Thierry DÉAU, President of MERIDIAM: « The success of a SEZ must be part of a larger whole »

Thierry DÉAU, President and founder of MERIDIAM © DR

Source : Thierry DÉAU, Président de MERIDIAM : « La réussite d’une ZES doit s’inscrire dans un (…) – AfricaPresse.Paris

While Africa imports most of its manufactured goods, the goal of increasing levels of industrial transformation remains key. In theory, Africa has many assets – starting with access to raw materials, an abundant labor pool, and the rise of a consumer middle class – to achieve an emergence that relies on industrialization, import substitution, and insertion into global markets, all supported by an influx of foreign investment.

In this context, the creation of SEZs, in its various forms, has been and can be an important element of this emergence strategy, as shown by the proliferation of SEZs, particularly Chinese SEZs, on the African continent. 

On the one hand, by concentrating administrative and fiscal facilities and infrastructure in one place, the aim is to attract FDI, which is known to be selective and sensitive to the environment, in terms of its concentration in a certain number of zones or countries. On the other hand, the development of these zones, generally focused on one or more specific sectors, is supposed to generate spillover effects on the rest of the economy and other sectors once a strong industry has been structured.

The need for an articulation with the local economic ecosystem.

Beyond the theoretical discussions, it must be noted that practical achievements have so far produced contrasting results.

While many SEZs have been able to play a role in the structural transformation of their country’s economies and promote better integration into trade, others have suffered from “enclave effects”, a kind of SEZ outside the ground, making massive use of foreign labor, and therefore without any impact on employment and competitiveness in the host country because of the lack of articulation with the local economic fabric. Thus, if all other things being equal, companies perform better in SEZs than outside of them, the positive effects beyond the zone alone, on the scale of the region and the country, are far from being unequivocal.

And this is the main merit of this report, for us investors and for public decision-makers, that it reminds us, in the light of past and present experience, that the success of a SEZ, beyond the resources deployed within it, must be part of a larger whole, which involves and depends on both the host country and potential foreign partners.

Thus, in order to succeed, SEZs must benefit from a minimum level of national capacity and cannot be a substitute for more global and structural reforms, both in terms of education and training, in order to ensure a competent workforce, and in terms of access to infrastructure and transport corridors, or even benefit from provisions such as the “local processing obligation”, as the flagship example of the Nkok zone in Gabon has done in the timber sector.

Rethinking the SEZ model model that is more inclusive and sustainable.

Similarly, assistance in the creation of SEZs by foreign partners can be valuable from a manufacturing or associated infrastructure point of view, but can only succeed and benefit the country if it is associated with skills transfers and the implementation of cooperation between companies in the zone and local companies. 

This is the direction that the current redefinition of Afro-European relations could take, guided by a growing desire to promote a partnership logic that respects the sovereignty of states in the long term.

It is up to us, investors, and public decision-makers, to draw the consequences of this while infrastructure constraints remain severe, global value chains are unstructured, and, all in all, the integration of the continent remains very weak. 

The second merit of this report is that it calls for a rethinking of the SEZ model that is more likely to achieve inclusive and sustainable industrialization, which, on the one hand, promotes integration into international trade through the creation of local and subregional value chains around SEZs, and, on the other hand, contributes to closing the infrastructure gap through the development of regional corridors and multimodal platforms, as some SEZs already offer.

For the latter, as for local economies, it is now incumbent that local and subregional markets account for a growing share of the outlets for the processing industries that the SEZs host. And it is to these ambitious objectives that Meridiam is working to give substance within the framework of the current development in West Africa of its first special economic zone.

Thierry DÉAU, President and founder of MERIDIAM

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