr. Antonin DOSSOU, Minister in charge of Public Policy Evaluation, Promotion of Good Governance and Social Dialogue, “By streamlining the procedures and allowing the companies to join the formal sector at no charge, the Government of Benin intended to enable the small size companies of Benin which - in their vast majority - operate in the informal sector, to enjoy the various benefits attached to this status that will enable them create more jobs, increase their profits, and contribute significantly in the creation of wealth and the alleviation of poverty in the country”.
The official launching of the “Status of business starter ” follows a positive assessment of the pilot phase conducted from April 2014 to March 2015. It focused on a sample of 2,400 informal micro enterprises located in Cotonou and a checking group of 1200 companies. This phase led to the formalization of 424 companies, which presently enjoy the formal status of business starter with the various support services provided, particularly in terms of bookkeeping, training, preparation of business plan, access to various banking services and protection against administration abuses as well as a simpler and fairer tax scheme called “Synthetic Business Tax (TPS)” with effect from 1st January 2016.
According to Mr. Sébastien GNONHOUSSOU, a tailor in Cotonou and recipient of the pilot phase, the formalization of his business brought him a lot of advantages: “With the status of business starter, I received trainings in accounting, inventory management and finance management. My management skills have improved so much and my profits are in the rise. Today, I have a bank account, a checkbook and I have become a big man. Moreover, I have disposable income that I use to pay for food, health care and education of my children.”
However, Sébastien wishes to go beyond: “My dream is to export the outfits I sew to other African countries and even to Europe!” He said. This illustrates the saying that “small companies of today are large companies of tomorrow.”
The success of the pilot phase has been instrumental in the spread of the “Status of business starter” in the whole country. Benin hence becomes the first country of OHADA (Organization for the Harmonization of Business Law in Africa) to effectively implement this new status which was adopted by the regional institution in December 2010 and entered into force in May 2011:
Mr. Olivier FREMOND, Resident Representative of the World Bank in Benin observed that “Benin has just demonstrated to the 16 other Member States of OHADA that through a well adapted policy, a country can successfully integrate millions of companies that operate outside of the formal economy so that they may become more prosperous and create jobs. The support of the World Bank Group in Benin has enabled to test and identify the most suitable policies to this important segment of the economies of countries in the sub-region.”
In Benin, the World Bank Group supports the implementation of the “Status of business starter” through two projects: (i) the Competitiveness and Integrated Growth Project (PCCI), financed at more than 12.5 billion CFA francs, aims to promote entrepreneurship, investment in value chains with strong potential for growth and employment as well as the public-private partnerships; and (ii) the Project on the Improvement of Investment Climate in OHADA Member Countries (PACI), which provides technical assistance to support the Government in its efforts to improve the business environment and implement the OHADA Uniform Acts.