Economic View

On leveraging economic zones to bolster development

In what ways can special economic zones (SEZs) catalyse development in Africa?

ISMAIL ERSAHIN: SEZs serve to increase exports, create jobs and produce value-added products. Some investment promotion agencies also manage national SEZs. The most successful zones have adopted strategies linked to both the local context and international economic trends via a coordinated institutional approach.

To ensure their competitiveness, SEZs must focus on sustainable development and environmental, social and governmental objectives, with long-term development plans accompanied by knowledge sharing.

How can SEZs benefit from the African Continental Free Trade Area (AfCFTA)?

ERSAHIN: AfCFTA will allow better access to the continent’s markets, better workforce mobility, lower costs and higher production standards. According to a July 2020 World Bank report, the first phase of the trade agreement, which went into effect in January 2021, could increase regional income by 7%, equivalent to $450bn, accelerate the growth of women’s wages and lift 30m people out of extreme poverty by 2035. In addition, total export volumes would increase by nearly 29% by 2035, while intra-continental exports would increase by over 81%, and exports to non-African countries would increase by 19% in the same period. This implies an increase in foreign direct investment, creating better-paying jobs.

Moreover, investment promotion agencies can play a key role in bridging the financing gap that Africa is facing in the coming years. Greater collaboration between promotion agencies and SEZs should attract investors and help harness the region’s full economic potential.

What are the obstacles facing international investors seeking to operate in Africa today?

ERSAHIN: Major challenges in boosting Africa’s investment profile are often related to perceptions around political instability and insecurity as well as the lack of skilled labour.

As African economies grow, collaboration between public authorities and the private sector can serve to train the workforce. To this end, the challenge for investment promotion agencies and public authorities is to implement programmes that increase the continent’s supply of qualified human resources.

Given the appropriate level of infrastructure, SEZs will allow African countries to overcome the hurdles that investors are facing today. Many approaches are producing results that can be shared and used by promotion agencies not only in Africa but also globally.

Addressing the aforementioned concerns will help to attract more economic operators and foreign investors. Creating a portfolio of projects and channelling more funds into those that align with the vision statements of nations are also important to draw investment. Looking ahead, favourable conditions will ultimately help ensure the robust flow of free zone- related trade in the coming years.