Bryan Robinson - African Special Economic Zones Lessons and Investments from China-Palgrave Macmillan (2022)

African Special
Economic Zones
Lessons and Investments from China
Bryan Robinson
African Special Economic Zones
Bryan Robinson
African Special
Economic Zones
Lessons and Investments from China
Bryan Robinson
Nelson Mandela University
Port Elizabeth, South Africa
ISBN 978-981-16-8104-2
ISBN 978-981-16-8105-9 (eBook)
https://doi.org/10.1007/978-981-16-8105-9
© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer
Nature Singapore Pte Ltd. 2022
This work is subject to copyright. All rights are solely and exclusively licensed by the
Publisher, whether the whole or part of the material is concerned, specifically the rights
of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on
microfilms or in any other physical way, and transmission or information storage and
retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology
now known or hereafter developed.
The use of general descriptive names, registered names, trademarks, service marks, etc.
in this publication does not imply, even in the absence of a specific statement, that such
names are exempt from the relevant protective laws and regulations and therefore free for
general use.
The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither
the publisher nor the authors or the editors give a warranty, expressed or implied, with
respect to the material contained herein or for any errors or omissions that may have been
made. The publisher remains neutral with regard to jurisdictional claims in published maps
and institutional affiliations.
Cover image: Zambia-China Economic & Trade Cooperation Zone (ZCCZ) headquarters
at the Chambishi Multi Facility Economic Zone, captured by the author
This Palgrave Macmillan imprint is published by the registered company Springer Nature
Singapore Pte Ltd.
The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore
189721, Singapore
The journeymen and women
Journey Back Journey Forward, Zambia, August 2011
Preface
I am sitting on the train from Beijing South Railway Station to the
Xiong’an New Area, a visionary new smart-city to ease the urban congestion of Beijing—not quite a Special Economic Zone… but I am curious
as to the conceptualisation of a new city out of almost nothing.
Watching the skyline change as the high-speed train hurtles ahead:
High-rise residential blocks many of which are mini-residential cities in
their own right; thousands of tree saplings, an indication of China’s policy
to re-forest and greenify the concrete jungle; walkways and parks with citizens enjoying the open areas; and lots of cranes and hectic construction
visible everywhere. Sometimes the railway-line intersects with a maze of
high-speed and bullet-train railway lines and new highways.
My t-shirt reads: ‘You can’t scare me—I was born in South Africa’. But
you can impress me. And every time I visit China, I am very impressed by
the sheer scale of the country’s development. This time my visit to China
is to see for my own eyes, how the Special Economic Zones have helped
transform the Chinese socio-economic landscape, and the lessons we as
Africans can glean from this.
My mind wanders back to a trip my family and I did in 2011. We called
it ‘Journey Back Journey Forward’, as we re-enacted a trip my father did
when he was 20 years old on a BSA Motorcycle. As a 76-year-old, this
time he ‘led the pack’ of my brother, cousin, nephews, friends and myself,
on his BMW 750 GS (which I now have as his better-half banned him
riding when he reached 80 years of age). We travelled from Johannesburg
vii
viii
PREFACE
in South Africa, through Botswana, Zambia, Malawi, Tanzania, Kenya and
Uganda, before re-tracing our trip back to South Africa.
We experienced corrugated roads, potholes, poor signage, many
policemen most of which were ‘on the take’, and generally poor infrastructure wherever we were. Of course, this wasn’t universal, but it was a
significant concern. While the entrepreneurial spirit of small traders and
service providers and a vibrant youthful population was noticeable, so was
the lack of social development and poverty was rife.
What I did notice though was an emerging Chinese presence. Chinese
people; signboards in Chinese; Chinese traders selling Chinese goods,
and most obvious were the Chinese construction companies building new
roads, public buildings and other infrastructure. This was the beginning of
my interest in the relationship between China and Africa, and a couple of
years later, I partnered with Kobus Jonker to evaluate the affiliation which
culminated in the book ‘China’s Impact on the African Renaissance—the
Baobab Grows’.
The journey hasn’t ended for me yet though, and as I sit on this train,
I look forward to travelling to Special Economic Zones in China and
in Africa, in order to critically evaluate the success factors of SEZs, the
constraints to the success of the proliferation of these zones in Africa,
how China can contribute to the fortune of these zones through lessons
and investment, and the ultimate quest will as always be, how can and
will these zones better the lives of Africans.
I trust you will enjoy and learn from this journey with me.
Port Elizabeth, South Africa
Bryan Robinson
Acknowledgements
I believe the success of writing a book that covers such diverse and
complex issues, requires the author to acknowledge their own limitation
of knowledge and reach out to others who can guide them along the
long journey to publication. This was certainly the case in writing this
book and I am grateful to a great number of people who enthusiastically
supported me along the way.
My co-author of a book published on China’s engagement in Africa,
entitled ‘China’s Impact on the African Renaissance—The Baobab
Grows’, Prof. Kobus Jonker, not only taught me a great deal during the
writing of that book, but has also been a mentor and friend to me over
the years since I have been affiliated to Nelson Mandela University Business School. The number of times I have ‘popped’ into his office are too
numerous to mention, yet he has always shown enthusiasm for my ideas
and challenged my preconceptions. I owe a great deal of gratitude for his
assistance and influence.
For a book of this nature to be balanced in viewpoints, it was of course
necessary to obtain a Chinese perspective on the issues raised, and to
access Chinese initiated SEZs and visit and speak to Chinese investors
in these zones. H.E. Ambassador Lin Songtian of the Embassy of the
People’s Republic of China in the Republic of South Africa has provided
the opportunity to visit China and visit the city-sized SEZs in China, as
well as opened numerous doors throughout Africa through the respective
Chinese Embassies in those countries in which research was conducted.
ix
x
ACKNOWLEDGEMENTS
Mr. Zhengze Hu, support staff of the Embassy, assisted in liaising with
the initial contact with the other Chinese Embassies in Africa to obtain
access to their zones. These embassies have in turn gone out of their way
to assist me in accessing information and to gain access to the respective
Zones and companies. Other Chinese individuals who contributed to the
success of the book include the following: Mr. Zhang Pengcheng of the
Embassy of the People’s Republic of China in the Federal Democratic of
Ethiopia who kindly provided assistance in accessing some of the many
SEZs in Ethiopia including the Eastern Industrial Park, where Ms Dong
Lingpei provided insight and guided me through the Zone itself, introducing company representatives, and viewing the manufacturing facilities
of some of the larger Chinese investors.
In the Federal Republic of Nigeria, Wang Yichen of the Embassy of the
People’s Republic of China facilitated visits to both the Lekki Free Zone
and the Ogun-Guangdong Free Trade Zone, both of which are situated
just outside the city of Lagos. My Denny Gao, Manager of Marketing
of the Lekki Free Zone Development Company hosted me for the day,
introducing me to the Managing Director of the Zone, Mr. Xigong
Huang; Mr. Oyewole Adegoke the General Manager of Marketing; and
Elvis Njoku, the Human Resources Officer, all of whom provided valuable insights into the operations of the Zone. Jesse Gao and Daniel Che,
both Assistants to the General Manager of the Ogun-Guangdong Free
Trade Zone, hosted me for the day at the Zone. I was fortunate enough
to have also met some investors in the zone who shared their thoughts
with me, such as Mr. Leo of Hewang Packaging and Printing, and Mr.
Xianli Zhang and Mr. Eric Xu (in a later follow-up VoiP call) of Green
Power Utility.
I was warmly welcomed when I visited the Chambishi Multi-Facility
Economic Zone, a division of the Zambia China Economic & Trade
Cooperation Zone (ZCCZ). Mr. Liao Zibin the Vice Chairman and
General Manager of ZCCZ, Steven Lindunda, Zhenni Liu and Alan, all
from the Zone, graciously entertained my many questions, and guided
me through their impressive head office and the zone itself, where I also
met some zone investors including Mr. Zhang from Pingan Auto and Mr.
Liu of Sonomine Service Station.
Special mention of Rosanna Ma is necessary. Apart from assisting with
logistical arrangements for my field research trip to China, we spent much
time in Beijing, and Rosanna went out of her way to investigate my areas
of interest and share her findings and thoughts with me. This Chinese
ACKNOWLEDGEMENTS
xi
perspective helped provide a balanced view of the book. In the process, I
feel I can now count Rosanna as one of my friends.
Prof. Gerd Schwandner of the Anette & Gerd Schwandner Foundation
for the Promotion of Science and Culture with an avid interest in SinoAfrican-German geopolitical issues, provided guidance and enthusiasm
for the project. Graham Taylor of the Coega Development Corporation kindly shared his insights with me. Being involved from the inception
of the Coega SEZ, he had a wealth of knowledge which he gladly
imparted to me.
This work is based on the research supported by the National Institute
for the Humanities and Social Sciences. Opinions, findings and conclusions or recommendations expressed is that of the author, and the NIHSS
accepts no liability in this regard.
Definition of Special Economic Zones
At the outset, I would like to explain that I have taken a very broad
approach to the definition of a Special Economic Zone. In actual fact,
the definition has very few delimitations.
Claude Baissac (2011) echoes the array of economic zones, explaining
that the multiplicity of names and forms of zones are due to numerous
factors, including
(1) the need to differentiate among types of zones that display very real
differences in form and function; (2) differences in economic terminology
among countries; (3) zone promoters’ desire to differentiate their product
from those of the competition; and (4) the consequences of multiple
translations. Definitions vary across countries and institutions, and evolve
continuously as new types of zones are developed and older types disappear
or are adapted. Any attempt at a comprehensive definition of economic
zones must be sufficiently broad to encompass the bewildering array of
past, present, and future zones, and yet sufficiently precise to exclude those
that do not display the essential structural features that make a zone a zone.
To substantiate this broad approach, it is necessary to consider how vastly
different Special Economic Zones are in the world. Some of China’s
Zones are entire mega-cities, while in Africa, many are quite small. Yet
the underlying premise is the same: These are geographic areas that have
been demarcated for stimulating investment and economic development.
By having such a wide definition, we can apply some of the lessons learnt
in Chinese Special Economic Zones to the successful implementation of
such zones in Africa.
xiii
Pillar 2:
Government
support
Leadership
support
Pillar 6:
Integration
People
Location
Government
policy
Protocol 7: Protocol 8: Protocol 9:
Modern International Addressing
shortservice
cooperation
comings
delivery
Pillar 5:
Protocol 6:
Phased
approach
Pillar 4:
Protocol 5:
Favourable
Investment
Climate
Pillar 3:
Protocol 4:
Innovation
& learning
Pillar 1:
Protocol 2: Protocol 3:
Ease of Preferential
policies
business
African Model of Special Economic Zones
Protocol 1:
Phased
approach
Sustainable development
Infrastructure
Pillar 7:
Protocol 10: Protocol 11: Protocol 12:
Social
Diversified
Export
system
orientation industries
xiv
DEFINITION OF SPECIAL ECONOMIC ZONES
DEFINITION OF SPECIAL ECONOMIC ZONES
xv
Therefore, zones include industrial parks, industrial clusters, industrial development zones, export processing zones, economic cooperation
zones, economic processing zones, free-trade zones, free ports, foreign
trade zones… the list goes on, and yes, Special Economic Zones. Ownership and the financing of the zones can differ significantly, some may be
government owned, others privately owned, or something in between.
Ownership may be domestic or foreign, or again, something in between.
Some have significant government support, others experience the
constraints of government bureaucracy, or even worse, government ineptitude and corruption. Some have management and customs offices in
conjunction with the state, others offer little support in this regard. Some
have superior infrastructure, some have very little—infrastructure may be
provided by the state, but in many cases, infrastructure especially in Africa,
is financed by the investors themselves.
So please forgive me for such a wide interpretation, but it was necessary
to overcome the smorgasbord of configurations of economic zones.
Reference
Baissac, C. 2011. Brief History of SEZs and Overview of Policy Debates. In
T. Farole (Ed.), Special Economic Zones in Africa: Comparing Performance
and Learning from Global Experience. Washington: The International Bank
for Reconstruction and Development / The World Bank. © World Bank.
[Online]. Accessed from: http://documents.worldbank.org/curated/en/996
871468008466349/pdf/600590PUB0ID181onomic09780821386385.pdf
(accessed 23 April 2020). License: Creative Commons Attribution License
(CC BY 3.0 IGO). (http://creative-commons.org/licenses/by/3.0/igo/).
Contents
Part I
1
2
Context
Africa’s Economies
1.1
Africa: A Continent of Contrasts
1.2
The African Tree of Organic Growth
1.3
The State of African Economies and Economic
Growth Prospects
1.4
Global, Regional and National Efforts to Stimulate
Sustainable Economic Development in Africa
1.4.1
International and Regional Institutions
for Development
1.4.2
National Development Finance
Institutions
1.5
Foreign Direct Investment
1.6
What Is Needed to Shift Africa Towards Sustainable
Development?
References
China’s Surge in Growth Facilitated by Special
Economic Zones
2.1
Special Economic Zones: A Key Development Policy
Instrument
2.2
Shenzhen Special Economic Zone
2.3
Chapter I—The Initial Phase: 1978–1992
3
3
10
14
16
16
22
26
27
32
35
38
43
46
xvii
xviii
CONTENTS
2.4
Chapter II—Creating New Advantages, Making
More Progress: 1992–2002
2.5
Chapter III—Braving a New Way with Scientific
Development Outlook: 2002–2012
2.6
Zhuhai SEZ
2.7
Shantou Special Economic Zone
2.8
Conclusion
References
3
The Chinese Special Economic Zone Model and China
of the Future
3.1
The ‘Pillars’ of the Chinese Model of Special
Economic Zones
3.2
The ‘Protocols’ of the Chinese Model of Special
Economic Zones
3.3
The Chinese Model of Special Economic Zones
3.4
Epilogue: The Future of Chinese Development
3.5
Xiong’an New Area
3.6
Belt and Road Initiative
3.7
Conclusion
References
50
52
54
57
59
60
61
62
62
65
66
73
77
80
80
Part II The Emergence of Chinese Special Economic
Zones in Africa
4
China in Africa
4.1
China’s Intricate Relationship with Africa
4.1.1
Political and International Cooperation
4.1.2
Development Assistance
4.1.3
Humanitarian Support, Peacekeeping
Efforts, Military Cooperation, and Law
Enforcement
4.1.4
Education and Training
4.1.5
Science and Technology
4.1.6
Health
4.1.7
Environmental Issues
4.1.8
Cultural and Other Exchanges
4.1.9
Trade
4.1.10
Chinese Foreign Direct Investment
in Africa
85
87
89
89
90
91
91
92
92
93
93
95
CONTENTS
Natural Resources for China
and Infrastructure for Africa
4.1.12
Chinese Loans, Debt-Traps and Debt
Forgiveness
4.1.13
China’s Non-Intervention Policy
and One-China Conditionality
4.1.14
Facts and Fallacies About the Impact
of China on Africa
4.2
China’s Economic Policy in Africa
4.2.1
The Forum on China-Africa Cooperation
(FOCAC)
4.2.2
FOCAC Economic Cooperation
with a Specific Focus on Industrialisation
and Special Economic Zones
4.2.3
FOCAC: Other Strategic Areas
of Cooperation
4.2.4
BRICS Plus
4.3
Conclusion
References
xix
4.1.11
5
The Emergence of Chinese Interest in Special
Economic Zones in Africa
5.1
Special Economic Zones in Africa
5.1.1
Investment
5.1.2
Exports
5.1.3
Employment
5.2
Existing and Planned Special Economic Zones
in Africa
5.3
Chinese Special Economic Zones: Policy on Global
Investment
5.4
Chinese Special Economic Zones in Africa
5.5
Conclusion
References
97
99
100
101
102
102
103
103
103
108
110
111
111
113
113
115
117
117
126
130
132
Part III Evaluating Special Economic Zones in Africa
6
Critical Issues for Chinese Investment in Special
Economic Zones in Africa
6.1
Financial Motivation
6.1.1
Tax Incentives
137
139
140
xx
CONTENTS
6.1.2
Duty Free Imports of Capital Equipment,
Supplies and Raw Materials
6.1.3
Subsidised Utilities and Rental Rates
6.1.4
Financing and Preferential Interest Rates
6.2
Ease of Business
6.2.1
Ease of Business Initiatives
6.2.2
Permits and Licenses
6.2.3
Ability to Employ Foreign Nationals,
Visas and Work Permits
6.3
Special Economic Zone Management
and Infrastructure
6.3.1
Ownership and Management of Zones
6.3.2
Suitable Zone Infrastructure
6.3.3
In-house Customs Office
6.4
Location and Market Opportunities
6.4.1
Location Advantages and Disadvantages
6.4.2
Domestic Market
6.5
Human and Other Resources
6.5.1
Labour Productivity and Labour Cost
and Labour Legislation
6.5.2
Access to Raw Material, Goods
and Services, and Equipment
6.6
Ownership and Profits
6.6.1
No Restrictions on Foreign Ownership
6.6.2
Currency, Profits and Repatriation
of Profits
6.7
Lifestyle
6.8
African Preferential Trade Arrangements
6.9
Chinese Policy Towards Africa
6.10 Reflection on the Pillars and Protocols of the Chinese
Model of Special Economic Zones
References
7
Labour: Obstacles and Opportunities
7.1
The Scourge of Unemployment, Lack of Skills
and Low Productivity in Africa
7.1.1
Unemployment in Africa
7.1.2
Skills Levels in Africa
7.1.3
Wage Rates
143
145
146
148
148
149
149
149
151
153
154
156
156
159
161
161
163
163
164
164
165
167
169
170
172
175
175
176
177
181
CONTENTS
7.2
7.3
7.4
Economics 101: The Labour Market
The Decision: Employ Chinese or African Labour?
Perspectives on Labour in Africa by Chinese
Investors in Special Economic Zones
7.4.1
Wage Rates, Education and Skills,
and Productivity
7.4.2
Labour Legislation and Unions
7.5
Case Study: South Africa’s Labour Environment
and Job Creation in Its Special Economic Zones
7.5.1
South Africa: High Unemployment,
Limited Skills, Low Productivity and High
Inequality
7.5.2
Policies and Institutions Supporting
Industrialisation and Special Economic
Zones
7.5.3
Organised Labour
and Politics—A Volatile Combination
7.5.4
Labour Legislation
7.5.5
Overview of Special Economic Zones
in South Africa
7.5.6
Evaluation of the South African Special
Economic Zones Against the Pillars
and Protocols of China’s Model of Special
Economic Zones
References
8
The Social and Environmental Impact of Special
Economic Zones in Africa
8.1
The Social Dimension of China in Africa
8.2
Evidence from Special Economic Zones
8.2.1
Enterprise Development
8.2.2
Local Communities and Urbanisation
8.2.3
Infrastructural Benefits
8.2.4
Access to Services and Facilities
8.2.5
Conflict with Local Communities
8.3
The Chinese Diaspora in Africa, Chinese Migration
and Integration in local Communities
8.4
China’s Economic Growth and Environmental
Degradation
xxi
181
184
186
186
189
190
191
197
203
208
209
213
220
225
226
228
229
229
229
230
231
232
235
xxii
CONTENTS
8.4.1
8.4.2
Paris Agreement
China’s Policy Commitment to Mitigating
Climate Change
8.4.3
China’s Water Scarcity and Water
Pollution
8.5
Is China Shifting Environmental Risks to Emerging
Economies?
8.5.1
China’s Declarations Towards
Environmental Support in Africa
8.5.2
Chinese Special Economic Zones in Africa
and the Environment
8.6
Case Study: Ethiopia—An Environmental
Perspective
8.6.1
Ethiopia’s Eastern Industrial Park
8.7
Pillars and Protocols
References
9
African Governments’ Enabling (or Constraining)
Influence on Special Economic Zone Investment
by the Chinese
9.1
Political Leadership Commitment to Special
Economic Zones
9.1.1
Ethiopia
9.1.2
Zambia
9.1.3
Nigeria
9.2
Political Stability, Security and Safety
9.3
Government Policy
9.3.1
Export Orientation
9.3.2
Import Restrictions
9.3.3
Currency Fluctuations
9.3.4
Policy Uncertainty
9.4
Corruption
9.5
Infrastructure: Promises Made; Promises Broken
9.5.1
Ethiopia
9.5.2
Zambia
9.5.3
Nigeria: Promises Broken
9.6
Inadequate Service Delivery
9.7
Ease of Business
9.7.1
Bureaucracy
236
237
239
241
242
245
247
251
256
256
261
262
262
263
264
265
266
266
268
268
268
269
271
271
274
274
275
281
283
CONTENTS
9.7.2
9.7.3
Customs Office
Port Efficiency and Corruption: A Case
of Ogun-Guangdong Free Trade Zone
9.8
Case Study: Government Commitment
to Infrastructure of SEZs in South Africa
9.9
Pillars and Protocols
References
xxiii
283
284
284
287
290
Part IV The African Model of Special Economic Zones
10
Towards Impactful Special Economic Zones in Africa
10.1 Rwanda’s Kigali Special Economic Zone
10.1.1
From Ashes to Rejuvenation
10.1.2
Facilitating Investment Through
a Business-Friendly Environment
10.1.3
The Kigali Special Economic Zone
10.1.4
Critical Success Factors of the Kigali
Special Economic Zone—A Reflection
of the Chinese Model of Special Economic
Zones
10.2 Mauritius: An Island of a Special Economic Zone
10.2.1
Sailing Ahead in Economic Development
10.2.2
Export Processing Zones
10.2.3
The Jinfei Economic and Trade
Cooperation Zone: Not Living
up to Expectations
10.2.4
Mauritius of the Future
10.2.5
Key Learnings from Mauritius in Terms
of the Pillars and Protocols of the Chinese
Model of Special Economic Zones
10.3 The Lessons and Investments from China for Africa
10.3.1
Pillar 1: Leadership Support
10.3.2
Pillar 2: Government Support
10.3.3
Pillar 3: Government Policy
10.3.4
Pillar 4: Location
10.3.5
Pillar 5: People
10.3.6
Pillar 6: Integration
10.3.7
Pillar 7: Infrastructure
10.3.8
Protocol 1: Phased Approach
293
294
294
296
297
300
302
303
305
306
309
309
311
312
312
314
314
316
317
318
318
xxiv
CONTENTS
10.3.9
10.3.10
10.3.11
10.3.12
Protocol 2: Ease of Business
Protocol 3: Preferential Policies
Protocol 4: Innovation and Learning
Protocol 5: Favourable Investment
Climate
10.3.13 Protocol 6: Modern Service Industry
10.3.14 Protocol 7: Environmental Consideration
10.3.15 Protocol 8: International Cooperation
10.3.16 Protocol 9: Address Shortcomings
10.3.17 Protocol 10: Social System
10.3.18 Protocol 11 and 12: Export Orientation
and Diversifies Industries
10.4 The African Model of Special Economic Zones
References
Index
319
320
320
321
321
322
323
323
324
324
325
327
329
List of Figures
Fig. 1.1
Fig. 1.2
Fig. 1.3
Fig. 2.1
Fig. 2.2
Fig. 2.3
Fig. 2.4
Fig. 2.5
Fig. 2.6
Fig. 2.7
Fig. 2.8
Fig. 2.9
Fig. 2.10
Fig. 2.11
Fig. 2.12
Population and poverty levels in Africa (World Bank
2019)
The African Tree of Organic Growth (Jonker
and Robinson 2018)
United Nations 17 Sustainable Development Goals
(2015)
GDP growth (annual %)—China (World Bank 2020)
Exports of goods and services (% of GDP)—China
(World Bank 2020)
Location on the Special Economic Zones in China
(Google Maps)
KK100: Second tallest building in Shenzhen with 100
floors
Shenzhen Municipal Government
Shenzhen North Railway Station—extensive transport
infrastructure connects the city with the rest of China
and the world
Colourful nightlife in Shenzhen
Shenzhen Museum
Seashore of high-rises: Zhuhai Yanlord Riverside Centre;
Statue of the Fisher Girl
Zhuhai Opera House in the design of an open pearl
Gongbei Port—gateway to Macau and beyond
Abandoned and decaying
10
11
28
39
40
41
45
46
47
48
49
55
55
56
57
xxv
xxvi
LIST OF FIGURES
Fig. 2.13
Fig. 2.14
Fig. 2.15
Fig. 3.1
Fig. 3.2
Fig. 3.3
Fig. 3.4
Fig. 3.5
Fig. 3.6
Fig. 3.7
Fig. 3.8
Fig. 3.9
Fig. 3.10
Fig.
Fig.
Fig.
Fig.
Fig.
Fig.
3.11
3.12
3.13
3.14
3.15
4.1
Fig. 4.2
Fig. 4.3
Beautiful architecture with evidence of urban restoration
efforts
Port and railway station connecting Shantou to China
and the rest of the world
Various industrial parks are found in the Zone
One of the original planning documents
for the Shenzhen Special Economic Zone, dated 1986:
‘General Planning of Shenzhen Special Economic Zone’
The 7 Pillars of the Chinese Model of Special Economic
Zones
The 12 Pillars of the Chinese Model of Special
Economic Zones
The Chinese Model of Special Economic Zones
The contribution of consumption, investment and net
exports to GDP Growth (China Economic Update,
World Bank 2019a: 11)
Global Economic Prospects—Forecasts—China (World
Bank Data 2020)
The impact of the 3D’s on the production Frontiers
3D’s (World Bank, Innovative China: New Drivers
for Growth 2019b: XIX)
The Baiyangdian Lake area with fields of the giant lotus
flowers
Typical streets of the Xiong’an area—Far
from the high-rise city it is to become
Typical streets of the Xiong’an New Area—Karaoke,
a favourite pastime
Xiong’an New Area—signs of what is to come
Almost deserted new 3-lane city roads
The Belt and Road Initiative (World Bank 2020)
Nairobi and Mombasa Terminal
New and modern trains—the ‘Madakara Express’
Trade between China and sub-Saharan Africa: Relative
Trade Shares (Pigato and Wang 2015, source World
Integrated Trade Solution Data, World Bank)
Trade between China and sub-Saharan Africa: Imports,
exports, and trade balance (Pigato and Wang 2015,
source World Integrated Trade Solution Data, World
Bank)
Sub-Saharan Africa’s imports from China (Pigato
and Tang 2015, source World Integrated Trade Solution
Data, World Bank)
58
58
58
62
63
64
65
67
67
72
74
75
75
76
76
77
79
79
94
95
96
LIST OF FIGURES
Fig. 4.4
Fig. 4.5
Fig. 4.6
Fig. 5.1
Fig. 5.2
Fig. 5.3
Fig. 6.1
Fig. 6.2
Fig. 6.3
Fig.
Fig.
Fig.
Fig.
Fig.
7.1
7.2
7.3
7.4
7.5
Fig. 7.6
Fig. 7.7
Fig. 7.8
Fig. 7.9
Fig. 7.10
Fig. 7.11
Chinese FDI Flows to SSA, 2003–2013 (Pigato
and Tang 2015, sourced from UNCTAD 2014
and MOFCOM 2014)
Chinese FDI in sub-Saharan Africa, by country
in USD Millions (Pigato and Tang 2015, sourced
from MOFCOM 2014)
Chinese FDI in sub-Saharan Africa, by sector (%)
(Pigato and Tang 2015, sourced from State Council
of China, 2013)
Number of firms operating in the Economic Zones,
2009 (Farole 2011)
Ownership structure of SEZ Investments, 2009 (Farole
2011: 74)
SEZ export growth trajectories by year of operation
(Farole 2011)
Population growth in sub-Saharan Africa (World Bank
2020)
One in four proportion of the world’s people in 2050
will be from sub-Saharan Africa (World Bank 2020)
The pillars and protocols of the Chinese model
of special economic zones that attract Chinese
investment to African zones
Labour supply in rural areas during urbanisation
Labour supply and demand in urban areas
Skills training and productivity
Productivity and wage rates
South Africa’s GDP growth (annual %) (The World
Bank 2020)
Trends in the number of work stoppages in South
Africa, 2014–2018 (Department of Employment
and Labour 2019: 2)
Distribution of work stoppages by industry, 2014–2018
(Department of Employment and Labour 2019)
Trends in working days lost in South Africa (Department
of Employment and Labour 2019)
South African Special Economic Zones (Map data:
Google Maps, AfriGIS)
Evaluation of Pillars 1, 2, and 3 of the Chinese Model
of Special Economic Zones: Leadership support,
policital will, and government policy
Evaluation of Pillar 4 of the Chinese Model of Special
Economic Zones in Africa
xxvii
96
97
98
114
115
116
159
159
171
182
183
184
185
190
205
206
207
210
213
214
xxviii
LIST OF FIGURES
Fig. 7.12
Fig. 7.13
Fig. 7.14
Fig. 7.15
Fig. 8.1
Fig. 8.2
Fig. 8.3
Fig. 8.4
Fig. 8.5
Fig. 8.6
Fig.
Fig.
Fig.
Fig.
Fig.
Fig.
8.7
8.8
8.9
8.10
8.11
8.12
Fig. 9.1
Fig. 9.2
Fig. 9.3
Fig. 9.4
Fig. 9.5
Fig.
Fig.
Fig.
Fig.
9.6
9.7
9.8
9.9
Fig. 9.10
Evaluation of Pillar 5 of the Chinese Model of Special
Economic Zones in Africa
Evaluation of Pillar 6 of the Chinese Model of Special
Economic Zones in Africa
Evaluation of Pillar 7 of the Chinese Model of Special
Economic Zones in Africa
Evaluation of the protocols of the Chinese Model
of Special Economic Zones in South Africa
Road to Nigeria’s Ogun-Guangdong Free Trade Zone
The Sinozam Friendship Hospital
Land encroachment in the Chambishi multi-facility
Economic Zone—crops planted by a local land-rights
claimant
Lekki Free Trade Zone restaurant with Chinese
decorations
Recreational facilities at Chambishi multi-facility
Economic Zone’s residential complex for Chinese
employees
Federal Democratic Republic of Ethiopia’s Intended
Nationally Determined Contribution (INDC) (2015: 1)
of greenhouse gas emission reduction
The imposing entrance to Eastern Industrial Park
Location of the Eastern Industrial Park (Google Earth)
SSP pharmaceutical
Huajian shoe factory
Lida Textile—denim manufacturer
The African SEZ pillars and protocols of the Chinese
Model of Special Economic Zones in Africa
Corruption Perceptions Index 2020: sub-Saharan Africa
Ethiopia’s Chinese built light-rail system in Addis Ababa
The imposing new railway stations on the outskirts
of Addis Ababa and Dire Dawa
Queues to board the modern carriages from Dire Dawa
to Addis Ababa
The 3-lane highway between Addis Ababa
and the Eastern Industrial Park
Seemingly abandoned rail or road construction
Truck weaving through the rutted roads
Lekki-Free Zone Water Treatment Plant
Percentage of firms experiencing electrical outages
(Blimpo and Cosgrove-Davies 2019: 19)
Percentage of firms owning or sharing a generator
(Blimpo and Cosgrove-Davies 2019: 19)
215
218
219
220
230
231
232
234
234
249
252
253
254
254
255
256
270
272
272
273
273
275
275
276
277
277
LIST OF FIGURES
Fig. 9.11
Fig. 9.12
Fig. 9.13
Fig. 9.14
Fig. 9.15
Fig.
Fig.
Fig.
Fig.
9.16
9.17
9.18
9.19
Fig. 10.1
Fig. 10.2
Fig. 10.3
Fig. 10.4
Fig.
Fig.
Fig.
Fig.
Fig.
Fig.
Fig.
Fig.
Fig.
Fig.
Fig.
Fig.
Fig.
Fig.
Fig.
Fig.
Fig.
Fig.
Fig.
Fig.
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
Access to reliable electricity by firms (Blimpo
and Cosgrove-Davies 2019: 20)
Ogun-Guangdong Free Trade Zone Power Plant
Lekki-Free Zone Power Plant
The Zambia–China Economic and Trade Cooperation
Zone Power Station
What is measured in Doing Business (Doing Business
2020)
Coega new access road system—waiting for investors
Deepwater Port of Ngqhurha
BAIC SA’s sprawling plant at the COEGA SEZ
The African SEZ pillars and protocols of the Chinese
Model of Special Economic Zones in Africa
Rwanda’s GDP from 1960 to 2020 (Word Bank 2021)
Kigali Special Economic Zone
China Star Construction in the Kigali Special Economic
Zone
Carnegie Mellon University Africa in the Kigali Special
Economic Zone
Pillar 1 of Leadership support
Pillar 3 of supportive government policy
Protocol 1 of a phased approach
Protocol of ease of business
Protocol 4 of innovation and learning
Protocol 7 of environmental consideration
Protocol 12 of diversified industries
GDP Mauritius (The World Bank 2021)
Pillar 3: Government Policy
Pillar 4: Location
Pillar 5: People
Pillar 6: Integration
Protocol 1: Phased approach
Ease of business
Protocol 12: Diversified industries
Protocol 10: Social System
African Arch 1: Peace, safety and security
African Arch 2: Inter and Intra-African continental trade
African Arch 3: African accountability
The African Model of Special Economic Zones
xxix
278
279
279
281
281
285
286
286
289
295
298
299
300
301
301
301
301
301
302
302
304
310
310
310
310
311
311
311
311
313
315
322
326
List of Tables
Table 1.1
Table 1.2
Table 1.3
Table 1.4
Table 1.5
Table 1.6
Table 1.7
Table 1.8
Table 2.1
Table 3.1
Table 3.2
Table 3.3
Table 4.1
Country indicators
The roots of the African Tree of Organic Growth
(Jonker and Robinson 2018)
The trunk of the African Tree of Organic Growth
(Jonker and Robinson 2018)
The leaves and fruit of the African Tree of Organic
Growth (Jonker and Robinson 2018)
The seven aspirations of Agenda 2063 (African Union
2020)
Flagship projects of Agenda 2063 (African Union 2020)
National development finance institutions
Pre-conditions for Africa Nations’ sustainable
development
Specialised zones
A summary of the 3D’s (World Bank, Innovative China:
New Drivers for Growth 2019b: 19–149)
A summary of the Six Strategic Choices (World Bank,
Innovative China: New Drivers for Growth 2019b:
19–149)
A summary of the 7 Areas of Structural and Institutional
Reforms (World Bank, Innovative China: New Drivers
for Growth 2019b: 19–149)
Excerpts from the Five Major Pillars of China
and Africa’s strategic partnership (Xi 2017: 496–497)
5
12
12
13
23
24
26
29
43
68
69
70
86
xxxi
xxxii
LIST OF TABLES
Table 4.2
Table 4.3
Table 4.4
Table 4.5
Table 4.6
Table 5.1
Table 5.2
Table
Table
Table
Table
Table
5.3
5.4
5.5
5.6
5.7
Table 5.8
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
Table
5.9
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
6.9
6.10
6.11
6.12
6.13
Table 6.14
Table 6.15
Excerpts from the Ten Cooperation Programs of China
with Africa (Xi 2017: 498–501)
Fallacies and facts about the impact of China on Africa
(Jonker and Robinson 2018: 277)
Summary of the FOCAC Beijing Action Plan
2019–2021 (2018): Industrialisation and Special
Economic Zones
Summary of the FOCAC Beijing Action Plan
2019–2021 (2018): Areas of strategic cooperation
Selected excerpts from the BRICS Summit Declaration,
Brasilia 2019 (2020)
Summary of key developments in the evolution of SEZs
(Baissac 2011)
Overview of African Zone Programs by Decade
of Launch (Farole 2011; data from FIAS 2008)
SEZ investment statistics (Farole 2011: 71)
Employment contribution of SEZ (Farole 2011)
Special Economic Zones in Africa
Planned Special Economic Zones in Africa
Objectives of China’s overseas economic zones
(Bräutigam and Tang 2011a)
Special Economic Zones officially supported
by MOFCOM (Zeng 2016)
China’s seven Special Economic Zones in Africa
Tax holidays and allowances offered to investors
Favourable customs duties and requirements
VAT exemptions
Duty free imports of capital equipment and raw materials
Subsidised utilities and rentals
Facilitating ease of business
Permits and licenses
Work visas, permits and quotas
Infrastructure of Special Economic Zones
In-house customs’ offices at Special Economic Zones
Location advantages of selected Special Economic Zones
Domestic market access incentives
Special Economic Zones that allow for 100% foreign
ownership
Currency, profits and repatriation of profits by zones’
investors
Pleasant lifestyle offered in countries and their zones
87
101
104
106
109
112
113
114
116
118
124
125
127
128
141
144
146
147
148
150
151
152
155
155
158
161
164
166
168
LIST OF TABLES
Table 7.1
Table 7.2
Table 7.3
Table 7.4
Table 7.5
Table 8.1
Table 8.2
Table 8.3
Table 8.4
Table 8.5
Table 8.6
Table 9.1
Table 9.2
Unemployment levels in sub-Saharan Africa
Educational completion rates for sub-Saharan African
countries
Employment by industry in thousands (Stats SA (2)
2020)
Characteristics of the South African labour market
in 2017
Comparative analysis of SEZ wages per sector
and municipal wages (Coega Industrial Development
Zone: Zone Labour Agreement 2017 and Department
of Labour South Africa 2017)
Social Development Cooperation (FOCAC Beijing
Action Plan of 2019–2021)
A summary of China’s Intended Nationally Determined
Contributions (INDC)
Chinese water-related policies (Adapted from Key Water
Policies, Chien 2019)
Chinese industry and technology-related policies
(Adapted from Key Policies: Industry and Technology,
Chien 2019)
FOCAC Energy and Natural Resources commitments
(FOCAC Action Plan [2019–2021])
FOCAC Environmental and Climate Change
commitments (FOCAC Action Plan [2019–2021])
12 areas of business regulation (Doing Business 2020)
Abridged top 10 reasons to invest at Coega (Coega
Development Corporation 2021b)
xxxiii
176
178
192
193
217
227
238
240
240
243
244
282
288
PART I
Context
CHAPTER 1
Africa’s Economies
Africa. A continent blessed with rich and abundant natural resources and
a vibrant and diverse population, yet most African countries are far behind
in achieving their full potential, compromising Africans’ ability to live
productive and happy lives.
This chapter endeavours to provide a background to the rest of the
book by addressing Africa’s potential in the context of the social challenges that many countries in Africa face; consider the role that economic
development can play in facilitating a sustainable growth trajectory; the
level of economic performance and progress in Africa; global, regional and
national efforts to stimulate socio-economic development in Africa; and
the current attractiveness of African countries in attracting investment.
1.1
Africa: A Continent of Contrasts
Africa consists of 54 countries, or 56 countries if one includes the
disputed Somaliland and Western Sahara. And many of these countries
include an array of provinces or regions with their own languages and
unique cultures. This uniqueness and diversity is an important variable
whenever evaluating Africa in order to avoid generalisations.
African countries are lagging behind the world when one considers
most socio-economic indicators. A couple of indicators have been selected
© The Author(s), under exclusive license to Springer Nature
Singapore Pte Ltd. 2022
B. Robinson, African Special Economic Zones,
https://doi.org/10.1007/978-981-16-8105-9_1
3
4
B. ROBINSON
for 10 countries in Africa, as well as the USA, Germany and China to
provide a sense of the situation in Africa.
The various indexes presented in Table 1.1 highlight how African
countries rank below the USA and Germany and mostly below China.
In terms of the Human Development index, Angola, the DRC, South
Africa, Ethiopia, Rwanda, South Sudan, Egypt and Nigeria are all significantly below the USA, Germany and China. Mauritius and Algeria fare
slightly better than China but are still much below that of the USA and
Germany.
Poverty remains a stubborn problem in Africa. A report on accelerating
poverty reduction in Africa published by The World Bank (2019) highlights the fact that while the poverty rate may have reduced in Africa, due
to population growth, the number of Africans living in poverty continues
to grow (Fig. 1.1). In 1990, the poverty rate was 54%, and this has
dropped to 41% in 2015, but the number of poor increased during this
same period from 278 million to a worrying 413 million. The report
suggests that if this trend continues, African poverty will account for 90%
of global poverty in 2030.
Poverty reduction in Africa is complicated by many factors—such
as rural poverty with much of the population surviving on subsistence
farming; fragile economies; conflict; inequality between men and women;
and the slow decline of fertility rates raising population growth. The
World Bank report further suggests a number of interventions that
could mitigate the problem. For instance, ‘fertility-transition’ policies that
provide family planning programmes and female education that improves
their income opportunities. Another is better use of productive land
for rural communities to access the agricultural value chain, again with
government policy support. The challenge though is that public resources
in many African countries are severely constrained, which makes it difficult
to introduce sustainable poverty reduction programmes.
The problem of poverty is exacerbated by inequality. South Africa, the
most industrialised nation in Africa, has a terrible track record when it
comes to inequality, with a Gini coefficient of 63% with 50.5% of income
share held by the richest 10% of the population (United Nations Development Programme 2019). Referring to Table 1.1 once again, GDP growth
in many African countries has been quite phenomenal thanks mostly to
natural resource exploitation, but this new-found wealth has often landed
in the pockets of the elite. At the other extreme, fragile states that are
in negative growth, also exhibit significant inequality, for instance South
4
0.939
31.7
0.861
15
0.92
41.5
0.797
Human
Development
Index rank 2018
(out of 189
countries)
(United Nations
Development
Programme
2019)
Human
Development
Index Value 2018
(1 high/0 low)
(United Nations
Development
Programme
2019)
Gini Index (0
low inequality,
100 high
inequality) (World
Bank estimate)
Inequalityadjusted Human
Development
Index Value 2018
(1 high/0 low)
(United Nations
Development
Programme
2019)
0.636
38.6
0.758
85
Germany China
USA
Country indicators
Indicator
Table 1.1
0.574
42.7
0.574
149
113
63
0.316 0.463
42.1
0.459 0.705
179
0.337
35
0.47
173
0.382
43.7
0.536
157
0.688
38.5
0.796
66
0.264
46.3
0.413
186
Angola DRC South Ethiopia Rwanda Mauritius South
Africa
Sudan
0.492
31.8
0.7
116
Egypt
0.349
43
0.534
158
AFRICA’S ECONOMIES
(continued)
0.604
27.6
0.759
82
Algeria Nigeria
1
5
20.7%
24.8%
82.93
0.3%
0%
15.2%
30.6%
327.17
0.6%
1.2%
Income share
held by poorest
40% 2018
(United Nations
Development
Programme
2019)
Income share
held by richest
10% 2018
(United Nations
Development
Programme
2019)
Population in
millions, 2018
(The World Bank
Country Profile)
Population
growth annually,
2018 (The World
Bank Country
Profile)
Poverty
headcount ratio
at $1.90 per day,
2018 (The World
Bank Country
Profile)
0.7%
0.5%
1392.73
29.4%
17%
Germany China
USA
(continued)
Indicator
Table 1.1
30.1%
3.3%
30.81
32.3%
15%
50.5%
1.4%
76.6% 16.5%
3.2%
84.07 57.78
32%
15.5% 7.2%
30.8%
2.6%
109.22
31.4%
17.6%
55.5%
2.6%
12.3
35.6%
15.8%
0.5%
0.1%
1.27
29%
19.2%
42.7%
0.6%
10.98
33.2%
12.5%
Angola DRC South Ethiopia Rwanda Mauritius South
Africa
Sudan
1.3%
2%
98.42
27.8%
21.9%
Egypt
0.5%
2%
42.23
22.9%
53.5%
2.6%
195.87
32.7%
23.15% 15.1%
Algeria Nigeria
6
B. ROBINSON
54,560
81
1.6
98%
63,690
79
1.8
99%
GNI (Gross
National Income)
per capita, PPP
(Purchasing Price
Parity)
International $,
2018 (The World
Bank Country
Profile)
Life expectancy at
birth, 2018 (The
World Bank
Country Profile)
Fertility rate,
total, 2018
(births per
woman) (The
World Bank
Country Profile)
School enrolment,
secondary (%
gross), 2018 (The
World Bank
Country Profile)
N/A
1.7
76
18,170
Germany China
USA
Indicator
51%
5.6
60
6170
46%
6
60
900
105%
2.4
64
35%
4.4
66
13,250 2010
41%
4.1
68
2200
95%
1.4
75
26,080
11%
4.8
57
N/A
Angola DRC South Ethiopia Rwanda Mauritius South
Africa
Sudan
Algeria Nigeria
88%
3.4
72
42%
5.5
54
(continued)
N/A
3
76
12,100 14,970 5710
Egypt
1
AFRICA’S ECONOMIES
7
0.1%
0.4%
Prevalence of
HIV, total (% of
population ages
15–49), 2018
(The World Bank
Country Profile)
GDP, US$
Billions, 2018
(The World Bank
Country Profile)
GDP growth,
2018 (annual %)
(The World Bank
Country Profile)
Inflation, GDP
deflator (annual
%), 2018 (The
World Bank
Country Profile)
Industry
(including
construction),
value added (% of
GDP), 2018 (The
World Bank
Country Profile)
2%
0.8%
20.4%
1%
1.5%
1.5%
27%
2.9%
2.4%
18%
41%
2.9%
6.6%
42%
34.8%
0.8%
44%
26%
30.1% 3.9%
−2.1% 5.8%
27%
12.5%
6.8%
18%
1.7%
−0.8%
16%
3.8%
14.22
1.3%
8.6%
9.51
2.5%
33%
17.7%
0.1%
1.5%
Algeria Nigeria
35%
21.4%
40%
7.6%
1.4%
26%
10.2%
1.9%
250.89 173.76 397.27
0.1%
Egypt
−10.8% 5.3%
12.00
2.5%
Angola DRC South Ethiopia Rwanda Mauritius South
Africa
Sudan
20,544.34 3947.62 13,608.15 105.75 47.23 368.29 84.36
N/A
Germany China
USA
(continued)
Indicator
Table 1.1
8
B. ROBINSON
USA
20%
19%
15.8%
47%
41%
0.5%
Germany China
37%
34%
−6.8% N/A
23%
29%
23%
8%
−4.2% −4%
30%
30%
−3.1%
34%
17%
−1.9%
54%
41%
N/A
29%
37%
Angola DRC South Ethiopia Rwanda Mauritius South
Africa
Sudan
−11%
29%
19%
Egypt
N/A
32%
26%
N/A
18%
15%
Algeria Nigeria
Adapted from The World Bank Country Profiles (2020), Transparency International’s Corruption Perception Index (2018), World Happiness Report
2019 (Helliwell et al. 2019); Human Development Report (United Nations Development Programme 2019)
Exports of goods 12%
and Services (%
of GDP), 2018
(The World Bank
Country Profile)
Imports of goods 15%
and services (% of
GDP), 2018 (The
World Bank
Country Profile)
−5.2%
Net lending
(+)/Net
borrowing (−) (%
of GDP), 2018
(The World Bank
Country Profile)
Indicator
1
AFRICA’S ECONOMIES
9
10
B. ROBINSON
Fig. 1.1 Population and poverty levels in Africa (World Bank 2019)
Sudan with GDP contraction of 10.8% has 33.2% of its wealth held by
the 10% wealthiest of the population.
