macroafricaintel | African SEZs & GVCs in the age of automation (1)

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

I write a monthly research paper series for NTU-SBF Centre for African Studies at Nanyang Business School in Singapore. The following is the first part of the highlights of the issue published in June 2019.

Is the African industrialisation dream via special economic zones (SEZs) and global value chains (GVCs) still feasible? SEZs are “demarcated geographic areas contained within a country’s national boundaries where the rules of business are different from those that prevail in the national territory.”18 Key success factors for SEZs are cheap labour, large domestic markets, proximity to inputs, and high quality infrastructure.17 Strong institutions and leadership are also considered crucial.13 The attraction of industrial parks lies in how they enable “delivery-constrained governments” to provide infrastructure needed for industrial development within a “geographically limited space”; something they would not be able to do otherwise.2 Incidentally, almost all African governments could be considered delivery-constrained.

GVCs involve production over borders – one or more – and now account for two-thirds of global trade.19 China’s phenomenal industrial revolution was on the back of SEZs and GVCs. When wages in China started to rise, in tandem with the authorities’ desire for higher value-added manufacturing, labour-intensive GVCs moved to neighbouring but less developed Asian countries. Vietnam and Bangladesh account for much of this movement.19 However, some African countries, especially Ethiopia, have been beneficiaries.19 And like China, these countries have been able to participate in GVCs via SEZs. SEZs are not without some controversy. Tax concessions to special economic zones deprive governments of revenue, for instance. And it is yet to be proven that there would not have been development in the absence of these special zones in some cases.2 Still, it is generally agreed that they have been a success in China and emerging Asian countries like Vietnam and Bangladesh.2,13,17

African SEZs have not been similarly successful.1,2,3,6,7,17 Bad luck and bad policy have been attributed by some for why.6,7 Mauritius led the way on SEZs in Sub-Saharan Africa when it set one up in 1971.3 Since then, many African countries have developed “various forms of special economic zones (SEZs)”, ranging from “export processing zones (EPZ), free trade zones (FTZ), and industrial parks.” With a few exceptions, their performance has thus far not been encouraging.3

The World Bank categorises the implementation failures of industrial parks into four. The parks may not be built eventually. If they are built, they could enjoy little custom. In the third category, they could be built and highly subscribed but not yield the expected “cluster effects”. For the fourth category, they could be built, enjoy great custom, produce cluster effects, but have “negative spillovers” and “crowding out” effects. In other words, if successful, they could weigh on “investment climate outside the park”. Still, “park and zone programs continue to proliferate, and many continue to under-deliver.”2

Industry 4.0 labour saving technologies – “the Internet of Things, advanced robotics, and 3D printing” – are reducing the differentiation role of wages in the production process.20 Consequently, Africa’s relatively cheap labour, or that of any other jurisdiction for that matter, may cease to be an advantage over time.20 This is because industry may have advanced beyond the need of much labour by the time emerging Asian countries – which in tandem with China currently dominate labour-intensive GVCs – mature.

FDI into African manufacturing (2016)
Country Investment ($ bln) Market share Investment projects
China 36.1 38.4% 66
United Arab Emirates 11.0 11.7 35
Italy 4.0 4.3% 20
United States 3.6 3.9% 91
Japan 3.1 3.3% 27
United Kingdom 2.4 2.5% 41
France 2.1 2.2% 81

Source: Ernst & Young; Signe (2018)12

Nonetheless, some remain optimistic that African countries would be beneficiaries of the about 100 million labour-intensive manufacturing jobs expected to exit China to lower cost jurisdictions by 2030.12 And there is evidence of increased Chinese foreign direct investment (FDI) into African manufacturing.12 In 2016, China invested in 66 African manufacturing investment projects worth $36 billion. With a 38 percent market share, China is the lead foreign investor in African manufacturing.12 Only a year before, the highest manufacturing FDI into Africa came from the United States.12 Still, labour-intensive GVCs are increasingly facing disruption from automation. In light of this, what must African SEZs do to remain relevant to their countries’ goal of industrialisation? Firstly, the paper examines why African SEZs have performed below expectations. Thereafter, it addresses the question.


