AfCFTA considers Special Economic Zones

Africa’s dependence on global value chains has exposed the continent due to the advent of the novel coronavirus pandemic that has paralysed world markets and claiming lives in excess of 400 000.

The continent has to re-think the industrial development value chains to achieve business resilience during this Covid-19 pandemic.

One of the long-term objectives of the AfCFTA is to boost intra–Africa trade beyond the current 18 percent that pales in the shadow of 36 percent in comparison with Africa trade alongside other global countries.

The Africa Regional Integration Index Report of 2019 identifies infrastructure development and productive capacity development as key in implementing the AfCFTA.

A number of recommendations have been identified in the report which include innovation, revamping regional supply chains across sectors, increase in technology uptake, higher quality inputs and adopting current modern marketing techniques.

These strategies resonate with the continent more so as Africa seeks to move away from depending on commodities, recover from over reliance on global supplies chains.

The Special Economic Zones (SEZ) are being considered strongly by the AfCFTA as one of the recovery strategies from Covid-19.

The SEZ concept has been around for more than 50 years all over the world including Africa. The marauding coronavirus has not spared the vulnerable Special Economic Zones in Africa due to the links with global supply chains.

The decline of international trade by 13 percent has ushered a niche for Africa however, this time, the SEZ’s focus will be more on the huge African markets that will be created by the AfCFTA.

Covid-19 has also ushered a new dispensation where multi-lateralism is under severe threat while economic nationalism and hegemony is slowly ascending.

Africa has to be inward looking for markets through intra–Africa trade. In addition to spur industrialisation, the AfCFTA will expect Member States to pool resources together to exploit the economies of scale factor and the comparative advantage when designing Special Economic Zones.

This strategy may pay off regionally as well as when lobbying the international markets.

However, the success of economic contribution in countries is not without controversy. Some researchers have bemoaned the presence of Special Economic Zones especially in developing countries.

The United Nations Conference on Trade and Developmen (UNCTAD) research reveals that due to the much desired investment, SEZs are an attractive conduit to lure quality foreign direct investment (FDI).

It is important to mention that firms operating in SEZs can be domestic, foreign owned being joint ventures. Furthermore, the firms can be owned privately, publicly or foreign owned.

The service, infrastructure and management of the SEZs determine whether it is low end or high end.

These entities may enjoy a wide range of privileges from import tax on raw materials and capital goods for the manufacture of goods for export.

It is also common to grant SEZs rebates on utilities and grant tax concessions that could last five years. Nevertheless, labour laws are also relaxed in SEZs in comparison with the national labour regulations of the countries.

Research reveals that most SEZs fail to observe labour laws because of relaxed supervision on their activities.

It is these privileges that are enjoyed by the SEZs that spark criticism on them and raise questions over the economic contribution of SEZs to developing countries. According to the World Bank findings of 2011, SEZs in Africa fail to deliver on their mandate. The Zones have been portrayed as under achievers in Africa. Other literature attributes this failure to poor governess, lack of resources and lack of competitive strategies.

Article (3) (e) of AfCFTA emphasises socio–economic inclusivity for the development of Africa as one of its principal objective.

Gender equality is central in all the operations of AfCFTA. Literature by UNCTAD reveals how traditional Special Economic Zones were notorious of segregating women to unskilled positions that had no prospects for personal growth, training and promotion.

Increasingly, SEZs have reinvented themselves through the lens of Sustainable Development Goals to avoid their traditional pitfalls. Emerging SEZs are multi-industry in outlook and driven by huge appetite for high tech innovation.

These new SEZs have moved beyond labour intensive manufacturing processes, focusing on the preservation of environment, urban regeneration, use of scientific methods and regional development.

Furthermore, in other studies, some SEZs have regulations in place that promote gender equality and have incorporated child care and schooling facilities.

It is with this view that the AfCFTA focuses on SEZs as part of the strategic interventions to accelerate Africa’s industrialisation that will create employment and economic diversification while leaving none behind.

The AfCFTA with a market of US$2,5 forecast a boost of 50 percent intra–Africa trade and welfare gains amounting US$16 billion.

Goods and services produced within SEZs will be subject to AfCFTA rules of origin. This has been a matter of concern to Member States because of the apparent unfair competition induced by incentives that are obtaining within the SEZs.

These incentives may be interpreted as subsidies that cause injuries in the domestic market of other countries.

In the event of such disputes the WTO Agreement on Subsidies and Countervailing Measures is in place to address such disputes.

Incorporating SDGs in designing Special Economic Zones within the AfCFTA while leaning on WTO regulations will catapult industrialisation in Africa and ensure quick recovery of Africa’s economies from the impact of Covid-19.

Most importantly, the perception that Special Economic Zones are rent-seeking at the expense of the nation will also change.–

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