Other indicators reflect the impact of these problems. Referring to
Table 1.1 (The World Bank Country Profiles), life expectancy at birth
in the USA, Germany and China are in the 76–81 range, while it is in the
range of 54–60 for Angola, the DRC, South Sudan, and the lowest is 54
in Nigeria. Secondary school enrolment in the USA and Germany is just
under 100%, but 35% in Ethiopia, 41% in Rwanda, 42% in Nigeria, and a
dismal 11% in South Sudan.
1.2
The African Tree of Organic Growth
How can African countries change this status-quo? In 2018, Professor
Kobus Jonker and myself published a book entitled China’s Impact on the
African Renaissance: The Baobab Grows (Jonker and Robinson 2018).
The book explored a range of themes in evaluating China’s contribution to African Nations’ economic growth, social development and
environmental sustainability—the so-called African Renaissance.
The Baobab tree is synonymous with the African landscape. A beautiful
tree seemingly planted upside down in often severe conditions, it lives for
many hundreds of years and has become part of folk lore and serves as
a resource for humans and animals alike. The analogy of the tree was a
1
AFRICA’S ECONOMIES
11
constant theme throughout the book and one of the important contributions the book made was the proposed African Tree of Organic Growth
Paradigm depicted in Fig. 1.2.
Without getting into the complexities of economic growth versus
inclusive growth versus organic growth, organic growth was defined as
‘pursuing a path of national well-being for all citizens through the effective development of core resources and critical assets of the country’
(Jonker and Robinson 2018).
In other words, instead of adopting a ‘one shoe fits all’ approach to
development in Africa, the African Tree of Organic Growth acknowledges
that every country within Africa is fundamentally different, each with its
own unique resources, assets and structures at a particular point in time—
the roots of its organic growth. The roots could either be strong or be
indicative of shortcomings and constraints to development.
The roots detailed are the following (Table 1.2).
The trunk of the African Tree of Organic Growth depicts the growth
channels to produce wealth and capital. The trunk is a two-way channel
of conducting and transforming the ‘water and nutrients’ available from
the roots to produce the leaves and fruit. There is also the return
flow between the leaves and fruit back towards the roots —the future
Fig. 1.2 The African Tree of Organic Growth (Jonker and Robinson 2018)
12
B. ROBINSON
Table 1.2 The roots of the African Tree of Organic Growth (Jonker and
Robinson 2018)
People resources: people, their education and their competencies
Natural resources: minerals, oil, agricultural land, scenic beauty, etc.
Other critical assets: Existing infrastructure such as transport, ICT, power, water and
finance
Location and geo-political importance: Access to markets and geopolitical influence
Political structure: The continuum of political stability from strife, political
opportunism and incompetence towards an enabling political environment that
maintains law and order, protects human rights and enhances entrepreneurial activity
Economic structure that determines how wealth is created, distributed and consumed
within the primary, secondary and tertiary sectors
Cultural and social structure—the rich cultural heritages and value systems found in
Africa
Table 1.3 The trunk
of the African Tree of
Organic Growth (Jonker
and Robinson 2018)
Economic growth and diversification
Infrastructure
Education and skills
Governance and regulatory
Markets
Social and cultural
resources, assets and structures. Organic growth in terms of this paradigm
is therefore not linear, but rather depicts a multiplier effect.
The trunk’s effectiveness is influenced by both the ‘indigenous’ roots of
the particular country, but also by external factors, such as foreign direct
investment, international trade, geo-political competition, global warming
and a multitude of other factors. Some of these can be moderated by the
country, others not.
The trunk comprises the following growth channels (Table 1.3).
The leaves and fruit are the outcomes of this organic growth process.
This is much more than just economic growth outcomes such as GDP
growth, but reflects the capital and wealth that is created that ultimately
leads to improved well-being of the populace and contributes to stronger
roots for further development.
The leaves and fruit consist of the following capital and wealth
outcomes (Table 1.4).
1
AFRICA’S ECONOMIES
13
Table 1.4 The leaves and fruit of the African Tree of Organic Growth (Jonker
and Robinson 2018)
Social wealth where rights and duties are upheld, social indicators such as life
expectancy is improved, and law and order are maintained
Cultural wealth depicted by a strong cultural identity where diverse cultures and values
are respected and celebrated, and freedom of expression supported
Natural capital where environmental sustainability is prioritised, finite resources
protected and efforts are made to mitigate climate change externalities
Human capital is developed to improve knowledge and research, skills and
competencies, and productivity
Institutional capital is reflected through effective government and governance,
institutional strength, and fairness and justice
Produced capital outcomes of infrastructure, production capacity, and innovation and
technology
Financial capital of the availability of development finance; improved savings and
investment and the partnering with international players
Economic wealth that ensures employability, economic participation and indigenous
entrepreneurship
The African Tree of Organic Growth provides a valuable visual representation of the complexity of sustainable growth within African Nations.
The book you are now reading focusses on the growth channels,
specifically economic growth and diversification, yet the interrelatedness
between the various features of the African Tree of Organic growth
confirm that economic growth cannot be considered in isolation.
Therefore, while economic growth and diversification with a particular
consideration of special economic zones is the topic of the book, it is
acknowledged that the failure and successes of these zones and investment
levels in these zones is a function of the complex environment that the
paradigm presents.
For instance, indigenous labour may be plentiful in many countries
in Africa, yet skills may be lacking. This will be a constraint on foreign
companies wishing to invest and necessitate the payment of premium
wages for scarce skills such as that in the technical and engineering domain
or requiring the importation of skills and the resultant costs of using expatriates. Yet, these investors can contribute to skills transfer, thus providing
an improved labour skill set for the future. Infrastructure is another good
example—both a critical asset and a growth channel. The investment in
infrastructure facilitated by China and other countries plays an important role in the success of special economic zones as it eases and reduces
14
B. ROBINSON
the cost of transport and logistics or provides access to power and critical services. If not, Investors in zones may have to manage without or
provide their own infrastructure, at a significant cost.
These and other examples will be highlighted as the book progresses
through the Chapters.
1.3 The State of African Economies
and Economic Growth Prospects
Africa’s economic growth on a continental level seems quite strong at an
estimated 3.4% for 2019, above the World average of 3%, and that of
advanced economies which average 1.7%. Yet economic growth in Africa
has stagnated to some extent from the decade average of 5% (African
Development Bank 2020b).
Africa’s growth is mercurial in nature and particularly susceptible to
outside shocks. Angola and other oil exporters were ‘hit’ when the oil
price per barrel dropped from a high of $115 to less than $35 in 2016.
These economies had failed to diversify their economies and their dependence of oil export revenues impacted them terribly. Angola, for instance,
dropped from a GDP high of 8.542% at the beginning of the decade to
−2.58 in 2016 (World Bank 2020). At the time of writing this book, the
Coronavirus or Covid-19 was already been felt in Africa having a negative
impact on most industries especially the retail, manufacturing and tourism
industries.
The strong growth of 3.4% on the continent also fails to reflect the
poverty and inequality alluded to previously. It also fails to reflect how
regional and country differences can be significant in terms of growth.
East Africa’s estimated growth for 2019 was 5%; North Africa was 4.1%;
West Africa 3.7%; Central Africa 3.2%; and Southern Africa only 0.7%.
Country differences in 2019 GDPs were stark with South Sudan at 5.8%;
Egypt 5.6%; Mauritania 6.7%; Ghana 7.1%; and on the other side of the
spectrum, Zimbabwe −12.8%; the most diversified economy of South
Africa at only 0.7%. The GDP growth levels, and fluctuations in these
levels are complex and for 2019 were influenced by a number of factors,
for instance, the collapse of Zimbabwe’s monetary system led to the
distortion of their markets; inefficiencies and corruption in state-owned
enterprises in South Africa; the Ebola outbreak taking its toll in the
Democratic Republic of the Congo; and oil production problems due
to security issues in Libya (African Development Bank 2020b).
1
AFRICA’S ECONOMIES
15
Inflation remains a concern, although there are indications that there is
some improvement in lowering inflation due to the stabilizing of energy
prices and falling food prices, with a reduction of Africa’s inflation by 2
percentage points, from 11.2% in 2018 to 9.2% in 2019. Again, country
differences are prevalent: 32 countries in Africa reduced inflation levels
and 22 countries experienced a rise in inflation (African Development
Bank 2020b).
With regards monetary policy, Central Banks in Africa have generally utilised interest rate reductions to manage domestic demand and
encourage investment to stimulate growth. Examples of this approach
include Egypt, Nigeria, Namibia and Botswana. In cases of severe inflation, interest rates have been a tool to reduce hyper-inflation, although
the success of this approach is questionable: In 2019 Zimbabwe’s inflation was 200% and an increase on the interest rate of 2000 basis points
was announced, similarly Sudan raised interest rates by 220 basis points to
address their inflation of over 60% (African Development Bank 2020b).
Deficit to GDP ratios have improved in Africa from a level of 5.9%
in 2017 to 4.8% in 2019 mostly thanks to stable commodity prices and
revenues for natural resource exporters. Non-exporting countries also
showed some improvement thanks to fiscal policy that reduced large
fiscal expansion; improved resource mobilization; or cut spending due
to debt burdens. Revenue to GDP ratios in Africa remain lower than
other low- and middle-income countries globally. This worrying reality is
due to the lack of progress in implementing income tax reforms; failure
to encourage business registration in the informal sector; and inability
to introduce counter-cyclical policy instruments to mitigate volatility and
external shocks (African Development Bank 2020b).
Debt to GDP, as opposed to fiscal deficit, is rising. Over a 10-year
period, debt-to-GDP climbed from 38 to 56%. One reason for this is
greater access for African countries to international capital markets and
bilateral creditors (for example China). From a positive perspective, this
is the result of improved monetary credibility and greater investment in
infrastructure to address the infrastructural bottlenecks experienced in
much of Africa. There are country differences as usual and certain countries now have very high ratios of external debt to export levels, such as
Ethiopia of more than 400% and Sudan, over 600%. Nearly 20 African
countries are regarded as being in debt distress or at risk of debt distress
(African Development Bank 2020b).
16
B. ROBINSON
1.4 Global, Regional and National
Efforts to Stimulate Sustainable
Economic Development in Africa
Although much of Africa has not had satisfactory success in their
economic growth trajectories, this has not always been a result of a lack
of effort. There have been numerous international and national attempts
to improve the economic growth prospects in Africa. These take various
forms from development finance, aid, investment support and incentives,
and just general advice.
The rationale for Development Finance Institutions is summarised by
Xu et al. (2019: 6) as the need to fix market failures; counter information asymmetries in addressing financial constraints; the failure to consider
positive externalities; short termism that neglects finance for high-risk
and long-term investment; and pro-cyclical lending where lending is
restricted during recessionary periods when it is needed the most. Development Finance Institutions are tasked with countering these through
‘mission-oriented innovation that creates new technological opportunities
and markets; incubating market institutions in lesser-developed economies
with weaker institutions, such as corporate governance; fostering capital
markets’.
Xu et al.’s. mapping further considered the objectives of development
finance institutions. It found that about half were general in nature, 9.03%
was multi-sectoral, while just over 40% were focussed on a single-sector.
Single sector objectives included trade 30.06%; SMEs and entrepreneurship 29.48%; agriculture and rural development 21.97%; housing 11.56%;
and infrastructure 4.05%.
The global, regional and national finance institutions are now investigated in more detail.
1.4.1
International and Regional Institutions for Development
While there are numerous global and regional development finance institutions that provide a myriad of support services, the discussion will be
limited to the World Bank, International Monetary Fund, OECD, the
New Development Bank, and the African Development Bank mention is
also made of the African Union and their Agenda 2063.
1
AFRICA’S ECONOMIES
17
1.4.1.1
World Bank
While the World Bank was established in 1944 during the Bretton Woods
Conference, it only began introducing conditions on its loans in the
1980s. The rationale was that countries experiencing severe economic
crises required more than just money, but that structural adjustments were
also required—and so came about the structural adjustment programmes.
The International Bank for Reconstruction and Development (IBRD)
and the International Development Association (IDA) are the loan
providers of the World Bank Group (2019). The IBRD, a cooperative
owned by 189 member countries, is the world’s largest development bank
providing financial products and policy advice in an effort to improve
policy and contribute to sustainable growth. The IDA focusses on some of
the world’s poorest countries in an effort to reduce poverty. Programmes
are geared towards boosting economic growth, reducing inequalities, and
improving living conditions. The IDA claims to be the largest source
of assistance for the world’s 76 poorest countries, providing loans at a
zero or very low interest charge, allowing repayments over an extended
period of 30–38 years, and sometimes providing 5–10-year grace periods.
The IDA committed $22 billion for the year ended 30 June 2019, and
since 1960 has committed $391 billion to 113 countries. The Top 10
recipients of loans for the year ended 2019 included eight African Countries: Ethiopia $2,61 billion; Kenya $1,06 billion; Côte d’Ivoire $1,05
billion; Mozambique $980 million; DRC $812 million; Burkina Faso
$797; Niger $733 million; and Mali $599 million.
The World Bank’s own evaluation of the success of conditionality
suggests that social policy lending had a significant impact on the quality
of social policies (Bogetić and Smets 2017).
Whether the conditions were observed by countries receiving the loans
is debatable, and the number of conditions have been decreasing over
time. One of the reasons may be that there are more options for financing
with limited conditionality for countries in distress or requiring significant
investment to assist in development—such as that of China and ArabNations’ with their non-interference stance. Securing repayment for the
loans in these cases takes place slightly differently, such as the ‘Angolamode’ swap of infrastructure for resources the Chinese have adopted.
Diego Hernandez (2017) evaluated he decrease in conditionality and
suggested that the proliferation of new donors was challenging conditionality. It also found that the conditions have varied sporadically and
that the average conditions per project in African countries has decreased
18
B. ROBINSON
from a high in the 1980s of 30–40 conditions towards 10 and less from
the late 2000s.
It is interesting to note that the conditions per country has varied quite
significantly with the highest number of conditions (40 and more) in
Algeria and the Republic of Congo to less than 10 in Sudan, Seychelles,
Lesotho and Djibouti. Hernandez suggests a number of reasons for this
discrepancy, including the timing of the loans (1980s and 1990) for
Algeria and the Republic of Congo, and the value of the loans (2008–
2013 and of value of less than $20 million) for Djibouti, Lesotho and the
Seychelles.
1.4.1.2
International Monetary Fund (IMF)
The International Monetary Fund (IMF) (2020) is an organisation of 189
countries that seeks to further global monetary cooperation, secure financial stability and facilitate international trade, whilst reducing poverty,
creating employment and supporting sustainable economic growth. While
it does not fund specific projects, it does support a stable macroeconomic
environment that would facilitate international trade and foreign direct
investment—at the core of the organisation’s existence is the stabilisation
of the international monetary system and includes all macroeconomic and
financial sector issues that may impact global stability.
While all IMF member countries can access the General Resources
Account, the IMF does prioritise support for low-income countries
through the Poverty Reduction and Growth Trust (PRGT), an interest
free concession for such countries. This can take the form of an
extended credit facility, a standby credit facility or a rapid credit facility
in the case of urgent balance of payment problems. It also engages
these countries through monitoring economic and financial policies; and
capacity-building to increase domestic revenue, manage public finances
and monetary policy, regulate the financial systems, and implement effective policies. In addition, it has a Post-Catastrophe Debt Relief Trust to
assist with catastrophic or natural disasters.
IMF lending arrangements through the PRGT as at 31 January 2020
were mostly for African countries. There are conditions attached to
lending by the IMF. Countries must agree to a programme of economic
policies before the lending takes place—these conditions aim to overcome
the problems that led to the country seeking financial aid in the first
place and safeguard repayment of the loan. Loans are usually paid out
in instalments subject to adherence of policy commitments.
1
AFRICA’S ECONOMIES
19
Policy commitments include prior actions taken before the loan to
provide a framework for the intervention’s success; quantitative performance criteria that relate to macroeconomic variables such as minimum
level of internal reserves, fiscal balances and ceilings on government
borrowing; indicative targets to assess progress in meeting objectives; and
structural benchmarks that could include improving financial sector operations and better public financial management. The IMF acknowledges
the complexity in low income and transitional countries, and that the
conditionality framework needs to adapt to multiple structural problems
that inhibit economic stability and growth.
1.4.1.3
OECD
The Organisation for Economic Co-operation and Development
(OECD) has its historical roots in the Organisation for European
Economic Cooperation that was established after World War II in 1948,
initially financed by the US, to reconstruct countries devasted by the
ravages of war. It grew into a global organisation with 36 member
countries and 3 ‘key partner’ countries including South Africa, the only
country from Africa. These countries account for 80% of world trade and
investment (OECD 2019).
The OECD primarily assists with informing policy and supporting and
monitoring policy implementation, standard setting such as the OECD
Guidelines for Responsible Business Conduct, and multi-stakeholder
global collaboration The OECD has regional initiatives in Africa that
helps ‘facilitate policy benchmarking and the exchange of good practices between countries in a specific geographical area within and across
regions; help(s) guide countries towards globally recognised standards
and ambitious reform agendas to unlock greater prosperity and wellbeing for citizens’. The OECD Development Centre is a forum for policy
dialogue with developing and emerging economies to develop policy that
stimulates growth and improves living conditions.
1.4.1.4
New Development Bank (NDB)
Referred to often as the BRICS bank, the New Development Bank
(2020a) was conceptualised at the Fourth BRICS (Brazil, Russia, India,
China and South Africa) Summit in 2012. The New Development Bank
was established to mobilise financial resources for infrastructure and
sustainable development projects in BRICS countries, as well as for other
emerging and developing economies.
20
B. ROBINSON
The New Development Bank (2020b) describes in its General Strategy:
2017–2021 how it intends to be ‘New’ in terms of relationships; projects
and instruments; and approaches. With regards new projects and instruments, it confirms that the core operational strategy is towards financing
sustainable infrastructural development:
Physical infrastructure is a critical enabler of faster and inclusive economic
growth, and sustainability criteria are essential to ensure this infrastructure safeguards the physical and social environment for current and future
generations. NDB is helping to fill an important gap in the global development finance architecture, as financing for and technical expertise in
sustainable infrastructure development is limited, despite growing demand
The New Development Bank aims to cut-out unnecessary bureaucracy
and provide ‘fast, flexible, and efficient’ project review and implementation oversight. Key areas of operation are clean energy; transport
infrastructure; irrigation, water resource management and sanitation;
sustainable urban development; and economic cooperation and integration among member countries.
Financing is subject to standard risk and return criteria, rather than
policy conditionality or similar country-type conditions—it states that
the bank has introduced robust financial and risk management policies
that encompasses prudent leveraging, a conservative level of loans as
a ratio to equity, strong liquidity buffers, and a diversified and wellperforming portfolio. Projects will mostly be sovereign in nature or be
under sovereign guarantee.
Financing of projects in Africa have only transpired in South Africa. For
instance, there was a loan in 2016 to beleaguered Eskom, South African
State-Owned power company for $180 million for grid infrastructure to
support renewable energy projects and the augmentation of the transmission network in Soweto, South Africa. Others loan in South African have
been towards various transportation, renewable energy, water and sanitation, and environmental protection initiatives. However, with the focus
on emerging economies, the so-called BRICS+ economies, it is likely that
more financing with be made available outside of South Africa’s borders
in the future.
1
AFRICA’S ECONOMIES
21
1.4.1.5
African Development Bank
The African Development Bank Group (2020a) is a regional develop
finance institution, who’s objective is to pursue sustainable economic
development and social progress within the African region, specifically
the 54 regional member countries, by mobilising and allocating resources
for investment while also providing policy and technical support. Nonregional members include countries from Europe, America and Asia,
which allows the bank to access greater financial resources, in addition
to accessing markets these non-regional member countries could offer.
It has a long history having been established in 1963 in Sudan, and
is now headquartered in Abidjan, Côte d’Ivoire, and has offices in 25
regional member countries. It comprises the African Development Bank,
the African Development Fund, and the Nigeria Trust Fund. It has a close
relationship with the World Bank, and in 2019, signed a Memorandum
of Understanding with the New Development Bank to identify, prepare
and co-finance projects when suitable.
The African Development Bank finances projects in many sectors, but
prioritises the agricultural, health, education, public utilities, transport
and telecommunications industries and the private sector. It has also
financed non-project interventions, such as structural adjustment loans,
policy-based reforms, debt reduction programmes under the Highly
Indebted Poor Countries initiative that included the cancellation of $9
billion of loans and provided technical assistance and policy advice. Loans
can either be Sovereign-Guaranteed Loans or Non-Sovereign-Guaranteed
Loans.
Based on country creditworthiness and GNI per capita, three categories are countries defined for the purposes of funding.
1. Not creditworthy: These are countries with a GNI per capita below
an established threshold updated annually and are only eligible for
concessional loans from the African Development Fund.
2. Blend countries: These are countries below the pre-determined GNI
per capita but who are creditworthy. They are eligible for African
Development Fund and African Development Bank resources.
3. Countries above the operational GNI level and creditworthy. These
countries are eligible for African Development Bank funding only.
22
B. ROBINSON
1.4.1.6
African Union (AU)
The African Union (2020) consists of 55 member states, African countries recognised by the African Union, with the following vision: ‘An
integrated, prosperous and peaceful Africa, driven by its own citizens and
representing a dynamic force in the global arena’. Incidentally, the African
Union headquarters in Addis Ababa, Ethiopia, was financed and built by
the Chinese.
The African Union, in its Agenda 2063, specifies 7 ‘aspirations’, each
of which has a number of related goals. These are detailed in Table 1.5.
In order to assist in the achievement of these aspirations, the African
Union details a number of flagship projects. The flagship projects of
Agenda 2063 (African Union 2020) are key programmes and initiatives
of the African Union to accelerate Africa’s economic growth and development, while promoting arts and culture and securing peace on the
continent. The projects are detailed in Table 1.6.
While the African Union is not a financing institution such as other
institutions discussed in this Chapter, it is clear that the African Union
has a wide range of aspirations and intended projects to accomplish its
vision and Agenda 2063, and these recognise and prioritise an enabling
environment to encourage and support inclusive growth and sustainable development. Whether it has the capacity and support or political
willpower of the member states to accomplish these is yet to be seen.
1.4.2
National Development Finance Institutions
Most African countries have some form of development finance institutions that amongst other objectives prioritises economic growth. Examples of these are detailed in Table 1.7.
1
AFRICA’S ECONOMIES
23
Table 1.5 The seven aspirations of Agenda 2063 (African Union 2020)
Aspiration
Goals
Aspiration 1: A prosperous Africa based on
inclusive growth and sustainable
development
1. A high standard of living, quality of
life and well-being for all
2. Well educated citizens and skills
revolutions underpinned by science,
technology and innovation
3. Healthy and well-nourished citizens
4. Transformed economies and jobs
5. Modern agriculture for increased
proactivity and production
6. Blue/Ocean Economy for accelerated
economic growth
7. Environmentally sustainable climate
and resilient economies and
communities
1. United Africa (Federal/Confederate)
2. World class infrastructure criss-crosses
Africa
3. Decolonisation
1. Democratic values, practices, universal
principles for human rights, justice and
rule of law entrenched
2. Capable institutions and transformed
leadership in place at all levels
1. Peace security and stability is
preserved
2. A stable and peaceful Africa
1. African cultural renaissance is
pre-eminent
Aspiration 2: An integrated continent,
politically united and based on the ideals of
Pan-Africanism and the vision of Africa’s
Renaissance
Aspiration 3: An Africa of good governance,
democracy, respect for human rights, justice
and the rule of law
Aspiration 4: A peaceful and secure Africa
Aspiration 5: An Africa with a strong
cultural identity; common heritage, shared
values and ethics
Aspiration 6: An Africa, whose development
is people-driven, relying on the potential of
African people, especially its women and
youth, and caring for children
Aspiration 7: Africa as a strong, united,
resilient and influential global player and
partner
1. Full gender equality in all spheres of
life
2. Engaged and empowered youth and
children
1. Africa as a major partner in global
affairs and peaceful co-existence
2. Africa takes full responsibility for
financing her development
24
B. ROBINSON
Table 1.6 Flagship projects of Agenda 2063 (African Union 2020)
Project
Details
1. Integrated high-speed train network:
The project aims to connect all the
African capital cities and commercial
hubs in Africa through an African
High-Speed Train Network to improve
connectivity, reduce transport costs of
transport and ease congestion of current
and future transport networks
The development of an African
Commodities Strategy is seen as key to
enabling African countries to add value,
extract higher rents, integrate their
global value chains, and promote vertical
and horizontal diversification in
commodities—thus transforming Africa
from a raw materials supplier for the
world to utilising its own resources to
promote economic development
In order to boost Africa’s trading
position in the global economy, the
AfCFTA aims to accelerate intra-Africa
trade for sustainable development. It has
some lofty ambitions, such as doubling
intra-Africa trade and strengthening
Africa voice in global trade negotiations
This project aims to remove restrictions
on African’s ability to travel, work and
live within Africa
‘Silencing the Guns’ acknowledges the
debilitating impact of wars, civil conflicts,
gender-based violence, violent conflict
and genocide on Africa, and the
programme aims to address this through
various interventions including the
operationalisation of an African Human
Security Index
The Grand Inga Dam could generate
43,200 MW of power and move much
of Africa towards reliable and affordable
electricity access
2. African Commodities Strategy
3. African Continental Free Trade Area
(AfCFTA)
4. The African Passport and Free
Movement of People
5. ‘Silencing the Guns’ by 2020
6. Implementation of the Grand Inga Dam
Project
(continued)
1
AFRICA’S ECONOMIES
25
Table 1.6 (continued)
Project
Details
7. Single African Air-Transport Market
(SAATM)
THE SAATM would liberalise
intra-African air transport through
market access and traffic rights for
scheduled and freight air services, thus
improving connectivity and efficiencies
The establishment of an Annual African
Economic Forum would serve to bring
together Africa’s political leadership, the
private sector, academia, and civil society
to discuss and debate how to accelerate
economic transformation on the
continent
The African Continental Financial
Institutions aims to establish
organisations to mobilise resources and
manage the African financial sector.
These include the African Investment
Bank, Pan African Stock Exchange, the
African Monetary Fund, and the African
Central Bank
The project aims to promote
transformative e-applications and services
in Africa, including broad-band terrestrial
infrastructure, cyber security, the bio and
nanotechnology industries—thus
transforming Africa into an e-Society
The strategy aims to provide for Africa’s
access to space technologies and products
In order to improve access to tertiary
and continuing education in Africa, the
programme aims to develop relevant and
high quality open, distance and
eLearning resources to reach large
numbers of students and professionals in
multiple sites simultaneously
Cyber security to ensure data protection
and safety online
The Museum project aims to create
awareness about Africa’s vast, dynamic
and diverse cultural artefacts and the
influence Africa has had on various
cultures of the world, therefore
preserving and promoting the African
cultural heritage
8. Annual African Economic Forum
9. African Financial Institutions
10. The Pan-African E-Network
11. Africa Outer Space Strategy
12. An African Virtual and E-University
13. Cyber Security
14. Great African Museum
(continued)
26
B. ROBINSON
Table 1.6 (continued)
Project
Details
15. Encyclopaedia Africana
The Encyclopaedia African aims to
provide an authentic history on Africa
and African life
Table 1.7 National development finance institutions
Country
English name
Angola
Botswana
Côte D’Ivoire
Djibouti
Ethiopia
Gabon
Kenya
Lesotho
Mauritius
Namibia
Rwanda
Seychelles
Sierra Leone
Somalia
South Africa
The Development Bank of Angola
Botswana Development Corporation Limited
National Bank of Investment
Development Fund of Djibouti
Development Bank of Ethiopia
The Development Bank of Gabon
Industrial and Commercial Development Corporation
Lesotho National Development Corporation
Development Bank of Mauritius
Development Bank of Namibia
Development Bank of Rwanda
Development Bank of Seychelles
National Development Bank Ltd
Somali Development and Reconstruction Bank
Development Bank of Southern Africa
Independent Development Trust
Industrial Development Corporation
National Development Corporation
Uganda Development Bank
Development Bank of Zambia
Tanzania
Uganda
Zambia
1.5
Foreign Direct Investment
While development finance can help stimulate growth and support
sustainable development in Africa, Foreign Direct Investment reflects
mostly private foreign investment in infrastructure projects and business
investments. This is at the heart of economic development through global
investment activities.
1
AFRICA’S ECONOMIES
27
Financial inflows to Africa amounted to $205.7 billion in 2018. Remittances and Foreign Direct Investment (FDI) comprised the bulk of this
figure with FDI totalling $45.9 billion and remittances $82.8 billion. FDI
had increased by 10.9% from 2017 levels, although remained below the
high of $56.9 billion in 2015 (African Development Bank 2020b).
EY (2018) produces a useful report commonly known as the African
Attractiveness Report which provides some insights on FDI in Africa.
For instance, the number of FDI projects against GDP growth showed a
positive correlation, and that FDI in Africa since 2015 has struggled to
maintain its previous highs even with the recent increases in FDI. The
report also reflects on the increased competitiveness in attracting FDI
from the various African regions, with Southern, Eastern, Western and
Northern Africa attracting similar levels of FDI.
Investment varied between sectors, and the trend has been towards
greater investment in infrastructure, manufacturing and renewables. Real
Estate, Hospitality and Construction (RHD) has increased by 133%;
Chemicals by 83%; Automotive, 42%; and Power and Utilities by 40%. On
the downside, FDI in Consumer Products and Retail (CPR) has reduced
by 14%; Financial Services by 16%; Transport and Logistics by 17%; Business Services by 33%; and Technology, Media and Telecommunications
(TMT) have fallen by 43%.
The source of FDI for 2017 showed that the biggest increase in the
number of FDI projects was the US with a 43% increase and Western
Europe by 17%, while emerging market investors decreased significantly,
most probably due to their own slowing economic growth and weak
commodity prices (EY 2018: 8).
China’s FDI in Africa will be more thoroughly evaluated in Chapter 4.
1.6 What Is Needed to Shift Africa
Towards Sustainable Development?
In conclusion, what is needed to shift African countries from underperformance to levels of sustained economic growth that is inclusive in
nature? To answer this, perhaps the United Nations 17 Sustainable Development Goals (2015) provide some guidelines on the objectives that
should be top of mind: eradicating poverty and no hunger, health and
well-being, quality education, gender equality, clean water and sanitation,
affordable and clean energy, decent work and economic growth, industry,
innovation and infrastructure, reduced inequality, sustainable cities and
28
B. ROBINSON
communities, responsible consumption and production, climate action,
life below water and on land, peace justice and strong institutions, and
partnership for the goals (Fig. 1.3).
One of the mistakes make in evaluating the UNs’ Sustainable Development Goals is that they are sometimes viewed in isolation. This is not
the within the spirit of the Goals, rather they need to be seen holistically as they are all closely woven together. As eluded to earlier when
discussing the African Tree of Organic Growth, economic growth is the
fuel for development, but for organic growth to occur, it requires peace,
justice and strong institutions, it needs infrastructure innovation and a
sound industrial sector, and an educated and healthy workforce. Such
growth should not have negative impact on the environment and societal well-being, instead responsible production should ensure equality in
the workplace and beyond, contribute to skills development and education and reduce inequalities, mitigate climate change, and have a positive
social impact.
Some pointers are provided on essential pre-conditions required to
ensure that sustainable development is achieved in the challenging environment of African nations. These all require good policy, from planning to intervention, and governance. Table 1.8 has been developed
Fig. 1.3 United Nations 17 Sustainable Development Goals (2015)
Macroeconomic stability
Structural transformation
of relocating economic
resources from low to
high productivity activities
Development Financing in
Africa
Sustain
macroeconomic
stability while
improving public
financial management
Deepen structural
reforms to diversify
the continent’s
productive base and
unleash its growth
potential
African Economic
Outlook 2020
Pre-conditions for Africa Nations’ sustainable development
Structural transformation
Policy
Conditions
Table 1.8
While there has been
progress in
policy-making for
development, the impact
is still unrealised
EY Attractiveness Report
(continued)
Development states
require the
channelling or
guiding market
activity through
effective government
policies such as
incentives, controls
and mechanisms to
ensure inclusive
growth
The organic growth
paradigm is based on
an economic
framework that will
encourage
diversification in
sectors in which the
country enjoys a
comparative advantage
or can develop a
comparative advantage
African Tree of
Organic Growth
1
AFRICA’S ECONOMIES
29
The transformation into
modern economies will be
impossible without
infrastructure
Urgent need to mobilise
the public sector,
domestic resources,
development finance, and
private finance
Infrastructure development
Partnerships and financing
Agriculture and sustainability About 55% of African
work in agriculture and
productivity levels are
extremely low
Ease of business
Shared value in the supply
chain
Development Financing in
Africa
(continued)
Conditions
Table 1.8
African Economic
Outlook 2020
Promoting shared value
throughout the value
chain to ensure skills
transfer and local supply
chains are developed
Create a conducive
environment for
entrepreneurship
Inadequate infrastructure
and private investment
should be overcome by
diversifying the sources
of finance and creating
innovative financing
solutions
Public–Private
Partnerships (PPPs) can
overcome some of the
fiscal and trade deficits
EY Attractiveness Report
African Tree of
Organic Growth
30
B. ROBINSON
Invest in people’s health
and education—link
between education to
growth and structural
transformation
Development Financing in
Africa
Expand social safety
nets and increase
their efficiency,
Strengthen domestic
capacity to cushion
extreme weather
events
Address obstacles to
labour mobility,
within and across
countries and
industries
African Economic
Outlook 2020
Inter-regional trade is
only at 18%. Free trade
initiatives need to be
realised
EY Attractiveness Report
The historical, social
and cultural context is
the central fibre of
the development
process
African Tree of
Organic Growth
Adapted from ‘Development Financing in Africa’ by the United Nations Economic Commission for Africa, 2017; ‘African Economic Outlook 2020’
by the African Development Bank (2020b); the ‘EY’s Attractiveness Report, 2018’ and ‘The African Tree of Organic Growth’ (Jonker and Robinson
2018)
External shocks
Social safety nets
People
Regional integration
Conditions
1
AFRICA’S ECONOMIES
31
32
B. ROBINSON
to highlight these pre-conditions based on insights from the following
documents: ‘Development Financing in Africa’ by the United Nations
Economic Commission for Africa; ‘African Economic Outlook 2020’ by
the African Development Bank (2020b); the ‘EY’s Attractiveness Report,
2018’ and ‘The African Tree of Organic Growth’ (Jonker and Robinson
2018).
Ensuring sustainable development for all African Nations is a huge
challenge that faces the continent, but there can be no doubt that
economic growth is central to this happening. Introducing Special
Economic Zones have been a successful model for stimulating economic
activity throughout the world, and the question which this book aims to
answer, is whether they are able to do the same in Africa?
References
African Development Bank. 2020a. [Online]. Available from: https://www.afdb.
org/en. Accessed 24 Feb 2020.
African Development Bank. 2020b. African Economic Outlook 2020 [Online].
Available from: https://www.afdb.org/en/documents/african-economic-out
look-2020. Accessed 27 Feb 2020.
African Union. 2020. Agenda 2063 [Online]. Available from: www.au.int.
Accessed 19 Feb 2020.
Bogetić, Ž., and L. Smets. 2017. Association of World Bank Lending with Social
Development Policies and Institutions. © World Bank [Online]. Available
from: https://ieg.worldbankgroup.org/sites/default/files/Data/WorldBank
PolicyLending.pdf. Accessed 17 Feb 2020. License: Creative Commons Attribution License (CC BY 3.0 IGO). http://creative-commons.org/licenses/
by/3.0/igo/.
EY. 2018. EY’s Attractiveness Program. Africa. Turning Tides [Online].
Accessed from: https://www.ey.com/Publication/vwLUAssets/ey-africaattractiveness-survey-2018/$File/ey-africa-attractiveness-survey-2018.pdf.
Accessed 2 Mar 2020.
Helliwell, J., R. Layard, and J. Sachs. 2019. World Happiness Report 2019. New
York: Sustainable Development Solutions Network [Online]. Available from:
https://worldhappiness.report/ed/2019/#read. Accessed 7 Jan 2020.
Hernandez, D. 2017. Are “New” Donors Challenging World Bank Conditionality? World Development 96: 529–549.
International Bank for Reconstruction and Development. 2020. © World Bank
[Online]. Available from: https://www.worldbank.org/en/who-we-are/ibrd.
Accessed 17 Feb 2020. License: Creative Commons Attribution License (CC
BY 3.0 IGO). http://creative-commons.org/licenses/by/3.0/igo/.
1
AFRICA’S ECONOMIES
33
International Development Association. 2020. © World Bank [Online]. Available
from: http://ida.worldbank.org/. Accessed 17 Feb 2020. License: Creative
Commons Attribution License (CC BY 3.0 IGO). http://creative-commons.
org/licenses/by/3.0/igo/.
International Monetary Fund. 2020. [Online]. Available from https://www.imf.
org/external/. Accessed 18 Feb 2020.
Jonker, K., and B. Robinson. 2018. China’s Impact on the African Renaissance:
The Baobab Grows. Singapore: Palgrave Macmillan.
New Development Bank. 2020a. [Online]. Accessed from www.ndb.int. Accessed
19 Feb 2020.
New Development Bank. 2020b. New Development Bank Strategy 2017–2021
[Online]. Accessed from: https://www.ndb.int/wp-content/uploads/2017/
08/NDB-Strategy.pdf. Accessed 19 Feb 2020.
OECD. 2019. Who We Are. [Online]. Available from: https://www.oecd.org/
about/. Accessed 5 Feb 2020.
The United Nations 17 Sustainable Development Goals. 2015. United Nations
[Online], September 25. Available from: https://www.un.org/sustainabled
evelopment/news/communications-material/. Accessed 6 Jan 2020.
The World Bank. 2019. Accelerating Poverty Reduction in Africa: In Five Charts.
© World Bank [Online], October 9. Available from: https://openknowl
edge.worldbank.org/handle/10986/32354. Accessed 6 Jan 2020. License:
Creative Commons Attribution License (CC BY 3.0 IGO).
The World Bank. 2020. Country Profiles. © World Bank [Online]. Available
from: https://data.worldbank.org/country. Accessed 7 Jan 2020. License:
Creative Commons Attribution License (CC BY 3.0 IGO). http://creativecommons.org/licenses/by/3.0/igo/.
Transparency International. 2018. Corruption Perceptions Index 2018 [Online].
Available from: https://www.transparency.org/cpi2018. Accessed 7 Jan
2020. Corruption Perceptions Index 2018 by Transparency International is
licensed under CC-BY-DE 4.0.
United Nations Development Programme. 2019. Human Development Report
2019 [Online]. Accessed from: http://www.hdr.undp.org/sites/default/
files/hdr2019.pdf. Accessed 7 Jan 2020. Creative Commons Attribution 3.0
IGO http://creativecommons.org/licenses/by/3.0/igo/.
United Nations Economic Commission for Africa. 2017. Development Financing
in Africa [Online]. Accessed from: https://www.uneca.org/publications/dev
elopment-financing-africa. Accessed 3 Mar 2020.
Xu, J., X. Ren, and X. Wu. 2019. Mapping Development Finance Institutions
Worldwide: Definitions, Rationales, and Varieties. Institute of New Structural
Economics, Peking University. Accessed from: https://www.idfc.org/wp-con
tent/uploads/2019/07/nse_development_financing_research_report_no-12.pdf. Accessed 26 Feb 2020.
CHAPTER 2
China’s Surge in Growth Facilitated
by Special Economic Zones
This Chapter is dedicated to better understanding the context and emergence of Special Economic Zones in China; the opening-up of the
Chinese economy and the pivotal role the Zones played during this
period; and case studies will illustrate how the phenomenal growth
trajectory of China was closely associated with the evolution of the zones.
The history of Chinese civilisation dates to about 4000 BC, a leading
civilisation that has spanned centuries. History depicts many dynasties
with many emperors, terrible wars, colonial rule, trade routes, and a
strong cultural and societal identity. It is beyond the scope, and certainly
my expertise, to delve into this ancient history.
Rather, let’s jump straight to 1912 when the last of the dynasties came
to an end, and the Chinese Republic became the constitutional form of
state with a President. Years followed with inner turmoil and conflict
between the northern and southern regions of the country, conflict
between different political and economic ideologies. Communism was for
some time a topic of interest of a number of intellectuals and politicians,
and in 1921 the Communist Party was established in Peking. Mao Tsetung mobilised millions under the ideology, while the Nationalists (KMT)
under Chiang Kai-shek, were staunchly anti-communist. The country also
found itself a casualty in the global power chess-game, with Japan all but
conquering the country. The situation for the country was dire, until an
unexpected opportunity—the Hiroshima and Nagasaki Atom Bombs in
© The Author(s), under exclusive license to Springer Nature
Singapore Pte Ltd. 2022
B. Robinson, African Special Economic Zones,
https://doi.org/10.1007/978-981-16-8105-9_2
35
36
B. ROBINSON
1945 ‘neutralised’ Japan, and China found itself free to determine its own
future fate.