  1. Lopes, C. (2013, June 28). Global Value Chains: Africa, the factory floor of the world? [Blog post]. Retrieved from
  1. Saleman, Y. & Jordan, L. (2014). The implementation of industrial parks: Some lessons learned in India (Policy Research Working Paper No. 6799). Washington DC: World Bank. Retrieved from
  1. Brautigam, D. & Xiaoyang, T. (2011). African Shenzhen: China’s special economic zones in Africa, Journal of Modern African Studies, 49 (1), 27-54. Retrieved from
  1. Cling, J.P. & Letilly, G. (2001). Export processing zones: A threatened instrument for global economy insertion? (Working Paper No. DT/2001/17). France: Developpement et insertion internationale. Retrieved from
  1. Ramdoo, I. (2015). Industrial policies in a changing world: What prospects for low-income countries? Geneva: The E15 Initiative. Retrieved from
  1. Newman, C., Page, J., Rand, J., Shimeles, A., Soderbom, M. & Tarp, F. (Eds.). (2016). Manufacturing Transformation: Comparative studies of industrial development in Africa and Emerging Asia. (1st ed.). Oxford: O.U.P. Retrieved from
  1. Newman, C., Page, J., Rand, J., Shimeles, A., Soderbom, M. & Tarp, F. (2016). Can Africa Industrialize? In C. Newman, J. Page, J. Rand, A. Shimeles, M. Soderbom, & F. Tarp (Ed.), Manufacturing Transformation: Comparative studies of industrial development in Africa and Emerging Asia (1st ed., pp. 257-276). Oxford: O.U.P. Retrieved from
  1. Auty, R. (2011). Early Reform Zones: Catalysts for Dynamic Market Economies in Africa. In T. Farole & G. Akinci (Ed.), Special Economic Zones: Progress, Emerging Challenges, and Future Directions (pp. 207-226). Washington DC: World Bank. Retrieved from
  1. Ansu, Y., McMillan, M., Page, J., & Willem te Velde, D. (2016, March). Promoting manufacturing in Africa. Paper presented at the African Transformation Forum 2016, Kigali, Rwanda. Retrieved from
  1. Cilliers, J. (2018). Made in Africa: Manufacturing and the fourth industrial revolution (Africa in the World Report No. 8). Pretoria: Institute for Security Studies. Retrieved from
  1. Balchin, N., Gelb, S. Kennan, J., Martin, H., Willem te Velde, D., & Williams, C. (2016). Developing export-based manufacturing in Sub-Saharan Africa. London: Overseas Development Institute. Retrieved from
  1. Signe, L. (2018). The potential of manufacturing and industrialization in Africa: Trends, opportunities and strategies. Washington DC: Brookings Institution. Retrieved from
  1. Newman, C. & Page, J.M. (2017). Industrial clusters: The case for Special Economic Zones in Africa, (WIDER Working Paper No. 2017/15). Helsinki: United Nations University World Institute for Development Economics Research. Retrieved from
  1. Cusolito, A.P., Safadi, R. & Taglioni, D. (2016). Inclusive Global Value Chains: Policy options for small and medium enterprises and low-income countries. Washington DC: World Bank/OECD. Retrieved from
  1. Douglas, Z.Z. (2016). Special Economic Zones: Lessons from the global experience. (PEDL Synthesis Paper Series No. 1). Retrieved from
  1. Brautigam, D. & Tang, X. (2014). “Going Global in Groups”: Structural transformation and China’s special economic zones overseas, World Development, 63, 78-91. Retrieved from
  1. Farole, T. (2011). Special Economic Zones in Africa: Comparing performance and learning from global perspectives. Washington DC: World Bank. Retrieved from
  1. Farole, T. & Akinci, G. (Eds.). (2011). Special Economic Zones: Progress, Emerging Challenges, and Future Directions. Washington DC: World Bank. Retrieved from
  1. Dollar, D. (2018, January 19). Foresight Africa viewpoint – African economies and global value chains [Blog post]. Retrieved from
  1. Hallward-Driemeier, M. & Nayyar, G. (2018). Is automation undermining Africa’s industrialization prospects? In B.S. Coulibaly (Ed.), Foresight Africa – Top priorities for the continent in 2018 (pp. 70-71). Washington DC: Brookings Institution. Retrieved from

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