Special Economic Zones: Panacea for Economic Development in Africa

Special Economic Zones: Panacea for Africa’s Economic Development

There is a strong case for the establishment of Special Economic Zones that will anchor Economic Development in Africa.

Today we see China as the second largest economy on the planet with industrial GDP that keeps leaping year-on-year.

We see Korea move from a very poor country with per capital GDP of $200 in the 1960s to a very rich country with per capita GDP that’s in excess of $26,000.

We see Brazil move from a third world country characterized by poverty and misery into a globally competitive economy.

Nobody ever believed that India could feed itself. But today, India is not only able to feed itself, but is a major food exporter.

So, how did all these guys do it?

Simple! They established Special Economic Zones!

Creating Special Economic Zones allows government to focus on certain critical areas of competitive advantage; provide critical infrastructure clusters and other economic growth enablers to allow creativity, innovation and entrepreneurship around these areas of competitive advantage.

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Can Special Economic Zones Transform African Economies?

Yes it will in very phenomenal scales.

If it worked wonderfully well in other climes, why wouldn’t it work in Africa if African leaders are committed to its implementation?

Fortunately, Africa has a number of areas where it enjoys competitive advantage. Agriculture, Oil and Gas, Solid Minerals, Tourism etc. can be very profitable in Africa.

However, Agriculture stands out of all others as one area Africa can use to displace other economies on the list of top performers.

Just take a look at it. If you think about the only region of the world where 65% of all of the world’s uncultivated arable land that would feed over 9 billion people on earth by 2050 is, then that’s not in Asia, Europe, America or Australia, it’s in Africa.

If you also think about the region of the world whose food and Agricultural industry by 2030 would hit $1 trillion, then, don’t think far, think Africa.

What about the manpower needed to drive agricultural transformation on the continent? Africa is the youngest continent on the planet. We have very energetic, entrepreneurial and creative young population that can drive the transformation necessary to create the Africa we want.

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So, what’s left now?

What Africa needs to do is to establish and activate special economic zones across Africa. Such would help Africa build industrial value chains across all its commodities.

If you take a look at what the African Development Bank (AfDB)plans to do to enhance food production in Africa, with its Staple Food Procesing Zone initiative, it’s indeed a classic example of how the special economic zones program should be modeled.

Under the Staple Food Processing Zone Program of the (AfDB), rural areas where agricultural activities are burgeoning will be provided with critical infrastructure. Roads, electricity, water, ICT etc. will be concentrated there to reduce the risks and overheads of investment in this areas.

Thereafter, governments will provide fiscal incentives to encourage food and agricultural business to locate there and build industrial value chains from the commodities being produced in these rural communities.

These industries will buy directly from these farmers and feed their production lines and no longer rely on imported raw materials or semifinished products.

By so doing, what will leave our rural areas will no longer be raw materials that have little to no value, but finished products.

Besides, middlemen will be almost totally removed from the agricultural value chain so that farmers can begin to enjoy more value from their commodities.

Creating wealth among rural farmers will most likely cause them to expand their farms and hire more labour. This will create enormous employment opportunities and reduce rural unemployment and by extension rural-urban migration.

Also, a number of SMEs will spring up along these agricultural value chains thereby creating shared prosperity and reducing inequality.

Most importantly, these value chain activities fostered by agricultural industrialization will transform rural communities from zones of economic misery to zones of economic prosperity.

It will also effectively lift hundreds of millions of people out of poverty. This way, Africa’s growth will become more inclusive and consistent with the African Union’s Agenda 2063 and the Sustainable Development Goals.

This long term growth program will ensure that Africa moves from the bottom to the very top of global value chains.

Further Gains

We will no longer produce 75% of all cocoa beans in the world, but yet, enjoy only 2% of the over $100 billion chocolate market.

We will no longer produce most of the maize in the world, yet get peanuts from the multibillion dollar cornflakes market.

Africa is blessed. We have land, minerals, sunshine and most importantly, a large population of creative and energetic young people. Africa therefore has no business being poor.

We should not develop by begging but by the discipline of investment. And the best way of attracting such level of investment that will not only close Africa’s infrastructure investment gap which today stands at $68-108 billion, but accelerate industrialization which will unlock Africa’s potential is by establishing special economic zones where private sector investments can thrive.

If the Asian Tigers did it and it worked perfectly, Africa’s experience won’t be different.

We must create special economic zones that will allow us take full advantage of the Africa’s Continental Free Trade Agreement (CFTA) which the African Union member states have made.

The time to act is now!

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