The Nationalist government took over the country’s administration
after the war, but the communists were well organised and equipped
thanks to arms surrendered by the Japanese and Soviet armies, and had
their ranks increased by deserters from the Nationalist army. The ensuing
Chinese Civil War resulted in most of mainland China being in control
by the Communists, who established their capital in Peking. The Nationalist government eventually relocated to Taiwan, an area which is still
in dispute regarding Chinese sovereignty, and the Communist Party of
China came to power in 1949.
Mainland China found much of its infrastructure and industry devastated after years of war and conflict. The transportation, communication
and power systems were not well developed. The agricultural sector was
faltering. The economy was on a poor footing with rampant inflation.
This was the state of the nation that Mao inherited, and he soon began
trying to change that.
The immediate priority of government was to normalise the economy
and get the necessary infrastructure up and running. The banking system
was nationalised, and the People’s Bank of China established. Inflation
was stabilised through a guaranteed currency value, unified monetary
system, credit control and better management of government budgets.
In order to stimulate the economy, state trading companies were established, state-owned enterprises further developed, and private companies
were increasingly brought under state control. Landownership was fundamentally changed, with 45% of arable land expropriated from landlords
and productive farmers and redistributed to farm families who previously
had no land of their own. These farmers were encouraged to cooperate amongst themselves in so-called mutual aid teams. The efforts were
reasonably successful, and the economy improved.
In the 1950s China entered into an alliance with the Soviet Union for
specialist civil and military products, and loan agreements were concluded
to finance these. The focus was on heavy industry, especially military
equipment to the detriment of consumer goods, and many factories were
established up to the 1960s with the Soviet’s assistance. Their new-found
military might was demonstrated in the Korean War and the invasion of
Tibet.
The first Five-Year Plan of 1953–1957 adopted the Soviet model
of industrial growth and socialisation that included state ownership of
2
CHINA’S SURGE IN GROWTH FACILITATED …
37
industry, collective agricultural units which eventually became producer
cooperatives accounting for most of the country’s agricultural households, and centralised economic planning. By 1956, no private companies
remained. Iron and steel manufacturing, machine manufacturing, electricity generation and the mining industry were prioritised and succeeded
in generating significant improvements in industrial production and
national growth. The Plan’s priority, which was developed with the
assistance of the Soviets, was clear: maximise industrial development.
A mistake that China made (and which Western and African economists
and leaders have sometimes made since) is assuming that policies to
quickly industrialise would automatically springboard massive economic
growth—these policies mostly fail as they are one-sector focussed and do
not contextualise development interventions to the country’s fundamentals.
China certainly experienced this first-hand when Chairman Mao introduced the Great Leap Forward policy to drastically increase industrial
output and address the ‘frustratingly’ slow growth of the agricultural
sector. One aspect of the policy entailed turning the rural farming cooperatives into communes, many of which were required to produce iron
in home-furnaces, smelting whatever they could, and producing mostly
poor-quality products or unfinished iron and steel output. In 1958, 98%
of the farm population were in these communes. The Great Leap Forward
Policy was ill-conceived and unwieldy, and coupled with misallocation of
resources and adverse weather, it eventually resulted in drastically reduced
agricultural production. Estimates vary that between 25 and 45 million
people died from famine as a result during the years 1958–1962. The
industrial sector wasn’t spared, and industrial output is estimated to have
fallen by nearly 38% in 1961.
Policy priorities were reversed: first agriculture, then light industry, and
finally, heavy industry. From 1961 to 1964, central commune administration was reduced, private plots were restored, and farmers were once
again allowed to conduct farming for their own reward. Agricultural taxes
were reduced, and prices raised for agricultural output. This coupled with
improved farming techniques contributed to improved agricultural output
to the extent that China could once again feed herself.
The Cultural Revolution which occurred around 1966–1976, was
political in nature, and put further strain on the economy. Political activity
of students and workers disrupted production of industries and the mines,
transport logistics of raw materials and goods were compromised in favour
38
B. ROBINSON
of transporting the Chinese Red Guards, and factories were placed under
the leadership of revolutionary committees which included the Chinese
Liberation Army. Scientists, engineers and others were demoted or even
jailed. Imports of foreign equipment was banned—which resulted in
many years of stagnant technological advancement. Focussed on eliminating the cultural traditions in favour of radical social revolution, the
Red Guard invaded homes, and books and art were destroyed. The
educational sector collapsed, the political system was in turmoil, and the
economy weakened and was embattled for a further decade.
Slowly but surely, political stability was restored, and the economy
began to slowly grow in the early 1970s. Communist Party of China
Committees replaced revolutionary committees, and well-educated and
skilled labour were once again employed. Universities re-opened, and
there was some effort to open the county to the outside world, and
foreign investment in certain industries was encouraged. Industrial output
and agricultural production increased significantly. There was, however,
a movement by the ‘Gang of Four’ who through their media strength,
sowed seeds of uncertainty in the mid-1970s and created a power struggle
and policy inaction. This countered economic advances made during the
previous years. After the arrest of the Gang of Four, Deng Xiaoping took
over the reins of the country.
Deng Xiaoping revitalised the Four Modernizations (modernising agriculture, industry, defence and science and technology) and introduced
sweeping changes: Amongst others, foreign trade was to be increased;
managers and economic decision makers would take precedent over party
officials; workers would be incentivised; research and education was to be
increased. A 10-year plan for the period of 1976–1985 period was developed that prioritised industry and agriculture. Key to the success of this
plan was the establishment of Special Economic Zones.
2.1 Special Economic Zones: A Key
Development Policy Instrument
China embarked on its ambitious opening-up of the country and market
reform in the late 1970s, and utilised Special Economic Zones and
Industrial Clusters as key facilitators of growth.
The results have been nothing less than spectacular. GDP growth has
surged and averaged around 10% for decades, although growth has been
slowing due to structural constraints, and the impact of the COVID-19
2
CHINA’S SURGE IN GROWTH FACILITATED …
39
Fig. 2.1 GDP growth (annual %)—China (World Bank 2020)
virus is still uncertain (Fig. 2.1). The export orientation of the Zones
and their spectacular success is reflected in the growth of exports as a
percentage of GDP from 4.556% in 1978 doubling to 11.02% in 1982
after just 4 years, reaching a high of 36.04% in 2006, before dropping to
a strong level of 19.52% in 2018 (Fig. 2.2). Not only were the economic
indicators strong, but the societal improvements were just as impressive:
From a poverty rate of 88% in 1981, it was less than 1% in 2019 with the
government planning to eradicate poverty by 2020—850 million people
were lifted out of extreme poverty.
The definition in this book of Special Economic Zones is wide as
described in the book’s front pages, and refers to economic development
zones promulgated as Special Economic Zones, as well as the Industrial Development Zones, Export Processing Zones, Industrial Parks,
and a myriad of other formats, all of which are specific interventions or
investments for economic growth. China has numerous of these types of
economic zones and clusters, but the attention of this Chapter is mostly
40
B. ROBINSON
Fig. 2.2 Exports of goods and services (% of GDP)—China (World Bank 2020)
dedicated to some of the seven designated Special Economic Zones in
China: Shenzhen (case study); Zhuhai (case study); Shantou (case study);
Xiamen; Hainan; Shanghai Pudong New Area and Tianjin New Area
(Fig. 2.3).
A publication by The World Bank entitled ‘Building Engines for
Growth and Competitiveness in China’ (2010), edited by Douglas Zeng,
provides some valuable insights into the role of these zones and their
contribution to China’s successful Opening Up strategy. This will serve as
a brief introduction to the emergence Special Economic Zones, following
which, three case studies are presented.
Zeng explains that the Open-Door Policy in 1978 was essentially a
social experiment to gauge the efficiency of market-oriented economic
reform in a controlled manner—and within a delimited geographic area
(the Zone in question). This is probably the most fundamental difference between Special Economic Zones in other regions of the world and
China: the zones were a testing ground for the fundamental change to
the country’s economic construct of a planned economy.
2
CHINA’S SURGE IN GROWTH FACILITATED …
41
Fig. 2.3 Location on the Special Economic Zones in China (Google Maps)
Deng Xiaoping inherited a country with a struggling economy with
much of the population in dire straits with widespread poverty. He introduced the ‘Four Modernisations’ to stimulate China which focussed on
the fields of agriculture, industry, defence and science and technology. He
was also the chief architect of the Open-Door Policy. In 1979, the Central
Government decided that Guangdong and Fujian provinces would lead
the implementation of the Policy.
The first four of the zones, namely Shenzhen, Zhuhai, Shantou and
Xiamen were designated in the latter half of 1980. Their objectives were
to facilitate broad-based comprehensive economic development enjoying
financial, investment and trade privileges. Zeng explains that they were
deliberately established far from the capital city of Beijing to minimise
risks and political interference; while also being located in coastal areas
42
B. ROBINSON
that already had a long history of contact with the rest of the world, and
that were close to the established commercial and industrial hubs of Hong
Kong, Macao and Taiwan. From the outset, they were encouraged to take
a very different approach with open and innovative policies, that if proven
successful, could be rolled out throughout the country.
The success of the zones was almost immediate. By 1981, the four
Special Economic Zones accounted for 59.8% of total FDI in China,
mostly thanks to Shenzhen which contributed 50.6%. Hong Kong was
helpful in providing much needed Foreign Direct Investment in many of
the production centers of the Zones and other areas. The growth rates of
China’s GDP between 1980 and 1984 grew at 10% per annum, buoyed
by Shenzhen’s growth of 58% during this period, followed by Zhuhai at
32%, Xiamen at 13%, and Shantou at 9%. Between 1988 and 2006 the
other large Special Economic Zones of the province of Hainan, Shanghai
Pudong New Area and Tianjin Binhai New Area were initiated.
Encouraged by the success of the Special Economic Zones and to
support the opening of the economy, the government in 1984–1988
introduced smaller zones called ‘economic and technological development zones’, known better as industrial parks—14 of these zones were
established in cities in the Pearl River Delta, the Yangtze River Delta,
and the Min Delta. The success of these supported the decision to create
another 35 of these variants in 1992 that included inland regions, and
since then the number has continued to grow.
There were other variants to these zones with specific objectives. Some
of these are detailed in Table 2.1.
Another contributor to China’s economic growth worth mentioning
is that of industrial clusters. These often emerge naturally, although
in China, they have been given significant support. They are mostly
labour intensive and found in the manufacturing sector, although this
is changing, and more of these clusters are now found in the high-end of
the value chain. Often, they are found within the large Special Economic
Zones and are an important contributor to the Zones’ own success.
In order to gain a better idea of the history, structure, and functioning
of Chinese Special Economic Zones, three Zones in the country were
visited during my research. These visits and resultant first-hand knowledge gained served as the foundation for the development of the Chinese
Model of Special Economic Zones described in the next Chapter—this
Model is referred to throughout the book as a benchmark against which
various African Special Economic Zones are evaluated. The observations
2
CHINA’S SURGE IN GROWTH FACILITATED …
43
Table 2.1 Specialised zones
Zone category
Details
High-tech Industrial Development Zone
(HIDZs)
• These zones were used to implement
the Torch Program initiated by the
Ministry of Science and Technology in
the late 1980s
• Objective was to use the technological
capacity and resources of research
institutes, universities, and large and
medium enterprises to develop new
and high-tech products and to
commercialise research and
development
• These were experimental zones to
investigate free trade before China’s
accession to the World Trade
Organisation
• Functions were export processing,
foreign trade, and logistics and bonded
warehousing
• They function outside of China’s
customs regulations and are eligible for
tax refunds on exports, import duty
exemption, and concessionary
value-added tax
• These zones were developed to
support export-oriented industries and
thus enhance foreign exchange
earnings
Free Trade Zones (FTZs)
Export-Processing Zones (EPZs)
Adapted from Zeng (2010: 10–12)
are described in the following case studies of the Shenzhen, Zhuhai and
Shantou Special Economic Zones.
2.2
Shenzhen Special Economic Zone
Shenzhen today is a bustling city of over 13 million people, most of
whom are migrants from other parts of China. Skyscrapers dominate the
skyline—Shenzhen has 262 skyscrapers above 150 m which ranks it 3rd
place in the World after Hong Kong and New York. Sometimes referred
to as China’s Silicon Valley, it boasts about 14,000 high-tech companies
including Huawei, Lenovo and Tencent, and is headquarters to numerous
44
B. ROBINSON
multinational corporations. It is home to the Shenzhen Stock Exchange,
the 8th largest stock exchange in the world.
The position of the city is advantageous, being just 41 kilometres
from Hong Kong, with easy access by rail, road, metro and ferry. It is
part of the Pearl River Delta Metropolis which comprises other megacities such as Guangzhou, Zhuhai, Hong Kong and Macau, in total with
an estimated 120 million people. The extensive and modern transport
infrastructure allows for Shenzhen to easily trade with the rest of the
world. The city’s economic contribution is 3rd after Shanghai and Beijing
(Figs. 2.4, 2.5, 2.6, and 2.7).
Visiting the city today, one finds it very difficult to believe that it was
once a small fishing town that was transformed during the ‘Opening-up’
policy that started in 1978. In order to fully appreciate the history of
the Zone, I visited the Shenzhen Museum. The following narrative on
the evolution of the Zone is gleaned from observations and information
from the museum (Fig. 2.8).
Shenzhen, the predecessor of which was called Bao’an County, is in
actual fact an ancient city with a history of over 7000 years of human
development as a marine economy, 1700 years of urban history, and
which served as a coastal defence for China over the past 600 years.
Not only was it a fishing town, but its prime position in the Pearl
River Delta allowed the city to play an important role in trade, situated along the ‘porcelain ware road’, and served as the gateway to
Guangzhou. It also became embroiled in the conflicts of modern Chinese
history due to its position: the Opium Wars of the nineteenth century;
the anti-colonial fight against Britain’s occupation of Hong Kong; the
Sanzhoutian Uprising; the farmer’s movement led by Bao’an County
Organization of the Communist Party of China; the Guangdong-Hong
Kong General Strike; the War of Resistance Against Japan, and China’s
War of Liberation.
In the 1950s, a ‘Mutual Aid Team’ and ‘Agricultural Cooperative’
were established to assist mobilising the so-called ‘peasants’—reservoirs
and dams were built, lands were intensely cultivated, and bumper crops
were yielded. Small volume trade was opened with Hong Kong, and gradually factories and tourist facilities began emerging. However, prior to the
establishment of Shenzhen as a SEZ, Shenzhen citizens faced significant
economic hardship. For instance, farmers’ wages in 1977 were 270 Yuan
in Shenzhen, while in Hong Kong they were 6000 Yuan. Photographs
2
CHINA’S SURGE IN GROWTH FACILITATED …
45
Fig. 2.4 KK100: Second tallest building in Shenzhen with 100 floors
from the period indicate Shenzhen was a small-sized city at that stage,
but things were about to change…
In 1978, the Third Plenary Session of the Eleventh CPC Central
Committee resolved to ‘Reform and Open up’ the Chinese economy,
with Deng Xiaoping proposing Special Economic Zones as a principal
method to do this. Xi Zhongxun, father of today’s President Xi Jinping,
played a pivotal role during this period. After a turbulent history with
46
B. ROBINSON
Fig. 2.5 Shenzhen Municipal Government
the communist party and imprisonment during the Cultural Revolution,
Xi emerged as an important supporter for economic liberalisation and
encouraged Deng Xiaoping to allow the province of Guangdong to make
their own decisions regarding foreign trade policy and foreign investment.
In 1980, the 15th Session of the Standing Committee of the 5th National
Congress passed the “Regulations on Special Economic Zones in Guangdong Province”, leading to the establishment of the Shenzhen Special
Economic Zone, which was soon to become known as the ‘The Miracle
of China’. The history of the Zone is described in terms of ‘Chapters’ by
the Shenzhen Museum and which are described below.
2.3
Chapter I---The Initial Phase: 1978–1992
Large-scale capital construction was a priority, focussed on developing
urban infrastructure to facilitate a modern and efficient city zone. It
tested the waters of market orientated reform and was industrial and
2
CHINA’S SURGE IN GROWTH FACILITATED …
47
Fig. 2.6 Shenzhen North Railway Station—extensive transport infrastructure
connects the city with the rest of China and the world
export-focussed in nature. The ‘Opening-up’ allowed for the introduction of foreign equipment, technology and capital; it encouraged regional
associations; and supported combinations of domestic and international
collaboration. It promoted shareholding reform of state-owned enterprises and the financial system, and very early on established the stock
exchange.
Several nicknames and sayings exist today because of the sheer speed
and magnitude of development of Shenzhen. The Miracle of China
mentioned before was one of them, another name the city was called
was City Rose Overnight. A nickname depicting the ‘force’ of development was the Trail-blazing Ox, when 20,000 construction engineers
were deployed by the Central Military Commission to support the capital
construction programme. Probably the most famous though internationally is Shenzhen Speed. The term was coined when the 50 floor Guomao
48
B. ROBINSON
Fig. 2.7 Colourful nightlife in Shenzhen
Building was built in the early 1980s in just 37 months and became the
tallest building in China at the time.
There were momentous cultural and societal changes during this
period. Concepts such as all people ‘eat from the same pot’ were abolished, signifying a move towards a free market system. Market reform
was incremental and was introduced through the ‘Four-Step Measures’
for price reform of Shenzhen:
• Step 1: Gradually improving the price system and pricing structure
mainly with market regulation.
• Step 2: Further improving the price system mainly with relaxing price
controls.
• Step 3: With the guidance of value law, mainly tightening the indirect control on free price by control, market regulation and relaxing
price controls.
2
CHINA’S SURGE IN GROWTH FACILITATED …
49
Fig. 2.8 Shenzhen Museum
• Step 4: Starting price reform from commodity price to noncommodity tolling areas.
There were also other important changes to facilitate economic growth:
The labour market was allowed to function more freely through
the ‘Labor Contract System’. The complex bureaucracy of the time
was improved through drastically simplifying municipal administration.
Reforms were introduced for state-owned enterprises allowing for a shareholding system and private investment in these entities. The financial
system was reformed. A domestic foreign exchange regulation centre
was established. Foreign banks were allowed in the city while regional
joint-stock banks were established. A nonferrous metals futures market
began operating. Land-use rights were auctioned for the first time. The
housing system was overhauled with a new property management system
and people being allowed to purchase homes.
50
B. ROBINSON
The strategic position of Shenzhen next to Hong Kong and ease of
access to the domestic and international markets, lent Shenzhen towards
a foreign-oriented structure of economic development.
In order to achieve a key objective of the Shenzhen Special Economic
Zone of developing an export-oriented economy, it encouraged investment and introduced bonded industrial zones, and supported exportorientated enterprises and ocean trade.
Early in the history of the Zone, Shenzhen was able to attract foreign
direct investment including a number of multinational enterprises. In
addition, local Chinese business with the support of government were
established to spur industrialisation, such as the Shenzhen Electronics
Industrial Corporation, Great Wall Computer Co., Konka Group Corporation and the Union Textile of China (Group) Ltd. There was also an
early indication of the Zone’s ambitions to enter the hi-tech arena, when
the Chinese Academy of Sciences established the SSIPC hi-tech industrial
park.
2.4
Chapter II---Creating New Advantages,
Making More Progress: 1992–2002
In the early 1990s, Shenzhen was well on the way towards been a
major economic powerhouse. The next decade saw a renewed dedication to the Shenzhen Special Economic Zone to increase competitiveness
and complete the basic framework of the country’s socialist market
economy. Further opening up of the country was prioritised through
the ‘Introducing-in’ and ‘Going out’ policy throughout the country,
much of which was led by the Shenzhen Special Economic Zone. The
high-tech industry was vigorously developed while industrial development and upgrading continued. In addition, the city’s administration and
institutions were further strengthened and streamlined to support growth.
The commercial sector and the trade circulation system experienced
greater reform, as did the reform of state-owned enterprises. The land use
system was improved, the technology market was advanced, an Assets and
Equity Exchange market established, and the Venture Investment Market
System was introduced.
The framework of the socialist market economy, initiated by Shenzhen,
were based on ‘Ten Systems’:
2
CHINA’S SURGE IN GROWTH FACILITATED …
51
1. Ownership system taking public ownership as the principal
part, diverse economic sectors for competing and developing in
common.
2. Capital-linked supervision administration and operation system of
state-owned assets.
3. Market oriented price system.
4. Market system based on commodity market and supported by
production elements market.
5. Social security system of integrating common social aid with
personal security system.
6. Social service supervision system taking agent organisation as the
principal part.
7. National economy accounts system and enterprise accounting
system meeting with the requirement of market economy.
8. Distribution system with labor-based distribution as principal part,
efficiency in priority, and attending to equity at the same time.
9. Economy administration and regulation system of whole society
with indirect means as principal part.
10. Legal system of meeting with the requirements of socialist market
economy system of the special zone.
The ‘10 Systems’ were holistic in approach, combining macroeconomic
reforms while also improving the social security system, such as the
Social Insurance Bureau, in an attempt to ensure the economic benefits also accrued to people in need. Businesses began fulfilling some social
responsibilities through CSI activities and better employee engagement.
The development and progress of the zone has always mirrored the
political and legal transformation that was going on at the same time:
“Constructing and developing socialist democratic politics is one of the key
objectives of the construction of Shenzhen SEZ. Shenzhen combined the
promotion of economic base reform with the promotion of superstructure
reform, continued to strengthen the democratic and legal construction,
and boosted political restructuring in a moderate manner. Shenzhen
also promoted law-ruling throughout the city, which not only improved
the Reform and Opening-up and the economic development, and also
guaranteed the social stability and harmony”. Shenzhen Museum poster.
52
B. ROBINSON
Chapter II also saw greater commitment to the quality and degree of
service the Zone offered foreign investors with the introduction of a
Foreign Investment Service Centre. Granting National Treatment to
Foreign Investors was a policy to improve the lifestyle and services for
foreign nationals in Shenzhen in order to enjoy some of the benefits that
Chinese citizens were afforded.
The strategy of ‘Going out to the Outside World’ was embraced by
the Shenzhen Special Economic Zone. Diplomatic exchanges became the
norm with China encouraging leaders from nations throughout the world
to visit Shenzhen. Shenzhen also played a facilitating role in China’s
admission to the World Trade Organization (WTO).
Chapter I had prioritised industrialisation and urbanisation to shift the
local economy away from the traditional agricultural economy and trade
and commercial economy. Chapter II took this to the next level and vigorously developed high and new technologies and advanced industry. To
achieve this, the city took a global lead in developing these industries,
for instance through the initiation of High-tech Industrial parks and the
hosting of the World Conference on Science and Technology in 1985.
There were numerous other areas of advancement in the Shenzhen
Special Economic Zone: The zone emphasised the development of a
modern service industry and the logistics industry was enlarged—the
Yantian Port was one of the biggest projects of that time. An innovative
financial industry was developed. The tourism sector received attention
and today is an important tourism hub for the country. Urban administration was further fine-tuned to meet the needs of a burgeoning
city including an advanced road and railway system to cope with the
population growth. Rural areas were urbanised.
2.5 Chapter III---Braving a New Way
with Scientific Development Outlook: 2002–2012
“Innovation is the root and the soul of Shenzhen. It is compulsory therefore to promote innovation for further development”. Shenzhen Museum
poster.
At this stage of the city’s development, the phenomenal growth had
led to severe limitations of land, resources, population and environmental capacity. To address these constraints, a new development strategy
2
CHINA’S SURGE IN GROWTH FACILITATED …
53
was required that optimised the city’s industry structure while further
developing new and hi-tech industries.
In 2008 Shenzhen became the national pilot city of innovation.
Six strategic emerging industries were identified and prioritised: Bioindustry; internet; new energy; new material; cultural innovation; and new
generation information technology. Its vision was to be an international
innovation city with world influence.
Shenzhen wanted to be a model ‘Eco-environment Friendly City’ or
so-called ‘Model City of Ecological Garden in China’. From an environmental perspective, it focussed on being a low-carbon economy through
energy-saving real-estate developments, supporting the introduction of
zero-emission electric vehicles, and innovative methods of generating
power, such as the garbage burning power plant in the Nanshan district.
Urban planning was adjusted to improve land utilisation with important
infrastructural projects in transport, communication, power, water and gas
to improve service capabilities in a pollution-free and low carbon manner.
The area of the Shenzhen Special Economic Zone was also increased from
the original 417 km2 to 1991 km2 .
Major infrastructural projects during this period included the China
South Logistic Park; the new Stock Exchange; Shenzhen Hi-Tech Industrial Park; Dafen Cultural Industry Park; Futian Transport Hub; Yantian
Port; and improving facilities at Futian Port.
China has struggled with corruption, and there was a renewed effort
to mitigate the problem through improving Communist Party conduct,
upholding integrity and fighting corruption. Supervision over party
conduct and government ethics was strengthened.
The phase also built on previous advances in improving the well-being
of its citizens through the initiative of ‘Promoting the Construction of a
Harmonious Society’. In order to this, it focussed on strengthening social
management, improving public service, promoting welfare, and generally
ensuring that the success of the city was enjoyed and shared by the people
of the society. This included the improvement of the social security system
and provision of Medicare. Terms such as ‘Harmonious Shenzhen’ and
‘Safe Shenzhen’ were used to reflect the city’s commitment to a safe and
enjoyable lifestyle.
The ‘10 Concepts of Shenzhen’ epitomise the innovative, inclusive and
values-driven philosophies of the Shenzhen Special Economic Zone:
54
B. ROBINSON
1. Time is money, efficiency is our lifeblood.
2. Empty words talk the talk, hard work walks the walk.
3. Dare to be the first.
4. Shenzhen: born in reform, driven by innovation.
5. May Shenzhen become a city where people love to read.
6. Encourage innovation, fear no failure.
7. Cultural access for all.
8. The pleasure of giving lingers on the giver.
9. Shenzhen: in step with the world.
10. When in Shenzhen, you are one of us.
In Conclusion: The Shenzhen Museum boasted numerous pre- and
post-Special Economic Zone photographs, and the change of the city’s
landscape seems metamorphosized in 3–4 decades from an almost sleepy
coastal fishing town to a modern city touching the sky. The approach
adopted by the Shenzhen Special Economic Zone guided China through
its economic transformation.
The Zone’s approach will be evaluated and applied later in the
next Chapter when the Chinese Model of Special Economic Zones is
presented.
2.6
Zhuhai SEZ
Zhuhai is a beautiful city and a huge tourist destination, and a relatively
successful Special Economic Zone (Figs. 2.9, 2.10, and 2.11).
Zhuhai is in a prime position and is well connected through road,
rail, water and air transport to the major cities of the Pearl River Delta
Metropolis—it borders Macau to the South, and is within an hour’s
reach from Guangzhou and Shenzhen. The engineering masterpiece of
the Hong Kong-Zhuhai-Macau bridge connects the city to Hong Kong.
The Zhuhai Special Economic Zone was promulgated at the same time
as Shenzhen and Shantou in 1980. A little border town of a mere 7 square
kilometres expanded rapidly over the 40 years and now occupies 1724
square meters. GDP increased from 209 million Yuan to 291.5 billion
Yuan in 2018 (Guangdong China 2019).
The Zhuhai Special Economic Zone was initially intended to be a hitech research area to the exclusion of heavy industry. In reality, the Zone
has mostly focussed on light industries, and has a thriving textile and electronics manufacturing sector. Other major industries include electronic
2
CHINA’S SURGE IN GROWTH FACILITATED …
55
Fig. 2.9 Seashore of high-rises: Zhuhai Yanlord Riverside Centre; Statue of the
Fisher Girl
Fig. 2.10 Zhuhai Opera House in the design of an open pearl
56
B. ROBINSON
Fig. 2.11 Gongbei Port—gateway to Macau and beyond
information, biopharmaceuticals, petrochemicals, electrical appliances,
precision machinery manufacturing and energy. With the electronics base,
the Zone has recently prioritised a shift back towards hi-tech and highvalue industries. The Zone also boasts the only deep-water port that side
of the Pearl River Delta and has thus become an important large-scale
harbour industry zone. The Hengqin New Area is a pilot Free Trade
Zone within the area that has attracted over 60,000 entities and has had
some notable achievements such as having 370 institutional innovations
recorded.
The relatively lower wages of the area, good infrastructure, tax incentives, and probably the pleasant lifestyle the city offer, has contributed
to significant investment by global companies, such as the many financial institutions that have found a home in the city, including Morgan
Stanley, Bank of East Asia and Standard Chartered. It now boasts some
3000 foreign trade companies, and is home to 2055 hi-tech companies
(Guangdong China 2019).
The Zone has prioritised preserving the ecology and adheres to the
concept of ‘Green Hills and Clear Waters are Gold and Silver Mountains’, and in 1998 won the Dubai International Award for Best Practice
in Improving the Living Environment granted by the UN Center for
Human Settlements. Zhuhai Special Economic Zone has also led the
way in terms of social development. Some examples of this are the
2
CHINA’S SURGE IN GROWTH FACILITATED …
57
following: In 1993 Zhuhai issued the first national social insurance regulation; in 2002 it established serious illness medical insurance for migrant
workers; 2007 saw the introduction of free education for local primary
and secondary school students; and in 2018 tickets for city bus routes
were lowered to 1 Yuan (Guangdong China 2019).
The Zhuhai Special Economic Zone seems to have found the balance
between driving economic growth whilst ensuring the environment is
protected and the well-being of its people is enhanced.
2.7
Shantou Special Economic Zone
Not all the Special Economic Zones were as successful as envisaged.
Shantou is one of those which has not achieved the level of development
expected. Historically a fishing village and trade port, with the benefit
of becoming a ‘treaty port’ in the nineteenth century, which allowed for
trade with the world. Its position has always been advantageous being
between Hong Kong and Taiwan. In actual fact many Chinese living
outside of mainland China originate from the area—an attraction in itself
to lure back Chinese wanting to invest in their homeland.
It is a city of contrasts, derelict buildings and dirty alleys, revitalised
historical centres, and new high-rises dominate the cityscape (Figs. 2.12,
2.13, 2.14, and 2.15).
The Shantou Special Economic Zone has all the infrastructure necessary to support its success and it is well located with port access and
proximity to Shenzhen and other major cities in the region. So, the reason
for its lacklustre performance is not immediately obvious.
Fig. 2.12 Abandoned and decaying
58
B. ROBINSON
Fig. 2.13 Beautiful architecture with evidence of urban restoration efforts
Fig. 2.14 Port and railway station connecting Shantou to China and the rest
of the world
Fig. 2.15 Various industrial parks are found in the Zone
2
CHINA’S SURGE IN GROWTH FACILITATED …
59
Initially the Zone experienced rapid growth after the Shantou Special
Economic Zone was designated in the 1980s, with investors attracted
by incentives such as duty-free exports and reduced import taxes; relatively low wages; and excellent infrastructural resources. Much of the
investment was from the Asian Pacific region. In the 1990s, the Chinese
Government split the city into 3 cities of Shantou, Jieyang and Chaozhou,
with Shantou Special Economic Zone being enlarged from the Eastern
Suburbs to covering the entire city.
The division of the city is one of the reasons advanced for the Shantou
Economic Zone experiencing a downturn, as much of its manufacturing
and agricultural capacity was lost through the division; limited fiscal
resources were split too thinly; and the three cities were now in fierce
competition to each other. Another is the Asian financial crisis of 1998—
the Shantou economy was strongly linked to the Asian Pacific region
which was their major source of foreign capital and the market for their
exports. The economy even entered a contractionary period between
1998 and 2002. The city also had a problem with tax evasion and
smuggling which was a deterrent to investment (Chai 2017).
Bowen Chai (2017) makes a valuable observation as to why the
Shantou Special Economic Zone’s trajectory changed its course for the
negative after the splitting of the city into three: Chai suggests the
Shantou-Jiyang-Chaozhou had a history of almost a thousand years with
the same culture, history and economy—they were reliant on one another.
The initial success of the Shantou Special Economic Zone was a function
of the holistic contribution of the three regions, while the separation of
the region into the three cities compromised this delicate balance.
2.8
Conclusion
The preceding discussion and evaluation of the three Chinese Special
Economic Zones provided the foundation for the depiction of a Chinese
Model of Special Economic Zones that was adopted and that evolved
over time. This will be the focus in the next Chapter as I construct the
Chinese Model of Special Economic Zones—the model is envisaged as a
useful benchmark for the evaluation of Special Economic Zones in Africa
conducted later in the book.
60
B. ROBINSON
References
Chai, B. 2017. The Research on the Stagnant Development of Shantou Special
Economic Zone Under Reform and Opening-Up Policy. University of Pennsylvania Scholarly Commons. Accessed from: https://arxiv.org/ftp/arxiv/pap
ers/1711/1711.08877.pdf. Accessed 10 Mar 2020.
Guangdong China. 2019. Zhuhai Special Economic Zone Marks 39th Anniversary [Online], August 28. Accessed from: http://www.chinadaily.com.cn/reg
ional/2019-08/27/content_37505873.htm. Accessed 4 Apr 2020.
World Bank. 2020. China Country Overview. © World Bank [Online]. Accessed
from: https://www.worldbank.org/en/country/china/overview. Accessed
12 Mar 2020. License: Creative Commons Attribution License (CC BY 3.0
IGO). http://creative-commons.org/licenses/by/3.0/igo/.
Zeng, D. 2010. Building Engines for Growth and Competitiveness in China:
Experience with Special Economic Zones and Industrial Clusters. © World
Bank [Online]. Accessed from: http://documents.worldbank.org/curated/
en/294021468213279589/pdf/564470PUB0buil10Box349496B01PU
BLIC1.pdf. Accessed 4 Mar 2020. License: Creative Commons Attribution
License (CC BY 3.0 IGO). http://creative-commons.org/licenses/by/3.0/
igo/.
CHAPTER 3
The Chinese Special Economic Zone Model
and China of the Future
The photograph of the original planning document of the Shenzhen
Special Economic Zone (Fig. 3.1) provides just a glimpse of the incredible amount of planning that went into the development of the Shenzhen
Special Economic Zone. In studying and visiting the various Zones in
China, it became clear that not only was planning key to the zone,
but that there were certain dynamic success factors that contributed to
the rapid development of the Zone and the economic growth that was
generated.
These are complex, yet somehow simple if one redacts it to a visual
representation of the model that seems to emerge when delving into the
evolution of the zones—especially that of the Shenzhen Special Economic
Zone. This I have attempted to do in the model below, where the pillars
and processes that were adopted in the development of the Zones are
illustrated.
This chapter will unpack key learnings from the success of Special
Economic Zones in the previous chapter and reformulate them into a
‘Chinese Model of Special Economic Zones’—a useful point of comparison against African Special Economic Zones. In addition, the Chapter
will evaluate China of the future—a country that will soon be the biggest
economy in the world and yield much influence over Africa’s propensity
for socio-economic development.
© The Author(s), under exclusive license to Springer Nature
Singapore Pte Ltd. 2022
B. Robinson, African Special Economic Zones,
https://doi.org/10.1007/978-981-16-8105-9_3
61
62
B. ROBINSON
Fig. 3.1 One of the original planning documents for the Shenzhen Special
Economic Zone, dated 1986: ‘General Planning of Shenzhen Special Economic
Zone’
3.1 The ‘Pillars’ of the Chinese
Model of Special Economic Zones
The 7-pillars are the foundation to China’s Special Economic Zones,
without which, they pose a severe constraint to the propensity of these
Zones to prosper. They are Leadership support, government support,
government policy, location, people, an integrated approach, and last but
certainly not least, infrastructure (Fig. 3.2).
3.2 The ‘Protocols’ of the Chinese
Model of Special Economic Zones
While the pillars need to be in place, the planning and establishment of
the Zones need to follow certain protocols in the implementation of these
zones. These are a phased approach, preferential policies, ease of business,
innovation and learning, a favourable investment climate, modern service
delivery, environmental consideration, international cooperation, address
shortcomings, support the social system, and they usually have an export
orientation and are diversified (Fig. 3.3).
3
• From Deng Xiaoping and Xi
Jinping, Chinese Presidents
have provided vociferous
support and commitment
• Support has filtered from
top leadership down to
middle and lower-levels of
leadership
Pillar 1:
Leadership
support
Pillar 3:
Government
Policy
THE CHINESE SPECIAL ECONOMIC ZONE MODEL …
• Closely aligned to socio-economic policy
• Clear objectives and long terms outlook
• ‘Opening up’ market reform was
implemented through the SEZs
• The SEZs also informed future policy
direction – dynamic in nature
• Policy was tested in a controlled
approach
• Policy evolved
• Willingness to experiment and make
mistakes – thus informing future efforts
Pillar 5:
People
Pillar 7:
Infrastructure
• Outcomes of SEZs economic
and social
• Social upliftment and wellbeing always a priority
• Focus on a harmonious
society
Pillar 2:
Government
support
Pillar 4:
Location
Pillar 6:
Integration
63
• There has been immense
commitment and
participation by all tiers of
government towards the
Special Economic Zones
• Position of the SEZs selected
for access to domestic,
regional and international
markets
• Geo-political significance an
important consideration
• The approach of the zones
was integrated
• The SEZ was carefully
integrated with the cities of
the SEZ
• The SEZ was aligned to
national objectives
• Infrastructure was of
paramount importance
• Significant investment by
government in transport,
power, water and waste,
and ICT infrastructure
Fig. 3.2 The 7 Pillars of the Chinese Model of Special Economic Zones
64
B. ROBINSON
Protocol 1:
Phased
approach
Protocol 3:
Preferential
Policies
Protocol 5:
Favourable
investment
climate
Protocol 7:
Environmental
consideration
Protocol 9:
Addressing
shortcomings
Protocol 11:
Export
orientation
• Phased approach
developed as lessons were
learnt and mistakes made
• Successes benchmarked
and applied to other
emerging SEZs
• A wide range of
preferential policies
were offered for both
foreign and local investors
• Internationally
competitive
• Multipronged approach
• State Owned Enterprises played
an important initial role
• Domestic investment was through
public, private, and public-private
partnerships
• FDI encouraged through
incentives, service, infrastructure
and market access
• Foreigners were given ‘national
treatment’
• Environmental issues were
an important consideration
as SEZs evolved
• Better pollution control
• Focus on low-carbon
manufacturing and
transport
• Identify negative
externalities
• Mitigation of corruption
• Addressing congestion
and population growth
through better use of
space and resources
• Adapt for better
efficiencies
• The SEZs mostly had a
strong focus on exports
Protocol 2:
Ease of
business
Protocol 4:
Innovation
and learning
• Reduced bureaucracy
• Simplified local
government
administraƟon
• ‘Pilot city of innovation’
• Industrialisation evolved over
time from heavy industry to
high-tech
• Innovation a priority
• Focus on strategic industries
• ‘Smart-cities’
Protocol 6:
Modern
Service
Industry
Protocol 8:
InternaƟonal
cooperaƟon
Protocol 10:
Social System
Protocol 12:
Diversified
industries
• Development prioritised
modern service industry
• ‘Going out to the outside
world’
• Developed internaƟonal
cooperaƟon and goodwill
• The social system was
continually improved
• Companies played a role in
improving well-being
through Corporate Social
Investment and
stakeholder engagement,
especially around labour
• SEZs were not exclusively
focussed on
industrialisaƟon
• Incubated a wide range of
related industries such as
tourism
Fig. 3.3 The 12 Pillars of the Chinese Model of Special Economic Zones
3
THE CHINESE SPECIAL ECONOMIC ZONE MODEL …
65
3.3 The Chinese Model
of Special Economic Zones
The Pillars and Protocols serve to balance and secure the ultimate objectives of Special Economic Zones, namely sustainable development on a
regional and national basis, as depicted in Fig. 3.4.
A working paper commissioned by the World Bank Group by Douglas
Zeng (2015) considered the major success factors for Chinese Special
Economic Zones: Strong commitment and support of the government
to pilot market-oriented economic reforms; land reforms that allowed
for the allocation of land to be market based; investment incentives
and institutional autonomy; attracting foreign direct investment; technology learning, innovation, upgrading and strong links to the domestic
economy; innovative cultures; clear objectives, benchmarks, and competition; and location advantages. These success factors are reflected in the
Chinese Model of Special Economic Zones, therefore providing support
for the conclusions drawn in the Model.
In conclusion, it is worthwhile reflecting on an earlier work of Douglas
Zeng (2010, xiv) who provides a summary of key experiences of China’s
Special Economic Zones, much of which is encapsulated in the Chinese
Model of Special Economic Zones depicted above:
… can best be summarized as gradualism with an experimental approach;
a strong commitment; and the active, pragmatic facilitation of the state.
Sustainable development
Protocol 1:
Phased
approach
Protocol 2: Protocol 3: Protocol 4:
Ease of Preferential Innovation
policies
business
& learning
Protocol 5:
Favourable
Investment
Climate
Protocol 6:
Phased
approach
Protocol 7: Protocol 8: Protocol 9:
Modern International Addressing
shortservice
cooperation
comings
delivery
Protocol 10: Protocol 11: Protocol 12:
Social
Export
Diversified
system
orientation industries
Pillar 1:
Pillar 2:
Pillar 3:
Pillar 4:
Pillar 5:
Pillar 6:
Pillar 7:
Leadership
support
Government
support
Government
policy
Location
People
Integration
Infrastructure
Fig. 3.4 The Chinese Model of Special Economic Zones
66
B. ROBINSON
Some of the specific lessons include the importance of strong commitment and pragmatism from the top leadership; preferential policies and
broad institutional autonomy; staunch support and proactive participation
of governments, especially in the areas of public good and externalities; public-private partnerships; foreign direct investment and investment
from the Chinese diaspora; business value chains and social networks; and
continuous technology learning and upgrading.
The Chinese Model of Special Economic Zones serves as a useful benchmark against which to evaluate African Special Economic Zones. While
it is acknowledged that there are important contextual differences that
need to be taken into account when evaluating African Zones against this
Model, the premise of this book is that there are lessons to be learnt from
the Chinese Model, and that such a model can help identify the elements
of success and failure of Special Economic Zones in Africa.
3.4 Epilogue: The Future
of Chinese Development
Before embarking on the evaluation of Africa’s Special Economic Zones,
it would be of value to consider the outlook for China—as Africa’s biggest
trading partner and significant investor in Africa’s Special Economic
Zones, China’s future local and global economic aspirations will have a
direct bearing on Africa’s Zones.
The Chinese economy is slowing down.
The World Bank’s China Economic Update of December 2019
describes the sluggish growth as a result of ‘cyclical headwinds and
structural challenges’. The cyclical factors include a global economic
slowdown; trade tensions especially between China and the USA; and
tighter regulations of non-bank credit. Structural challenges include
slower labour force growth; poor productivity increases; the outcomes
of excessive borrowing; and the impact of environmental negligence.
Figure 3.5 from the China Economic Update, based on the World
Bank’s NBS figures indicates how the GDP Growth has been influenced by reduced domestic consumption; reduced gross capital formation
due to weak investor confidence, trade policy uncertainty, and tight
domestic financing; while net exports have strengthened due to significant
reduction of imports—much attributed to the trade policy uncertainty.
Figure 3.6 below indicates the World Bank forecasts of GDP growth
dropping to 5.7% by 2022.
