The dangers of a big public sector: findings from my project in Benin

Posted by Niek Huizenga on October 23, 2013

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At this moment I am in Benin working on an entrepreneurship project at the University of Parakou in the West-African country Benin.

Today I had a discussion with some professors and asked them where most of their students end up working. Most of the students start working for the public sector (or end up unemployed).

So public money is spend to educate people to get a job where they are paid with public money… I remember reading an article that, in developing countries, the majority of the jobs are provided by the public sector. This is a system that is on the verge of collapse… the tax coming from the private sector can never be enough to feed the hungry beast.

With this in mind I found an interesting IMF article that discusses the impact of a large public sector compared to the private sector. This study shows that high rates of public employment, which incur substantial fiscal costs, have a large negative impact on private employment rates. Actually it increases the total unemployment rates (Behar & Mok, 2013).

I conducted interviews with small entrepreneurs and my observation was that most of them are necessity entrepreneurs (they start a business because they can not find a job). These are small entrepreneurs who struggle to get enough income, let alone employ people. According to the local Chamber of Commerce (covering an area of a 1M+ population) the number of registered businesses in 2012 did not top 250. The majority of the businesses are small and active in the informal circuit (and do not pay taxes).

So my quick conclusion is: Benin needs more and most of all “better” entrepreneurs. Smart entrepreneurs coming from the University that start a formal business instead of becoming a government employee. Smart entrepreneurs building growing companies that innovate, create employment and contribute to the overall welfare.

A lot of work needs to be done at all levels. The project I am working for has the objective to increasing the entrepreneurial awareness at the University. The plan is to start a “Centre de Developpement de l’Entrepreneuriat”. This organization stimulates and facilitates students (and staff) to start an opportunity driven business that really has impact on economic development.

Unfortunately Benin’s business climate is not very favorable yet. The annual report of Doing Business puts Benin on place 176 out of 185. But we have to start somewhere and I strongly believe that we, the project team, can make these first necessary steps.

Greetings from Parakou, Benin

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