The special economic zones (ZES) are multiplying on the African continent, but do they really meet the objectives in terms of development, especially for the host countries? We find elements of an answer to this question in a study carried out in recent months by the Senegalese Ministry of Economy, Planning and Cooperation, analyzed in recent days by the Ecofin press agency.
Overall, the analysis believes that the performance of the Zes remains – despite some successes – below the objectives set in terms of industrialisation, attraction of foreign direct investment (FDI) and job creation.
The report explains the poor performance of SEZs in Africa due to the isolation of a significant number of these areas, failures in the supply chain of inputs, high energy costs and governance problems. The Zes are also penalized by the exclusion of their products from the trade preference regimes established by some regional economic communities, due to the competitive advantages that companies located in these areas can offer compared to ordinary companies that export to the same market without benefiting from the same advantages. This aspect underlines the importance of an in-depth reflection on how to allow companies located in the Zes to benefit from the advantages of the African Continental Free Trade Area (African Free Trade Area, AfCfta) without penalizing too much companies operating under the common law regime .
The report indicates that Africa has a total of 237 Zes spread across 37 countries. The African countries hosting the largest number of these areas are Kenya (61), Nigeria (38), Ethiopia (18), Egypt (10) and Cameroon (9).
As regards the areas of activity, according to the analysts of the Senegalese ministry, the African Zes are not specialized enough. 89% are multi-sectoral (agri-food, equipment and devices, pharmaceutical, etc.). Only Ethiopia (Hawassa/textile), Gabon (Nkok/wood) and Morocco (Tangier Med and Kenitra/automotive and aeronautical industries) have so far developed specific zones to exploit their comparative advantages in well-defined sectors.
The report underlines in this context that African Zes have generally failed to industrialize the continent’s economies so far. Between 2015 and 2020, manufactured goods accounted for less than 25% of African exports compared to 61% of imports.
Successful cases have been recorded in some countries such as Morocco, Ethiopia, Mauritius or Djibouti. Apart from these few exceptions, the continent’s EEZs have not performed well compared to those of Asia and Latin America, where they have played a key role in attracting FDI, industrialization and job creation.
Apart from Djibouti, where the contribution to national employment is 48%, this indicator is very low in Africa (usually below 5%). The study on a sample of twelve African countries (Angola, Djibouti, Egypt, Ethiopia, Ghana, Kenya, Morocco, Rwanda, Senegal, South Africa, Tanzania and Togo) reveals that the average number of jobs created at the level of each Zes is between 1001 and 10,000 per area. A handful of Zes are notable for creating relatively large numbers of jobs, such as Tangier Med in Morocco (80,000) and Alexandria Public Free Zone in Egypt (74,000).
In terms of FDI attraction, the performance of the mainland’s SEZs is also very modest. Morocco and Ethiopia are frequently cited as success stories in this chapter.
Defined as geographical areas delimited within the borders of a country, offering investors tax incentives (reduction or elimination of taxes), infrastructure (constructed land, buildings, utilities), special customs regime (exemption from taxes and customs duties) and simplified regime administrative procedures compared to what they would normally benefit from in the national environment, the Zes owe their notoriety mainly to Asian countries. These areas have been very decisive for the economic take-off of China and other Asian dragons such as South Korea, Hong Kong and Singapore. [Da Redazione InfoAfrica]
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Read our focus on the economic prospects of the continent: https://www.africaeaffari.it/rivista/2023-ci-sara-ancora-da-ballare