3
THE CHINESE SPECIAL ECONOMIC ZONE MODEL …
67
Fig. 3.5 The contribution of consumption, investment and net exports to GDP
Growth (China Economic Update, World Bank 2019a: 11)
Fig. 3.6 Global Economic Prospects—Forecasts—China (World Bank Data
2020)
68
B. ROBINSON
The Chinese government has adopted the following policy measures
to address this sluggish trend: Targeted and measured policy support
in light of the structural and cyclical nature of the slowdown; increased
fiscal support, including tax cuts and a higher limit on local government
on-budget borrowing; easing the monetary policy stance; and the introduction some structural reforms (World Bank, China Economic Update
2019a: 23–25).
Another World Bank publication sheds some light on how China could
lay the path for the future: ‘Innovative China: New Drivers for Growth’,
2019. The report proposes the so-called “3+6+7” Reform Agenda: 3D’s;
6 Strategic Choices; and 7 Areas of Structural and Institutional Reforms:
These are summarised in Tables 3.1, 3.2 and 3.3.
The 3D’s are also presented in visual form (Fig. 3.7), which is
quite useful, as it illustrates how the production frontiers can be shifted
outwards and allow for greater production making better use of domestic
resources; global technologies; and through introducing new technologies.
Table 3.1 A summary of the 3D’s (World Bank, Innovative China: New Drivers
for Growth 2019b: 19–149)
3D’s
Summary
1. Removing
distortions
• Reduce distortions in the allocation of resources to maximise its
potential production frontier
• This requires that land, labour and financial resources be allocated
competitively and efficiently to ensure their most productive use
• Accelerate the diffusion of advanced technologies and innovations
• This would allow China to extend its current production frontier to
the global frontier
• This will allow China to take advantage of the potential for growth
by promoting technology diffusion; upgrading the capacity of
workers to adopt and use new technologies; and facilitate access to
global technologies and innovations
• Fostering discovery of new innovation and technology
• This will create new innovations and push out the global
technology frontier
The government would need to provide a market-supportive role to
promote these 3D’s
2. Accelerating
diffusion
3. Fostering
Discovery
Governance and
institutional reforms
3
THE CHINESE SPECIAL ECONOMIC ZONE MODEL …
69
Table 3.2 A summary of the Six Strategic Choices (World Bank, Innovative
China: New Drivers for Growth 2019b: 19–149)
6 Strategic Choices
Summary
1. Striking the
right balance
between the three
drivers of growth
2. Reshaping
industrial policies
• While new technologies have been emphasised by Chinese
policy, the third D, the country also needs to pay attention to
the first two D’s, as these will produce immediate results and
will remain the main driver for growth for some time
• As China is at a more advance stage of development than when
it ‘opened-up’, it needs a new approach to industrial policy
• Industrial policy needs to focus on market failures and to be
market conforming and enhancing
• Industrial policies that leverage and promote market
competition are of particular importance due to the country’s
large state presence
• The state needs to be less market interventionist and more
market supportive and augmenting
• While State-owned Enterprises (SOEs) are still important, fair
competition between SOEs and non-SOEs would expose firms
to competitive pressure and facilitate the selection of the most
productive enterprises, whether State-owned or not
• Trade tension have brought uncertainty and downside risk
which could unravel global value chains
• China should work with global partners to achieve mutually
beneficial global economic relations
3. Adjusting the
balance between
the state and
markets
4. Attaining
mutually beneficial
international trade
and investment
relations with
global partners
5. Balancing
supply-side
reforms with
demand-side
reforms
6. Preparing for
the future impact
of technological
changes
• China should rely less on investments and more on
consumption for growth, while maintaining robust aggregate
demand
• Consumption growth can be accelerated by encouraging lower
household saving through reforms such as an improved social
security system and more progressive tax rates
• The ‘Hukou’ system of household registration should be
reformed in order to integrate migrants into the urban
population
• Policy needs to prepare China’s current workforce for the
impact of technology on the workplace, as while new
employment opportunities may be created, others may be
displaced or require new skills
70
B. ROBINSON
Table 3.3 A summary of the 7 Areas of Structural and Institutional Reforms
(World Bank, Innovative China: New Drivers for Growth 2019b: 19–149)
7 Areas of Structural
and Institutional
Reforms
Summary
1. Reshaping
industrial policies
and supporting
market competition
• Focus policies on improving factor markets, the broader business
environment, and promote market competition
• Targeted industrial policies need to be focussed on market failures, such
as information asymmetry and externalities
• Policy should target just a few strategic industries with extensive support
• A market led corporate bankruptcy regime to ensure timely
discontinuation of support for non-viable firms
• Expand government-industry dialogue on policy for transparency and
accountability
• Open more sectors to private and foreign investment to promote
greater competition
• Reduce market restrictions and improve the business climate and local
innovation and entrepreneurship ecosystems
• SOE reforms to ensure fair competition which could include
mixed-ownership initiatives
2. Promoting
innovation and the
digital economy
3. Building human
capital
• Increase the capacity of the competition regulatory agency
• Although China has an extensive top-down innovation system, this
should be complemented with a more bottom-up market orientated
approach, such as R&D tax credits, innovation support programs, and
global innovation partnerships
• Greater protection of intellectual property rights through increasing
fines and damages for infringement
• Government support for patenting should be more stringent and quality
driven
• To promote digital innovations, China could facilitate the trade of flow
of data through more open and less restrictive digital policies
• Improve the quality of telecommunications technology to support digital
services
• To sustain productivity and innovation-driven growth, investments
should be shifted from physical capital to human capital
• Develop a new education sector for the future workforce
• Address disparities in the educational system; ensure the poor and
disadvantaged are afforded and encouraged to remain in school; develop
a multi-tiered tertiary education system; promote curriculum and
pedagogical reforms to promote creativity, cognitive and socioemotional
skills; and strengthen technical and vocational training and lifelong
learning systems
(continued)
3
THE CHINESE SPECIAL ECONOMIC ZONE MODEL …
71
Table 3.3 (continued)
7 Areas of Structural
and Institutional
Reforms
Summary
4. Allocating
resources efficiently
• Improve the allocative efficiency of finance, especially towards SMEs
• Scale up regulatory and supervisory oversight in the fintech industry
while still encouraging innovation
• Address the significant debt accumulation in the financial system
• Improve the allocative efficiency of labour
• Access the underutilised labour in agriculture, increase female labour
participation, and extend the working lives of the labour force
• Reform the ‘hukou’ household registration system to promote labour
mobility
5. Leveraging
regional development
and integration
6. Promoting
international
competitiveness and
economic
globalization
• Consolidate the pension and social security system
• Increase the pace and efficiency of urbanisation and facilitate the
rural–urban migration of labour
• Regionally coordinated development supported by reforms of the
government performance appraisal system to incentivise coordination
and collaboration
• Find smarter ways to plan, utilise and manage infrastructural investment
• Further reforms to promote an open global economy
• Pursue preferential trade agreements to stimulate trade and foreign
direct investment flows and integrate with global value chains
• Provide leadership in developing international rules on foreign
investment, cross-border mergers and acquisitions that both developed
and developing economies could support
• Further protect the rights and interests of foreign investors in China
• Encourage the introduction of foreign technologies in China and
prevent ‘forced’ technology transfers
• Strengthen the linkages between domestic and foreign enterprises to
enhance technology and managerial spill overs and global collaboration
7. Governing the
next transformation
• Improve China’s outward direct investment management system by
adopting a more market-oriented approach
• The belt and road initiative should include investment in ‘soft
infrastructure’, including the adoption of international standards and
rules of trade, foreign investment and environmental standards
• Belt and road investment should be transparent and environmentally,
socially and fiscally sustainable
• Government reforms to ensure a more balanced relationship between
the state and market
• The market must play a more decisive role, while the state should play
a more market-supportive role
• Governance reforms to provide clear, fair and predictable regulations
• Reform of the civil service management system to strengthen incentives
to support markets and long-run productivity growth
• Reshape and modernise its intergovernmental relations and strengthen
its fiscal discipline
• Improve the coverage, quality, and public accessibility of government
related data
72
B. ROBINSON
Fig. 3.7 The impact of the 3D’s on the production Frontiers 3D’s (World
Bank, Innovative China: New Drivers for Growth 2019b: XIX)
A critique of this publication lies in the one aspect that is perhaps
underestimated in the 3D’s, namely the role of Chinese Foreign Direct
Investment in other countries. This provides the opportunity to fundamentally shift China’s local and global production frontier. Especially
in the face of Chinese firms encountering oversupply of capacity in
the face of an economic downturn domestically. The significant investment and potential for future investment by Chinese companies in
Special Economic Zones is Africa is one example of that. Not only are
Chinese companies investing in African financed Special Economic Zones,
but Chinese investors, with the support of China’s government, have
established and financed Chinese Special Economic Zones in Africa.
3
THE CHINESE SPECIAL ECONOMIC ZONE MODEL …
73
Two case studies are presented that expand of two elements of the
New Drivers for Growth available to China. Firstly, the Xiong’an New
Area and the Belt and Road Initiative.
3.5
Xiong’an New Area
The 3Ds have a great deal of emphasis on technology in order to shift
the production frontier for China. The Xiong’an New Area provides an
example of both the efforts to accelerate the diffusion of technology and
to foster the discovery of technology.
There has been a lot of ‘noise’ around the Xiong’an New Area, President Xi’s brainchild and which could be indicative of China’s future
focus as it address the constraints of mega-cities and leads the way into
the Fourth Industrial Revolution. It has not been designated a Special
Economic Zone with the usual preferential benefits, but it is enjoying the
country’s leadership and governmental support, and will be an interesting
project to observe as it unfolds, as if it is successful, it could be the next
Shenzhen and provide the blueprint for China’s future cities.
Beijing is bursting at the seams and options are limited for authorities
to increase the city in an effective manner. So, as happens often in China,
an experiment is under way. Simply create a new city. But a better city—a
smart city that is green, innovative, and one that is pleasant to live in.
President Xi announced his vision for Xiong’an on the 1st of April
2017. It is estimated that RMB 4 trillion will be invested in building the
city over the next two decades. It is intended to integrate the BeijingTianjin-Hebei area, with approximately RMB 600 billion earmarked for
transport infrastructure alone, and which includes four high-speed train
lines and two canals. This will reduce transit time to 20 minutes from
Xiong’an to Beijing’s airport and 30 minutes to Beijing and Tianjin
(Wong 2019).
This New Area will grow through the influx of non-capital functions
from Beijing, such as financial institutions, colleges, hospitals and certain
public service departments. Universities will also be shifted to the area
including the Peking University Guanghua School of Management and
Renmin University of China. The innovation focus of the area is reflected
in the fact that the Zhongguancun technology hub currently in Beijing
will develop a science park in Xiong’an, and it is hoped that about
74
B. ROBINSON
Fig. 3.8 The Baiyangdian Lake area with fields of the giant lotus flowers
500,000 scientists will migrate to Xiong’an from Beijing. Investments in
hi-tech industries, such as biotechnology and new materials will be given
priority, and there has already been an indication that leading companies
in these fields will set up operations there, including Baidu, Alibaba and
Tencent (Wong 2019).
It intends attracting 12 energy conservation and environmental protection companies to the area in its drive to be a leading Green city. The city
itself aims to be powered by 100% clean power, some of which it will
produce itself through natural gas and geothermal energy. Factories with
high carbon emissions will be removed or restricted, and 5,200 companies in the area have already been shut down due to pollution violations
(Wong 2019).
When visiting China in 2019, I asked many locals about the Xiong’an
New Area. Most people didn’t know about the planned city (although
this may also have been thanks to my terrible pronunciation of Xiong’an).
When I visited the New Area itself, about 130 km from Beijing, it
comprised mostly small towns and rural areas. It is home to the country’s
largest freshwater lake, the Baiyangdian Lake, a spectacular area of reed
marshes and giant lotus flowers. This in itself promises to provide pleasant
living for those who intend living there, although the marsh and mercurial
weather is seen by some as a constraint to the area’s development.
But already there were signs of what was to come. New (and currently
deserted) roads, billboards advertising the new high-speed rail line,
and signs of investors taking ‘first-mover’ advantage, with modern new
commercial buildings spotted here and there. This sleepy area is going to
metamorphosize very soon… (Figs. 3.8, 3.9, 3.10, 3.11 and 3.12).
3
THE CHINESE SPECIAL ECONOMIC ZONE MODEL …
75
Fig. 3.9 Typical streets of the Xiong’an area—Far from the high-rise city it is
to become
Fig. 3.10 Typical streets of the Xiong’an New Area—Karaoke, a favourite
pastime
3.6
Belt and Road Initiative
In terms of the 7 Areas of Structural and Institutional Reform, the New
Drivers for Growth for an innovative China, mention was made of the Belt
76
B. ROBINSON
Fig. 3.11 Xiong’an New Area—signs of what is to come
Fig. 3.12 Almost deserted new 3-lane city roads
3
THE CHINESE SPECIAL ECONOMIC ZONE MODEL …
77
and Road Initiative (BRI). The Initiative is an ambitious vision of President Xi Jinping that was initiated in 2013. It is founded on, and intended
to rekindle, the ancient Silk Road that connected China to the rest of the
world. Today’s Belt and Road will similarly enhance the connectivity of
China throughout the modern world, with a specific initial focus on Asia,
Europe and Africa, that serves to improve trade and economic cooperation (Fig. 3.13). The initiative is the culmination of China’s Opening-Up
and ‘Going-Out’ policies begun in the late 1970s.
The Belt and Road Initiative describes global opportunities in five
areas: Policy coordination that will support large-scale infrastructural
development; building facilities to enable connectivity; facilitating crossborder investment and supply chain cooperation; financial integration
that enhances monetary policy coordination and bilateral financial cooperation; and cultural exchange through promoting people to people
interaction and cooperation. The plan also suggests that the initiative
will further the development agenda of lesser developed economies and
regions while promoting peace.
The World Bank (2020) estimates that the cost of the Belt and Road
Initiative spanning potentially 70 corridor countries is in the region of
$575 billion. In doing so, travel times would be reduced by 12%, trade
Fig. 3.13 The Belt and Road Initiative (World Bank 2020)
78
B. ROBINSON
would be increased by between 2.7 and 9.7%, income would go up to
3.4%, and lift 7.6 million people from extreme poverty.
The Belt and Road Initiative holds enormous potential in Africa to
improve access to domestic, regional and international markets, especially
through improved transport infrastructure. While Kenya is depicted as
the point of entry of the Belt and Road in Africa in the above figure
(Fig. 3.13), the initiative is certainly not limited to the country. For
instance, the envisaged rail network in East Africa will link the Port
of Mombasa in Kenya to the Capital of Nairobi, and then extends to
Uganda, Rwanda, Burundi and South Sudan—all of which are landlocked countries. Other significant regional railway networks that have
been galvanised by China include the recently completed Djibouti to
Addis Ababa railway, and the Lobito corridor that will link Lobito in
Angola to the Copperbelt of Zambia. The potential of this network to
improve transport times, cost and regional integration are enormous.
For instance, the Chinese have already financed and built the Mombasa
to Nairobi section, which they are currently still managing and maintaining—it is modern, comfortable, on-time, and already been used to
transport people and goods efficiently. The Madakara Express passenger
train replaces the infamous overnight ‘Lunatic Express’, and is only 5
hours in duration. The photographs below give a glimpse of this new
infrastructure (Figs. 3.14 and 3.15).
There are of course concerns: The accumulative debt burden for developing economies could be problematic, and governance risks especially
around corruption, and environmental risks pose a problem. There are
also concerns there could be negative societal externalities, such as forced
removal of communities. The perception by many locals who I met were
quite negative towards the new railway lines, and when travelling on the
Addis Ababa to Djibouti railway line also built by the Chinese, locals
threw rocks at the carriages and have been known to deliberately stop the
train out of protest to the trains’ existence.
The transport infrastructure that has resulted from the Belt and Road
Initiative, as well as other mammoth infrastructural investments by the
Chinese in Africa, will receive much attention in this book. Such investments have the propensity to alleviate the bottlenecks of infrastructural
development found in many African countries, and by doing so, they
facilitate the success of Special Economic Zones in Africa.
3
THE CHINESE SPECIAL ECONOMIC ZONE MODEL …
Fig. 3.14 Nairobi and Mombasa Terminal
Fig. 3.15 New and modern trains—the ‘Madakara Express’
79
80
B. ROBINSON
3.7
Conclusion
The Chinese are not afraid of failing. They are afraid of not trying.
Their innovative approach of trying, succeeding and failing, and learning,
have led to the hugely successful application and replication of Special
Economic Zones to facilitate sustainable development for China.
‘If it works, copy it’ as one of my Chinese colleagues explained.
African countries can benefit not only from the investment by the
Chinese in important infrastructural projects, investment in African
Special Economic Zones, and Chinese investing in their own Special
Economic Zones in Africa, but Africa has an enormous amount to learn
from China’s model and adapting it to African nations’ specific contexts.
There are of course many reciprocal benefits to China, notably, these
investments hold the promise to shift the production possibilities frontier
for the country as it embarks on its next stage of economic development
in the face of an economic slowdown. It is in the interest of the Chinese
for African Special Economic Zones to succeed.
This chapter was important as it studied and presented China’s Model
of Special Economic Zones, as a construct and benchmarking tool against
which African Special Economic Zones are further evaluated in the
Chapters that follow.
References
Wong, F. 2019. Xiong’an New Area: President Xi’s Dream City. China Briefing,
26 March. Accessed from: https://www.china-briefing.com/news/xiongannew-area-beijing-tianjin-hebei/. Accessed 20 Mar 2020.
World Bank. 2019a. China Economic Update December 2019: Cyclical Risks
and Structural Imperatives. © World Bank [Online]. Accessed from: https://
www.worldbank.org/en/country/china/publication/china-economic-upd
ate-december-2019. Accessed 31 Mar 2020. License: Creative Commons
Attribution License (CC BY 3.0 IGO). http://creative-commons.org/lic
enses/by/3.0/igo/.
World Bank. 2019b. Innovative China: New Drivers of Growth. © World
Bank [Online]. Accessed from: https://openknowledge.worldbank.org/han
dle/10986/32351. Accessed 31 Mar 2020. License: Creative Commons
Attribution License (CC BY 3.0 IGO). http://creative-commons.org/lic
enses/by/3.0/igo/.
World Bank. 2020. Belt and Road Initiative. © World Bank [Online].
Accessed from: https://www.worldbank.org/en/topic/regional-integration/
3
THE CHINESE SPECIAL ECONOMIC ZONE MODEL …
81
brief/belt-and-road-initiative. Accessed 13 Mar 2020. License: Creative
Commons Attribution License (CC BY 3.0 IGO). http://creative-commons.
org/licenses/by/3.0/igo/.
World Bank Data. 2020. GDP Growth and Exports of Goods and Services. ©
World Bank [Online]. Accessed from: https://data.worldbank.org/indicator/
NY.GDP.MKTP.KD.ZG?locations=CN&view=chart. Accessed 12 Mar 2020.
License: Creative Commons Attribution License (CC BY 3.0 IGO). http://
creative-commons.org/licenses/by/3.0/igo/.
Zeng, D. 2010. Building Engines for Growth and Competitiveness in China:
Experience with Special Economic Zones and Industrial Clusters. © World
Bank [Online]. Accessed from: http://documents.worldbank.org/curated/
en/294021468213279589/pdf/564470PUB0buil10Box349496B01PU
BLIC1.pdf. Accessed 4 Mar 2020. License: Creative Commons Attribution
License (CC BY 3.0 IGO). http://creative-commons.org/licenses/by/3.0/
igo/.
Zeng, D. 2015. Global Experiences with Special Economic Zones: Focus on
China and Africa. Policy Research Working Paper No. 7240. World Bank,
Washington, DC. © World Bank [Online]. https://openknowledge.worldb
ank.org/handle/10986/21854. License: CC BY 3.0 IGO.
PART II
The Emergence of Chinese Special
Economic Zones in Africa
CHAPTER 4
China in Africa
Chinese President Xi Jinping’s book The Governance of China II (2017)
depicts Xi’s vision for the future of ‘Socialism with Chinese Characteristics and the Chinese Dream’ to achieve a ‘Moderately Prosperous Society
in All Respects’. When first reading the book, I found it quite baffling
that the term ‘moderately prosperous’ had been used. Used to the lofty,
and unkept promises of many politicians, I would have expected the term
‘phenomenally prosperous’, or simply ‘wealthy’ society? Yet when reading
the book, which is essentially Xi’s philosophy (the antecedent of which
could be considered as Maoism), one begins to understand that this is one
step, an important step, in China’s evolving development—the criterion
of which is inclusive growth where everyone will achieve an rudimentary
level of prosperity. Once achieved, the word ‘moderate’ will likely change
to reflect the next level of prosperity. Integral to this vision, is China’s
global goals.
Two quotes serve as a useful introduction to the influence of China in
Africa. The first describes the function of Free Trade Zones (FTZs) for
China in the global economy which provides a hint of the role African
Special Economic Zones may play in this regard; and the second, a quote
on Xi’s view on Africa:
© The Author(s), under exclusive license to Springer Nature
Singapore Pte Ltd. 2022
B. Robinson, African Special Economic Zones,
https://doi.org/10.1007/978-981-16-8105-9_4
85
86
B. ROBINSON
Accelerating the implementation of the FTZ strategy is an objective
requirement for adapting to the new trends of economic globalization. It
is the option we must choose if we are to achieve deeper reform and build
an open economic system, and it is an important measure in addressing
foreign relations and implementing foreign strategies. (Xi 2017: 106)
In conducting China’s relations with Africa, we apply the principles of
sincerity, affinity, and good faith and uphold the values of the greater good
and shared interests. We will work with our African friends to embrace a
new era of mutually beneficial cooperation and common development. (Xi
2017: 496)
Xi then proposes strengthening the ‘Five Pillars’ of the partnership
between China and Africa (Table 4.1):
Xi further details the implementation of Ten Cooperation Programs
with Africa (Table 4.2):
The Chapter will now detail the historical relationship between China
and Africa, the current relationship the Continent and China have with
specific reference to economic interaction between them, and the policy
framework between China and Africa. The Chapter also serves as an introduction to Special Economic Zones in Africa, the investment of China in
Special Economic Zones in the developing world, and finally, Chinese
Special Economic Zones in Africa.
Table 4.1 Excerpts from the Five Major Pillars of China and Africa’s strategic
partnership (Xi 2017: 496–497)
Five Major Pillars of China and Africa’s strategic partnership
1. We should remain committed to political equality and mutual trust. China strongly
believes that Africa belongs to the African people and that African affairs should be
decided by the African people
2. We should remain committed to mutually beneficial economic cooperation…
requires us to facilitate Africa’s development efforts and ultimately deliver common
development through mutually beneficial cooperation
3. We should remain committed to mutually enriching cultural exchanges
4. We should remain committed to mutual assistance in security
5. We should remain committed to solidarity and coordination in international affairs
4
CHINA IN AFRICA
87
Table 4.2 Excerpts from the Ten Cooperation Programs of China with Africa
(Xi 2017: 498–501)
10 Cooperation Programs of China with Africa
1. The China-Africa industrialization program:
China will actively promote partnering in the fields of industrial complementarity and
industrial capacity between China and Africa, and encourage more Chinese enterprises
to make investment in Africa. China will build or upgrade a number of industrial
parks in cooperation with Africa, send senior experts and advisors to Africa, and set up
regional vocational education centers and schools with a view to enhancing Africa’s
industrial capacity
2. The China-Africa agricultural modernization program
3. The China-Africa infrastructure program:
We support Chinese enterprises in their active participation in Africa’s infrastructural
development, particularly in sectors such as railways, roads, regional aviation, ports,
electricity, and telecommunications, which will help enhance Africa’s capacity for
sustainable development
4. The China-Africa financial program:
It will encourage Chinese financial institutions to set up more branches in Africa, and
increase its investment and financing cooperation with Africa in multiple ways so as to
provide financial support and services for Africa’s industrialization
5. The China-Africa green development program:
China will support Africa in bolstering its capacity for green, low-carbon and
sustainable development… China-Africa cooperation will never be pursued at the
expense of Africa’s eco-system and long-term interests
6. The China-Africa trade and investment facilitation program:
China is ready to negotiate comprehensive free-trade agreements with countries and
regional organizations in Africa covering trade in goods and services and investment
cooperation… once concluded (these) will boost China’ s import of African products
7. The China-Africa poverty reduction program
8. The China-Africa public health program
9. The China-Africa cultural and people-to-people program
10. The China-Africa peace and security program
4.1
China’s Intricate Relationship with Africa
China is geographically very far away from Africa, yet the first contact
between them seems to date to over two millennia ago, when Chinese
explorers ventured west and arrived at Likan, believed to be Alexandria
of Egypt. This is disputed by some historians, although there are other
suggestions that indirect trade of goods occurred around this period—
Chinese silk worn by Queen Cleopatra of Egypt, and it is recorded that in
166 AD, the Han Emperor received gifts of elephant tusks and rhinoceros
horn from the Roman Emperor of the time. During the Sung Dynasty
88
B. ROBINSON
of 960–1279, advances were made in Chinese shipbuilding, and trade
with Africa began in earnest, with remnants of Chinese coins and porcelain from the period found as far South as Zimbabwe. China’s Ming
Dynasty saw this interaction increase and some ambassadors and envoys,
such as those from Somalia and Egypt, travelled to China. Interaction,
however, reduced over time and by the sixteenth century ship building
and sea going trade was prohibited due to China’s internal conflicts, and
European invasions and colonisations in Africa and Asia (Jinyuan 1984).
The Ching dynasty had a closed-door policy regarding foreign relations, and for a long period there was little interaction between China and
Africa. In the early 20th Century this started to change. Chinese labourers
were recruited to work in the new-found gold mines of South Africa, and
it is estimated that between 70,000 to 100,000 Chinese labourers worked
on the mines between 1904 to 1907 and many descendants still live in the
country. Apart from this, there was not much contact between China and
Africa, much of which was under colonial rule. The Bandung Conference
of Asian-African countries changed this, and in 1956 Egypt established
diplomatic relations with China, and this trend in confirming diplomatic
relations has grown over the years to include all African countries except
for eSwatini due to their recognition of Taiwan, an issue discussed later in
the chapter. In parallel, economic activity and investment between China
and Africa have blossomed (Jinyuan 1984).
Since the late 1990s the relationship between China and the African
continent has truly exploded. In 2013, China became sub-Saharan
Africa’s largest export and development partner. About a third of China’s
energy imports come from Africa as China’s hunger for energy resources
became acute with the massive growth experienced by the country. Large
scale infrastructural projects, which will be detailed throughout this book,
were undertaken with the assistance of Chinese Banks such as the People’s
Bank of China, the China Development Bank, and the Export–Import
Bank of China (EXIM Bank). Thousands of Chinese enterprises are now
operating in Africa. Diplomatic contacts, bilateral trade, and cooperation
initiatives have grown including the Forum on China Africa Cooperation
(FOCAC) and the Association of BRICS (Brazil, Russia, India, China and
South Africa) (Pigato and Tang 2015).
Before embarking on a conversation on the economic cooperation
between China and Africa, it is worthwhile addressing some of the other
areas where China is contributing to Africa’s development, and to touch
4
CHINA IN AFRICA
89
on some areas of concern regarding the relationship between them. Reference is made to various FOCAC documents such as he FOCAC Beijing
Action Plan 2019–2021, news releases, and academic perspectives in the
ensuing discussion.
4.1.1
Political and International Cooperation
The FOCAC Beijing Action Plan 2019–2021 emphasized high level
visits and dialogue; bi-lateral consultation and cooperation; and exchanges
between legislatures, consultative bodies, political parties and local
governments.
In addition, China endeavoured to support the African Union and
sub-regional organisations in Africa in their efforts to promote peace
and stability, and further better integration of Africa such as through the
African Continental Free Trade Agreement initiative.
There are a number of examples of the collaboration between China
and African Nations and their increasing role in World Affairs: China
supported the lifting of international sanctions against Zimbabwe in
2020; China stated that it encouraged multilateralism and opposed international ‘bullying’ in South Africa in 2019; and China has spoken
up at the United Nations for the international community to increase
support for Somalia while safeguarding the country’s sovereignty and
independence.
The Beijing Action Plan (2019–2021) idealises the future of cooperation between China and Africa in the rapidly changing global environment:
It is in line with the trend of the times and serves the interests of Chinese
and African people to build a community with a shared future for mankind,
an open, inclusive, clean, and beautiful world that enjoys durable peace,
universal security, and common prosperity, and a new type of international
relations featuring mutual respect, equity, justice and win-win cooperation.
4.1.2
Development Assistance
China often describes itself in similar development terms as Africa.
Lessons learned from its success in alleviating poverty, it believes, can be
successfully adapted and applied in Africa. Not only does China provide
90
B. ROBINSON
financial assistance for social development, it also provides information
and guidance founded on its own successes in development.
The Beijing Action Plan (2019–2021) speaks of ‘Sharing the Poverty
Reduction Experience’. The Plan includes an array of poverty alleviation
projects to help Africa improve its rural public service; enhance skills to
improve employability; improve the environment and living conditions in
rural areas; and protect the health and well-being of women and children.
As part of its varied educational interventions, China provides workshops
and tertiary degrees on poverty reduction and development for African
Countries, as well as conducts collaborative research projects on poverty
reduction.
4.1.3
Humanitarian Support, Peacekeeping Efforts, Military
Cooperation, and Law Enforcement
China has a long history of providing humanitarian support after
‘Opening-up’. International peacekeeping efforts were bolstered in the
1980s and 1990 by China who sent 600 peacekeepers to Liberia;
218 peacekeepers to the Democratic Republic of Congo; and China
participated in numerous UN-sanctioned operations to promote stability
(Alden 2005). China also donated $22 Million during this period to
the UN Trust Fund for African Development and the UN Environment
Programme. In 1999, China provided $200,000 to combat drought in
the Horn of Africa. And there are many more examples of this over the
years.
China has been engaged in military support since the 1980s in the
form of training, equipment provision, and the sales of arms. Examples in
the 1990s of China’s military support include the provision of uniforms,
training, and light equipment to Mozambique; the sale of fighter jets to
Zimbabwe; the sale of helicopters to Angola and Mali; the sale of light
arms to Namibia and Sierra Leone; the alleged sale of $1 Billion worth of
arms to both sides of the Ethiopian-Eritrean war; arms to the Democratic
Republic of Congo to defend it against Rwandan forces; provision of arms
and ammunition and helicopters to Sudan; as well as the provision of
Chinese firms’ contract workers with an estimated 4000 and 10,000 arms
(Alden 2005).
The Beijing Action Plan (2019–2021) describes FOCAC’s ChinaAfrica Peace and Security Plan. In it, China commits to increased
defence and security assistance to Africa, and cooperation and strategic
4
CHINA IN AFRICA
91
support in social governance, public security, peacekeeping, cyber security,
anti-piracy and counter terrorism. China also actively supports UN peacekeeping operations in Africa; supports capacity building for Africa’s own
peacekeeping missions, such as the African Standby Force and African
Capacity for Immediate Response to Crisis; and provides military aid to
the African Union.
There are many examples of China’s direct involvement in this regard.
In 2019, China supported both the UN Assistance Mission and the
African Union Mission in Somalia. China has also encouraged countries
to find their own solutions and resolve their own conflicts, for instance, in
2020, China advocated for political dialogue to end the Libyan crisis and
cautioned against external military intervention and the use of weapons.
The Beijing Action Plan (2019–2021) also discusses joint efforts
against corruption, while promoting law enforcement and security. Law
enforcement includes providing police equipment to some African countries and offering law enforcement training courses.
4.1.4
Education and Training
The Beijing Action Plan (2019–2021) indicated some of the ongoing
commitments of China to Africa’s continued improvement in education
of its citizens. Not only does it cover primary, secondary, and tertiary
educational support, but training and education also focusses on specific
sectors and professions, for instance, training government administration
professionals. It also committed to training 1000 ‘high-calibre’ Africans,
and providing Africa with 50,000 government scholarships and 50,000
training opportunities for professionals in a range of disciplines. The
‘20+20 Cooperation Plan for Chinese and African Institutions of Higher
Education’ continued implementation was emphasised, an initiative which
encourages academic exchanges and cooperation.
China has established a number of Confucius Institutes and Classrooms
at various African educational institutions, manned by Chinese teachers
and volunteers. One objective of these Institutes is to encourage learning
of the Chinese Language within Africa.
4.1.5
Science and Technology
Science and technological know-how that the Chinese possess has been
shared with their African counterparts to facilitate African capacity in
92
B. ROBINSON
this regard, such as through the implementation of the Belt and Road
Science, Technology and Innovation Cooperation Action Plan and the
China-Africa Science and Technology Partnership Program 2.0.
The Fourth Industrial Revolution is acknowledged in the Beijing
Action Plan (2019–2021) when it described the increasing role of artificial intelligence and quantum computing, and how quantum physics
principles on computing will change the face of operating systems, cyber
security, big data, block chains and other applications. China committed
to applying its strength in these areas to support Africa.
4.1.6
Health
China actively engages with African Nations in their efforts to improve
and ensure responsive public health care systems. China supports various
efforts in health control, prevention and treatment. More effective
hospital management is encouraged in Africa with cooperation between
respective professional and specialised health departments, and efforts
have been made to train medical specialists, medical staff, public health
workers and administrative personnel in African Countries. It works
closely with African health programmes such as the African Center for
Disease Control and Prevention; and China has established several ChinaAfrica Friendship Hospitals and provides a number of mobile medical
services. China has helped build capacity in the production of essential
medicines and contributed to technology transfer in pharmaceuticals.
China supports anti-malarial efforts in Africa and is contributing
towards the objective of eradicating AIDS, TB and Malaria by 2030.
China has a history of assisting Africa during its health crises, such as
during the Ebola outbreak and more recently the COVID-19 pandemic,
where it supplied a wide-range of support, guidance and anti-epidemic
supplies.
4.1.7
Environmental Issues
China has certainly had its difficulties in managing pollution during its
rapid industrialisation. Africa faces the same problem as it seeks to quickly
grow and develop—Chinese policy seems committed to mitigating these
environmental externalities.
The Beijing Action Plan (2019–2021) details some of the ChinaAfrica Green Development Plan that aims for environmental protection
4
CHINA IN AFRICA
93
and mitigating climate change by improving Africa’s capacity for green,
low-carbon and sustainable development. 50 Projects of exchanges and
cooperation were prioritised that addressed climate change, oceans, desertification prevention and control, and wildlife protection.
The widespread problem of poaching in Africa, products of which are
often destined for the Chinese market, is an issue that China is trying to
keep in check. It is doing so through supporting the various efforts within
Africa to stop poaching and the illegal trade of wildlife, while domestically,
stopping ivory processing and sale in China.
4.1.8
Cultural and Other Exchanges
One of the characteristics of the Chinese and African Nations’ relationship has been the emphasis of respect and learning of cultural diversity,
much of which has been achieved through ‘people-to-people exchanges’,
cultural centres and cultural festivals.
Included in these efforts, is a focus on press and media exchanges;
academia exchanges, research collaborations, and ‘Think Tanks’.
4.1.9
Trade
China-sub-Saharan Africa trade has grown by 26% per annum since 1995,
reaching $170 Billion in 2013, and China accounts for about 24% of subSaharan Africa’s total trade from just 2.3% in 1995, although sub-Sahara
Africa’s share in Chinese trade was only 3% in 2013. Figure 4.1 (Pigato
and Tang 2015: 5).
Sub-Saharan Africa’s exports to China have grown faster than its
imports, generating a positive trade balance (Fig. 4.2). Exports are
mainly in resources and agricultural commodities, such as oil, uranium,
aluminium, zinc, phosphates, copper, nickel, gold, timber, rubber, coffee,
cotton, cocoa, fish and cashew nuts. Imports from China are quite diversified although consumer goods represent the largest share (Fig. 4.3)
(Pigato and Tang 2015).
Africa with its large, but mostly poor population, has been an ideal
market for low-value mass produced products from China. Chinese
importing companies in Africa have prospered with a vast network of
formal and informal trade throughout Africa. While this has led to
94
B. ROBINSON
Fig. 4.1 Trade between China and sub-Saharan Africa: Relative Trade Shares
(Pigato and Wang 2015, source World Integrated Trade Solution Data, World
Bank)
consumers benefitting from a greater supply and variety of consumer
goods at affordable prices, there have also been criticisms of poor quality
of products and the crowding out of certain industries, such as the textile
industry.
Overtime there has been an increase in the presence of the Chinese in
some of the labour intensive, mass-manufacturing industries, which have
in turn contributed to both Africa’s and China’s trade volumes. There are
many reasons for this. The cost of production, especially labour, is cheaper
in many African countries due to the increase in wage levels in China.
Chinese firms have also cleverly used the United States’ African Growth
and Opportunity Act (AGOA) and the European Union’s Coutanou
Agreement, to manufacture goods in Africa to export to United States
and Europe at preferential rates and duties.
4
CHINA IN AFRICA
95
Fig. 4.2 Trade between China and sub-Saharan Africa: Imports, exports, and
trade balance (Pigato and Wang 2015, source World Integrated Trade Solution
Data, World Bank)
4.1.10
Chinese Foreign Direct Investment in Africa
Chinese investments on the African continent continues to be significant. Foreign Direct Investment in sub-Saharan Africa, as reported by
the Chinese Ministry of Commerce (MOFCOM) reached $3.1 Billion
in 2013, which at that time was 7% of global investment in the region,
just behind that of the US at 7.3% (Fig. 4.4). The total stock of Chinese
Foreign Direct Investment was at $24 Billion. (Pigato and Tang 2015).
Foreign Direct Investment by China in Africa is becoming more diversified, and encompasses all countries in Africa, although it does tend to be
concentrated in resource rich countries, such as Zambia, Nigeria, Angola
and Zimbabwe (Fig. 4.5) (Pigato and Tang 2015).
96
B. ROBINSON
Fig. 4.3 Sub-Saharan Africa’s imports from China (Pigato and Tang 2015,
source World Integrated Trade Solution Data, World Bank)
Fig. 4.4 Chinese FDI Flows to SSA, 2003–2013 (Pigato and Tang 2015,
sourced from UNCTAD 2014 and MOFCOM 2014)
4
CHINA IN AFRICA
97
Fig. 4.5 Chinese FDI in sub-Saharan Africa, by country in USD Millions
(Pigato and Tang 2015, sourced from MOFCOM 2014)
Investments are quite diversified, although the extractive industry
accounts for the bulk, and finance, construction and manufacturing
account for about half of the investment (Fig. 4.6) (Pigato and Tang
2015).
The level of Foreign Direct Investment by China in Africa continues
to grow, and the emergence and continued operationalisation of Special
Economic Zones is likely to support this trajectory and lead to a greater
diversification in investments.
4.1.11
Natural Resources for China and Infrastructure for Africa
As touched upon earlier, China’s rapid economic growth has required
massive amounts of raw materials, especially energy and strategic metals
and minerals. Africa, on the other hand, has these unexploited resources
in abundance. This has led to increasingly significant investment by the
Chinese in oil & gas and mining industries in Africa.
The 1990s saw an increase in Chinese investment in natural resources
in Africa. For example, the China National Petroleum Company (CNPC),
a state-owned oil company, has invested heavily in petroleum and natural
98
B. ROBINSON
Fig. 4.6 Chinese FDI in sub-Saharan Africa, by sector (%) (Pigato and Tang
2015, sourced from State Council of China, 2013)
gas in Sudan, Angola, Algeria and Gabon. In 1993, thanks to China’s
strong relationship with the Front de Liberation Nationale government
in Algeria, the government purchased numerous oil refineries in the
country for $350 Million. CNPC purchased 40% of Sudan’s Greater Nile
Petroleum Operating Company (GNPOC) in 1996 (Alden 2005).
China continues to invest heavily in mining and the oil and gas industry
for its own consumption, and for sale to the rest of the world. It has
also utilised various ways of funding these initiatives, such as the so-called
‘Angola-Mode’ resources for infrastructure framework agreement. This
was an innovative approach that allowed China to invest in mining activities, where the extracted resources were paid for in a barter type exercise
with infrastructure development. With the Chinese EXIM bank providing
the funding to Chinese Companies based on potential returns from
these African resources, Chinese construction companies were able to
invest in major infrastructure construction projects in Africa. The benefits
were numerous: ‘Money’ never changed hands which limited corruption;
Chinese firms were able to provide the expertise, labour, equipment and
material in an efficient manner for construction in countries which often
lacked the competence to manage these projects; the speed of implementation of these projects alleviated the bottlenecks of infrastructure in the
countries with poor infrastructure after years of insufficient investment,
4
CHINA IN AFRICA
99
poor maintenance and conflict; and the countries did not need to raise
finance and incur debt for their already fragile economies.
There has been criticism though of China’s infrastructural investments
in Africa. Professor Tang (2010) uses the terms ‘Locomotive’ versus ‘Bulldozer’ approaches in terms of the strategy applied by the Chinese and
their African counterparts in infrastructural projects. Although not exclusively referring to the Angola Mode approach, his analysis considered the
cases of Angola and the DRC: The Bulldozer approach was one where
the speed of the project was of paramount importance—get the project
done as expeditiously as possible! This approach was useful in alleviating
bottlenecks, but due to the use of mostly Chinese labour, equipment and
construction materials, it had very little other benefit, and sometimes
had long term negative results. For example, the lack of maintenance
and management, due to lack of capacity, led to almost immediate problems, delays and cancellations of the newly Chinese built Lobito Corridor
Railway in Angola (Duarte et al. 2015). The locomotive approach takes
longer but has greater socio-economic spin-offs. This approach encourages more use of local labour, SMMEs, and local materials, and thus
should result in some skills transfer, enterprise development, sustainable
employment and community development.
A concern and criticism has been that China’s demand for African
resources would lead to the so-called ‘resource curse’ which results in
over-allocation of financial resources to mining activities and facilitating
infrastructure for mining production, and does not contribute to broad
economic development across sectors. There is evidence though that this
is not the case. Alexis Habiyaremye (2015) found that the infrastructure
for resources agreements do not result in resource dependence by African
countries, if anything, his research suggests that the eradication of infrastructural constraints due to China’s approach contributed to improved
export diversification.
4.1.12
Chinese Loans, Debt-Traps and Debt Forgiveness
One of the criticisms against China is that the financing of large infrastructural projects in Africa is creating debt-traps for heavily indebted
countries. China refutes this vehemently, suggesting that its approach
is to improve the capacity of African countries to achieve financial
independence and sustainability.
100
B. ROBINSON
China has for some time provided concessionary loans, and in some
cases, provided debt forgiveness for struggling African nations. For
example, at the 2003 FOCAC Summit, China announced debt forgiveness towards 31 African countries totalling $1.27 Billion. The Beijing
Action Plan (2018) of 2019–2021 confirmed Africa’s gratitude to China
for exempting outstanding interest-free government debts owed by
Africa’s Lesser Developed Nations which had matured at the end of 2015.
4.1.13
China’s Non-Intervention Policy and One-China
Conditionality
While Chapter 1 introduced the conditionality of international development financing by international bodies such as The World Bank Group
and the International Monetary Fund, China has historically been quite
lenient in this regard, and has invested in countries with contentious
political and economic dispensations.
The Beijing Action Plan 2019–2021 (2018) makes its non-interference
policy quite clear:
In its investment and financing cooperation with Africa, China is
committed to the principles of no political strings, mutual benefits and
efficient development, supports Africa’s pursuit of diversified and sustainable development, and will make active efforts to help African countries
improve debt sustainability and achieve internally-driven development and
mutually-reinforcing economic and social development.
China does have one condition which is a pre-condition to investment and
support, and that is the acknowledgement of ‘One-China’—this requires
countries to sever ties with Taiwan. In 2019, diplomatic relations resumed
between China and the African island nation of São Tomé and Príncipe
with the country agreeing to adhere to the one-China principle. The only
country in Africa that still formally recognises Taiwan is eSwatini, the
small southern African country. Some African countries have, however,
retained trade and liaison offices with Taiwan due to Taiwan’s much
longer trade relationship with Africa.
