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Thứ Sáu, 12 tháng 5, 2017

Benin: Cashew industry stifled by the state!

10 May 2017

While cashew growers are trying to earn a decent living in Benin, the state comes curb their hard work. In his article, Mauriac Ahouangansi, denounced the price of cashew imposed by the State of Benin. Disconnected from the market, a fixed price is like nothing. In addition, a new 50 FCFA tax now applies on cashew exports. What dissuade producers who advanced in a hostile environment that already complicated their business before the new measures. The cashew growers discover the depth of the lack of freedom ...

Since 6 April 2017, the Council of Ministers in Benin announced the introduction of a levy of 50 FCFA per kilogram of raw cashew nuts exported, regardless of CFAF 10 tax on exports of the same product. This follows another fixing the floor price to 500 CFA francs per kilogram on the basis of wanting to encourage local processing and improving the living standards of the producers. Certainly the laudable intention, but is it the best solution?

Obviously discourage the export of cashew nuts, via taxes, can not encourage local processing. Instead, with the price of 500 CFA francs / kg, set well above prices set by some countries in the sub-region as the Ivory Coast (world's largest producer), which will be grafted the new taxes, this will that raising the cost of raw material for processing and is likely to result in low competitiveness of the finished product, which ultimately discourage local processing.

Moreover, beyond the tariff measures, local processing encounter many obstacles. Indeed, despite the many possibilities in terms of energy, the rate of electrification in Benin would be at 38.40% according to the World Index performance energy architecture "Global Energy Architecture Performance Index Report 2017". Energy dependence lasting follows and lasts for years has led to the failure of creating an Industrial Free Zone initiated since 1999. With the 155th spot out of 190 countries in the Doing Business ranking, the environment business is still very hostile to private investment because of the tax and regulatory burden on entrepreneurs. As an illustration, the tax system in Benin does not encourage the emergence of processing industries, since according to the Doing Business 2017 report, there are 57 different taxes payable per year against an average of 39 in Africa Saharan. To enforce a contract it would take 750 days against 655 days in sub-Saharan Africa; and to transfer a property 120 days are required, while in sub-Saharan Africa just 60 days.
As the floor price, supposed to guarantee an income to farmers, it is an illusion because only the international market decides what goes to farmers. Therefore, the price of 500 CFA francs set by the government is not at all guaranteed and examples in the sub-region are instructive. The cocoa industry is currently in crisis in Ivory Coast since the government was not able, during the last campaign, to buy the production price promised 1,100 CFA francs per kilogram. The fall in prices on the world market has forced the government to reduce the price to 700 CFA francs per kilogram. It should to go obviously a floor price above the market could backfire by encouraging producers to overproduction creating lower prices and consequently a circle vicious. The main victims are the farmers who will see their purchasing power eroded along with the price of their products.
To this tendency of price controls, plus a poor political management of the sector comparable to that observed in previous years in the cotton industry that could survive thanks to heavy government subsidies. In bankruptcy in this sector are the state coffers that will again suffer through bailouts. All these difficulties make the bulk of production lands in India, Vietnam and Brazil are to be converted. Thus, it is clearly preferable that the government guarantee the freedom to produce and exchange to farmers, while merely ensuring compliance with competition rules.

In addition to the price control, the Beninese government has taken export bans by land; but also the prohibition of the sale between producer and exporter of cashew nuts. Such restrictive measures especially those prohibiting export by land, going against the spirit of Article 4 of the UEMOA Treaty stipulates in c one of the union's objectives is to " create between Member States a common market based on the free movement of persons, goods, services, capital and the right of establishment of self-employed persons and employed, as well as a common external tariff and trade policy common. " The decision of the government deprives the hinterland countries like Niger or Burkina Faso who are also members of the market access of cashews. In addition, the slump driven by pricing actions and restrictions could cause the birth of a black market and informal export sector. Importing in Benin gasoline smuggling despite his ban is proof of porous borders. In the perspective of a black market, loss of profits and tax losses for the state that would be larger. This is what happened at the height of the economic crisis in Nigeria when the depreciation of the Naira led invasion of Nigerian products on the Beninese market through normal processes initially and then through smuggling after their ban despite all arrangements. Moreover, price controls as is the case with the die cashew currently violates the choice of a liberal economy made in 1990 by Benin and part of its constitution.

The Beninese government should not hinder business life. Its role is to ensure the proper functioning of the exchanges. Hopefully he learns from past mistakes, and the difficulties experienced by other countries such as Côte d'Ivoire. The livelihoods of thousands of people depend on it.

Mauriac Ahouangansi, student researcher, Benin.
Article published with free Africa.


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