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SEZs key to localisation in Africa

Special Economic Zones (SEZs) are geographically designated areas where governments promote industrial activity. They use incentives, infrastructure, and improved services to attract foreign and domestic investment and technology. www.africaeconomiczones.com SEZs can be an effective catalyst for industrialization and structural transformation in developing countries. They can also create jobs, increase exports, and upgrade the local industrial base. According to the United Nations Conference on Trade and Development (UNCTAD), there are over 200 SEZs in 38 African countries. At least 56 zones are under construction, and others are still in the early stages of development. Some challenges that may impede the success of SEZs include: Regulatory and legislative issues Transportation networks Logistical hubs Institutional and governance challenges Ask a follow up How many economic zones are in Africa? What are the Chinese special economic zones in Africa? What are the challenges facing special economic zones in Kenya?

Creating value from Africa’s raw materials is part of AFC’s strategy to reduce emissions from shipping in terms of Africa’s exports to other regions. In many cases, the transformed products are shipped back to Africa as finished goods.

AFC is collaborating with partners in Africa to create new and productive value chains from the continent’s rich resource base. This is proving to be a game-changer for participating nations in the industrial parks program.

The organisation has outlined its approach in this regard in its white paper released in 2022, Roadmap to Africa’s COP: A Pragmatic Path to Net Zero, in which it suggests that the first step to reducing wasteful shipping is to build circular local economies for commodities and minerals.

“Africa is the world’s biggest store of minerals and commodities – everything from copper and iron ore to cotton, cocoa and coffee. Most of these commodities and minerals are shipped halfway around the world to Asia for manufacturing and processing, before being transported yet again to the consumer marketplace.

“This is a key reason why shipping is the single biggest carbon dioxide emitter, after China, the US, India, Russia and Japan at 3.1% of global greenhouse gas emissions – about equivalent to all African nations combined.” The value addition strategy has been given new impetus by the disruption of supply chains from the Covid-19 pandemic lockdowns and global trade tensions.

A place for special economic zones

Investment in special economic zones and industrial hubs with focused interventions is regarded by multilateral and other finance institutions as a way to dramatically improve existing value chains and logistics and create new opportunities for value-added products.

It is also proving to be an effective way to develop new value chains and export capability in countries that have long been import dependent despite their wealth of agricultural and other resources.

The success of such ventures relies on many factors, key among them the political will to back transformation with suitable policy frameworks, according to speakers at the recent Africa Investment Forum. These urged African governments to be bold in taking the steps towards building value for their natural resources. This is a key step but there are other factors required in building successful industrial parks.

These factors include reducing bureaucracy by putting in place effective one-stop shops and other agencies; building relevant skills; and providing infrastructure to attract companies into the zones – particularly reliable energy supply.

AFC has proved the efficacy of this model in its investment in industrial parks alongside industrial development company ARISE Integrated Industrial Platforms (IIP) in various African countries.

The model is to build integrated ecosystems and industrial platforms that develop an end-to-end value chain around a particular natural resource.

Testing the model

AFC tested the model with its investments in the Gabon Special Economic Zone, Glo-Djigbé Industrial Zone (GDIZ) in Benin and in Togo with the Adétikopé Industrial Platform (PIA).

The journey started in 2016, when AFC invested $140m for a 21% stake in the Gabon SEZ, now rebranded as ARISE – a diversified portfolio of ports and logistics, integrated industrial platforms, infrastructure and airports businesses. GSEZ commenced as a joint venture between AFC, Olam and the Republic of Gabon.

The Gabon SEZ is home to a successful wood-based export industry that has transformed wood from the country’s massive forests into furniture. The project has enabled the building of a supply chain that joins sustainable forestry with furniture manufacturing and spin-off and support activities in a 37-hectare manufacturing cluster, which provides shared infrastructure such as power and water. Gabon is now the second-biggest exporter of sawn wood in Africa and the tenth globally. It is also the third largest veneer exporter globally and the largest in Africa. In short, it is now a leading player in furniture manufacturing and export in Africa.

After successfully testing the model in the central African nation, in 2020, AFC invested a further $150m of convertible debt in ARISE IIP for expansion into Benin and Togo, following execution of binding concession agreements with the respective governments.

It also plans to engage in the expansion of the Gabon project and planned developments in Chad and Côte d’Ivoire, which will be mainly dedicated to processing local agricultural products. The success of the initiative is highlighted by the two case studies we present here, from Gabon and Benin.

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