4
4.1.14
CHINA IN AFRICA
101
Facts and Fallacies About the Impact of China on Africa
China’s impact on Africa has been, and continues to be, a contentious
issue. Some viewpoints are positive, others negative, some based on fact,
others on hype and fake news. Revisiting the book Kobus Jonker and
Robinson (2018) authored, I’d like to recap our findings in this regard
(Table 4.3).
One aim of this book is to further the conversation regarding China’s
impact on Africa, especially the socio-economic outcomes, by providing
objective facts and analysis on Chinese policy, financing, and investment
in Special Economic Zones in Africa.
Table 4.3 Fallacies and facts about the impact of China on Africa (Jonker and
Robinson 2018: 277)
Assumption
1. Trade deficits with China impact
negatively on Africa
2. China has a thirst for Africa’s
natural resources and energy
3. China is using its
infrastructure-for-resources
framework agreements primarily to
get easy and cheap access to
resources
4. Chinese companies employ
mainly their own nationals in
projects in Africa
5. China want to ‘grab’ farmland
in Africa to deal with its own food
security concerns
6. China’s manufactured exports
are crowding out opportunities for
Africa’s diversification into
manufacturing
7. China has a dubious human
rights and environmental legacy
that impacts negatively on Africa
Fallacy
Fact
√
√
√
√
It is the overall trade deficit that is
important
China has a huge need for
resources
This is a by-product rather than
the main aim
This is only true for managers and
technical staff who are scarce in
most African countries
Proved to be false propaganda
with no substance
√
√
Comment
√
√
This is true for products like
textiles and footwear, but seems to
be limited for other products
That is true although it seems that
China is sensitive towards this and
committed to change it
102
B. ROBINSON
4.2
China’s Economic Policy in Africa
China’s policy towards Africa has evolved over time, but today two
primary bodies determine the interaction between China and the African
continent, namely the Forum on China-Africa Cooperation (FOCAC)
and BRICS Plus (an acronym for the developing nations association of
Brazil, Russia, India, China and South Africa, and ‘Plus’ indicating other
developing nations). These bodies, and their relevant policies, are now
unpacked to discern the economic blue-print that exists between China
and Africa.
4.2.1
The Forum on China-Africa Cooperation (FOCAC)
The relationship between China and African nations has grown significantly over time, and continues to grow. In 2000, the first Ministerial
Conference of the Forum on China-Africa Cooperation (FOCAC) was
held in Beijing and was represented by 80 Chinese Ministers and 44
African countries, representatives from 17 regional and international
organisations, as well as a variety of people from the business community.
The Conference ‘chartered the direction for the development of a new,
stable and long-term partnership featuring equality and mutual benefit
between China and African countries’ (FOCAC 2020). The Conference
passed the Beijing Declaration of the Forum on China-Africa Cooperation and the Programme for China-Africa Cooperation in Economic and
Social Development. FOCAC now comprises all but one African Nation,
Eswatini, as a result of the country recognising Taiwan.
This first Ministerial Conference was followed by the second Ministerial Conference in Addis Ababa in Ethiopia in 2003; the third Ministerial
Conference was held in Beijing in 2006 with the addition of the first
FOCAC Summit; the fourth Ministerial Conference was held in Sharm
el-Sheikh in Egypt in 2009; the fifth Ministerial Conference was held in
2012 in Beijing; the sixth Ministerial Conference and second FOCAC
Summit was held in 2015 in Johannesburg in South Africa; and the most
recent third FOCAC Summit was held in 2018 in Beijing. Numerous
incremental commitments were made to Africa, and various Action Plans
were proposed, as these Conferences and Forums evolved.
The outcomes of the FOCAC Forums and Ministerial Conferences
provide a valuable insight into the policy direction and actual interventions of China in Africa. These will be described in the following two
4
CHINA IN AFRICA
103
sections where we unpack areas of economic cooperation and other areas
of strategic cooperation.
4.2.2
FOCAC Economic Cooperation with a Specific Focus
on Industrialisation and Special Economic Zones
It is worthwhile re-capping some of the outcomes of the latest FOCAC
summit, namely the Beijing Declaration and the FOCAC Beijing Action
Plan of 2019–2021, and they provide some understanding on policy
objectives and practical implementation of policy towards Africa from an
economic perspective.
The Beijing Declaration was themed ‘China and Africa Toward an
Even Stronger Community with a Shared Future through Win–Win
Cooperation’ and committed to deepening the partnership between
China and Africa. Insights from the 24-point declaration included an
emphasis and commitment to the Belt and Road Initiative and improved
cooperation in areas of trade, investment, financing and infrastructure—
particular mention was made of enhancing Africa’s production capacity in
the secondary and tertiary industries and improving economic and trade
cooperation.
The FOCAC Beijing Action Plan of 2019–2021 is a considerable document, so once again, only points that are of relevance to industrialisation
and special economic zones are unpacked in Table 4.4 (the numbering
refers to the relevant Action Plan clause number):
4.2.3
FOCAC: Other Strategic Areas of Cooperation
The FOCAC Beijing Action Plan of 2019–2021 is again investigated to
determine some other areas of strategic economic cooperation. These are
summarised in Table 4.5 (the numbering refers to the relevant Action
Plan clause number):
4.2.4
BRICS Plus
BRICS was initiated by Russian President Vladimir Putin in 2006,
and initially comprised the Federative Republic of Brazil, the Russian
Federation, the Republic of India, and the People’s Republic of China
(BRIC). The motivation behind the association was to expand multilateral
cooperation between these large, developing nations.
104
B. ROBINSON
The first BRIC Summit was held in 2009 in Russia. The following
extract from the joint statement following the Summit reflects the vision
of the association:
to promote dialogue and cooperation among our countries in an incremental, proactive, pragmatic, open and transparent way. The dialogue
and cooperation of the BRIC countries is conducive not only to serving
common interests of emerging market economies and developing countries, but also to building a harmonious world of lasting peace and
common prosperity. (BRICS 2020)
Table 4.4 Summary of the FOCAC Beijing Action Plan 2019–2021 (2018):
Industrialisation and Special Economic Zones
FOCAC Beijing Action Plan (2019–2021): Industrialisation and Special Economic Zones
1.4 China and Africa will take the Belt and Road Initiative as an opportunity to strengthen
multi-dimensional, wide ranging and in-depth cooperation for mutual benefits and common
development and 1.5 includes China and Africa jointly building the Belt and Road
1.8 China will launch eight major initiatives including an industrial promotion initiative, an
infrastructure connectivity initiative, a trade facilitation initiative, a green development
initiative, a capacity building initiative, a health care initiative, a people-to-people exchange
initiative and a peace and security initiative in close collaboration with African countries to
support African countries in achieving independent and sustainable development at a faster
pace
3.2 Economic Cooperation: Industry partnering and industrial capacity cooperation
• The two sides will fully tap into China’s strengths in equipment and technology, draw on
the complementarity of the industrial supply and development needs of the two sides,
and promote the growth of real economies
• China encourages policy-based financial institutions, developmental financial institutions,
the China-Africa Development Fund, the China-Africa Fund for Industrial Cooperation
and the Special Loan for the Development of African SMEs to scale up support for
China-Africa industrial capacity cooperation to boost the industrialization of Africa
• The two sides will advance industrial capacity cooperation along with the implementation
of the Belt and Road Initiative
• China will step up support in the development of industries in Africa including
processing and manufacturing and the development of special economic zones and
industrial parks, and support Chinese private enterprises in setting up industrial parks
in Africa and carrying out technology transfer , to help African countries build more
diversified economies and stronger capabilities for self-driven development
• African countries will continue to improve the legal framework and infrastructure, and
provide efficient and results-oriented government services wherever possible to create a
more enabling environment for attracting investment from Chinese enterprises and for
industrial capacity cooperation
(continued)
4
CHINA IN AFRICA
105
Table 4.4 (continued)
FOCAC Beijing Action Plan (2019–2021): Industrialisation and Special Economic Zones
3.7 Investment and economic cooperation
• Africa appreciates China’s efforts in implementing the China-Africa industrialization plan,
promoting industrial partnering and production capacity cooperation, building or
upgrading industrial parks and other economic and trade cooperation zones, and
providing effective and sustainable basic vocational training for African workforce to help
Africa translate its population dividends into development strength. China will continue
to support Africa’s efforts in advancing economic transformation, improving industrial
competitiveness, and generating more jobs
• China will encourage Chinese companies to increase investment in Africa, build and
upgrade a number of economic and trade cooperation zones in Africa. China will
encourage Chinese companies to make at least US$10 billion of investment in Africa in
the next three years
South Africa joined BRICS in 2010, and the association represented over
41% of the global population in 2015 and accounted for 23.2% of the
world’s GDP in 2018 (BRICS 2020). Importantly, this grouping of countries signifies significant growth compared to industrialised countries: For
the period 1981–2013 real GDP growth was 6.3% per annum for BRICS
countries, compared to 2.4% for industrialised countries, although there
are significant differences in growth between the BRICS countries, with
9.5% in China, 6.1% in India, 2.7% in Brazil, and 2.4% in South Africa
(Nayyar 2016: 581).
In addition to bilateral meetings and side-line meetings of the G20
and UN General Assemblies, Annual BRICS Summits are held: Brazil in
2010; China 2011; India 2012; South Africa 2013; Brazil 2014; Russia
2015; India 2016; China 2017; South Africa 2018; and Brazil 2019.
China proposed BRICS Plus in 2017 to enhance cooperation between
BRICS and various other developing nations in Africa and elsewhere.
BRICS now has significant influence, has reached common agreement on a variety of financial and economic issues, and BRICS has
campaigned for World Bank and IMF reforms. Importantly, from the
African perspective, BRICS has expanded its external relations to include
that of the African Union and eight of the African Integration Associations. The New Development Bank (BRICS Bank) was established
in 2014, and the Treaty for the Establishment of a BRICS Contingent
Reserve Arrangement was entered into, both of which would serve to
finance development within BRICS Plus. Various cooperation agreements
106
B. ROBINSON
Table 4.5 Summary of the FOCAC Beijing Action Plan 2019–2021 (2018):
Areas of strategic cooperation
FOCAC Beijing Action Plan (2019–2021): Other strategic areas of strategic economic
cooperation
3.1. Economic cooperation: Agriculture, food security and food safety
• China supports Africa’s agricultural modernization and will help Africa upgrade the
industry and agricultural infrastructure, increase agricultural productivity and the
value added of agro-products, improve Africa’s ability to ensure food security, invest
in testing and adaptation of machines to African conditions, establish African
dealerships capable of after-sale support and service, support township and village
industries’ development, promote inclusive growth and shared prosperity and
support Africa in achieving general food security by 2030
• China will provide assistance in terms of capacity building, technology transfer
through the exchange of scientists and development of new research thrusts
• Both sides will work together in the agro-industrial sector to increase the capacity of
agri-entrepreneurs to export their products on the regional market and enhance
skills of farmers at grass root level in modern farm management techniques
3.3 Economic Cooperation: Infrastructure development
• The two sides will aim to pursue efficient and high-quality development, focus on
the economic and social benefits of projects, step up mutually beneficial cooperation
for the planning, design, construction, operation, maintenance and good governance
of infrastructure projects and maintain the sustainability of the debt of relevant
African countries. China supports Chinese enterprises in utilizing their advanced
equipment and technology, and their expertise in standards and service to help
African countries improve infrastructure and connectivity
• The two sides will actively explore and advance cooperation in the application of
new technologies including cloud computing, big data, and the mobile internet.
China will support African countries in building “smart cities” and enhancing the
role of ICT in safeguarding public security, counter terrorism and fighting crime
and work with the African side to uphold information security
3.4 Energy and natural resources
• Enhance policy dialogue and technological exchanges on energy and resources,
coordinate each other’s energy and resource strategies, conduct joint research, and
formulate energy development plans that are operable and based on local conditions.
The two sides will work together for the establishment of a China-Africa Energy
Cooperation Center in Africa to further advance energy exchanges and cooperation
• The two sides encourage and support Chinese and African companies, while
upholding the principle of mutual benefits, to work together in energy trade and
the investment, development and operation of energy projects, carry out
demonstration projects in green energy financing, and explore green and sustainable
ways of energy cooperation. China will support the development of renewable
energy, mainly solar energy in Africa as well as the use of battery storage and
strengthening of the electricity grid
(continued)
4
CHINA IN AFRICA
107
Table 4.5 (continued)
FOCAC Beijing Action Plan (2019–2021): Other strategic areas of strategic economic
cooperation
3.5 Ocean economy
• The two sides recognize the enormous potential of maritime economic cooperation
and will work to promote blue economy cooperation for mutual benefits
3.6 Tourism
• China welcomes more African countries to become destinations for Chinese tour
groups. The two sides will roll out visa facilitation policies as appropriate and
streamline customs procedures to enable easier traveling so that mutual tourist visits
could steadily increase
• The two sides encourage capacity building and training exchange programs for
employees of the tourism industry and industry partners to improve quality of
service
3.8 Trade
• Implement the China-Africa trade and investment facilitation plan to promote trade
connectivity in Africa by strengthening African countries’ customs and taxation law
enforcement capabilities and upgrading customs and transportation facilities
• China supports Africa in boosting its exports and has decided to increase imports,
particularly non-resource products, from Africa, with a focus on value added
agricultural produce and industrial products
• China will continue to materialize its pledge of zero-tariff treatment for 97% of tax
items from African LDCs having diplomatic relations with China
• The Chinese side will continue to facilitate the opening of businesses by African
countries in China and protect the legitimate rights and interests of companies in
China invested by African countries
3.9 Finance
• China will extend loans of concessional nature, export credit line and export credit
insurance to African countries, make the loans reasonably more concessional, create
new financing models and improve the terms and conditions of the credit to
support China-Africa Belt and Road cooperation and industrial capacity cooperation,
and the infrastructure construction, development of energy and resources,
agriculture, manufacturing and the comprehensive development of the whole
industrial chain of Africa. China will extend US$20 billion of credit lines and
support the setting up of a US$10 billion special fund for development financing
• China supports stronger cooperation between the policy banks, developmental
financial institutions, commercial banks, multilateral financial institutions, equity
investment funds and export credit insurance institutions of the two sides, and
supports the establishment of China-Africa Developmental Financing Forum and
China-Africa Financial Cooperation Consortium to provide more diversified
financing packages for African countries
108
B. ROBINSON
have been concluded, including cultural, youth, migration, industry,
energy, peacekeeping, environment, and infectious diseases accords.
The BRICS Summit Declaration (2019) following the BRICS Summit
in Brasilia comprises 73 statements, and some of these provide valuable
insight into the association’s objectives which could play an important
role in both China and Africa’s sustainable development (Table 4.6,
numbers as per the Declaration’s clauses):
(EME: Emerging Market Economies; EMDC’s: Emerging Economies
and Developing Countries).
BRICS is a strategic focus for China and is a mechanism to further
their policy towards Africa. In addition, it complements China growing
influence in global affairs with BRICS providing the ‘clout’ in multilateralism and power relations with the United Nations, IMF, World Bank and
the World Trade Organisation. And, according to President Xi of China,
BRICS collaboration is important more now than ever before to balance
all their countries’ interests and ensure economic growth in a challenging
global environment:
President Xi Jinping pointed out in his speech that there is a growing
wave of protectionism and bullying by advanced countries (mainly the
US) in their bid to reduce trade deficits with the Emerging Market and
Developing Economies (EMDEs) which include the BRICS. It is doing
immense harm to global trade and is leading to shrinkage in investment
flows which is bringing hardships to millions of people in the developing
countries. BRICS has to cooperate in many areas to keep the growth of
trade and investment from declining further and a beginning was made at
the Summit – BRICS Summit, Brasilia, 2019. (Sengupta 2019)
4.3
Conclusion
There can be no doubt that China is having a significant impact on
Africa’s development trajectory. Be it through direct investment, cooperation programmes, strategic relationships, geopolitical partnerships,
development assistance, and humanitarian support, bilateral relations are
at an all time high. In addition, institutions and initiatives such as FOCAC
and BRICS has introduced a multilateral approach between China and
the Africa continent. While outside the ambit of this book, the Belt and
Road Initiative (watch this space for a planned book on the Belt and Road
Initiative from an African perspective) and the 2021 launch of the African
4
CHINA IN AFRICA
109
Table 4.6 Selected excerpts from the BRICS Summit Declaration, Brasilia
2019 (2020)
BRICS Summit Declaration, Brasilia, 2019
6. We reiterate the urgent need to strengthen and reform the multilateral system,
including the UN, the WTO, the IMF and other international organizations, which we
will continue working to make more inclusive, democratic and representative, including
through greater participation of emerging markets and developing countries in
international decision-making
8. We express our commitment to sustainable development in its three
dimensions—economic, social and environmental—in a balanced and integrated
manner. All our citizens, in all parts of our respective territories, including remote
areas, deserve to fully enjoy the benefits of sustainable development
23. We recall the importance of open markets, fair, just and non-discriminatory
business and trade environments, structural reforms, effective and fair competition,
promoting investment and innovation, as well as financing for infrastructure and
development. We stress the need for greater participation of developing countries in
global value chains. We will continue to cooperate within the G20 and advance the
interests of EMEs and developing countries
26. We reiterate the fundamental importance of a rules-based, transparent,
nondiscriminatory, open, free and inclusive international trade. We remain committed
to preserving and strengthening the multilateral trading system, with the World Trade
Organization at its center. It is critical that all WTO members avoid unilateral and
protectionist measures, which run counter to the spirit and rules of the WTO
29. We will explore in appropriate fora ways to promote and facilitate investments in
productive sectors, e-commerce, MSMEs, infrastructure and connectivity, which will
help to promote economic growth, trade and job creation. In so doing, we will take
into account national imperatives and policy frameworks, with the aim of enhancing
transparent, effective and an investment-friendly business environment
32. We acknowledge the progress made by the New Development Bank towards
expanding its membership. The expansion of the NDB membership in accordance with
its Articles of Agreement will strengthen the Bank’s role as a global development
finance institution and further contribute to the mobilization of resources for
infrastructure and sustainable development projects in BRICS and other EMDC’s
38. We welcome the holding of the BRICS Business Forum and acknowledge the
efforts of the BRICS Business Council (BBC) in promoting trade and investment
among its members by fostering cooperation in areas such as infrastructure,
manufacturing, energy, agribusiness, including biotechnology, financial services, regional
aviation, alignment of technical standards, skills development and digital economy
Continental Free Trade Area (AfCFTA) could have enormous ramifications for this relationship, and if correctly leveraged, Africa and China
stand to gain much benefit in the coming decades.
110
B. ROBINSON
References
Alden, C. 2005. China in Africa. Survival: Global Politics and Strategy 47: 147–
164.
Beijing Action Plan (2019–2021). 2018. FOCAC 2018 Beijing Summit
[Online]. Accessed from: https://focacsummit.mfa.gov.cn/eng/hyqk_1/t15
94297.htm. Accessed 15 Apr 2020.
BRICS. 2020. [Online]. Accessed from: http://infobrics.org/. Accessed 19 Apr
2020.
BRICS Summit Declaration. 2019. [Online]. Accessed from: https://infobrics.
org/post/29770. Accessed 20 Apr 2020.
Duarte, A., F. Pacheco, R. Santos, and E. Tjønneland. 2015. ‘Diversification and Development, or “White Elephants”? Transport in Angola’s Lobito Corridor’. Chr. Michelsen Institute Report R2015:07.
Accessed from: https://www.cmi.no/publications/5510-diversification-anddevelopment-or-white-elephants. Accessed 21 Apr 2020.
FOCAC. 2020. About FOCAC; Previous Conferences; 2018 FOCAC Summit
[Online]. Accessed from: www.focac.org. Accessed 9 Apr 2020.
Habiyaremye, A. 2015. Is Sino-African Trade Exacerbating Resource Dependence in Africa? Structural Change and Economic Dynamics 37: 1–12.
Jinyuan, G. 1984. China and Africa: The Development of Relations Over Many
Centuries. African Affairs 83 (331): 241–250.
Jonker, K., and B. Robinson. 2018. China’s Impact on the African Renaissance—
The Baobab Grows. Singapore: Palgrave Macmillan.
Nayyar, D. 2016. BRICS, Developing Countries and Global Governance. Third
World Quarterly 37 (4): 575–591.
Pigato, M., and W. Tang. 2015. China and Africa: Expanding Economic Ties
in an Evolving Global Context. © World Bank [Online]. Accessed from:
https://openknowledge.worldbank.org/handle/10986/21788. Accessed 20
Apr 2020. License: Creative Commons Attribution License (CC BY 3.0 IGO).
http://creative-commons.org/licenses/by/3.0/igo/.
Sengupta, J. 2019. The Economic Agenda of BRICS. Observer Research Foundation [Online], 2 December. Accessed from: https://www.orfonline.org/res
earch/the-economic-agenda-of-brics-58286/. Accessed 5 July 2021.
Tang, X. 2010. Bulldozer or Locomotive? The Impact of Chinese Enterprises
on the Local Employment in Angola and the DRC. Journal of Asian and
African Studies 45 (3).
Wang, Yi. 2020. FOCAC Top Stories: Rock-Solid China-Africa Friendship Will
Not Be Affected by Isolated Incidents [Online], 15 April. Accessed from:
https://www.focac.org/eng/ttxxsy/t1769827.htm. Accessed 15 Apr 2020.
Xi, J. 2017. The Governance of China II . Beijing: Foreign Language Press Co.
Ltd.
CHAPTER 5
The Emergence of Chinese Interest
in Special Economic Zones in Africa
With the relationship between China and Africa having been detailed, it
is appropriate to introduce the topic of Special Economic Zones in Africa,
and China’s facilitating role in the investment in Special Economic Zones
in Africa. The Chapter begins with detailing Special Economic Zones in
Africa, then discusses Chinese policy towards Special Economic Zones
globally, and then specifically hones in on Chinese owned and managed
Special Economic Zones in Africa.
Special Economic zones are not a Chinese ‘trademark’ and have been
around globally for centuries, in various formats even before China’s
ventures into Zones. Shannon, Ireland was the first modern Special
Economic Zone. In the 1970s, countries in East Asia and Latin America
experimented with Export Processing Zones to support labour intensive industries, and by 1986 there were 176 Export Processing Zones in
47 countries (Zeng 2016). This trend has continued to proliferate. The
evolution of SEZ’s is portrayed by Baissac (2011) in Table 5.1.
5.1
Special Economic Zones in Africa
Free Trade Zones and Export Processing Zones in Africa were initiated
from as early as the 1970s in Liberia, Mauritius and Senegal. Operational Special Economic Zones only emerged in Africa in the late 1990s,
most of which were Export Processing Zones. Some were the result
© The Author(s), under exclusive license to Springer Nature
Singapore Pte Ltd. 2022
B. Robinson, African Special Economic Zones,
https://doi.org/10.1007/978-981-16-8105-9_5
111
112
B. ROBINSON
Table 5.1 Summary of key developments in the evolution of SEZs (Baissac
2011)
Period
Format of Special Economic Zone
Ownership structure
Antiquity and middle ages
• First free port—Phoenicia
• Delos—circa 150 BC
• Hanseatic League and charter
cities—thirteenth to seventeenth
centuries
• Colonial charter companies and
trading posts—seventeenth to
mid-nineteenth centuries
• Free port islands—mid-nineteenth
to early twentieth centuries
• Free trade zones—since early
1900s
• Pioneering manufacturing
zones—1920s to 1940s
• Operation Bootstrap—1948
• Shannon Free Zone—1958
• Maquiladora—1965
• La Romana Free Zone—1969
• Chinese Special Economic
Zones—1978
• Subic Bay—1992
• DISZ, JinFei, Lekki—2010+
“Public” zones
Colonial era
Modern era
Private, then public
Public
Private zones
PPPs
of African countries or investors (such as the Chinese) taking advantage of the US Africa Growth and Opportunities Act (AGOA) and the
Multi-Fiber Arrangement (MFA). Since then, they have proliferated with
varying degrees of success—Table 5.2 provides an overview of Special
Economic Zones initiated per decade.
Historic success of Special Economic Zones in Africa has been limited.
Zones in Mauritius, Kenya, Madagascar and Ghana are considered relatively successful, while others, such as Nigeria, Senegal, Malawi, Namibia
and Mali, less so. Thomas Farole investigated some African Zones,
and although cautioning that it was sometimes difficult to make direct
comparisons between them due to the context and structure of the Zones
and sometimes lack of relevant data, the investigation does provide some
insight into African zones from a quantitative perspective.
5
Table 5.2 Overview of
African Zone Programs
by Decade of Launch
(Farole 2011; data from
FIAS 2008)
THE EMERGENCE OF CHINESE INTEREST …
113
1970s
1980s
1990s
2000s
Liberia
Senegal
Mauritius
Djibouti
Togo
Burundi
Cameroon
Cape Verde
Equatorial Guinea
Ghana
Kenya
Madagascar
Malawi
Mozambique
Namibia
Nigeria
Rwanda
Seychelles
Sudan
Uganda
Zimbabwe
Gabon
Gambia
Mali
South Africa
Zambia
Eritrea
Mauritania
Tanzania
5.1.1
Investment
In terms of investment, while the African zones do attract foreign direct
investment, figures trail far behind what other developing nations’ zones,
such as Bangladesh, Dominican Republic, and Vietnam have been able to
achieve. However, as a percentage of African countries’ FDI, the zones do
contribute to some level of investment. Table 5.3 details these differences
(the single units refer to single unit factories that are deemed to be Special
Economic Zones benefitting from the various incentives, but that operate
throughout Ghana and Kenya).
The number of companies investing is also much lower, with a
seemingly preference by firms for ‘single unit’ options (Fig. 5.1).
Ownership structure was similar between African and other developing nations analysed, with the majority being foreign owned, although
Senegal and Tanzania were predominantly locally controlled (Fig. 5.2).
5.1.2
Exports
Some African Special Economic Zones have been quite successful in
increasing and sustaining the level of exports. Ghana is one example,
and while much is attributable to cocoa products which are processed in
these zones for the export market, other products for the export market
114
B. ROBINSON
Table 5.3 SEZ investment statistics (Farole 2011: 71)
Country
Total SEZ FDI Stock
(2008) ($m)
SEZ FDI per capita
(2000–2008) ($)
SEZ FDI as % of
total national
FDI (2000–2008)
Bangladesh
Dominican
Republic
Vietnam
Ghana (Tema)
Ghana (single
units)
Kenya (EPZs)
Kenya (single
units)
Nigeria
Tanzania
1435
2611
6
141
30
18
36,760
68
2806
325
3
120
100
48
162
155
6
20
N/A
210
<1
5
<1
18
Fig. 5.1 Number of firms operating in the Economic Zones, 2009 (Farole
2011)
have shown good results, such as prefabricated housing and plastic household goods produced in the Tema Zone. Kenya, Nigeria, Tanzania and
Senegal performed less well. As the African Zones were more recent
developments, it could be argued that investment and export growth
5
THE EMERGENCE OF CHINESE INTEREST …
115
Fig. 5.2 Ownership structure of SEZ Investments, 2009 (Farole 2011: 74)
could increase as they grow, however, when one compares the time frame
against Zones in China and other developing nations, African Zones
do not seem to be experiencing the exponential growth seen elsewhere
(Fig. 5.3).
5.1.3
Employment
The African Special Economic Zones were not a major contributor to
employment levels in the countries under analysis and were far below the
levels of other developing countries if one considers Honduras and the
Dominican Republic. Lesotho is the exception—this is likely the result of
the small size of the country and relative size of the Zone. The employment contribution of the various Special Economic Zones is depicted in
Table 5.4.
Thomas Farole’s work serves as a useful introduction to Special
Economic Zones in Africa for this book—Farole’s analysis depicted above
suggests that African Zones are not achieving what they could and should
be achieving in Africa in terms of attracting investment, diversifying and
116
B. ROBINSON
Fig. 5.3 SEZ export growth trajectories by year of operation (Farole 2011)
Table 5.4 Employment contribution of SEZ (Farole 2011)
Country
Bangladesh
Dominican Republic
Honduras
Vietnam
Ghana (Tema)
Ghana (single units)
Kenya (EPZs)
Kenya (single units)
Lesotho
Nigeria (Calabar) (est.)
Nigeria (Onne, oil & gas)
Tanzania
SEZ employment (2008)
218,299
124,517
130,000
1,172,000
2025
26,534
15,127
15,551
45,130
1156
20,000
7500
SEZ employment as % of
national industrial sector
employment
3%
30%
30%
19%
3.5%
15%
>80%
<1%
N/A
2.5%
5
THE EMERGENCE OF CHINESE INTEREST …
117
growing exports for countries, and contributing to job creation and other
socio-economic factors. Farole’s analysis will be revisited later in the book
against my analysis of African and Chinese Special Economic Zones in
Africa.
5.2 Existing and Planned
Special Economic Zones in Africa
Newman and Page (2017) provide a comprehensive list of Special
Economic Zones in Africa with their particular focus, as well as list
planned Special Economic Zones for some time in the future. For ease
of reference these are presented in Tables 5.5 and 5.6.
5.3 Chinese Special Economic
Zones: Policy on Global Investment
There are two categories of Chinese investment in Special Economic
Zones for the purpose of this book:
1. Investment by Chinese firms in Special Economic Zones that have
been established by African governments, private investors, or other
forms of investment. The criteria is that the Special Economic Zone
has not been established by Chinese investments or financing.
2. Special Economic Zones that have been established by Chinese
investors in Africa, often with the support of Chinese government policy and financing support. These may be wholly Chinese
owned or some variation of public–private partnership, but it is
predominantly a Chinese investment initiative.
This section will consider the latter.
In the mid-1990s, the Chinese government began emphasizing a
‘going out’ or ‘going global’ approach. This entailed finding and developing new markets for Chinese goods and services, developing Chinese
brands, and increasing China’s own Foreign Direct Investment in other
countries. As early as 1999 China began venturing into Special Economic
Zones overseas: China entered into an agreement with Egypt to assist
with the development of an industrial area in the Suez economic area; the
Chinese appliance firm Haier built a 46-hectare industrial park in South
118
B. ROBINSON
Table 5.5 Special Economic Zones in Africa
Country
Zone name and year of inception
Activities and industries
Angola
Luanda-Bengo ZEE: 2009
Benin
Free Processing Zone of Benin
7 industrial reservations, 6
agricultural reservations, 8
mining reservations
Biotechnology, IT &
communications
Cameroon
Cote d’Ivoire
Industrial Free Zones: 1990
Free Zone Village of IT and
Biotechnology: 2008
Malaku SEZ: 2012
Democratic Republic of
Congo
Djibouti
Eritrea
Djibouti Free Zone: 2004
DAM Commercial Free Zone:
2013
Massawa free Zone: 2006
Gabon
Nkok SEZ: 2010
The Gambia
Mandji Tax-Free Zone: 2014
Export Processing Zones: 2010
July 22 Business Park: 2005
Ghana
Kenya
Tema EPZ
Ashanti Technology Park
ICT Cyber Village
Sekondi EPZ
Shama EPZ
52 EPZs in total
Athi River EPZ
Sameer Industrial Park EPZ:
1990
Agribusiness, building
materials, packaging,
metallurgical transformation
Construction materials,
agro-processing, batteries
Timber activities, chemicals,
agro-industry, construction
materials, metallurgy
Oil & gas
Garments, diapers & tissue
manufacturing
Textiles & garments
Mineral processing
Petrochemical activities
Textile & apparels, business
process outsourcing, IT
enabled services
Garments, cotton yarn,
pharmaceuticals, gemstones,
computers, food processing,
tanning products, electrical
goods, construction & lease
of industrial buildings
Garments & Apparel,
Agro-processing, call centre,
relief supplies, gemstones,
macadamia
(continued)
5
THE EMERGENCE OF CHINESE INTEREST …
119
Table 5.5 (continued)
Country
Madagascar
Malawi
Mauritius
Mozambique
Zone name and year of inception
Activities and industries
Kipevu Zone: 1996; Balaji EPZ:
2001, Mazeras Kenya EPZ:
2002, Pwani Industrial Park
EPZ: 2000, Ammar EPZ: 1993,
Mvita Industrial Park EPZ:
2004
Free Zones: 2008
EPZ: 1995
Mauritius Free Port: 1992
Sameer Industrial Park: 1990
All Zones specialise in
garments
Nacala SEZ: 2007
Mocuba SEZ & IFZ
Garments & apparel,
agro-processing, call centre,
relief supplies, gemstones,
macadamia, warehousing,
storage, breaking bulk, ship
building, repair and
maintenance, storage,
maintenance and repair of
containers, export and
re-export oriented airport
and seaport based activities,
labelling, packing and
repackaging, light assembly
and minor processing,
quality control and
inspection services, sorting,
grading, cleaning and
mixing, freight forwarding
services, seafood hub
Textiles & confection,
leather & tannery,
construction, production of
construction materials,
cement and iron, ceramics
industry, assembly of
machines and production
lines
Commercial agriculture,
aquaculture and
agro-processing, mineral
processing, lumber industry,
livestock and dairy products,
manufacturing, textile
industry
(continued)
120
B. ROBINSON
Table 5.5 (continued)
Country
Namibia
Zone name and year of inception
Activities and industries
Beluluane IFZ: 1998
Companies servicing
MOZAL, light
manufacturing and
production, heavy
manufacturing, downstream
aluminium conversion and
processing, service
industries, packaging and
labelling, manufacturing
primarily for export, training
providers, industrial linkage
companies, professional
services, stockpiling raw
materials, forwarding
manufactured goods,
value-adding industries
Manga-Mungassa SEZ: 2012
Crusse & Jamali Integrate
Tourism Development Zone:
2013
EPZs: 1996
Walvis bay EPZ
Nigeria
Calabar FTZ: 1992
Kano FTZ: 1998
Tinapa Free Zone: 2004
Snake Island IFZ: 2005
Maigatari Border Free Zone:
2000
Ladol Logistics Free Zone: 2006
Airline Services EPZ: 2003
ALSCON EPZ: 2004
Tourism & Entertainment
Minerals beneficiation,
diamond cutting and
polishing operations
Textile and garment
industries, manufacturing
plastic pallets and products,
automotive parts, fishing
related accessories, diamond
cutting and polishing
Manufacturing, oil & gas,
logistic services
Manufacturing, logistics
services, warehousing
Manufacturing, trade,
tourism and resort
Steel fabrication, oil & gas,
seaport
Manufacturing &
warehousing
Oil & gas fabrication, oil
and gas vessels, logistics
Food processing and
packaging
Manufacturing
(continued)
5
THE EMERGENCE OF CHINESE INTEREST …
121
Table 5.5 (continued)
Country
Zone name and year of inception
Activities and industries
Sebore Farms EPZ: 2001
Manufacturing, oil & gas,
petrochemical
Manufacturing
Manufacturing, logistics
Science & technology
Ogun-Guangdong FTZ: 2008
Lekki Free Zone: 2008
Abuja Tech Village Free Zone:
2007
Free Zone: 2006
Lagos FTZ: 2002
Olokola FTZ: 2004
Living Spring Free Zone: 2006
Rwanda
Brass LNG Free Zone: 2007
Kigali SEZ: 2011
Senegal
Dakar Integrated SEZ: 2007
Sierra Leone
First Step: 2012
South Africa
Coega IDZ: 1999
East London IDZ: 2003
Saldanha Bay IDZ: 2013
Science & technology
Manufacturing, oil & gas,
petrochemical
Oil & gas, manufacturing
Manufacturing, warehousing,
trading
Liquefied natural gas
Heavy & light
manufacturing industries,
large scale users, industrial
plants, commercial
wholesalers, chemical,
pharmacy and plastics,
warehousing, tourism and
service industry, ICT
logistics
Industrial, offices, tourist
resorts, commerce &
services
Agricultural goods, apparel
manufacturing, mineral
resources, marine resources,
export processing
Agro-processing,
automotive, business process
outsourcing, chemicals,
energy, logistics,
manufacturing, metals,
textiles
Automotive,
agro-processing,
pharmaceuticals, ICT &
BPO, renewable energy,
logistics, aqua-culture,
general manufacturing
Oil & gas, marine
engineering
(continued)
122
B. ROBINSON
Table 5.5 (continued)
Country
Zone name and year of inception
Activities and industries
Richards Bay IDZ
Agro-processing, metals
beneficiation
Aerospace and aviation
linked manufacturing,
agriculture and
agro-processing, electronics
manufacturing and assembly,
medical and pharmaceutical
production and distribution,
clothing and textiles
41% industrial, 15%
commercial, 44% service
Industrial investment and
assembly industries,
supporting services, logistic
centres and distribution
services, food industries
trade centres, light
transformational industries,
packing and packaging
requirement industry,
petrochemicals and plastic
products industry, financial
and consultancy services
Textiles & garments,
agro-processing, leather
processing and manufacture
of leather products, fish
processing, wood products,
agricultural &
agro-industrial, industrial,
tourism, commercial
forestry, ICT, banking &
financial centre
Food industry and
agro-industry and
horticulture, wood industry,
metallic engineering industry
and plastic industry, clothing
industry, synthetic hairs,
leathercraft, pharmaceutic
industry, cosmetic industry,
textile, light engineering
products and electronics,
jewellery, diamonds
polishing, building materials
industry, stationery
Dube Trade Port IDZ: 2014
Sudan
Suakin Free Zone: 2000
Alijaily Free Zone: 2009
Tanzania
EPZs and SEZs (2002)
Millennium Business Park;
Hifadhi EPZ; Kisongo EPZ;
Kamal Industrial Estate EPZ;
BWM SEZ; Global Industrial
Park
Togo
EPZs: 1989
Uganda
Free Zones: 2014
Nakaseke SEZ: 2015
Agribusiness products
(continued)
5
THE EMERGENCE OF CHINESE INTEREST …
123
Table 5.5 (continued)
Country
Zone name and year of inception
Activities and industries
Zambia
Chambishi MFEZ: 2007
Copper smelting,
manufacture of household
appliances, manufacture of
bars, wires, electric cables
and motor parts,
agro-processing
Light manufacturing
activities, provision of
services such as conference
facilities and hotel
accommodation
Lusaka East MFEZ: 2009
Lusaka South MFEZ: 2012
Sub-Saharan Gemstone
Exchange Industrial Park
Roma Industrial Park: 2011
Zimbabwe
EPZs: 1996
Warehousing & storage,
light industry, oil refinery,
residential, gemstone
processing
Light industries, retail parks,
office park, warehousing
Mining, agro-processing
Source Adapted from Newman and Page (2017: 7–14). This content is reproduced with special
permission of UNU-WIDER, Helsinki, the original publisher of the referenced research work: Industrial clusters: The case for Special Economic Zones in Africa, WIER Working Paper, No. 2017/15:
https://doi.org/10.35188/UNU-WIDER/2017/239-7
Carolina in the US. This was followed by some other notable investments:
Fujian Huaqiao Company built an industrial and trade zone in Cuba in
2000; Haier and a Pakistani company, Panapak Electronics, built a industrial park in Lahore in 2001; a Chinese company began an industrial zone
in Chambishi in Zambia in 2003; a $300 Million trade center designed to
host 4000 Chinese companies was constructed by the China Middle East
Investment and Trade Promotion Centre and Jebel Ali Free Trade Zone
in 2004; and a Chinese trade and industrial park was initiated in South
Carolina by the Tianjin Port Free Trade Zone Investment Company and
the United States Pacific Development Company in 2004 (Bräutigam and
Tang 2011a).
In 2006 the Chinese government announced the establishment of 50
overseas economic and trade cooperation zones as a key element to China
implementing their ‘going out’ policy, as detailed in their 11th five-year
plan. The approach, as discussed in Chapter 2, was experimental and
gradual.
124
B. ROBINSON
Table 5.6 Planned Special Economic Zones in Africa
Country
Zone details
Angola
New legislation was passed in 2015 that established rules for the
creation and functioning of SEZs
Four foreign trade zones are in the planning process
Several SEZs are planned over the coming years. They include
Kinshasa-Inga-Matadi-Banana; Ilebo-Tshikapa-Kananga-Mbuji; Mayi
Kolwezi-Likasi-Lubumbashi-Sakania;
Uvira-Bukavu-Goma-Beni-Bunia; and Kisangani-Bumba-Mbandaka
A number of new SEZs are planned over the coming years. They
include: Khor Ambado Free Zone; Jabanas Free Zone; UKAB
Holdings Free Zone; Fabtec Industries Free Zone; and the Djibouti
Free Trade Zone
SEZs are planned for Franceville, Port Gentil and Nyoni
SEZs have been approved for Mombasa, Lami, and Kisumu, and
some EPZs are to be converted into SEZs as part of Kenya Vision
2030
A special tax and custom regime is being created for the Zambesi
Valley until 2025
A number of Zones are in the process of been developed. Some new
Zones planned include the Ossiomo FTZ; Enugu Power &
Industrial Development Free Zone; Warri Industrial Business Park;
Kogi Free Zone; Baklang Free Zone; Madewell & Textile INC Free
Zone; Sahara Offshore Logistics Base Free Zone and various Airport
Free Zones
SEZ in progress and envisioned include Mthata; Harrismith;
Johannesburg; Tubaste; Musina; Nkomazi; Upington; Bojanala; and
Atlantis
Free Trade Zone in progress in Kosti
The Bagamoyo SEZ and Kigoma SEZ are planned
Under development is the Lumwana MFEZ which will include the
manufacture of explosives, agro-processing, horticulture fisheries, and
hotel accommodation
Congo
DRC
Djibouti
Gabon
Kenya
Mozambique
Nigeria
South Africa
Sudan
Tanzania
Zambia
Source Adapted from Newman and Page (2017: 17–18). This content is reproduced with special
permission of UNU-WIDER, Helsinki, the original publisher of the referenced research work: Industrial clusters: The case for Special Economic Zones in Africa, WIER Working Paper, No. 2017/15:
https://doi.org/10.35188/UNU-WIDER/2017/239-7
The objectives of the overseas economic zones were as follows (Table
5.7).
These Zones have different models based on the mix of objectives they
intend meeting. For instance, they can be industrial parks, export zones,
or science and technology parks; they can focus on the domestic, regional
or international market for their goods.
5
THE EMERGENCE OF CHINESE INTEREST …
125
Table 5.7 Objectives of China’s overseas economic zones (Bräutigam and Tang
2011a)
Objectives of the Chinese overseas zones
1. Increase demand for Chinese-made machinery and equipment and provide after-sales
support
2. By producing in overseas countries such as in certain African countries, China would
avoid trade barriers and be afforded the opportunity (such as AGOA) to export these
goods to Europe and North America
3. It would help boost China’s own domestic restructuring and move up the value
chain at home
4. Create economies of scale for overseas investment and support small and medium
enterprises to venture overseas in ‘groups’
5. Transfer China’s success in Special Economic Zones to other developing countries
to help recipient countries in their own development whilst benefitting China
A critical aspect is that the developers must have a profit motive as this
was viewed as an important contributing factor to Zones’ success, and the
Ministry of Commerce of China (MOFCOM) emphasized that projects
should be market driven. Companies are expected to take the lead, while
the Chinese government plays a supportive role with generous financial
and non-financial incentives (Zeng 2016).
MOFCOM utilises a competitive tender process for Zone projects,
with winning bids receiving a range of incentives, including RMB200
Million in grants and up to RMB2 Billion in long-term loans. Chinese
companies investing in the zone are also incentivised to do so. The
MOFCOM’s Special Fund for Economic and Technological Cooperation
allows investors to receive up to 100% rebate on the interest paid on
Chinese bank loans. MOFCOM had already invested $700 million in the
construction of 16 Special Economic Zones outside of China, with about
200 companies operating in these Zones with the support of an investment of $2.5 billion. These incentives reduce the risk of investment and
are performance based with benchmarking evaluations taking place every
1–2 years. The China-Africa Development Fund (CADF) is an additional
development finance instrument that is available to investors in African
Zones (Zeng 2016).
