12:00 to 13:30 CET : Special Economic Zones in Africa, in partnership with Deutsche Gesellschaft Für Internationale Zusammenarbeit Gmbh (GIZ)

October 20, 2021

Introduction

Despite Special Economic Zones (SEZs) having been widely used for decades, there was relatively little systematic research on their performance or economic impact, especially in the African context. UNCTAD’s World Investment Report 2019 presented a comprehensive analysis on the number and types of SEZs. However, large gaps remained concerning data on their design and the benefits that they accrued to the host economy. Similarly, although the implementation of the African Continental Free Trade Area (AfCFTA) agreement was set to impact SEZs on the continent significantly, there was a lack of research and policy guidance on how zones could adjust to the new regulatory environment. In this context, UNCTAD with the support of GIZ, developed a handbook for SEZs on the continent. The handbook, in addition to providing best practices and policy recommendations across a wide array of topics relevant to zones, also featured case studies from a number of different zones within and outside of Africa. In addition to the dissemination of the findings of the handbook, UNCTAD and GIZ also arranged a series of technical cooperation workshops in different parts of Africa. The handbook and the related technical cooperation had a particularly strong emphasis on helping SEZs adjust to the new trade and investment environment in Africa, after the full implementation of the AfCFTA.

This session was aimed at discussing the aforementioned issues covered by the handbook with a wide range of stakeholders, including high level representatives from African member States, SEZ managers, SEZ associations, United Nation bodies and specialised agencies. It provided a timely opportunity for a high-level exchange on the development of SEZs on the continent, with a focus on the opportunities and challenges in the context of the implementation of the AfCFTA.

Issues to be addressed:

  • How have zones in the continent fared so far, and what were the current main challenges that impeded their performance and contribution to sustainable development?
  • In the wake of the COVID-19 crisis, what were the challenges faced by SEZ stakeholders, the main actions undertaken to face the crisis and the key lessons learnt? What role could SEZs play to ensure a sustainable recovery post COVID-19?
  • How would the AfCFTA agreement impact SEZs? What were the main opportunities and concerns with regards to the implementation of the agreement?
  • In light of the expected changes in international trade and investment patterns, what would be the strategic focus of SEZs in Africa in the years to come?
  • What could be the key guidelines for policy makers in the design and implementation of SEZ development programmes, or programmes aimed at improving existing SEZs?

Session highlights

Africa represents the world’s largest free trade area with a population of 1.2 bn people, and even though the SEZs have been a prominent feature of the African continent since a few decades, the success has eluded them due to a variety of reasons. UNCTAD worked together with GIZ for industrial development of Africa. Their research highlighted that even though there were a large number of SEZs, only few were operational, with the African market being a relatively new and small player on the global stage.

The Panellists discussed four key issues:

  • Establishment of regional SEZs across the country, as compared to national SEZs which is the present scenario,
  • The focus to be more on clustering or developing SEZs along value chains,
  • Developing complementary units, and
  • Going green thereby ensuring decarbonising manufacturing.

To assess the challenges and to recommend best practices and policy recommendations, UNCTAD with the help of GIZ developed a handbook. This handbook has highlighted the current governing process of SEZs, and the need to move to new value chains. An example would be manufacturing. The intermediate goods required for manufacturing are still imported from abroad. Developing the skills and know-how locally would greatly reduce the cost of the final product. This handbook coupled with the technical cooperation workshops have attempted to help the SEZs to adjust to the new trade environment in Africa. The SDG modeled zones have attempted to move the SEZs from providing benefits to a few privileged to providing wide scale benefits, thereby creating skills development and streamlining regulations.

The challenges faced by SEZs are:

  • Lack of location advantage,
  • Mismatch between SEZ’s and countries’ competitive advantage,
  • Lack of infrastructure,
  • Poor environment, social and governance performance,
  • Lack of financial viability, and
  • Many zones perform below the rest of the country.

Some of the factors which make SEZs successful and lead to industrialisation are specific programs aimed at improving SEZs, improving technical skills, increasing innovation and productivity. For the dominoes to fall in place however there has to be political consensus, which would entail aligning the incentives along with ensuring local integration. The establishment of new SEZs would also need to focus on the changing business situation amidst the current and evolving global landscape. The development of SEZs has to be complemented with infrastructure, urban policy, green transformation and education. Morocco’s transformation into a car making hub can be considered a case study. The key takeaways from this story, applicable to a successful SEZ story are the presence of industrialisation, urbanisation, building end capacity and developing skills locally. Learning therefore becomes a key element of SEZs.

To further this process, AfCTA was launched in 2021 to ensure:

  • Economic integration,
  • Accelerated industrialisation including development of production capacity, and
  • Catalysing value chains

There are a number of static and indirect benefits which have resulted from the establishment and operation of these SEZs such as, increase in investment, capacity, export and employment along with development of local skills and knowledge. However, the performance of African SEZs has been sub par. To harness the full potential of SEZs and to make Africa a fully reliant continent, SEZs have to be developed by promoting industrial development through diversification, strong long term vision, constitutional support and policy adjustment.

Opening

  • Tanja Gönner, Chair of the Management Board, GIZ
  • Isabelle Durant, Deputy Secretary-General, UNCTAD

On the panel were:

  • E. Mr. Albert M. Muchanga,Commissioner for Economic Development, Trade, Industry and Mining, African Union Commission
  • E. Dr. Arkebe Oqubay Metiku, Senior Minister & Special Adviser to the Prime Minister of Ethiopia
  • Micheal Okyere Baafi, Deputy Minister Designate for Trade & Industry, Ghana
  • Harouna Niang, Consultant, Former Minister of Industry, Trade and Investment Promotion, Mali
  • Andrés Rodríguez-Pose, Princesa de Asturias Professor & Professor of Economic Geography and Director, Cañada Blanch Centre
  • Ahmed Bennis, General Secretary, Africa Economic Zones Organization
  • Amy Jadesimi, Managing Director, Ladol Free Zone, Nigeria
  • Ken Poonoosamy, CEO, Economic Development Board of Mauritius, Mauritius
  • Pierre Voges, CEO, Atlantis Special Economic Zone Atlantis SEZ Atlantis SEZ, South Africa

Moderator

  • Babita Sharma, Broadcaster, Journalist and award winning Author, BBC