126
B. ROBINSON
Investment by Chinese companies in Special Economic Zones are
not limited to MOFCOM approved Special Economic Zones, and many
Chinese companies have invested in other zones throughout the world.
The Special Economic Zones supported by MOFCOM internationally
in 2016 are listed in Table 5.8.
5.4
Chinese Special Economic Zones in Africa
The China-African Development Fund (CADF) and the Chinese Ministry
of Commerce (MOFCOM) are the primary facilitators of Chinese Zones’
authorisation and finance for Chinese Special Economic Zones in Africa.
In addition, the China-African Development Bank, established by the
China Development Bank, was launched at the FOCAC 2006 Summit
with $5 Billion initial capital. The role of the Bank was to support
investment by Chinese companies, Sino-Africa joint ventures, or African
companies.
China has approved seven Special Economic Zones in Africa, five of
which will be analysed in case studies later in the book (Table 5.9).
Deborah Bräutigam and Xiaoyang Tang (2011b) describe the roles of
the different parties to these zones:
1. The Chinese government:
The Chinese government provided material and networking
support for the Zone developers, and as mentioned before, had
access to RMB 200–300 Million in grants and RMB 2 Billion
in loans, and developers could apply for subsidies of 30% of preconstruction and implementation costs through the MOFCOM
Trade and Economic Cooperation Development Fund. Chinese
firms were also eligible for reimbursement of up to half of their
moving expenses; export and income tax rebates or deduction on
Chinese material used in construction; and easier access to foreign
exchange. Subsidies were performance based and only accessible
after costs were incurred. The China Africa Development Bank
invested in the Nigeria Lekki, Mauritius and Egyptian Zones. Some
provincial and municipal governments in China provided additional funds for the initial zones. FOCAC has also announced
various funding instruments to assist Chinese and African companies
5
THE EMERGENCE OF CHINESE INTEREST …
127
Table 5.8 Special Economic Zones officially supported by MOFCOM (Zeng
2016)
Region
Country
Zone
Tender year
Status
Africa
Zambia
• Chambishi
Nonferrous Metal
Mining
• Group Industrial
Park
• Lusaka sub-zone
• Lekki FTZ
• Ogun-Guangdong
Zone
• Eastern Industrial
Park
• JinFei Economic and
Trade Cooperation
Zone
• Jiangling Economic
and Trade
Cooperation Zone
• Tianjin TEDA Suez
Zone
• China-Vietnam
(ShenzhenHaiphong)
• Economic and Trade
cooperation Zone
• Longjiang Industrial
Park
• Thai-Chinese Rayong
IZ
• Sihanoukville SEZ
2006
Operational
2007
2006
Operational
Operational
2007
Operational
2006
Operational
2007
Not implemented
2007
Operational
2007
2007
Under
construction
Operational
2006
Operational
2006
• China-Indonesia
Economic Trade
Zone
• Korea-China
Industrial Park
• Haier-Ruba IZ
2007
Under
construction
Under
construction
Nigeria
Ethiopia
Mauritius
Algeria
Egypt
East Asia
Vietnam
Thailand
Cambodia
Indonesia
South
Asia
Republic of
Korea
Pakistan
2007
2006
Delayed due to
funding
Operational
(continued)
128
B. ROBINSON
Table 5.8 (continued)
Region
Country
Zone
Tender year
Status
Latin
America
Venezuela
• Venezuela-China
Science Technology
Industry Zone
• Mexico and China
(Ningbo) Geely
Industrial and Trade
Cooperation Zone
• Ussuriysk Economic
and Trade
Cooperation Zone
• Tomsk Timber
Industry and Trade
Cooperation Zone
• St. Petersburg Baltic
Economic and Trade
Cooperation Zone
2007
Not implemented
2007
Not implemented
due to land
access issues
2006
2007
2006
Operational
Operational
Dropped
Mexico
Eastern
Europe
Russia
Table 5.9 China’s
seven Special Economic
Zones in Africa
China’s seven Special Economic Zones in Africa
Zambia-China Economic and Trade Cooperation Zone /
Chambishi Multi-facility Economic Zone
Egypt Suez Economic and Trade Cooperation Zone
Ethiopian Eastern Industrial Park
Mauritius Jinfei Economic and Trade Cooperation Zone
Nigeria Lekki Free Trade Zone
Nigeria Ogun-Guangdong Free Trade Zone
Algeria-China Jiangling Free Trade Zone
investing in the Zones. The Chinese government did not get much
involved in the design or operation of the Zones. Chinese embassies
also encourage Chinese companies to invest in the zones. The
government has been known to intervene on rare occasions when
problems are encountered with the Zones, but generally, China
has had a ‘hands-off’ approach towards African policies towards the
Zones.
2. Chinese developers
The developers of the Chinese Special Economic Zones in Africa
have been both state-owned and private enterprises from China. As
5
THE EMERGENCE OF CHINESE INTEREST …
129
mentioned before, business models varied significantly. Some used
existing natural resources to expand processing capacity such as the
Zambia Chambishi Zone on the Copperbelt. Others used the Zone
as a springboard to enter new markets, such as the Jiangling Automobile Group which planned to build a vehicle assembly industrial
park in Algeria, the Mauritius Jinfei Zone was to leverage the Zones
location to become a hub of Sino-Africa trade and services, and the
zones in Nigeria and Egypt were strategic investments to capitalise
on the large regional markets they offered.
3. African governments
African governments regulate the Zone’s activities and provide
(or “fail to provide”) incentives for their development. Incentives
include tax holidays, waivers on import tariffs for raw materials
and inputs, and sometimes, even introduce restrictions on strike
activity. Chinese companies producing in the Zones may also be
able to obtain host countries’ certificates of origin. For example,
Chinese companies in Egypt can obtain Egyptian Certificates of
Origin that allow them to take advantage of various international
trade agreements.
The host government is supposed to provide infrastructure
outside the Zone, such as port, road and rail infrastructure, and
power and water, although, as this book will detail, this doesn’t
always materialise.
There are sometimes bilateral coordination committees that
include representatives of both countries’ governments which
operate at a strategic policy level. African governments have various
investment agencies that also promote the Zones. Although African
stakeholders do sometimes have some form of partnership with the
zone, most do not play a direct role, the exception of which is
the Lekki Zone where Nigerians are on the Zone’s board of directors and management team. Some African countries have specific
economic policies that include investment in Special Economic
Zones developed independently from Chinese initiated Zones in
Africa, although these incentivised Chinese investment in the
country.
Douglas Zeng (2016) notes several features of Chinese Special Economic
Zones in Africa: Companies that were successful in the MOFCOM
competitive tender selection process were usually companies that already
had a presence in the host countries; the models of the Zones ranged from
fully Chinese-owned companies such as those in Ethiopia and Mauritius
130
B. ROBINSON
to joint ventures with host governments found in Nigeria and Zambia;
Chinese Zone developers established consortiums with multiple Chinese
investors often with the participation of provincial SOEs from China;
Chinese investment were for on-site infrastructure within the zone, with
the host country being responsible for off-site infrastructure; and the
Zones involved high-level political support from Chinese and the host
country’s government. Referring to other studies such as those of the
World Bank, Zeng identifies other similarities: Zones were in close proximity to the economic capitals such as Lagos in Nigeria, Addis Ababa
in Ethiopia, and Port Louis in Mauritius; near key infrastructural assets,
for instance APAPA Port, Lagos airport and Lekki Port in Nigeria, the
Ethiopian Zone on the main highway between Addis Ababa and Djibouti,
and in Mauritius near the Free Port; all the Zones were mixed-use Zones;
the first phase was usually around 100 hectares; and the Zone ownership
was dominated by consortiums of 3–6 Chinese Business Partners.
There are other Special Economic Zones that were initiated by Chinese
investors that were outside the ambit of MOFCOM’s support. These
include the Guoji Industry and Trade Zone in Sierra Leone; the Nigeria
Lishi-CSI Industrial Park; the Linyi Industrial Park in Guinea; China
Daheng Textile Industrial Park in Botswana; and the Shandong Xinguang
Textile Industrial Park in South Africa.
This Chapter served as an introduction of China’s relationship with
Africa and the economic ties that have developed during its ‘Going—out’
policy, with specific reference to Special Economic Zones being made
in this regard. Both indigenous African Special Economic Zones and
Chinese Special Economic Zones in Africa will be the subject of analysis
for the rest of the book.
5.5
Conclusion
The day of writing this conclusion, the trade-war between China and
the US had seemed to be in the distant past after simmering down,
only to be re-ignited during tensions around the COVID-19 pandemic.
Having originated in Wuhan, China, in December 2019 the epidemic in
the country was contained through swift action by the Chinese authorities within a short period of two months, and by early March 2020, the
cumulative total of cases were 82,295, and new cases on the 14th of April
were at 46. At the beginning of March 2020, the US had 75 cases, but by
the end of March it had reached 189,967 confirmed cases, almost double
5
THE EMERGENCE OF CHINESE INTEREST …
131
that of China, and by 14 April 2020, the figure had reached 613,886
cases and was continuing to rise at an alarming, though decreasing rate
(Worldometer.info 2020).
The US President, Donald Trump’s mercurial nature and indecision
regarding the virus at this stage was quite clear, and the search for scapegoats for the problem became paramount. While having been advised of
its severity by US authorities, and the World Health Organisation (WHO)
declaring the disease a public health emergency on the 30th of January
2020, President Trump referred to it initially as a virus similar to influenza
that was under control, and only declared a national emergency of the
13th of March 2020. The President made reference to the ‘Wuhan Virus’
or ‘Chinese virus’ and has questioned the veracity of the figures of the
Chinese. This has been much to the ire of the Chinese, as could be
expected, as it was clearly laying the blame of a terrible situation at the
feet of China. Another institution blamed was the WHO authority, which
President Trump accused of being ‘wrong about a number of things’
and ‘China-centric’, and on the 14th of April 2020, the president cut-off
funding for the organisation.
In stark contrast, the relationship between China and Africa and many
nations throughout the world, has been bolstered by the support China
has given to their fight for survival against the Coronavirus. On the 13th
of April, Wang Yi, the Chinese State Councillor and Foreign Minister
make a phone call to the Chairperson of the African Union, Moussa Faki
Mahamat. The conversation was as follows:
As comprehensive strategic and cooperative partners, China and Africa
must fight it together through closer coordination and cooperation. China
will always remember the solidarity and support from the AU and African
countries at the height of its battle against the outbreak, with explicit opposition to certain country’s attempts to politicize the outbreak and label the
virus. It speaks volumes of our brotherly ties and solidarity in times of
adversity and the strength of China-Africa strategic cooperation.
China is ready to provide more medical supplies if needed by Africa.
China is also willing to share experience on outbreak response with African
brothers and send medical expert teams there. We will support Africa’s
purchase of medical supplies in China and deepen cooperation in public
health. China will stand firmly with Africa and fight together with our
African brothers and sisters until the virus is completely defeated across
the African continent. (Wang Yi, 2020)
132
B. ROBINSON
This Chapter has demonstrated the strength of China’s historic and
current relationship with Africa that continues to grow as the global
geo-political landscape rapidly changes. Chinese investment in Special
Economic Zones in Africa, strongly supported by Chinese policy toward
Africa, is an opportunity for African Nations to derive significant socioeconomic benefit going forward. The next few chapters will consider
whether African Nations are doing so.
References
Baissac, C. 2011. Brief History of SEZs and Overview of Policy Debates. In
Special Economic Zones in Africa: Comparing Performance and Learning
from Global Experience, ed. T. Farole. Washington: The International Bank
for Reconstruction and Development/The World Bank. © World Bank.
[Online]. Accessed from: http://documents.worldbank.org/curated/en/996
871468008466349/pdf/600590PUB0ID181onomic09780821386385.pdf.
Accessed 23 Apr 2020. License: Creative Commons Attribution License (CC
BY 3.0 IGO). http://creative-commons.org/licenses/by/3.0/igo/.
Bräutigam, D., and X. Tang. 2011a. Chinese Investments in Special
Economic Zones in Africa. In Special Economic Zones: Progress, Emerging
Challenges, and Future Directions, ed. T. Farole and G. Akinci,
69–100. Washington: The International Bank for Reconstruction and
Development/The World Bank. © World Bank. [Online]. Accessed
from: http://owa.baku8km.khazar.org/bitstream/20.500.12323/2799/1/
special%20economic%20zones.pdf#page=93. Accessed 22 Apr 2020. License:
Creative Commons Attribution License (CC BY 3.0 IGO). http://creativecommons.org/licenses/by/3.0/igo/.
Bräutigam, D., and X. Tang. 2011b. African Shenzhen: China’s Special Economic
Zones in Africa. The Journal of Modern African Studies 49 (1): 27–54.
Farole, T. 2011. Special Economic Zones in Africa: Comparing Performance
and Learning from Global Experience. Washington: The International Bank
for Reconstruction and Development/The World Bank. © World Bank.
[Online]. Accessed from: https://openknowledge.worldbank.org/handle/
10986/2268. License: CC BY 3.0 IGO http://documents.worldbank.org/
curated/en/996871468008466349/pdf/600590PUB0ID181onomic097
80821386385.pdf. Accessed 23 Apr 2020.
Newman, C., and J. Page. 2017. Industrial Clusters: The Case for Special
Economic Zones in Africa, WIER Working Paper, No. 2017/15, ISBN
978-92-9256-239-7, The United Nations University World Institute for
Development Economics Research (UNU-WIDER), Helsinki. https://doi.
5
THE EMERGENCE OF CHINESE INTEREST …
133
org/10.35188/UNU-WIDER/2017/239-7. Available from: http://hdl.han
dle.net/10419/161577.
Wang Yi. 15 April 2020. FOCAC Top Stories: Rock-solid China-Africa Friendship Will Not Be Affected by Isolated Incidents. [Online]. Accessed from:
https://www.focac.org/eng/ttxxsy/t1769827.htm. Accessed 15 Apr 2020.
Worldometer.info. 2020. Coronavirus. [Online]. Accessed from: https://www.
worldometers.info/coronavirus/country/china/. Accessed 15 Apr 2020.
Zeng, D. 2016. Global Experiences of Special Economic Zones with Focus
on China and Africa: Policy Insights. Journal of International Commerce,
Economics and Policy 7 (3): 1650018.
PART III
Evaluating Special Economic Zones in Africa
CHAPTER 6
Critical Issues for Chinese Investment
in Special Economic Zones in Africa
Special economic zones in Africa will not be successful unless they are
competitive in the global arena. To illustrate this, some economic theory
will be useful. Firstly, let’s review concepts of international business, such
as mercantilism and the theories of absolute and comparative advantage.
Mercantilism, dating back to the sixteenth century postulates that
countries should export more than it imports, thus maintaining a trade
surplus. This was regarded as creating wealth for a country, while a
deficit was seen as reducing wealth. This view is certainly still held by
some politicians in recent times, with politicians such as the US pastPresident Donald Trump holding neo-mercantilist views which equated
trade surpluses with economic and political power, a view that motivated
the mutually devastating trade war with China.
Absolute advantage suggests that productive resources should be
applied in the production of goods for which a country has an absolute advantage, and trade in goods (import) where it doesn’t have a
competitive advantage. So, as China has developed and become more
technically savvy while experiencing higher wages, they would have an
absolute advantage over let’s say Senegal, in the production of mobile
phones. Senegal on the other hand has lower wages and better productive capacity to produce labour intensive goods, such as kitchen utensils.
© The Author(s), under exclusive license to Springer Nature
Singapore Pte Ltd. 2022
B. Robinson, African Special Economic Zones,
https://doi.org/10.1007/978-981-16-8105-9_6
137
138
B. ROBINSON
Instead of trying to produce technologically advanced goods, which it
would only be able to provide in small quantities and at a high price due
to the scarcity of those skills, Senegal should specialise in labour intensive mass produced goods, such as these kitchen utensils. The countries
can then trade—exporting goods in which they have an absolute advantage, and importing goods in which they don’t. The net effect is that
both countries benefit from such specialisation, and it increases access for
both countries to these products. Thus, there is a greater net gain for both
countries trading, than trying to produce both types of goods themselves.
The theory of comparative advantage takes it one step further and
argues that countries should maximise production of goods in which it is
most efficient, and import other goods, even if these goods are produced
less efficiently than they can produce. Taking the same example above,
consider the situation where China can also produce the kitchen utensils
more efficiently than Senegal. China could still maximise production of
mobile phones to the exclusion of producing kitchen utensils if they have
a comparative advantage. They may be more efficient in producing these
mobile phones than kitchen utensils. In this case it would still make sense
for China to import the kitchen utensils from Senegal as it has a comparative advantage of being more efficient in producing mobile phones than
kitchen utensils. Once again, both countries benefit more from the trade
than without.
The reason for reverting to economic theory is useful in that it illustrates that Chinese companies will only invest in Special Economic Zones
if there is a comparative advantage in doing so, either for supplying the
host country with products, or to produce competitively priced export
goods. Failing which, there is little incentive for them to invest in African
Nations.
As China has become technologically astute, they have developed a
comparative advantage of producing technologically advanced products
in China where they have the skills. They may still be able to produce
textiles more efficiently than some African Nations, but their comparative advantage in advanced technologies precludes more investment in
products that do not require skilled labour.
We therefore see the influx of Chinese investors in lesser developed
countries, where while the efficiency of production may be lower, input
costs may provide these Chinese companies with an absolute advantage in
producing certain categories of products. It still makes sense to produce
6
CRITICAL ISSUES FOR CHINESE INVESTMENT …
139
there due to this advantage, access to the local market, and trade opportunities with more developed nations. These companies are competitive
due to the very nature of globalisation.
The following section is a meta-analysis of what African countries offer
in terms of Special Economic Zones to lure investors, including Chinese
investors. The data has been obtained from various internet sources which
are detailed in the reference list at the end of the Chapter. The list is
relatively comprehensive, but is limited to those countries which publish
information on the various incentives and advantages that their countries offer investors in their Special Economic Zones. It is also limited to
English versions of the information, so there may be some bias towards
English official-language countries.
In addition, observations are made and discussions with investors from
the various Special Economic Zones are shared, to provide some deeper
insights into these issues. This is aimed to emphasize the weighting
Chinese investors may place on these issues in their investment decision.
The Chapter has the following structure: It explores some of the tax
incentives, tax exemptions, subsidies and preferential financing facilities
offered by host countries; the ease of doing business; the management
and infrastructure provided; the location of the zone and the market
opportunities it offers; the human and other resources that are available;
foreign ownership limitations, repatriation of profits and currency issues;
lifestyle available for Chinese expatriates; global financial initiatives; and
China’s policy towards the host country and to Africa.
6.1
Financial Motivation
Countries have concocted a range of financial incentives to stimulate
interest in their Special Economic Zones, and zones have themselves
introduced their own packages of incentives to compete with the multitude of zones throughout the world. In analysing the incentives, some
broad categories of incentives emerged, namely tax incentives such as tax
holidays and allowances, reduced or free customs duties and protocols,
and VAT exemptions; duty free imports of capital equipment, supplies
and raw materials; subsidized utilities and rental rates; and the provision
of financing often at preferential rates.
140
B. ROBINSON
6.1.1
Tax Incentives
An investor from the Ogun-Guangdong Zone in Nigeria explained how
Nigeria, and the Zone itself, offered the best incentives (and service) of
all the countries and zones visited in Africa, confirming the importance
of financial and other incentives in the investment decision.
This was reiterated when speaking to investors in the Chambishi Multi
Facility Economic Zone in Zambia, where tax incentives were the main
driver of investment. The problem is when these incentives change over
time. One of the concerns voiced in Zambia at the Chambishi Multi
Facility Zone was policy uncertainty by the host government. While there
were a lot of incentives that encouraged the initial spurt of investment,
this had changed, with profits previously exempt and zero-rated VAT,
now subject to tax. Some investors were bitter, suggesting that there were
no incentives anymore.
The meta-analysis on tax incentives offered to investors by the zones
included in the study are divided into tax holidays and allowances;
customs duties and customs requirements; and VAT exemptions. Please
note that some of the incentives covered an array of these, while others
were scant in detail, but the analysis does provide a glimpse into the
nature of these incentives,
6.1.1.1
Tax Holidays and Allowances
Tax holidays and allowances ranged from a couple of years, to perpetuity. A sliding scale was often applied, with tax rates gradually increasing
from zero percent, upwards until reaching the national tax rate—see
Mozambique SEZs. They sometimes applied to all taxes, or were categorised into corporate taxes, personal income taxes and property taxes.
Sometimes industry classifications were included, with different sectors
attracting different incentives. Depreciation allowances on capital investment, capital gains tax benefits, and tax-free dividends were some of the
other incentives available. Table 6.1 provides some more detail in this
regard.
6.1.1.2
Customs Duties and Requirements
Customs duties and requirements were sometimes limited to duty free
imports of capital equipment, supplies and raw material (Sect. 6.2.2 will
go into more detail in this regard), but others were more comprehensive
6
CRITICAL ISSUES FOR CHINESE INVESTMENT …
141
Table 6.1 Tax holidays and allowances offered to investors
Country and/or zone
Incentive to attract investment
Cameroon’s Industrial Free Zones
Ten-year tax holiday on all taxes. From
then on, a flat tax rate of 15% on
corporate profits for perpetuity
Exemption of corporate and income tax
0% Corporate Income Tax and 0%
property tax
100% exemption from payment of
income tax on profits for 10 years which
will not exceed 15% thereafter
10% corporate tax for the first 10 years
after the start of operations; 15% for the
following 10 years; and 30% from then
on. Investment deductions are allowed
from between 100–150% for
construction and machinery purchases
Income tax is exempt during the first
5 years, and 10% after that for
processing and intensive production.
2 years tax exemption for service sector
companies, followed by a 10% income
tax rate. 15 years tax exemption for
other companies, followed by a tax rate
of 10%
Exemption of corporate tax. 100%
allowance on buildings, plant and
machinery. 25% export allowance on
revenue for non-traditional exports. No
taxes on gains from the sale of shares
held for more than a year. Carry
forward of loss for up to 7 years
Zero percent corporate tax
The incentive scheme differs for SEZ
developers, investors and service
enterprise. For developers, a 5-year tax
exemptions is granted, with a 50%
reduction for the following 5 years, and
25% after than. Businesses investing in
the zone qualify for a 3-year exemption,
and 50% for the following 5 years
Djibouti Free Zone
Gabon NKOK SEZ
Ghana (Tema Export Processing Zone and
others)
Kenya SEZs
Madagascar Free Zone
Malawi Export Processing Zones
Mauritius Freeport
Mozambique SEZs
(continued)
142
B. ROBINSON
Table 6.1 (continued)
Country and/or zone
Incentive to attract investment
Namibia Export Processing Zones
(The EPZs have been accused of being a
tax haven and the Namibian
Government is introducing new SEZ
legislation to counter the misuse of the
incentives)
Exempt from corporate income tax
All companies and individuals operating
in these zones are allowed a full tax
holiday from Federal, State and Local
Governments
100% capital allowance on qualifying
building and plant equipment
expenditure
An exemption from the flat rate
minimum tax on companies. 15%
corporation tax. Exemption from income
tax
Tax holiday for 3 years. Accelerated
depreciation of 40% on plant and
equipment the first year and loss carry
forward opportunities
Corporate tax rate reduced to 15%.
Special allowance for expenditure on
buildings at a rate of 10% per annum.
Youth employment tax benefits
Business tax exemptions and complete
exemption from personal income tax for
foreigners
10-year Corporate Tax holiday and 25%
tax rate for the subsequent 10 years.
100% investment deduction on capital
expenditure within 20 years. 10 year
withholding tax holiday on dividends for
non-residents
No tax during the first 10-year’s of
operation, 15% thereafter. Tax
exemption on dividends during the first
10 years for non-Togolese shareholders.
Payroll tax at the reduced rate of 2%
10-year Income tax exemption for zone
developers and operators subject to
minimum investment amounts.
Exemption from tax on plant and
machinery used in the Free Zones for
5 years upon disposal
Nigerian Export Processing Zones
Senegal Special Economic Zone
Sierra Leone
South Africa
Sudan Free Zones
Tanzania Free Economic Zones
Togo Export Free Zone
Uganda Free Zones
(continued)
6
CRITICAL ISSUES FOR CHINESE INVESTMENT …
143
Table 6.1 (continued)
Country and/or zone
Incentive to attract investment
Zambia Multi Facility Economic Zones
Zero percent tax rate on profits for a
period of 5 years; 50% of profits taxed
from years 6–8; and 75% of profits taxed
for years 9–10. Zero percent tax rate for
dividends for 5 years. Investments of
more the US$500,000 are allowed
accelerated depreciation on capital
equipment and machinery for five years
offering a range of benefits such as reduced port handling charges (Mauritius), exemption of customs duties for export (Sudan free zones), and
exemption of licences, authorisations and quota restrictions (Cameroon’s
Industrial Free Zones). Some of the incentives are described in Table 6.2.
6.1.1.3
VAT Exemptions
Vat exemptions have the dual impact of potentially reducing the cost
of supplies, while making prices cheaper/profits larger when goods on
sold. VAT exemptions varied from being blanket exemptions, exemptions
of VAT on imports, or exemptions of VAT on the purchase of goods
from the local market (South Africa). Table 6.3 lists some of the VAT
exemptions offered.
6.1.2
Duty Free Imports of Capital Equipment, Supplies and Raw
Materials
Duty free imports of capital equipment, supplies and raw material was an
important aspect for Chinese investors, especially in light of some of these
items not been available in the country.
There was sometimes a problem though—bribery and corruption:
‘Due to corruption, duties are sometimes higher’ one person told me
at the Ogun-Guangdong Free Trade Zone in Nigeria. This is also an
important consideration, as bribery and corruption significantly increases
the cost of doing business in some African countries—this is discussed in
more detail in Chapter 9.
There may be some duplication in this analysis with the other tax
incentives and allowances mentioned before, but Table 6.4 is provided
144
B. ROBINSON
Table 6.2 Favourable customs duties and requirements
Country and/or zone
Incentive to attract investment
Cameroon’s Industrial Free Zones
Exemptions from licenses, authorisations
and quota restrictions regarding imports
and exports; and exemption from all price
and margin controls. The zones are
export orientated, generally requiring 80%
of production to be exported, and
production for the local market would be
subject to customs duties and taxes
Exemption from custom duties on the
import of equipment and machinery for
industries
100% exemption from payment of direct
and indirect duties and levies on all
imports for production and exports from
free zones
Raw materials, inputs, materials and
equipment intended for free zones are
exempt from customs duties and import
taxes
Exemption of duties on capital equipment
and raw material. Exemption of Excise
tax on the purchase of raw materials
made in Malawi
Exemption from customs duties on all
goods imported into the Freeport zones
In addition, reduced port handling
charges are offered on all goods destined
for re-export
Exempt from duties on machinery,
equipment and raw materials imported
into Namibia for manufacturing purposes
Duty free, tax free on import of raw
materials for goods destined for re-export
Import duty exemption of raw materials
for manufacturers
Exemption of duties and taxes subject to
certain provisions
The import duty for raw material, plants
and machinery is 5%
Gabon NKOK SEZ
Ghana (Tema Export Processing Zone and
others)
Madagascar
Malawi Export Processing Zone
Mauritius Freeport
Namibian Export Processing Zones
Nigerian Export Processing Zones
Rwanda’s Kigali Special Economic Zone
Senegal Special Economic Zones
Sierra Leone
(continued)
6
CRITICAL ISSUES FOR CHINESE INVESTMENT …
145
Table 6.2 (continued)
Country and/or zone
Incentive to attract investment
South Africa
Goods imported into the
customs-controlled area of a Special
Economic Zone are exempt for import
customs, excise duties and economic
restrictions while being stored or
undergoing manufacturing
Goods imported and exported to
non-local areas are exempt from customs
duties
Duty and stamp duty exemption on raw
materials, machinery, equipment and
other inputs. Duty free export of goods
produced
Exemptions from taxes and duties on all
imported inputs that are for the exclusive
use in the development and production
output of the business enterprise
Investments over US$500,000 pay zero
percent import duty on capital equipment
and machinery for five years
Sudan Free Zones
Tanzania Free Economic Zones
Uganda Free Zones
Zambia Multi Facility Economic Zones
to emphasize the importance placed by Chinese investors on the cost of
importing capital, supplies, and raw material when these may be scarce
in certain African Nations. Incentives ranged from duty free imports of
equipment and machinery (Gabon NKOK SEZ) to duty free imports on
factors of production which would include supplies and raw materials
(Togo Export Free Zone and Uganda Free Zone).
6.1.3
Subsidised Utilities and Rental Rates
Subsidised utilities and rentals are another way of encouraging investment, although it didn’t seem that they were offered by many zones
within the analysis, or they were not promoted to any significant extent,
with only the Nigerian Export Processing Zone and the Togo Export
Free Zone making mention of such an incentive (Table 6.5).
146
B. ROBINSON
Table 6.3 VAT exemptions
Country and/or zone
Incentive to attract investment
Gabon NKOK SEZ
Kenya SEZs
Exemption from VAT
The supply of goods or taxable services
are perpetually VAT exempt. Investors in
SEZs are also exempt from stamp duty
and excise duty
Imports are not subject to VAT. Sales
made into the local market is subject to
ordinary rates of 20%
Exemption of VAT
Exemption on VAT for machinery,
equipment and raw material imported
into Namibia for manufacturing purposes
Subject to certain conditions, exemption
are allowed on VAT for the
manufacturing and mining sector
Exemption of VAT on goods and
services acquired from the local market
or imported
VAT exemption on raw material,
machinery, equipment and other inputs
Supplies to developers are zero rated,
and foreign supplies are exempt from
reverse VAT charges
Madagascar Free Zone
Malawi Export Processing Zone
Namibian Export Processing Zones
Rwanda’s Kigali Special Economic Zones
South Africa
Tanzania Free Economic Zones
Zambia Multi Facility Economic Zones
6.1.4
Financing and Preferential Interest Rates
Financing and preferential interest rates did not receive much attention
in the marketing of most of the Special Economic Zones. Gabon NKOK
Special Economic Zones was an exception, and it was mentioned that
easy access to loans was offered for manufacturers. This is not to say
that preferential financing would not be available. Chinese firms would
have access to its own development financing institutions such as the
Export–Import Bank of China, and host countries would have a range
of commercial financial institutions, as well as development finance institutions, to encourage investment by local and international companies
considering investment in their country.
6
CRITICAL ISSUES FOR CHINESE INVESTMENT …
147
Table 6.4 Duty free imports of capital equipment and raw materials
Country and/or zone
Duty free imports of capital
equipment and raw materials
Gabon NKOK SEZ
Exemption from custom duty on
import of equipment and machinery
for industries
100% exemption from payment of
direct and indirect duties and levies
on all imports for production
Raw materials, inputs, materials and
equipment intended for free zones
are exempt from customs duties and
import taxes
Exemption of duty on capital
equipment and raw materials
Exemption from customs duties on
all goods imported into the Freeport
Zones
Exemption for duties and VAT on
machinery, equipment and raw
material imported into Namibia for
manufacturing purposes
Duty free and tax free for imports of
raw materials for goods destined for
re-export
Manufacturers may import raw
materials and industrial output at a
reduced rate
Exemption of duties and taxes with
conditions
Import duty for raw materials, plant
and machinery is 5%
Goods imported are exempt from
import customs, excise duties and
economic restrictions while stored or
being manufactured
Goods imported are exempt from
customs duties
Duty and VAT Exemption in raw
material, machinery, equipment and
other inputs
Ghana (Tema Export Processing Zone and
others)
Madagascar Free Zones
Malawi Export Processing Zone
Mauritius Freeport
Namibian Export Processing Zone
Nigerian Export Processing Zones
Rwanda’s Kigali Special Economic Zone
Senegal SEZs
Sierra Leone
South Africa
Sudan Free Zones
Tanzania Free Economic Zones
(continued)
148
B. ROBINSON
Table 6.4 (continued)
Country and/or zone
Duty free imports of capital
equipment and raw materials
Togo Export Free Zone
Exemption from all duties and taxes
on import of raw material as well as
machinery and plant equipment
Exemption from duties on imported
inputs for the exclusive use of the
development of the business, and for
production output of the business
enterprise
Zero percent import duty rate on
capital equipment and machinery
Uganda Free Zones
Zambia Multi Facility Economic Zone
Table 6.5 Subsidised utilities and rentals
Country and/or zone
Incentive to attract investment
Nigerian Export Processing zones
Rent free land at construction stage, thereafter,
rent becomes payable
Preferential tariffs on utility services of electricity,
water and telephone
Togo Export Free Zone
6.2
Ease of Business
Bureaucratic red tape stifles entrepreneurship. Many African countries
are infamous for introducing administrative hurdles that make opening
a company, obtaining the requisite permits and licences, and simply operating a company, almost impossible to achieve. While financial incentives
may sweeten the investment decision, the ability to efficiently open and
operate a business in the host country is also of critical importance.
6.2.1
Ease of Business Initiatives
‘One-stop shops’ have been established by governments or introduced by
special economic zones. They can offer a range of services to new and
established businesses. For new businesses they can assist with registering
businesses, obtaining licenses, and applying for environmental permissions. For example, the Kenya SEZs one stop shop service assists with
6
CRITICAL ISSUES FOR CHINESE INVESTMENT …
149
these and other services such as assisting with the application of labour
regulations, the application for work permits, guiding investors with
import and export logistics, assisting with utility connections, and registration with tax authorities. They can also include a customs office which
will be detailed later in the chapter. Table 6.6 describes some of the ease
of business initiatives available to Chinese investors.
6.2.2
Permits and Licenses
The efficient granting of permits and licenses requires special attention, as
these can be a stumbling block to initial investment if not in place. Some
special economic zones guarantee or provide added-value services to assist
in this regard. Cameron’s Industrial Free Zone provides an undertaking
to issue licenses to operate within 30 days of application, while Gabon
NKOK Sez offers the an impressive 24-hour turnaround for registering a
new company, and 7 days for the provision of various certificates—these
and other initiatives are detailed in Table 6.7.
6.2.3
Ability to Employ Foreign Nationals, Visas and Work Permits
One of the challenges facing Chinese investors, and which is detailed in
this and other chapters, is their need to use Chinese labour when the skills
are not available in the host country. Visa restrictions, work permits, and
localisation quotas can be onerous and may make it difficult to operate in
certain African countries. Other countries on the continent have realised
this, and have introduced favourable requirements that allow companies
to bring in expatriate labour. For instance, Ghana offers no restrictions of
work or resident permits for zone investors and employees, while Nigeria
waives it expatriate quotas for companies operating in the zones—see
Table 6.8 for more detail.
6.3 Special Economic Zone
Management and Infrastructure
Well-managed zones with appropriate infrastructure holds the promise of
providing a conducive business environment in which to operate. This
section explores the ownership and operational management of these
zones, the infrastructure in place for investors, and specific attention is
paid to having an in-house customs office within the zone.
150
B. ROBINSON
Table 6.6 Facilitating ease of business
Country and/or zone
Ease of business initiatives
Cameroon’s Industrial Free Zones
The National Office for Industrial Free
Zones operates as a one-stop shop and
aims to expedite investment approvals
and respond to investors’ needs
Gabon’s Special Economic Zone
facilitates approvals, company registration
etc. and aims to build a business-friendly
ecosystem
Minimal customs formalities
Gabon NKOK SEZ
Ghana (Tema Export Processing Zone and
others)
Kenya SEZs
Malawi Export Processing Zones
Rwanda’s Kigali Special Economic Zone
Senegal Special Economic Zones
South Africa
Togo Export Free Zone
Uganda Free Zone
Zimbabwe Export Processing Zones
One-stop shop service to assist new
companies with regards to labour
regulations, work permits, import–export
logistics, applications for utility
connections, and registration with tax
authorities etc.
The Malawi Investment and Trade
Centre (MITC) acts as a one-stop shop
to assist investors and exporters
Streamlined government red tape
Streamlined business systems in the
country including company registration
within 24 hours
One-stop investor service. The
commercial service (Coega SEZ)
provides business analyst services.
Simplified business start-up and license
requirements
Modern government systems to reduce
bureaucracy, increase transparency and
lower administrative costs.
Single-window system for customs
administration and paperless trade
processes to boost cross-border and
international trade
One-stop center for reducing red tape
One-stop shop investment centre to
facilitate investment, permits and
accessing incentives
6
CRITICAL ISSUES FOR CHINESE INVESTMENT …
151
Table 6.7 Permits and licenses
Country and/or zone
Permits and licenses
Cameroon’s Industrial Free Zones
The National Office for Industrial Free
Zones is responsible for the granting of
licenses, permits and other authorisations
to businesses and zone developers and
operators. It undertakes to issue licenses
to operate within 30 days of a request. In
conjunction with the country’s
Investment Promotion Center, it assists
businesses throughout the formation and
establishment process
Investment and industry related approvals
are centralised. 24-hour turnaround for
the registration of a company; 7 days for
the issue of exemption certificates; 7 days
for obtaining technical approval, GSEZ
entry authorisation and certificate of
compliance
No importing licensing requirements
Gabon NKOK SEZ
Ghana (Tema Export Processing Zone and
others)
Kenya SEZs
Nigerian Export Processing Zones
Rwanda’s Kigali Special Economic Zone
South Africa
Zambia Multi Facility Economic Zones
6.3.1
One License requirement with rapid
project approval
Waiver on all import and export licenses
One stop registration and licensing
No license fees in the customs and
control area
Free facilitation for application of
immigration permits, secondary licenses,
land acquisition and utilities
Ownership and Management of Zones
Well-managed zones are critical for investors for a number of reasons.
Good management contributed to improved information dissemination
to investors, allowing for more accurate risk assessment and calculation of
their potential return on investment. It supported financial security in that
funds invested were well utilised. Promises made by zone operators were
more likely to be fulfilled. Infrastructure and services to businesses would
in all probability be more efficient. The ‘best-service’ received from the
zone’s operators in the Ogun-Guangdong Zone, was the deciding factor
for one investor who had considered a number of countries and zones
before investing in the zone.
152
B. ROBINSON
Table 6.8 Work visas, permits and quotas
Country and/or zone
Work visas, permits and quotas
Cameroon’s Industrial Free Zones
Djibouti Free Zone
Ghana (Tema Export Processing Zone and
others)
‘Liberal’ expatriate work visas
Flexibility to employ foreign nationals
No restrictions on the issuance of work
and residence permits to free zone
investors and employees
Work permits are available to 20% of
full-time employees
The One-Stop Service Centre assists with
the facilitation of Business Residence
Permits and Temporary Employment
Permits for investors
An example of restrictive quotas where
foreigners cannot exceed the quota of
between 5 and 10% of foreign employees
Waiver on all expatriate quotas for
companies operating in the zones
Kenya SEZs
Malawi Export Processing Zones
Mozambique SEZs
Nigerian Export Processing Zones
Chinese owned and managed Special Economic Zones in Africa had a
definite advantage in attracting Chinese investors. The culture of doing
business and relationship between investors in China often resulted in
strong investment relationships in African zones. In all of the Chinese
Zones visited in Africa the majority of investors were Chinese nationals.
A good example of how this relationship facilitated investment was found
in the Ogun-Guangdong Free Trade Zone in Nigeria. The name itself,
Guangdong, refers to the partnership between the Province of Guangdong in China and the State of Ogun in Nigeria. This would immediately
be reassuring to a Chinese investor, knowing that the Special Economic
Zone is supported by government policy and formal ties between the
states. One investor in the zone spoke of how their investment came
about due to a personal relationship with a Chinese national with a stake
in the Zone. This individual convinced the investor of the potential of
doing business in Nigeria, and the advantages of this Chinese operated
zone. The investor was convinced and is now one of the oldest companies operating in the zone, and when speaking to him, he confirmed that
it was a good decision in the long run.
Chinese operated zones visited all had a strong Chinese cultural influence, and some visited just after Chinese New Year, sported an array of
6
CRITICAL ISSUES FOR CHINESE INVESTMENT …
153
festival decorations. Canteens catered to Chinese tastes, with many traditional Chinese delicacies imported for their kitchens. Accommodation was
often provided for Chinese nationals, either at the factories or in Chinese
hostels within the Zones. The Zambia Multi Facility Economic Zone had
a ‘hotel’ just outside the Zone exclusively for their staff and guests—
I had the opportunity to stay there for an evening and enjoyed the
warm hospitality of this tight community, where I witnessed the sprawling
grounds where food was grown for the community, a large swimming
pool was available for exercise and an escape from the sweltering heat,
and a communal hall was equipped for favourite sports from home.
Investors and Chinese zone operators generally had a very good relationship, and in the close confines of the zone, friendships blossomed,
and social activities were common. A marathon in the Chambishi Multi
Facility Economic zone had been organised by an investor—some healthy
competition amongst residents.
6.3.2
Suitable Zone Infrastructure
Special Economic Zone infrastructure varies considerably, but the more
comprehensive zones provided modern facilities financed either by the
host government or the Zone owners and operators. Roads, railways, and
port facilities provided the logistical infrastructure, while water and electricity was provided from national water boards and the power grid, or
as often in the case of Chinese owned zones, borehole water and power
plants within the zones ensured these essential services were available on
a reliable basis. The cost of these services, such as power, was expensive though. In Nigeria, gas pipelines had to be laid and the compressed
natural gas was expensive. It also had limited capacity and some of the
bigger companies in the Special Economic Zones generated their own
power. That said, the reliability of power more than justified the cost,
and investors seemed resigned to the fact that they would have to pay a
premium for electricity provision. Some zones that generated their own
power, still struggled delivering reliable power. For instance, the OgunGuangdong Free Trade Zone’s pipeline gas wasn’t always stable, and they
had to rely on the backup of diesel power, which was cost-exorbitant.
Security was another area of concern, and many Zones had gone to
lengths to secure the perimeter of the property with a sizeable private
security or state security force.
154
B. ROBINSON
Logistical infrastructure to and from the zones vary from outstanding
(Ethiopia and South Africa) to poor (Nigeria), often a function of governments’ commitment to investing in these zone, a subject for a later
chapter.
Special economic zones often provided investors with various options
in terms of their individual infrastructural requirements. The Eastern
Industrial Park in Ethiopia allowed investors to buy the land; buy the
warehouse (subject to the government’s 99-year lease to the Chinese
Zone operators); or rent a warehouse. Warehouses and buildings provided
by the Zone would either be standardised units, or could be built to
investors’ specific requirements. This flexibility provided investors with
options suitable to their individual financial investment preferences. Lekki
Free Trade Zone in Nigeria offers investors standard factories which can
be leased from the operators; factories could be built to the investors’
requirements and leased from the operators; or investors could build their
own facilities on a 50-year lease.
While a bit off the topic, sometimes problems crept in on facility
costs. An interesting example was provided in the Chambishi Multi facility
Economic Zone. As investors poured capital into buildings and infrastructure of their premises, the value of the property naturally increased,
which in turn, attracted higher property rates and taxes. Chinese investors
couldn’t fathom the rationality of this approach that they felt disincentivised investment.
The meta-analysis provided insight into what some of the other special
economic zones were providing investors in terms of infrastructure—
Table 6.9.
6.3.3
In-house Customs Office
Speaking to the Zone’s operators at the Eastern Industrial Park, it was
emphasised that an in-house customs office was crucial. It allowed companies to import containers with little bureaucracy and which were inspected
once only, avoiding time consuming multiple phases of importation.
The customs office in the Zone was termed ‘small’, but it had 20 staff
including inspectors, supervisors and administrative staff.
Not all Zones have such in-house customs offices. The Lekki Free
Trade Zone was the only Zone in Nigeria to have one. Some other countries and zones that provided some form of an in-house customs office
are listed in Table 6.10.
6
CRITICAL ISSUES FOR CHINESE INVESTMENT …
155
Table 6.9 Infrastructure of Special Economic Zones
Country and/or zone
Infrastructure
Djibouti International Free Trade Zones
Advanced facilities are provided
including high-speed
telecommunications, power and water
supplies, and road infrastructure
Modern infrastructure. Reliable
electricity and water at a subsidized tariff
Comparatively well-developed
infrastructure with internal road
networks, electricity and water supplies,
internal and external communications, as
well as sea and airport facilities
Modern zone with excellent
infrastructure. Warehouses for dry
goods, cold storage rooms, processing
centers, offices and an international
exhibition centre
Option to lease industrial and business
sites and factory shells
World class infrastructure. Extensive
portfolio of land, buildings, equipment
and bulk infrastructure
A range of facilities available including
warehouses, commercial offices, business
park, retail outlets and residential units
Gabon NKOK SEZ
Ghana (Tema Export Processing Zone and
others)
Mauritius Freeport
Namibian Export Processing Zones
South Africa
Sudan Free Zones
Table 6.10 In-house customs’ offices at Special Economic Zones
Country and/or zone
In-house customs office
Cameroon’s Industrial Free Zones
The National Office for Industrial Free Zones
operates as a one-stop shop’ to facilitate customs
procedures. It provides streamlined, on-site
inspection procedures and immediate transfer of
goods and services to and from the port of
embarkation or debarkation
All zones have an onsite customs office for
customs documentation and clearance
Customs unit provides simplified customs
procedures
On site custom inspection of goods in lieu of
off-port inspection
On Site customs inspection
Kenya SEZs
South Africa
Tanzania Free Economic Zones
Uganda Free Zone
156
B. ROBINSON
6.4
Location and Market Opportunities
It makes sense that investors in Special Economic Zones want to be well
positioned geographically—this could be from the perspective of being
close to transport infrastructure to enable logistics, near requisite raw
materials for production or mining activities, close to industrial hubs to
ensure an efficient supply chain, or to have access to the domestic and
regional market. These and other considerations are discussed below.
6.4.1
Location Advantages and Disadvantages
The Ethiopian Eastern Industrial Park is situated just outside the capital,
Addis Ababa. This poses advantages and disadvantages from a location
perspective. Being far from the Port of Djibouti, even with the new
Chinese built railway, makes it costly and time consuming to ship goods
for export. But it is in the heart of Ethiopia, a huge potential domestic
market for goods produced in the zone. However, as will be detailed
shortly, the export orientation of the government is making production
for the local market increasingly difficult.
In selecting a location, Chinese zone operators in Nigeria had to
consider accessibility. The Lekki Free Trade Zone is positioned strategically on two major water bodies—a deep sea port and a navigable lagoon.
This allowed for the transport of supplies and goods by water and to
avoid the gridlock of road transport in Lagos. This has the potential
to have unanticipated positive consequences for the area—people were
migrating to the surrounding areas of Lekki and ‘decentralised congestion of Lagos… forcing people to migrate to this area… this is going to
change the face of Lagos and Nigeria’ was the view of one of the Zone’s
operators.
Investors also mentioned the importance of the Zone being within
close proximity of other industrial hubs. This served to strengthen their
supply chain and provide a market for certain industrial goods produced
within the Special Economic Zone. It also provided opportunities for
horizontal and vertical diversification—a packaging company in Nigeria
diversifying into pulp production; a fuel retailer opening up more outlets
in the region. The important of proximity to supportive industries is
evident with many Special Economic Zones throughout Africa being
positioned close to major cities and industrial areas.
6
CRITICAL ISSUES FOR CHINESE INVESTMENT …
157
The problem with poor accessibility was well illustrated in the OgunGuangdong Free Trade Zone. Even though the Ogun State had promised
to improve access routes, this had not happened. The result was that
the roads were in a terrible state of affairs, and coupled to corruption
along the route, the cost of transporting materials and products was skyrocketing in addition to transport times being radically increased. There
is no doubt that this would serve as a major deterrent to investment there
in the future.
The Chambishi Multi Facility Economic Zone in Zambia was very
different on this point. The zone had a state railway line running through
the zone. It also had good roads linking the zone to the various logistical
routes. This was critical as the Zone is ‘deep’ in Africa which necessitates
the transport of goods overland for 1000s of kilometres to Dar es Salam,
Beira or Walvis Bay. New roads were evident—a Zambian project, but
built by the Chinese. Even the airport was being re-built, with current
flights to the nodes of Johannesburg and Addis Ababa providing easy
access to expatriates from China and other African nations.
Location is generally also considered from the perspective of a local
work force and stable social and political environment. Once again,
Ogun-Guangdong Free Trade Zone serves as an example of a problematic location. The Zone’s operators inadvertently found themselves in
the midst of community problems with local strife with the local kings
disputing each others legitimacy, land claims by community members, and
locals plating crops within the Zone and then demanding remuneration
for the crops. It was a messy state of affairs, and the regional government
was doing little to help alleviate the problem.
Location is of course critical with mining related activities. The Chambishi Multi Facility Economic Zone is in the heart of the copper belt
of Zambia. The ‘supply chain is complete’ it was explained—the Special
Economic Zones naturally attracted suppliers for the mining sector.
Safety in general was an important consideration. The OgunGuangdong Free Trade Zone had been moved from its initial intended
location due to a violent attack on Chinese nationals during their preliminary investigations. Zambian investors mentioned that the safety of the
country was certainly an attraction—violent attacks were scarce with only
theft being a problem in the country.
Table 6.11 provides some insights into the location advantages
promoted by Special Economic Zones.
158
B. ROBINSON
Table 6.11 Location advantages of selected Special Economic Zones
Country and/or zone
Location advantages
Djibouti International Free Trade Zones
Djibouti is a centre of global trade routes
and on two of the three busiest shipping
routes globally. With the new railway line
linking Djibouti to Addis Ababa in
Ethiopia, the zone also has access to the
East and Central African markets
Ghana is centrally located and a good
access point to West Africa. Accra in
Ghana serves as the Secretariat of the
African Continental Free Trade Areas
(AfCFTA)
Inter-regional trade hub with good
transport facilities such as the US$3.6
billion SGR railway line linking Mombasa
to Nairobi
Companies can apply for EPZ status if
they produce exclusively for export. The
location can be anywhere of their
choosing
Freeport has direct access to modern port
facilities. Value added logistics services are
also provided including containers yards
and maintenance facilities
Businesses are free to establish themselves
anywhere in the country
The SEZs are strategically positioned at
commercial and logistics hubs allowing
for access to the South African and
Southern African market, while also some
being strategically located at international
ports or airports for global access
The Red Sea Free Zone is well
positioned on the Red Sea coast with
access to the regional and global market
Export opportunities in the COMESA
market of 19 member countries
Zones such as the Chambishi MFEZ are
situated in the heart of the copper-belt
Ghana (Tema Export Processing Zone and
others)
Kenya SEZs
Malawi Export Processing Zone
Mauritius Freeport
Namibian Export Processing Zones
South Africa
Sudan Free Zones
Uganda Free Zones
Zambia Multi Facility Economic Zones
6
CRITICAL ISSUES FOR CHINESE INVESTMENT …
6.4.2
159
Domestic Market
Africa is an exploding continent in terms of population growth (Fig. 6.1),
with Africans expected to be one in every four person on the globe
by 2050 (Fig. 6.2). The domestic market, and more importantly, access
to the domestic market, is one of the most decisive drivers of Chinese
investment in Special Economic Zones in Africa.
Fig. 6.1 Population growth in sub-Saharan Africa (World Bank 2020)
Fig. 6.2 One in four proportion of the world’s people in 2050 will be from
sub-Saharan Africa (World Bank 2020)
160
B. ROBINSON
Nigeria, has the biggest population in Africa with over 200 million
people, and is expected to double that, if not more, by 2050. Investors in
Nigeria’s zones emphasized the lucrative domestic market, and regional
market. Like South African being the springboard to the Southern African
market, Nigeria offered an opportunity to capitalise on the Western Africa
and Central African market. This was confirmed by all investors spoken
to, who also emphasised the positive economic impact of producing in
Nigeria for the Nigerian market—it is better than importing; products
are much cheaper; and job creation is bolstered.
But it wasn’t all smooth sailing in accessing the domestic market
of Nigeria by Chinese investors. Contradictory policy and regulations
resulted in the situation where some companies were disallowed to sell
on the domestic market. ‘The first two years we were doing nothing’
explained one investor, as they weren’t allowed to sell to the local market
until regulations were amended. The investor spoke of two companies
that he was aware of that had closed as a result of this problem.
As touched upon earlier, production for the export market for certain
industries, such as the textile industry, is difficult for inland zones due
to transport costs. The domestic market, on the other hand, holds enormous potential. The Eastern Industrial Park in Ethiopia is well positioned
to produce for the domestic market, and a denim factory visited was
reaping the rewards of an unsaturated market for clothing in the country.
The zone had approximately 30 textile companies, many small, family
owned, businesses. Their investment decision was based purely on the
large domestic market.
Government has however, begun placing pressure on Zones to
produce exclusively for export. It was mentioned by one investor that
there were 15 Industrial Parks in Ethiopia, but not all were successful.
One of the prevalent problems they experienced was their initial commitment to produce for the export market, but it was cost-prohibitive to do
so, and factories simply had no competitive advantage. The 2nd phase of
the Eastern Industrial Park proviso was that investors were expected to
produce 100% for the export market. This was expected to be a major
deterrent to further investment by Chinese companies.
Some Special Economic Zones actively encouraged investment for the
purposes of selling to the domestic market. This would make sense for
6
CRITICAL ISSUES FOR CHINESE INVESTMENT …
161
Table 6.12 Domestic market access incentives
Country and/or zone
Access to the domestic market incentives
Djibouti Free Zone
Possibility provided to sell to the local
market
30% of annual production of goods may
be sold to the local market
50% of re-export value to the local
market
Export into the customs territory is
allowed for any product or goods
manufactured, assembled, or pre-packaged
in the zone with certain exceptions
20% of turnover is allowed for sale to the
local market, subject to payment of all
taxes
Ghana (Tema Export Processing Zone and
others)
Mauritius Freeport
Nigerian Export Processing Zones
Tanzania Free Economic Zone
countries that embark on a import-substitution strategy, preferring local
production, even if that was the result of foreign direct investment in
the country. The benefits of job creation and other socio-economic benefits would also weigh heavily in favour of this approach for many African
countries. Some of these domestic market incentives are depicted in Table
6.12.
6.5
Human and Other Resources
Resources available to Chinese investors in the host country’s Special
Economic Zones was another important consideration. Human resources
and access to raw materials, supplies and equipment are contemplated
below.
6.5.1
Labour Productivity and Labour Cost and Labour Legislation
Labour is a key determinant of investment and will be covered extensively
in Chapter 7. Suffice it at this stage to say that labour cost, labour skills,
and labour legislation are critical questions in the investment decision:
162
B. ROBINSON
•
•
•
•
•
•
•
Are the wages competitive?
Are the skills needed available?
What training will need to be provided and at what cost?
What are the productivity levels in the country?
How stable is the labour force?
What is the nature of labour legislation in the country?
What is the level of trade union activity and are labour disputes
common?
• Will Chinese skilled, semi-skilled or unskilled labour be needed?
• What will the cost be to employ Chinese labour in the host country?
• How can the language barriers be resolved?
The nature of these attributes would determine scale and type of investment. A simple example of this was in the Lekki Free Trade Zone—
while Nigerians are generally well educated, critical skills were lacking
in the technology sector. This resulted in many Chinese companies
being assembly plants rather than original goods manufacturing facilities.
Another example is the Ogun-Guangdong Free Trade Zone—the zone
had access to relatively cheaper labour than Lagos, and was an important
differentiator between the two Nigerian zones.
Zambians were considered as well educated with the propensity to
benefit from skills training. The Sino-Zam Vocational College of Science
and Technology had been established, with skills training specifically
oriented towards the mining sector—the zones positioning within the
copper-belt region made these skills critical to investors.
Gabon NKOK SEZ promoted the fact that it had ‘relaxed and flexible’ labour legislation, and Ghana highlighted their competitive minimum
daily wage. South Africa, known for its restrictive labour legislation,
were at pains to point out the various incentives that were in place for
youth employment and skills development, and Coega SEZ provided
recruitment facilities and apprenticeship training centres to help support
investors with critical skills provision.
6
6.5.2
CRITICAL ISSUES FOR CHINESE INVESTMENT …
163
Access to Raw Material, Goods and Services, and Equipment
Investors would logically want to source raw materials, goods and
services, and capital equipment from the local market. These local sources
would intuitively be cheaper and quicker to obtain. This also supported
the local SMME sector. The Eastern Industrial Park in Ethiopia was a
good example of this where wood was sourced locally for the furniture
factory; and sand and stone materials for the cement factory. The Gabon
NKOK SEZ also benefitted from the regular supply of quality wood for
manufacturers.
This was not always feasible though, as quality of the supplies may be
poor, or simply not be available. For instance, in the cement factory in
Ethiopia, the quality of material was problematic. Pipes, tools and electric
parts were specifically mentioned as being in short supply. Even low-end
goods that would be assumed as been easy to produce, were unavailable,
such as packing materials. Investors would have to go to much effort to
obtain the most basic of materials or equipment, often necessitating the
importation of such goods.
A similar example was given by the Ogun-Guangdong zone operator in
Nigeria. With ceramics and packaging companies in the zone, about 95%
of the raw materials needed could be sourced from companies nearby—
although the quality was different necessitating a change in their technical
specifications. In actual fact, cheap raw materials was one of the benefits
for investors in the zone, in addition to relatively cheap land and labour.
Yet this wasn’t the case for all investors—the fridge assembly plant was
dependant on imports—‘no-one in Nigeria is producing compressors’.
6.6
Ownership and Profits
Various African nations have introduced ownership quota restrictions for
foreign investors. While countries may justify it from the perspective of
empowering local entrepreneurs, and there is certainly the argument that
foreign companies can benefit from local market knowledge and expertise, many foreign investors are reluctant to relinquish some of their
shareholding. South Africa’s Broad-based Black Economic Empowerment
policy is one example of a policy that while aimed to redress the inequality
and poverty within the country, may also disincentivise investment in the
country by foreign owned companies.
164
B. ROBINSON
Table 6.13 Special
Economic Zones that
allow for 100% foreign
ownership
Country and/or zone
Foreign ownership
Djibouti Free Zone
100% foreign ownership
permitted
100% foreign ownership
allowed
No restriction on
ownership for FDI
100% foreign ownership
allowed
100% foreign ownership of
investment
100% foreign ownership
right
100% foreign ownership
allowed
Ghana (Tema Export
Processing Zone and others)
Malawi Export Processing
Zone
Mauritius Freeport
Nigerian EPZs
Sudan Free Zones
Tanzania Free Economic
Zones
6.6.1
No Restrictions on Foreign Ownership
Knowing the importance to investors to retain full ownership, some
Special Economic Zones in Africa are promoting exactly that, with 100%
foreign ownership permitted—Table 6.13.
6.6.2
Currency, Profits and Repatriation of Profits
An unstable currency is problematic for investors and a significant risk
factor. If goods produced in the Zones are to be exported and US
Dollars to be earned, a depreciating host country currency makes it more
lucrative provided production costs remain in the local currency denomination. But the other side of the coin, is the repatriation of profits. As the
local currency depreciates, the value of profits in the local currency also
depreciates. These issues need to be carefully considered by investors.
And many Africa countries suffer from severe fluctuations and sometimes long-term depreciation of their currency. The Zambian Kwacha was
mentioned by Chinese investors—its instability made it difficult to plan.
Poor monetary policy and inflation can also wreak havoc on a currency.
Zimbabwe is an example of runaway inflation, where at one time the
largest banknote was Zimbabwean One Hundred Trillion Dollars, that
quickly deteriorated to being worth nothing. If you visit Victoria Falls in
6
CRITICAL ISSUES FOR CHINESE INVESTMENT …
165
Zambia and Zimbabwe, tourists can buy these (they are often counterfeits as the original notes are in such demand) for a couple of US$—their
value now is as a collectable souvenir.
Another aspect is the restriction of currency exchange and the repatriation of profits. Ethiopia is a good example of a country grappling
with currency problems. Dollar accounts may, without the authorisation
of investors, be converted to the Ethiopian Birr. This makes it difficult
to import critical supplies and equipment, and can be a problem when
trying to repatriate profits. Investors need to be assured that their return
on investment can be channelled back to them when necessary.
Some countries and Zones authorities have provided security in this
regard—see Table 6.14, as well as introduced other guarantees regarding
profits and their repatriation. Djibouti, Cameroon and most of the countries listed in Table 6.14 offer free repatriation of capital and profits,
providing surety to the investor that they can exit their investment and
retain their profits. Other incentives regard the ability to hold foreign
currency accounts, and thus not be at risk of local currency fluctuations
(Mauritius Freeport and Namibian Export Processing Zone).
6.7
Lifestyle
Lifestyle offered by the host country isn’t high on the list of priorities
as can be evidenced by some Special Economic Zones being situated in
some of the most inhospitable regions of the African continent. At the
Ogun-Guangdong Free Trade Zone, the Chinese spoke of the sacrifices
they had made in coming to the country; how they had to leave their
partners in China; the difficulty of supporting their families in China
when so far away. ‘We are here to work’ was a common refrain. One
investor expressed the culture shock of moving to Nigeria, and the difficulties experienced in communicating (he couldn’t speak English) and
managing his staff.
Chinese operators made some effort to provide a homely environment in these zones for Chinese residents. Speaking to Chinese expatriates
living in the Lekki Free Trade Zone, they described the boredom of living
in the area. The Zone had what they term a ‘camp’, which provided a
clinic with free facilities, and kitchens for Chinese and Nigerians working
within the zone, but apart from that, there wasn’t much to do. This
was about to change with the investment of a shopping centre within
the zone that would have restaurants and other lifestyle facilities for the
166
B. ROBINSON
Table 6.14 Currency, profits and repatriation of profits by zones’ investors
Country and/or zone
Currency, profits and repatriation of
profits
Cameroon’s Industrial Free Zones
Investors are allowed to hold foreign
exchange accounts in the domestic
banking system and are exempted from
restrictions on the purchase and sale of
foreign export exchange, and exempted
from all currency export taxes. They have
the right to transfer abroad all funds
earned and invested in Cameroon
No currency restrictions and free
repatriation of capital and profits
permitted
100% repatriation of capital and profits.
Fixed parity between Gabon currency
and the Euro
Total exemption from payment of
withholding taxes from dividends arising
out of free zone investments
Investors are permitted to operate foreign
currency accounts with banks in Ghana
There are no conditions or restrictions
on repatriation of dividends or net profit;
payments for foreign loan servicing;
payments of fees and charges for
technology transfer agreements and
remittance of proceeds from sale of any
interest in a free zone investment
No restriction on remittance of foreign
investment funds
Free repatriation of profits
Access to offshore banking facilities
Investors are allowed to hold foreign
currency accounts and repatriate their
capital and profits
Free transferability of capital, profits and
dividends by foreign investors
Full freedom to transfer capital and
profits. Free foreign exchange
Djibouti Free Zone
Gabon NKOK SEZ
Ghana (Tema Export Processing Zone and
others)
Malawi Export Processing Zones
Mauritius Freeport
Namibian Export Processing Zone
Nigerian Export Procession Zones
Sudan Free Zones
(continued)
6
CRITICAL ISSUES FOR CHINESE INVESTMENT …
167
Table 6.14 (continued)
Country and/or zone
Currency, profits and repatriation of
profits
Tanzania Free Economic Zone
100% retention of all profits. Free
repatriation of profit
Freedom to transfer capital and
possibility of holding foreign currency
bank accounts
Unrestricted remittance of profit after tax
Togo Export Free Zone
Uganda Free Zones
Chinese—with 90% of companies being Chinese owned, this was likely
to be a popular social centre for Chinese residents in the zone. What also
naturally occurred was that the investment by Chinese zone operators and
various businesses, led to an influx of investment catering to the Chinese
expatriates—restaurants and guest houses in the surrounding area.
Some investors spoke of the pleasant lifestyle in the zone and the
country. The Eastern Industrial Park for one was considered by investors
as temperate in climate and people were friendly, making the stay
for Chinese nationals pleasant. This positive perspective was shared in
Zambia—‘Business is good, Zambia is good’ was the view of one of the
investors in the Chambishi Multi Facility Zone. He was tired of the citylife in China, and preferred the pace, the landscape and climate of Zambia.
He had a family business, and the family lived on the property within the
zone—it was a happy lifestyle and he often invited family from China to
come visit and tour the country’s many natural delights.
Some countries and zones emphasised the lifestyle that was on offer in
an effort to attract investment (Table 6.15) by the Chinese and others.
6.8
African Preferential Trade Arrangements
There are a number of global initiatives that influenced investment by
Chinese in Special Economic Zones in Africa. Just a brief mention of
some that could encourage Chinese investors to set up shop in Special
Economic Zones in Africa, in order to export goods to lucrative markets
under incentives and trade preferences offered by these other countries
and regions to African countries and regions.
168
B. ROBINSON
Table 6.15 Pleasant lifestyle offered in countries and their zones
Country and/or zone
Pleasant lifestyle
Gabon NKOK SEZ
SEZ conceptualised to offer a
combined Work-Life-Play environment
Political stability, personal safety and
hospitable people
The idyllic island lifestyle is on offer
with luxurious residential estates
South African offers a modern lifestyle
with numerous tourist attractions
Ghana (Tema Export Processing Zone and
others)
Mauritius Freeport
South Africa
The United States enacted the African Growth and Opportunity Act
(AGOA) in 2000 as an intervention to support development in subSaharan Africa by providing duty-free enhanced access to US markets.
The list of Africa countries that are AGOA Beneficiaries is significant: Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon,
Cape Verde, Central African Republic, Chad, Comores, Congo, the
Democratic Republic of Congo, Djibouti, Eswatini, Ethiopia, Gabon,
Gambia, Ghana, Guinea, Guinea Bissau, Ivory Coast, Kenya, Lesotho,
Liberia, Madagascar, Malawi, Mali, Mauritania, Mauritius, Mozambique,
Namibia, Niger. Nigeria, Rwanda, Sao Tome, Senegal, Seychelles, Sierra
Leone, South Africa, South Sudan, Tanzania, Togo, Uganda and Zambia
(2021).
The benefits cover over 6000 products that can be exported to the
US (www.agoa.info provides the full list in their FAQ section). Reading
through the list, some products stand out, such as footwear and textiles.
Some Chinese investors have taken advantage of the Act to set up production facilities in Africa and export to the US. A prime example is the
Huajian Shoe Factory in the Eastern Industrial Park in Ethiopia.
Economic Partnership Agreements (2021) exist between the European
Union and the African trade blocs of the East African Community,
the Economic Community of West African States and the Southern
African Development Community. These agreements aim to remove trade
barriers, with the long-term vision of a continent-to-continent free trade
agreement between the European Union and Africa’s Continental Free
Trade Area (AfCFTA). It is in effect a duty-free, quota-free agreement
providing preferential market access to the EU for African goods. In a
6
CRITICAL ISSUES FOR CHINESE INVESTMENT …
169
similar way to AGOA, it could similarly encourage Chinese investment in
Africa in order to access the European market.
The Generalized System of Preferences of the United Nations Conference on Trade and Development (UNCTAD) (2021) aims to enable trade
for developing nations. The preferences allow for duty-free and quotafree market access for lesser-developed countries’ exports. Countries that
provide these preferences are Armenia, Australia, Belarus, Canada, the
European Union, Iceland, Japan, Kazakhstan, New Zealand, Norway, the
Russian Federation, Switzerland, Turkey, the United Kingdom, and the
US. Again, this could provide Chinese investors in Africa opportunities
to capitalise from their host countries preferential status.
6.9
Chinese Policy Towards Africa
African host countries’ approach towards Special Economic Zones creates
an enabling or constraining environment in which the zones operate—this
will be evaluated in detail in Chapter 9. But it is worthwhile considering
for a moment, the impact of Chinese policy towards Africa in general, and
Special Economic Zones specifically, in encouraging Chinese investment.
Sitting in the lounge of a successful entrepreneur’s home in the
Ogun-Guangdong Free Trade zone, I asked what made the gentleman
invest. Via an interpreter (one of the Zone’s management team), he was
emphatic in his response: It was Chinese Policy. A loyalist of the Communist Party of China, he was motivated to invest in Africa by China’s
opening-up policy; he spoke of the One Belt One Road Policy; and the
relationship China had with Nigeria. He was an astute business person,
and his loyalty was tempered with an understanding that this policy would
support his business venture. He also voiced a strong commitment to
socio-economic development in Nigeria, with the hope that ‘Nigerians
will be rich in their future… hopes to transmit skills to Nigerians, and
for them to open (their own) factory in the future’. He wasn’t the only
one to have invested due to Chinese patriotism and policy—numerous
investors reflected on China’s opening-up policy and bilateral relations as
a key determinant to their investment.
Chinese multilateral policy towards Africa and bilateral policy towards
certain African countries freed up financial resources for investment. The
development finance institutions of the Export–Import Bank of China,
170
B. ROBINSON
the China Development Bank and the Agricultural bank have after all
provided financing for Special Economic Zones and Zones’ investors,
while also partnering with the African Development Bank, which in turn,
also facilitated financing. An example of this is in Zambia. The Zambian
government had for many years had a positive relationship with China,
and while the government initially supported the establishment of Special
Economic Zones in the country, it lacked the finances and expertise
to develop such zones. The Chinese government helped indirectly. The
Chinese owned and managed Special Economic Zones in the country was
a result of amongst other funding sources, the Export–Import Bank of
China. There was also a sense of patriotism by the Chinese Zones operators, and they explained that China’s policy support made them believe
that their investment was safe, and protected from host country ‘issues’.
The Chinese government’s positive attention to Nigeria encouraged
the establishment of the Lekki Free Trade Zone and facilitated investors
putting their money on the table. A packaging company employee in the
Ogun-Guangdong Free Trade Zone explained how the initial investment
was motivated by the business owner visiting the region on other business,
but coming from Guangdong Province in China, he thought it may be a
good idea to invest in the Zone representing his province.
The Eastern Industrial Park operators mentioned the value of representatives from both the Chinese and Ethiopian Government visiting the
Zone. This was good ‘propaganda’/public relations for the zone, and
indicated a commitment by the Chinese government to the zone.
6.10 Reflection on the Pillars and Protocols
of the Chinese Model of Special Economic Zones
It would appear that each country and Special Economic Zone in
Africa has adopted different attributes of the Chinese Model of Special
Economic Zones in terms of critical issues attracting investment by
Chinese investors (some Pillars and Protocols are not included and they
are not applicable). A summary of these are provided in Fig. 6.3.
6
• The Chinese and African
political leadership support
gave some assurance to
Chinese investors
• The perceived leadership
support assisted in the
marketing of Chinese zones
in Africa
Pillar 1:
Leadership
support
Pillar 4:
Location
• Position of the SEZs was
mostly selected for logistical
access to international
markets
• Export policy reduced some
zones access to domestic
market
• Other factors included
access to mining, human
and other resources
Pillar 7:
Infrastructure
Protocol 2:
Ease of
business
Protocol 5:
Favourable
investment
climate
Protocol 11:
Export
orientation
CRITICAL ISSUES FOR CHINESE INVESTMENT …
Pillar 2:
Government
support
Pillar 5:
People
• Government support was
either extensive providing
a suitable incentive base,
ease of business, and
good infrastructure or,
• Government support was
lacking, and promises
were broken
• Zone investors preferred
employing host country
labour and made an effort
to train labour
• When skills were not
available, Chines labour was
brought into the host
country
171
• Government policy ranged
from clear SEZ legislation and
socio-economic strategy
Pillar 3:
around SEZs, to lack of SEZ
policy
Government • Policy uncertainty was a
Policy
major problem for some
investors
Pillar 6:
Integration
• There was a lack of
integration with cities and
industries, although the
preference for zones to be
close to industrial areas,
suggests some level of
supply chain integration
occurred
• Infrastructure was provided
either by the state or the SEZ
operators
• Infrastructure was generally very
good
• Utilities and services were
sometimes provided by the SEZ
due to governments’ inability to
provide
• The state in certain instances,
reneged on promises to provide
infrastructure
• Some countries
introduced a wide range
of initiatives to facilitate
ease of business
• In-house one-stop shops
and customs office were
effective
• Bureaucratic red-tape was
generally a constraint to
effective business
• Various investment incentives
were provided
• Some countries and zones
provided access to the domestic
market, others disincentivised or
disallowed such activity
• Certain countries and zones
provided assurance of foreign
ownership, currency exchanges,
and repatriation of profits
• The SEZs mostly had a
strong focus on exports
• This was a potential
constraint to investment
for investors wishing to
capitalise of the domestic
African market
Protocol 3:
Preferential
Policies
Protocol 6:
Modern
Service
Industry
Protocol 12:
Diversified
industries
• A wide range of financial
incentives were offered
for both foreign and local
investors
• These varied significantly
between SEZs
• Often SEZs had to invest
in their own utilities and
services which were
expensive
• Other SEZs operated
within a modern service
industry provided by the
state
Protocol 4:
Innovation
and learning
Protocol 8:
International
cooperation
• Investments in SEZs were
generally low-skilled / semiskilled industries
• While some SEZs had training
centres or colleges to boost
skills for SEZ investors, these
were in the minority
• China has driven
international cooperation
and encouraged the
establishment of SEZs in
Africa
• SEZs ranged from being
quite diversified to being
industry focussed
• Some SEZs through the
incentives offered or their
position, attracted
particular industries
Fig. 6.3 The pillars and protocols of the Chinese model of special economic
zones that attract Chinese investment to African zones
172
B. ROBINSON
References
African Growth and Opportunity Act. 2021. AGOA.info. [Online]. Accessed
from https://agoa.info/about-agoa.html.
Economic Partnerships. 2021. European Commission. [Online]. Accessed from
https://ec.europa.eu/trade/policy/countries-and-regions/development/eco
nomic-partnerships/.
Generalized System of Preferences. 2021. UNCTAD. [Online]. Accessed
from: https://unctad.org/topic/trade-agreements/generalized-system-of-pre
ferences.
World Bank. 2020. Population Estimates and Projections. © World Bank.
[Online]. Accessed from: https://datacatalog.worldbank.org/dataset/popula
tion-estimates-and-projections. Assessed 7 July 2021). License: Creative
Commons Attribution License (CC BY 3.0 IGO). (http://creative-commons.
org/licenses/by/3.0/igo/).
Country and Zone Information References
Cameroon: The National Office for Industrial Free Zones, Cameroon. Accessed
from: http://www.winne.com/cameroon/to01.html.
Djibouti: Djibouti Ports & Free Zones Authority. Accessed from: https://dpfza.
gov.dj/facilities/Free-trade-area/djibouti-international-free-trade-zone.
Gabon: NKOK SEZ. Gabon Special Economic Zones. Accessed from: https://
www.gsez.com/nkok-sez.php.
Ghana: Ghana Free Zones Authority. Accessed from: https://gfzb.gov.gh/.
Kenya: KenInvest. Accessed from: http://www.invest.go.ke/special-economiczones/.
Madagascar: World Bank. 2020. Benchmarking Madagascar’s Free Zone
Competitiveness. World Bank, Washington, DC. © World Bank. https://ope
nknowledge.worldbank.org/handle/10986/33972 License: CC BY 3.0 IGO.
Mauritius: Mauritius Trade Easy. Accessed from: http://www.mauritiustrade.
mu/en/trading-with-mauritius/mauritius-freeport.
Mozambique: APIEX. Accessed from: http://invest.apiex.gov.mz/invest/our-ass
istance/apiex/.
Namibia: Consulate General of the Republic of Namibia. Accessed from: https://
namibiaconsulate.co.za/?page_id=165.
Nigeria: Nigerian Investment Promotion Commission. Accessed from: https://
www.nipc.gov.ng/compendium/6-special-economic-zones/.
Rwanda: Rwanda Development Board. Accessed from: https://rdb.rw/.
Senegal: Senegal Ministry of Investment Promotion. Accessed from: https://
www.economie.gouv.sn/en/invest-senegal/economic-new-areas.
6
CRITICAL ISSUES FOR CHINESE INVESTMENT …
173
Sierra Leone: Sierra Leone Investment & Export Promotions Agency.
Accessed from: https://sliepa.org/investment/why-sierra-leone/investmentincentives/.
South Africa: The South African Revenue Services. Accessed from: http://www.
thedtic.gov.za/wp-content/uploads/SEZ_Tax.pdf and https://www.coega.
co.za/files/2020/Top_10-Reasons_to_Invest_at_Coega.pdf.
Sudan: Sudanese Free Zones & Markets Co. Accessed from: https://www.sud
anfreezone.com/en/areas/red-sea-free-zone/.
Tanzania: Tanzania Revenue Authority and the United Republic of Tanzania
Export Processing Zones Authority. Accessed from: https://www.tra.go.
tz/index.php/103-tax-incentives/170-what-are-tax-incentives-under-the-zan
zibar-investment-promotion-and-protection-act-2004 and https://www.epza.
go.tz/.
Togo: Togo Embassy in London, the Export Free Zone. Accessed from: https://
togoembassylondon.com/invest-in-togo/epz/.
Uganda: Uganda Free Zones Authority. Accessed from: https://freezones.
go.ug/.
Zambia: Zambia Development Agency. Accessed from: https://www.zda.
org.zm/ and https://www.zambiaembassy.org/page/incentives-for-investors.
Zimbabwe: Zimbabwe Investment Authority. Accessed from: https://investzim.
com/education-2/.
CHAPTER 7
Labour: Obstacles and Opportunities
There are two underlying themes to this chapter, namely the impact of
wage levels , productivity and labour legislation on attracting investment in African Special Economic Zones and their appeal from a Chinese
investors perspective, and the opportunity that investment has on localised
job creation and skills transfer in African countries.
The chapter considers the state of employment, skills and productivity
in Africa, detours into a discussion on labour economics, returning to
the choice by Chinese investors of employing home or host country
employees. It then reflects on some of the field research conducted in
Ethiopian, Zambian, and Nigerian Special Economic Zones. Finally, a case
study is presented on South Africa’s labour environment and the Coega
Special Economic Zone with reflections on the Chinese Model of Special
Economic Zones.
7.1 The Scourge of Unemployment, Lack
of Skills and Low Productivity in Africa
Most African nations grapple with unemployment and a lack of relevant
skills for a diversified and modern economy, which in turn contributes
to low productivity. One of the key development objectives of Special
Economic Zones is to counteract this problem by encouraging investors
that employ local labour and invest in upgrading their skills set.
© The Author(s), under exclusive license to Springer Nature
Singapore Pte Ltd. 2022
B. Robinson, African Special Economic Zones,
https://doi.org/10.1007/978-981-16-8105-9_7
175
176
B. ROBINSON
So, how big is this problem? This section serves to highlight the
employment problem in Africa while the case study on South Africa and
the Coega Special Economic Zone later in this Chapter will provide some
more in-depth analysis from a country perspective.
7.1.1
Unemployment in Africa
Unemployment in sub-Saharan Africa is at 6.6%, which compares
favourably to the world average at 6.5%. Yet, if individual countries are
reviewed in Africa in terms of unemployment levels, stark differences
between African unemployment levels are noted. Table 7.1 categorises
Table 7.1 Unemployment levels in sub-Saharan Africa
Unemployment
less than 5%
%
Unemployment
between 5 and
10%
Benin
Burundi
Cameroon
2.5 Angola
0.8 Burkina Faso
3.6 Comoros
Central African 4.3 Equatorial
Republic
Guinea
Chad
2.3 Eritrea
DRC
Cote d’Ivoire
Ethiopia
Ghana
Guinea
Guinea-Bissau
Kenya
Liberia
Madagascar
Mozambique
Niger
Rwanda
Sierra Leone
Tanzania
Togo
Uganda
4.5
3.5
2.8
4.5
4.3
3.2
3
3.3
1.9
3.4
0.7
1.4
4.6
2.2
4
2.4
The Gambia
Malawi
Mali
Mauritius
Nigeria
Senegal
Zimbabwe
%
Unemployment
above 10–20%
7.7 Botswana
5
Cabo Verde
8.4 Republic of
Congo
9.2 Mauritania
7.4 Sao Tome and
Principe
9.6 Somalia
6
South Sudan
7.5 Sudan
7.1 Zambia
9
7.1
5.7
%
Unemployment
more than 20%
%
17.7 Eswatini
13.4 Gabon
10.3 Lesotho
23.4
20.5
24.6
10.7 Namibia
20.4
13.9 South Africa
28.7
13.1
12.7
17.7
12.2
Source Adapted from The World Bank Unemployment Levels (2021b)
7
LABOUR: OBSTACLES AND OPPORTUNITIES
177
African countries in terms of unemployment levels at less than 5%,
between 5 and 10%, above 10% and below 20%, and above 20%. It
indicates that 21 countries have less than 5% unemployment which
can be considered fair in terms of levels in developed nations such as
Germany (4.3%), the United Kingdom (4.3%) and the Unites States
(8.3%). 12 countries range between 5 and 10%, but concerningly, 9 countries are in the range above 10% and below 20%, and 5 countries breach
the 20% unemployment level, with South Africa the highest at 28.7%.
These figures probably do not reflect the full impact of the Coronavirus
pandemic on unemployment (these unemployment figures are from The
World Bank’s database dated 2020) (those countries without available
data are excluded from the list).
7.1.2
Skills Levels in Africa
Skills levels are difficult to determine in each country, but the percentage
of the population acquiring primary, secondary and tertiary education
are useful indicators of the level of education in the country, and it is
likely that skills available would be related to the level of education within
the country. Table 7.2 provides an overview of African countries’ level of
education benchmarked against the world average, Germany, the United
Kingdom and the United States. This data does not indicate the quality
of the education provided, or the criteria for having achieved the level of
education—these may differ significantly between countries and standards
expected internationally. In addition, some of the data us quite dated, for
instance, Zimbabwe’s latest available primary level of education statistic is
from 2013.
Reflecting on these World Bank Statistics it immediately becomes clear
that sub-Saharan Africa is lagging behind the rest of the world on educational levels, and that the discrepancy becomes more acute as the level of
education received increases from primary to secondary level, and the low
proportion of the population that enrol for tertiary education. The result:
Only 65% of adults (aged 15 and above) are literate in sub-Sahara Africa,
and a very low proportion of the population ever have the opportunity
to gain tertiary education. This significantly impacts the employability of
labour for certain categories of work requiring functional literacy skills,
and in most cases limits the skills transfer that can take place.
178
B. ROBINSON
Table 7.2 Educational completion rates for sub-Saharan African countries
Level of education
Benchmarks
Percentage
categorisation of
education
African countries
Primary education
World (89.5%)
Germany (101%)
United Kingdom
(101%)
United States (100%)
Less than 50%
Angola (46%)
Central African
Republic (41%)
Chad (41%)
Equatorial Guinea
(41%)
South Sudan (27%)
Benin (64%)
Burkina Faso (65%)
Burundi (59%)
Cameroon (65%)
Comoros (77%)
DRC (70%)
Republic of Congo
(72%)
Cote d’Ivoire (79%)
Eritrea (60%)
Ethiopia (54%)
Gabon (71%)
The Gambia (79%)
Guinea (60%)
Guinea-Bissau (65%)
Liberia (61%)
Madagascar (63%)
Mali (50%)
Mauritania (73%)
Mozambique (55%)
Niger (62%)
Nigeria (74%)
Senegal (61%)
Sudan (62%)
Tanzania (68%)
Uganda (53%)
50–79%
(continued)
7
LABOUR: OBSTACLES AND OPPORTUNITIES
179
Table 7.2 (continued)
Level of education
Lower secondary
education
Benchmarks
World 76.1%
(Africa 44.3%)
Germany 83.7%
United Kingdom 101%
United States 103%
Percentage
categorisation of
education
African countries
Above 80%
Botswana (101%)
Cabo Verde (87%)
Eswatini (94%)
Ghana (94%)
Kenya (100%)
Lesotho (86%)
Malawi (80%)
Mauritius (99%)
Namibia (94%)
Rwanda (97%)
Sao Tome and
Principe (84%)
Seychelles (99%)
Sierra Leone (83%)
South Africa (90%)
Togo (87%)
Zambia (80%)
Zimbabwe (98%)
Angola (20%)
Benin (45%)
Burkina Faso (41%)
Burundi (30%)
Cameroon (47%)
Central African
Republic (10%)
Chad (15%)
Comoros (48%)
Equatorial Guinea
(24%)
Ethiopia (30%)
Gabon (22%)
Guinea (35%)
Guinea-Bissau (37%)
Lesotho (47%)
Liberia (44%)
Madagascar (36%)
Malawi (22%)
Mali (30%)
Mauritania (46%)
Mozambique (24%)
Niger (18%)
Nigeria (47%)
Rwanda (43%)
Senegal (37%)
South Sudan (18%)
Tanzania (30%)
Uganda (26%)
Less than 50%
(continued)
180
B. ROBINSON
Table 7.2 (continued)
Level of education
Benchmarks
Percentage
categorisation of
education
African countries
50–79%
Cabo Verde (68%)
DRC (50%)
Republic of Congo
(50%)
Cote d’Ivoire (53%)
Eritrea (51%)
Eswatini (54%)
The Gambia (56%)
Ghana (78%)
Kenya (79%)
Namibia (77%)
Sao Tome and
Principe (74%)
Sierra Leone (72%)
Sudan (58%)
Togo (50%)
Zambia (55%)
Zimbabwe (71%)
Botswana (98%)
Mauritius (89%)
Seychelles (110%)
South Africa (80%)
Angola (9%)
Burkina Faso (7%)
Burundi (4%)
Chad (3%)
DRC (7%)
Cote d’Ivoire (9%)
Eritrea (3%)
Madagascar (5%)
Mali (6%)
Mauritania (6%)
Mozambique (6%)
Niger (4%)
Rwanda (6%)
Tanzania (3%)
Benin (13%)
Cameroon (14%)
Republic of Congo
(13%)
Ghana (17%)
Kenya (11%)
Lesotho (10%)
Sao Tome and
Principe (13%)
Senegal (13%)
Sudan (16.9%)
Zimbabwe (10%)
80% and above
Gross enrolment ratio
for tertiary education
(for countries with data
available 2015–2019)
Germany 70%
UK 61%
USA 88%
China 54%
Sub-Saharan Africa 9%
Less than 10%
10–20%
(continued)
7
LABOUR: OBSTACLES AND OPPORTUNITIES
181
Table 7.2 (continued)
Level of education
Benchmarks
Percentage
categorisation of
education
African countries
More than 20%
Botswana (25%)
Mauritius (41%)
Namibia (23%)
South Africa (24%)
Source Adapted from The World Bank’s data on completion rates and tertiary education enrolment
rates (2021a)
7.1.3
Wage Rates
Wage rates are also much lower in Africa than most developed nations. If
one considers the same benchmarked countries in the previous analysis,
the United States has an annual national minimum wage of US$15,080;
and the United Kingdom US$22,597. A snapshot of some African countries highlight the significant difference between the benchmarked countries, and between the African countries themselves, with the following
minimum wage rates detailed: Swaziland US$848; Tanzania US$1593;
Sudan US$1100; Nigeria US$1543; Lesotho US$664 (Minimum-Wag
e.org—Minimum wage rates calculated in International Dollars).
Wage rates for highly skilled positions, such as engineers and other
professionals, are not readily available in Africa. It can be fairly assumed
that the lack of professionals in some African countries would result in a
premium being paid for such skills in these countries for local employees,
or that such skills are sourced from other countries.
These lower wage rates for unskilled labour should incentivise investment in Africa in industries requiring low-level, manual labour skills, yet
act as a barrier to investment in industries requiring specialist skills that
may be unavailable in the country, or require expatriate labour which
would be significantly more expensive.
7.2
Economics 101: The Labour Market
Reducing unemployment means creating employment. No rocket-science
here. But how to generate sustainable employment remains a huge challenge in the development context. Perhaps revisiting our Economics 101
under-graduate module provides an understanding of the fundamentals
182
B. ROBINSON
in this regard. My attempts at graphs are terribly simplified, which would
have probably resulted in the failure of Economics 101 but are illustrated in
such a manner to simplify the concepts.
Creating economic activity, economic growth, does not imply that
employment will be created. In Africa there are many examples of
this where astounding GDP growth has created little employment and
should shocks be experienced such as the collapse of the oil price that
many African nations are dependent on for revenue, economic growth
plummets in tandem.
To ensure economic growth generates employment, certain structural
changes are sometimes prerequisites. Simply put, there may be a need
for a different type of economic activity, and there may be a need for
a shift in the locality of this economic activity. For instance, shifting
workers from subsistence agriculture to commercial agriculture; from
agriculture into manufacturing and services; from rural to urban areas;
from informal employment to wage employment in larger companies;
from low-productivity into high-productivity industries. This is a dynamic
process where workers move voluntarily from one to the other—from an
activity of high supply to one of high demand, thus reducing supply where
there is too much of it. For instance, supply of labour in rural areas is
reduced when urbanisation occurs, making it more feasible to shift rural
dwellers from subsistence agriculture to small scale commercial farming
(Fig. 7.1).
Fig. 7.1 Labour
supply in rural areas
during urbanisation
100
Labour
supply in
rural areas
0
MigraƟon of labour from
rural to urban areas
100
7
LABOUR: OBSTACLES AND OPPORTUNITIES
Urban labour
supply
1000
Fig. 7.2 Labour
supply and demand in
urban areas
183
Labour
demand and
500
supply in
urban areas
Urban labour
demand
100
0
900
New labour entrants
from rural areas
The are many underlying assumptions and conditions to this
happening, such as workers being mobile, the cost of mobility, constant
working conditions and constant wages. There are some serious shortcomings to the above example: will the reduction in supply of labour
naturally lead to economically sustainable farming activity, will there be
employment opportunities in urban areas, or will rapid urbanisation create
an oversupply of labour in cities—an all too frequent experience in many
African cities (Fig. 7.2)?
For these types of structural changes to occur, there are other important contributors to the process of change in labour markets—namely
skills have got to be enhanced or different skills learnt for the new job
requirements, and productivity has to increase with the acquisition of
these skills. Labour must learn how to use new equipment and produce
new goods, become more technically astute, and work within changing
management regimes. One of the inhibitors to structural change, especially around technical and supervisory positions, is lack of education,
especially numeracy and language competencies. These take many years to
develop and are normally the function of suitable primary and secondary
education.
This has to happen quickly to support the incremental migration of the
workforce geographically and sectorally.
184
B. ROBINSON
7.3 The Decision: Employ
Chinese or African Labour?
In some of the Special Economic Zones visited, management of the zones
highlighted a natural outcome of skills development that left investors
feeling frustrated. In the Eastern Industrial Park in Ethiopia, the vast
majority of new employees were unskilled. Manufacturers would invest
time, effort and cost in training them—there was an opportunity cost of
supervisory employees training others rather than being productive themselves. At the end of the training, these employees were semi-skilled, and
their productivity greatly improved (Fig. 7.3).
This semi-skilled labour was in great demand by companies in the
Special Economic Zones. Even if the companies were operating in
different sectors, semi-skilled labour was relatively transferable between
companies. A culture of ‘poaching’ semi-skilled labour began occurring—a classic free-rider problem with the firm ‘poaching’ the employee
benefitting from the initial firm’s investment without any of their own
investment. This was achieved through offering higher wages than the
company that provided the training was paying—a natural accurence illustrated in Fig. 7.4. There was little hesitation from the employees, who
would quickly opt for moving to companies that paid more. Competition for semi-skilled labour became rife and wages rapidly increased. This
led to much disenchantment by the Chinese companies who had initially
invested in the training, and they became hesitant to invest in training
more unskilled labour. A classic ‘Catch 22’. The Zone operators were
1000
units
Fig. 7.3 Skills training
and productivity
ProducƟvity
in Units
0
$100
Cost of training
7
LABOUR: OBSTACLES AND OPPORTUNITIES
185
1000
units
Fig. 7.4 Productivity
and wage rates
ProducƟvity
in Units due
to training
0
$100
Wage rates as
producƟvity
improved
considering ways to manage the situation through introducing wage ceilings or restricting movement between the companies, although these were
preliminary in nature.
While the wage levels hadn’t risen enough for the following conjecture, it is worthwhile thinking about the competitive environment being
a disincentive to training unskilled local employees in the long run: As
wages rise, firms may be tempted to source labour from outside the immediate Zone’s community in other regions and countries, perhaps even to
the extent of employing Chinese labour. Doing this would diminish the
benefits of both skills transfer and job creation for local communities.
At this point it is worthwhile turning this conjecture around—how
does the investment in skills of local labour, and the resultant increase in
wages, impact the substitution effect of replacing Chinese employees with
local employees? This is an important question as often the accusation is
made that Chinese companies prefer to employ Chinese labour due to
their skills and low wages, the result of which is that there is no incentive
to train and employ local labour except in unskilled positions.
Professor Xiaoyang Tang (Tang 2010) who has been referred to before
in this book, provides a valuable insight in this regard. Tang argues that
there is indeed an incentive to bring Chinese workers to work in Chinese
companies in Africa when there are no skills available. But and this is an
important BUT, there is also a weighty argument for Chinese firms to do
this only during the initial stages of investment. It makes sense for Chinese
186
B. ROBINSON
companies to train unskilled labour in order for them to upskill themselves into semi-skilled and skilled positions. As skills improve, so does
productivity, until a point is reached where the local worker contributes
as much as the Chinese worker does to the profit, hopefully even more.
By employing the semi-skilled or skilled local African worker, the Chinese
company no longer needs to fork out all the costs of relocating and
housing the Chinese worker (also noting that wages in China continue
to rise). So even though the local worker may not be at the same productivity level, the profitability is the same or more. Tang therefore makes a
strong case that Chinese companies will prefer to localise their labour in
Africa in time, and he provides some examples of how this has happened
in especially the DRC.
Whether this argument holds true for highly skilled, technical and
managerial staff is questionable. The costs to educate, sometimes through
tertiary education, may be too much of a barrier due to the time and cost
the Chinese firm would incur. While there may be a few individuals who
possess the expertise needed, this is often in short supply and very expensive in Africa, in which case Chinese companies may still wish to bring
such skilled workers from China.
7.4 Perspectives on Labour in Africa
by Chinese Investors in Special Economic Zones
While the economics behind employing local versus Chinese labour has
been explained, at this point it is worthwhile reflecting of the perspectives
of Chinese investors on labour in Africa.
7.4.1
Wage Rates, Education and Skills, and Productivity
As wage rates have been rising rapidly in China as development has taken
place, it makes sense for certain Chinese labour-intensive Chinese businesses to shift production to countries with cheaper labour and employ
local labour.
In the Eastern Industrial Park in Ethiopia, a simple example was
given of a certain category of worker earning 5000 Chinese Yuan,
but in Ethiopia, it would be less than 500 Chinese Yuan. This was
similar in Nigeria and Zambia with a significant difference in wage levels
of unskilled and semi-skilled labour between Nigerians, Zambians and
Chinese. Even graduates, such as those in Zambia, earned a relatively low
7
LABOUR: OBSTACLES AND OPPORTUNITIES
187
salary—in this case US$200 was the example given. This made it affordable for a ceramic factory in Ogun-Guangdong zone to employ 2000
workers for their labour intensive, but relatively lower-skilled, factory.
Interestingly, the decision to invest in Ogun-Guangdong Free Trade Zone
rather than the Lekki Free Trade Zone, both in Nigeria, was motivated
by the relatively cheaper wages in the Ogun state, which was more rural
that the Lekki Free Trade Zone.
Wages did tend to be higher in the Zones than surrounding areas,
regionally or nationally. In the Chambishi Multi Facility Zone, labour
negotiations resulted in wages being above the minimum wage. Investors
in the Eastern Industrial Park, who aimed to attract efficient Ethiopian
staff and to retain their staff, offered the financial incentive of higher
wages. The higher wage rate was justified due to the individuals’ contribution to productivity—a reflection of the economics detailed previously.
As mentioned before, many companies provided extensive training, and as
skills improved, so did the wages of these Ethiopian employees in an effort
by companies within the Zone to retain their semi-skilled employees. This
was especially necessary as companies that did not train employees often
‘poached’ semi-skilled employees by offering better wages—a bone of
contention in the Zone.
In the Eastern Industrial Park, new companies would recruit staff
through either the Zone’s labour office, or simply go to the main gate.
Most of these new employees were unskilled labour and they fulfilled
unskilled labour requirements for companies. Providing some form of
training assisted in filling the gap for semi-skilled labour requirements.
For higher skilled employees, recruitment was via the colleges. However,
the problem that the zones investors experienced, was that most of these
new recruits had no practical skills—this was different to their experience
in China where students would normally spend a year gaining practical experience through some kind of apprenticeship before entering the
workforce. This is turn pushed up wages for skilled workers and they
were in short supply. A pharmaceutical company representative in the
Eastern Industrial Park explained that they wanted to train local people
to replace the Chinese, but that this was difficult to achieve when it came
to specialised skills they required.
In Nigeria, the sense was that Nigerians were in general well educated,
and a good source of labour for the Zones’ requirements. Yet, investors
in the Special Economic Zones visited still found there to be a lack of
specialised skills. This restricted the type of industries that were suitable
188
B. ROBINSON
for the zone, and as mentioned previously, most companies tended to
be assembly type production facilities, rather than high-tech type companies. And this reduces the opportunity for this important aspect of skills
transfer. On the other hand, the view of Chinese investors in Zambia
was that the general population was educated enough to benefit from
advanced skills training.
The Lekki Free Trade Zone were considering the establishment of a
training institute to address this skills shortage in their current facilities
and thus contribute to skills development, and in turn, encourage more
advanced technological industries to invest in the zone. The Chambishi
Multi Facility Economic Zone had established the Sino-Zam Vocational
College of Science and Technology which supported the development of
technical skills in the mining sector.
Some companies were addressing the shortage of skills and the lack of
suitable training facilities in Nigeria with sending staff to China to acquire
the requisite skills. There was also an ulterior motive—it was an opportunity for Nigerians to learn Chinese and address some of the language
barriers experienced in managing the businesses. This could perhaps even
reduce the culture shock sometimes experienced by Chinese investors
thanks to better communication between the Chinese and the Nigerian
work force.
It is a generally held misconception that Chinese companies in Africa
just want to employ Chinese, and this discussion hopefully illustrated the
opposite. ‘It just doesn’t make sense to employ Chinese… salaries are 2–3
times higher for Chinese labour, plus the Visa, plus the tickets and accommodation… localisation is very important’ explained one investor from
the Ogun-Guangdong zone in Nigeria. The quality of Chinese labour
that would be prepared to work in Nigeria was a problem mentioned by
another investor: ‘difficult to get good Chinese staff to come to Nigeria…
family hears about bombs in Nigeria… many of the [Chinese] staff are
not good enough’, besides, he believed that Nigerians could sometimes
do a better job, citing a Nigerian machine operator that was better than
his Chinese counterpart. A different investor in the same zone employed
only 9 Chinese, but 300 Nigerians, some of which were in management
positions. Employing locals in executive positions also occurred, such
as was found in the zone operating companies in Nigeria and Zambia.
Most investors did confirm, however, that Chinese employees were often
employed in critical positions although the long-term view was that they
needed to change this. These examples confirm Chinese Zone investors
7
LABOUR: OBSTACLES AND OPPORTUNITIES
189
often prefer employing local labour and upskilling them when possible,
rather than employing Chinese labour.
7.4.2
Labour Legislation and Unions
Labour legislation, labour standards, unionisation and volatility were all
deemed more restrictive and pronounced in the Zones and the respective
countries, than what was perceived to be the case in China.
‘We lost three cases recently in court’, one investor recalled. ‘Can’t
dismiss easily—we have to have three witnesses; we have to have CCTV’ as
he explained the steps necessary and onus of proof to dismiss an employee
for misconduct and ‘even with proof, can’t fire’. He described the one
case as way of example. An employee had stolen a forklift, and in the
process, broke his arm. He then proceeded to sue the investor and won
the case.
Labour legislation and the influence this had on productivity was sometimes difficult for Chinese investors to understand. ‘They do everything
to follow Nigeria law… no one in China only works 8-hours, in Nigeria
they can only work 8-hours… in China, not about hours, about how
much you produce’ complained one investor. Another investor in Nigeria
concurred saying that the Nigerians thought and worked differently to
the Chinese, and Chinese managers often pushed them to work hard and
fast, which ‘led to lots of arguments’.
Unions were discouraged or disallowed in many cases. While freedom
of association and union membership was mostly allowed or protected
by the host country, Zone operators sometimes refused to abide to these
regulations or allow requests for trade union activity within the zone.
One requirement in a Zone visited was government’s stipulation that the
zone has an office for a labour union representative. This was flat-out
refused by the operators. When trade unions were present in Zones, they
did influence wages through wage negotiations, although the degree of
influence was limited. The Chambishi Multi-Facility Zone explained that
even with the increase in wages of between 6 and 7% per annum, the
Zambian Kwacha was losing value in real terms due to inflation, and thus
didn’t impact their operating costs to any significant level.
Strikes were not much of an issue in the Zones I visited. The Ethiopian
Eastern Industrial Park was the only one who had experienced a short
wild-cat strike that seemed to have been stoked by misinformation.
190
B. ROBINSON
7.5 Case Study: South Africa’s
Labour Environment and Job Creation
in Its Special Economic Zones
South Africa is Africa’s most industrialised nation yet continues to grapple
with poor economic growth (Fig. 7.5) with real GDP only growing at an
estimated 0.7% in 2019. The country’s global competitiveness ranking
has declined sharply to 67 of 140 countries in 2018 from a previous
ranking of 47 two years prior, mainly due to skills shortages, health sector
challenges, weak domestic product competition, and limited information
and communication technology adoption. The budget is under pressure
with a high public sector wage bill, high costs of bailing-out state-owned
enterprises, and various costly social programmes (African Development
Bank 2020). South Africa’s sovereign credit rating has been downgraded
to junk status by various global rating agencies in 2019 and 2020: S&P
Global Ratings is at BB− the third tier of non-investment grade; Moody’s
is at sub-investment grade Ba1 with a negative outlook; and Fitch at
BB+− a result of which South African bonds were excluded from the
Fig. 7.5 South Africa’s GDP growth (annual %) (The World Bank 2020)
7
LABOUR: OBSTACLES AND OPPORTUNITIES
191
FTSE World Government Bond Index. Business confidence has been
negative for over a decade reflecting a pessimistic view towards investment in the face of unsatisfactory economic conditions (Industrial Policy
Action Plan 2018).
The South African government has initiated a wide range of interventions to address these problems, a key one of which is the initiation of
numerous Special Economic Zones in the country. Yet the Zones have
failed to make much of an impact for the country.
This case study will provide an overview of South Africa’s socioeconomic position, the introduction and implementation of Special
Economic Zones as a strategic economic policy, and then critically analyse
the country’s labour legislation and costs and the current impact and
potential future impact this has on investments in South Africa’s flagship
Special Economic Zone—the Coega Special Economic Zone.
7.5.1
South Africa: High Unemployment, Limited Skills, Low
Productivity and High Inequality
The Conversation (www.theconversation.com) is a valuable web-resource
for those interested in media accounts of Africa, and well worth
subscribing to. One recent article written by Melinda Du Toit (2020)
depicts the plight of those unemployed in South Africa based on research
while working on community projects in Orange Farm and Boipatong,
both of which are characterised by extreme poverty and unemployment.
The various participants describe unemployment as follows:
“a huge garbage heap filled with bad things”, “life is over”, “danger and
death”, “a man-made grave”, “a monster”, and “a black heart full of
sorrow and pain; the heart is broken, angry, sore and sad”.
Employment levels in South Africa are extremely low, and while government over the years has continually emphasised the need to create and
sustain employment, policies have had limited impact. The problem is
exacerbated by a population that continues to increase and unemployment
is the burden of the younger generation.
Statistics from Stats SA ((2) 2020) indicates very little change yearon-year between 2018 and 2019, and from a manufacturing perspective,
jobs were actually contracting (Table 7.3). In terms of full-time employees
over the same period, there was a decrease of employment of 0.2% overall,
192
B. ROBINSON
Table 7.3 Employment by industry in thousands (Stats SA (2) 2020)
Industry
Mining
Manufacturing
Electricity
Construction
Trade
Transport
Business
services
Community
services
Total
Dec
2018
Sept
2018
Dec
2019
Q/Q
change
Q/Q
change
%
Y/Y
change
Y/Y
change
%
453
1233
62
611
2280
498
2347
463
1213
61
592
2267
497
2336
448
1209
61
575
2306
495
2348
−15
−4
0
−17
39
−2
12
−3.2
−0.3
0
−2.9
1.7
−0.4
0.5
−5
−24
−1
−36
26
−3
1
−1.1
−1.9
−1.6
−5.9
1.1
−0.6
0
2711
2768
2771
3
0.1
60
2.2
10,195
10,197
10,213
16
0.2
18
0.2
with manufacturing having declined by −1.6%. Part-time employees in
the manufacturing sector declined by −6.2%. Unemployment for quarter
4 of 2019 was at a dismal level of 29.1%.
The composition of the population and workforce is worthwhile evaluating for a better understanding of the situation and the disparities and
inequities in unemployment and skills (Table 7.4).
The sectors that employ the largest share of workers is the Community, Social and Personal Services Sector (22.3%) followed by Wholesale
and Retail Trade Sector (20.1%) and the Financial Intermediation, Insurance, Real Estate and Business Sector (14.9%). The manufacturing sector,
instead of leading the way in generating employment lagged behind, in
actual fact, people employed in the manufacturing sector declined by 3.1%
(56,809 workers) for the period 2010 to 2017! (Department of Higher
Education and Training 2019).
There was an increase in elementary occupations (386,000), and
service and sales workers (155,000), and craft and related trade works
(114,000). Yet employment of technicians (−82,000), clerks (−11,000)
and skilled agricultural workers (−8000) all decreased for this period.
This suggests a move towards a service orientated economy on the one
hand, and a low-skilled workers economy on the other. In terms of educational levels, there was an increase in the employment of high-skilled
workers in managerial positions from 29.2% in 2010 to 42.2% in 2017
7
LABOUR: OBSTACLES AND OPPORTUNITIES
193
Table 7.4 Characteristics of the South African labour market in 2017
Population demographics
Race: 80.8% Black; 8.6% Coloureds; 8% Whites; 2.6% Indians/Asians
Age: Two-thirds of the population under the age of 35 years with one-third aged
younger than 15 years
Education
20 years and older: 13.9% had some post-school education or tertiary qualification
20 years and older: 43.6% had grade 12
20 years and older: 13.7% regarded as illiterate
53.8% of those employed held Matriculation certificates (grade 12)
21.3% of those employed had tertiary education
Proportion of the employed with higher education qualifications increased by 24.5%
from 1.2 million in 2010 to about 1.5 million in 2017
About 2 million workers only had primary/lower education
Educational enrolments
Enrolments in Higher Educational Institutions increased by 9.3% from 892,936 in
2010 to 975,837 in 2016
The share of these enrolments in Technical and Vocational Educational and Training
(TVET) college enrolments increased by 13.4 percentage points from 28.6% in 2010
to 42% in 2016
Enrolments in Science, Engineering and Technology increased from 28.1% in 2010 to
30.3% in 2016, while humanities increased from 40.6 to 42.6%; the share of
enrolments for Business, Economics and Management decreased from 31.2 to 27.1%
Enrolments in the Sector Education and Training Authorities (SETAs) increased with
the total number of learnership registrations increasing by 105.7% from 49,309 in
2010 to 101,447 in 2016
Skills programme registrations increased by 105.8% from 63,659 in 2010 to 131,017
in 2016
Artisanal programmes enrolments tripled from 9316 in 2010 to 30,817 in 2016
Completion rates for learnerships increased from 69% in 2010 to 57% in 2016
Completion rate for artisanal learning programmes improved by 32 percentage points
from 37% in 2010 to 69% in 2016
Unemployment amongst the various population race groups
75% of the working age population are black
90% of unemployed persons are black
21.8% of coloureds were unemployed
10.1% of Indians/Asians were unemployed
7.1% of whites were unemployed
(continued)
194
B. ROBINSON
Table 7.4 (continued)
Youth (15–24 and 25–34 years of age) unemployment
3.2 Million (31.1%) of 10.3 million young people aged between 15 and 24 were
unemployed and not in some form of educational or training facility (Not in
employment, education and training (NEET))
This was an increase of 1.4 percentage points from the previous year (both periods
were quarter 4)
Share of unemployed people aged 15–24 years decreased by 5 percentage points from
69.1% in 2010 to 64.1% in 2017
The share of unemployed aged 25–34 years was reasonably constant at 37.9%
64.4% of unemployed youth with less than a matriculation certificate were young
people aged 15–19 years, 62.6% aged 30–34, 57% aged 25–29 years, and 53.7% aged
30–34 years of age
Unemployed youth with tertiary education was 46.3% aged between 20 and 25 years,
43% aged 25–29 years
Of those employed, 57.5% had matriculation (Grade 12) certificates, 19.3% had tertiary
education qualifications
Of those employed, 59.9% of those aged 15–19 years had less than a matriculation
certificate, followed by 42.9% aged 20–24 years of age, 41.1% aged 25–29 years, and
42.6% aged 30–34 years
Gender
51% of the population are females
Gender disparities remain predominant
44% of employed were female
NEET rates for females was higher than that of males, with 33.3% compared to their
male counterparts with 26.2% (2017 quarter 4)
Qualification mismatch
About 32% share of workers are mismatched by their field field-of-study
Period of unemployment
In the 4th quarter of 2018, 6.1 million South Africans were unemployed, of these 4.4
million were unemployed for a year or longer
Proportion of long-term employment increased by 9.3% from 61.8% in 2008 to 71.1%
in 2018 (4th quarters)
Migration of labour
The issuance of work permits to foreign labour had declined from 28,266 permits in
2013 to 17,969 permits in 2015
In 2015 most temporary residence permits were given to nationals from Nigeria
(13.8%), Zimbabwe (13.1%), India (9.5%), Bangladesh (6.8%) and Pakistan (6.8%)
Permits may not reflect the reality of immigrants who live and work in the country
illegally or otherwise
Source Adapted from the Skills Supply and Demand in South Africa Report (Department of Higher
Education and Training 2019)
7
LABOUR: OBSTACLES AND OPPORTUNITIES
195
and professional positions from 61.2% in 2010 to 87.5% in 2017. Technicians and associated professionals with a high level of education increased
from 31.2% in 2010 to 45% in 2017. This indicated strong demand for
well-educated employees in positions requiring managerial, professional
and technical/engineering skills (Department of Higher Education and
Training 2019).
There seemed to be some level of a skills mismatch and shortages
of certain critical skills profiles and knowledge: There was a shortage
of professionals, although there was an indication of an oversupply of
managers in the industrial sector. There was a shortage of employees
in certain industrial sectors: safety and security; agricultural; and mining
sector (Department of Higher Education and Training 2019). In terms
of skills profile, shortages existed in complex problem and solving skills;
social skills; active learning; reading comprehension; learning strategies;
and writing. Knowledge shortages were strongest for computers and electronics; administration and management; and clerical knowledge. While
shortages existed, they were less critical for more technical and manual
skills. The report concluded that 32% of workers in South Africa are
mismatched by field of study (Department of Higher Education and
Training 2019).
These ‘characteristics’ are concerning. It is clear that there is huge
amount of the youth who are unemployed; women are more likely to
be unemployed; blacks find it more difficult to find employment; and
many of those with tertiary education still struggle for employment.
While there had been commendable improvements in qualifications and
enrolments in job related qualifications, these haven’t made a significant
impact on employment levels. This raises two concerns: the relevance and
quality of the qualifications may not be suitable for jobs that are available;
and/or there simply aren’t enough jobs being created to absorb those
with qualifications.
While government has tried to incentivise youth employment, such as
the introduction of the Employment Tax Incentive Act which reduces
the cost of hiring young people, this has had limited success. Youth
unemployment is aggravated by the mismatch between skills supplied and
skills demanded. While South Africa has numerous colleges and universities, many of these are churning out graduates without skills required
in the workplace. Marumo and Sebolaaneng (2019) highlight the trap
this poses for youth who cannot find employment after completing
their higher education, and that the longer they stay unemployed, the
196
B. ROBINSON
more disengaged they become with the job market. Technical and Vocational Education and Training (TVET) colleges are seen as a solution
to providing skills for employment. Currently there are about 50 such
colleges operating from 364 campuses throughout the country, but
students (and their parents) still seem to be biased towards the more
prestigious universities than colleges. Marumo and Sebolaaneng recommend that there needs to be closer ties between higher education and
secondary schools to provide career guidance for scholars that will assist
them in finding work after graduating. It was also recommended that
TVET colleges and universities shift from a theoretical focus toward
providing practical skills that are relevant and immediately applicable to
the job market.
South Africa has also experienced the so-called ‘Brain-Drain’ of critical skills. South Africans with sought after skills often succumb to the
attractiveness of employment outside of the country. Higher wages, better
social security benefits and safety in the face of violent crime in South
Africa is one side of the coin. The other is the perception that South Africa
does not offer employment opportunities and job security in the face of
Broad-Based Black Economic Empowerment (B-BBEE) policies of the
country to address historic racial inequalities—this will receive attention
later in the chapter.
An initial report on the impact of the COVID-19 pandemic and subsequent lockdown (Stats SA 2020) indicated that 8.1% of respondents who
had been employed had lost their jobs and 1.4% became unemployed in
approximately the first month of the lockdown. Those who had lost their
jobs indicated that this was the result of their place of work closing down.
The percentage of participants who reported that they earned no income
rose from 5.2 to 15.4% by the sixth week of the lockdown. South Africa is
regarded as a country with one of the most severe lockdowns, and at the
time of writing this Chapter, few concessions had been made. The long
terms effects of the lockdown and the COVID-19 cost to the economy
is likely to be extensive even in the face of numerous stimulus packages
offered by the South African Government. It is likely that jobs will be
obliterated during this period.
Productivity in South Africa is a problem. The benefits of a productive
work-force are quite obvious and have direct benefits for the economy:
there is a strong correlation between national productivity and levels
of unemployment, crime, poverty, education and living standards; the
more productive an economy, the more competitive it will be globally
7
LABOUR: OBSTACLES AND OPPORTUNITIES
197
which in turn reduces unemployment; and productivity is an indicator
for lucrative investment opportunities and attracts funds for new jobcreation enterprises and the reorganisation of individuals within the
workforce (Productivity SA 2020). Productivity SA confirm that while
capital productivity grew to 1.3% in 2018 from 0.7 in 2017, labour was
not performing nearly as well, where labour productivity declined further
from the low of 0.4% in 2017.
7.5.2
Policies and Institutions Supporting Industrialisation
and Special Economic Zones
South Africa has always acknowledged the importance of industrial development to facilitate growth and development. This section details some
of the recent policies towards industrialisation and SEZs.
7.5.2.1
Pre-2010 Policy
Zimmerman (2010: 35–64) provides a useful overview of post-Apartheid
economic policy from 1994 to 2010. The end of Apartheid and the
dawn of democracy in South Africa heralded a new era of promise
for South Africa, yet the country required significant economic growth
in order to finance the eradication of prevalent social inequalities
and problems the country faced. The period up to 2010 recorded a
number of policy interventions such as the Reconstruction and Development Programme (RDP); the Growth, Employment and Redistribution
(GEAR) Programme of 1996; Inflation Targeting Initiatives; the Broad
Based Black Economic Empowerment Act of 2003; and the Accelerated and Shared Growth Initiative for South Africa (ASGISA). Industrial
policies included the Industrial Development Zone Regulations of 2000
which allowed for the establishment and operation of the first Zones; the
National Industrial Policy Framework (NIPF) of 2007; and the Industrial
Policy Action Plan (IPAP) 2007 and IPAP II in 2010. The first Industrial
Development Zone Regulations were followed by the Industrial Development Zone Programme Guidelines in 2008 to provide more detail for
Zone operators. Most of these policy interventions had a disappointing
impact on job creation, the reduction on inequality, and GDP growth.
As Zimmerman explains, the policies were “at times at odds with one
another or (did) not allow for coordinated efforts”.
Special attention is now given to the Industrial Development Zone
Policy introduced in 2008.
198
B. ROBINSON
7.5.2.2
Industrial Development Zones
The Industrial Development Zone Programme was established by the
Department of Trade and Industry through promulgations in terms of
the Manufacturing Development Act. The Manufacturing Development
Board took responsibility for managing applications and recommending
approval, issuing grant operator permits and regulating activities of IDZ
operators and tenants.
The key objectives and rationale of the IDZ Programme was as follows
(Industrial Development Zone [IDZ] Programme Guidelines [2008: 5–
6]):
• Position South African-based manufacturing industries to meet the
challenges of globalisation,
• Attract advanced foreign production and technology methods in
order to gain experience in global manufacturing and production
networks through attracting foreign direct investment (FDI),
• Develop linkages between local and international-based industries,
• Provide world class infrastructure and proximity to international
ports to offer low cost and efficient logistics services, and
• Provide services to facilitate overcoming administrative hurdles for
investors securing permits required for their operations.
The characteristics of an IDZ were listed as being a customs controlled
area with dedicated South African Revenue Services (SARS) officials to
support customs and VAT requirements; an industries and services area
within the borders of the IDZ, and world class infrastructure linked to an
international port of entry. The customs controlled area would streamline customs administration while providing the following benefits: duty
rebates and VAT exemption on imports of production-related raw materials, including machinery and assets, to be used in production with the
aim of exporting the finished goods; and VAT suspension under specific
conditions for supplies procured in South Africa (the IDZ Programme
Industrial Development Zone [IDZ] Programme Guidelines [2008: 6]).
The criteria for the designation of an IDZ were as follows (8–10):
1. The Zone will facilitate the creation of an industrial complex having
strategic economic advantage.
2. Provide the location for the establishment of strategic investments.
7
LABOUR: OBSTACLES AND OPPORTUNITIES
199
3. Enable the exploitation of resource-intensive industries.
4. Take advantage of existing industrial capacity, promote integration
with local industry and increase value-added production.
5. Create employment and other economic and social benefits in the
region in which it is located; and
6. Be consistent with any applicable national policies and law, as
determined by appropriate environmental, economic and technical
analyses.
Even though the Industrial Development Zone Programme’s objectives
were commendable, it became clear very quickly that they were not
living up to their envisaged potential. Between 2002 and 2010 only
40 investors had operationalised in the three functioning IDZs with a
combined investment of R11.8 Billion after the government had invested
R5.5 Billion. Job creation was subdued with only 2800 jobs created in
the then Coega IDZ, 1400 jobs in the East London IDZ, and 300 jobs
in the Richards Bay IDZ (Nel and Rogerson 2013).
A number of shortcomings of the IDZ Programme were identified by
Nel and Rogerson (2013: 208):
1. The absence of special incentives for zones investors making them
unattractive to local and international investors.
2. The lack of a unique value proposition in the existing IDZ
programme.
3. The absence of clear guidance such as a comprehensive policy
framework and strategic planning.
4. Weak governance arrangement and poor coordination of government agencies.
5. The emphasis in Zone planning on infrastructure whilst ignoring
other critical support such as marketing, skills, or logistics.
6. The exclusive reliance on government ownership, management and
funding with no private sector involvement.
Zimmerman (2010: 100) suggested that the policy environment needed
a fundamental re-think that included the following action:
200
B. ROBINSON
• Re-evaluate the objectives of the IDZ programme and alter these if
necessary;
• Prepare an overview of the products and government offerings
which are relevant and complementary to the IDZ Programme;
• Remove or adapt the products or incentives which are no longer
appropriate, or are at odds with the new IDZ Objectives;
• Prepare a central repository of all IDZ related legislation, incentives,
information, operating procedures and zone specific details;
• Design and implement a mechanism that allows the private sector to
more actively participate in the IDZ programme;
• Establish a set of measurement or performance standards and metrics
which can be used to gauge the process and performance of the
South African IDZs;
• Provide mechanisms for Local and Provincial government to be
more actively involved in the marketing and operation of the IDZs,
in order to coordinate their respective efforts and present a unified
and coherent product.
It was eventually acknowledged by the South African government that
the Industrial Development Zones had not lived up to their expectation,
mainly due to poor governance; insufficient incentives; poor stakeholder
coordination; and lack of integrated planning. The programme was
reviewed, and this led ultimately to the initiation of a new act—the Special
Economic Zones Act of 2014.
7.5.2.3
Special Economic Zones Act
The Special Economic Zones Act was promulgated in 2014 and served
to take the initiative of the Industrial Development Zones to the next
level. The Act was introduced as the country was trying to fulfil its
electoral promises of mass job creation by President Jacob Zuma, with
Special Economic Zones envisaged as one of the key drivers of industrialisation to accomplish this objective. The Act was formulated within the
policy context of the National Industrial Policy Framework (NIPF), The
Department of Trade and Industry’s Industrial Policy Action Plan (IPAP),
the National Development Plan (NDP), and the Economic Development
Department’s 2010 New Growth Path (NGP).
The purpose of Special Economic Zones in terms of the Act were the
following:
7
LABOUR: OBSTACLES AND OPPORTUNITIES
201
4. (1) A Special Economic Zone is an economic development tool
to promote national economic growth and export by using
support measures in order to attract targeted foreign and
domestic investments and technology.
(2) The purpose of establishing Special Economic Zones includes –
(a) facilitating the creation of an industrial complex, having
strategic national economic advantage for targeted investments and industries in the manufacturing sector and
tradable services;
(b) developing infrastructure required to support the development of targeted industrial activities;
(c) attracting foreign and domestic direct investment;
(d) providing the location for the establishment of targeted
investments;
(e) enabling the beneficiation of mineral and natural resources;
(f) taking advantage of existing industrial and technological
capacity, promoting integration with local industry and
increasing value-added production;
(g) promoting regional development;
(h) creating decent work and other economic and social benefits
in the region in which it is located, including the broadening of economic participation by promoting small, micro
and medium enterprises and co-operatives, and promoting
skills and technology transfer; and
(i) the generation of new and innovative economic activities.
(3) For the purpose of this section –
(a) “regional development” means linkages to, or integration
with, the host province’s growth strategies, local economic
development of the host municipality and any other relevant
cross-provincial economic initiatives; and
(b) “targeted investment” includes investments in support of
government’s economic and industrial development policies.
The Special Economic Zones Act of 2014 also allows for different categories of Special Economic Zones including a free port; a free trade zone;
an industrial development zone; and a sector development zone.
202
B. ROBINSON
The performance of the Special Economic Zones has been moderate.
An advertorial promoting investment in South African Special Economic
Zones (South African Special Economic Zones Programme 2019), indicates that investments have steadily grown, with the growth between the
first quarter of 2018–2019 and 2019–2020 of investors increasing from
110 to 122, and the investment value sitting at R19 Billion, while jobs
for this period have increased from 13,466 to 15,737. Non-operational
investors were estimated to be 61 with an investment value of R33.64
billion.
These policies detailed have failed to generate the expect social and
economic return envisaged and South Africa finds itself in a similar situation to that of a decade ago. Poor leadership under President Jacob Zuma
and incompetent governance and corruption have also weighed heavily
on the country’s ability to achieve socio-economic growth. So, what does
the future hold? Some reflection on policy towards industrialisation and
Special Economic Zones is useful at this juncture.
The Industrial Policy Action Plan (IPAP) 2018/19–2020/21 lists
the key constraints to industrial policy as lack of policy coherence and
programme alignment; concentration of ownership and control; high
private sector input costs; security of electricity supply; high port tariffs;
transport and logistics constraints; customs irregularities; and the structure of the economy is ill-suited to creating employment at appropriate
skills levels.
The IPAP then continues to describe ‘transversal’ focus areas for the
period 2018/19–2020/21. These include a focus on public procurement; developmental trade policy, innovation and technology; industrial
financing; and probably most importantly, Special Economic Zones.
The IPAP specifically refers to China’s successful leveraging of Special
Economic Zones to accomplish the manufacturing capacity it now has
which has enabled it to be a highly-competitive net exporter of valueadded goods, and in the process, generated immense employment. There
are scant specifics in the IPAP, which simply refers to the current work
packages being centred on the designation of new SEZs; compliance with
legislation; investment promotion and marketing; infrastructure development; institutional development; capacity development and stakeholder
management. The key action programmes listed are the designation of
Special Economic Zones; institutional and capacity development; and
developing a marketing plan for special economic zones. In terms of
institutional and capacity development, the IPAP mentions a five-year
7
LABOUR: OBSTACLES AND OPPORTUNITIES
203
agreement that has been entered into with China which will provide a
forum for Chinese officials to share their experience on Zones in order
to equip policy-makers, development practitioners and operators with the
planning, technical, managerial and operational know-how. This could be
a valuable intervention—learning about, and hopefully applying, some of
the critical success factors embedded in the Chinese Model of Special
Economic Zones.
There is a concern though for South Africa’s future efforts to industrialise. The term ‘radical economic transformation’ has become populist
rhetoric by many a politician, and citizens disheartened by years of poor
governance and deteriorating well-being have latched onto the term in
the hope that the policy will provide a quick-fix to the country’s woes.
The Industrial Policy Action Plan 2018/19–2020/21 refers precisely to
this term, and without admitting the contribution poor governance has
had on industrialisation, it suggest that the critical constraint to the IPAP
programme over the previous 10 years has been a lack of transformation
and hence stipulates the objective of “transforming the racially skewed
ownership, management and employment profile of the economy”:
Defined as radical economic transformation, the key thrust of this
economic reorientation is to start tackling the long-standing structural
fault-lines in the economy head-on – systematically eliminating race-based
economic ownership and control and finding effective instruments to
attach South Africa’s catastrophic problems of unemployment, poverty and
inequality – which not only constitute a scourge on society but also act as
a critical barrier to growth. (2018: 6)
Without negating the absolute imperative to remove racial inequalities
and resultant structural inefficiencies, I argue in the next section, that
policies in their current format and legislation and political paralysis
are hampering the success of Special Economic Zones and discouraging
investment—thus detracting from the success of industrial policies and
their ultimate contribution to social well-being in South Africa.
7.5.3
Organised Labour and Politics—A Volatile Combination
The origin of South African trade unions date to as far back as the early
1900s as they grew in tandem with the emerging mining sector. From
early on, unions also played an important role in the country’s popular
204
B. ROBINSON
resistance against racial segregation, job reservation and Apartheid. Since
then, unions have continued to wield huge influence over the labour
market, and politics in general. The ruling African National Congress
(ANC) of today comprises an alliance with the Congress of South
African Trade Unions (COSATU) and the South African Communist
Party (SACP)—COSATU therefore had a very direct impact on policy
on employment and organised labour.
While COSATU is firmly entrenched in political leadership, other trade
unions continue to vie for power, and many have their own political
agenda. For instance, the Economic Freedom Fighters (EFF) political
party grew quickly after the Marikana platinum mine massacre of 2012
in which 17 people were killed by the South African Security Forces—the
party’s leader, Julius Malema, condemned the ANC and COSATU affiliated National Union of Mineworkers (NUM) for the event. COSATU
experienced severe reputational damage and many workers changed
alliances to the Association of Mineworkers and Construction Union
(AMCU). This union is now the largest union of the trade union federation National Council of Trade Unions (NACTU). The country has a
number of trade unions catering for different industries, and in 2016 the
Department of Labour listed 187 registered trade unions.
Strike action in the country is common and growing. Figure 7.6
reflects how the number of work stoppages have increased from 88 in
2014 to 165 in 2018. Figure 7.7 depicts the work stoppages per industry,
where it is noted that manufacturing has the second highest number of
work stoppages.
The number of working days lost between 2015 and 2018 continues
to increase from 903,921 in 2015 to 1 158,945 in 2018—Fig. 7.8 (the
high number in 2014 was an outlier year due to particular long-term
strike action in the mining industry).
Many workers in the South African labour environment do not identify
with COSATU and other large unions. COSATU comprises mostly (92%)
permanent workers with fulltime contracts with two-thirds having skilled,
supervisory, or professional positions, and thus is an “increasingly privileged segment of the workforce” (Paret and Runciman 2016). COSATU
has also been accused of wide-scale corruption, damaging its legitimacy.
Marginalised workers in temporary or casual forms of employment do not
belong to unions.
7
LABOUR: OBSTACLES AND OPPORTUNITIES
205
Fig. 7.6 Trends in the number of work stoppages in South Africa, 2014–2018
(Department of Employment and Labour 2019: 2)
This has contributed to a volatile labour situation in the country.
Worker resistance “from below” has increased rapidly with collective
action beyond unions or existing institutional frameworks. Between 2012
and 2014 about half of the strikes that occurred were ‘unprotected’ as
they occurred outside of the procedures of the country’s Labour Relations Act. Non-unionised strike action increased from 16,396 working
days lost between 2005 and 2008 to 116,255 days lost between 2009
and 2012 (Paret and Runciman 2016).
Unions as well as marginalised workers remain important political
agents today in democratic South Africa, and protests driven by union
forces are not uncommon, not just for labour related issues, but for
wider political ideals. In addition, communities have begun showing their
frustration at the snails-pace of social development in the country with
unpredictable protests.
7.5.3.1
A Restless Nation
Sometimes closely related to labour and labour union activism, sometimes not, is the problem of community unrest in South Africa. Marcel
Paret and Carin Runciman’s (2016) investigation of popular resistance in
South Africa found that since 2009 a ‘protest wave’ has emerged, and
a peak was reached in 2012 when there was on average one protest per
206
B. ROBINSON
Fig. 7.7 Distribution of work stoppages by industry, 2014–2018 (Department
of Employment and Labour 2019)
day. They attribute some of the action to organised resistance against the
governing ANC—organisations such as the Concerned Citizens Group,
the Western Cape Anti-Eviction Campaign, the Anti-Privatisation Forum,
Landless People’s Movement, many of which adopted class-based political
ideologies.
Another study of the frequency of community protests (Alexander
et al. 2018) use much stronger terminology—they describe the volatility
as ‘turmoil’ and ‘rebellion’. They further explain that this definition is
broader than service delivery protest which is popularly used to depict
the inability of government to provide certain essential services, social
services and infrastructure for a multitude of reasons. The definition
excludes ‘labour-related’ and ‘crime-related’ unrest—labour related unrest
has been dealt with to some extent in the previous section, while ‘crimerelated’ unrest is more ominous in nature where criminality is veiled
7
LABOUR: OBSTACLES AND OPPORTUNITIES
207
Fig. 7.8 Trends in working days lost in South Africa (Department of Employment and Labour 2019)
behind these protest activities. They also distinguish between ‘order’
versus ‘disorder’ and ‘peaceful’ versus ‘violent’ protests, acknowledging
that peaceful protests can sometimes be disorderly. Orderly protests are
tolerated and often negotiated prior to the event. Violent protests are on
the other hand evidenced by damage to property and injury to persons.
Their findings suggest that there is a disquieting trend of a higher number
of disruptive and violent community protests than orderly protests.
The unsettling labour and community situation in South Africa and
many other African countries is a major concern for potential foreign
investors. Small scale disruptions could lead to work stoppages, violent
protests could lead to damage of assets and products and even cause harm
and death to investors and employees. For instance, Chinese employees
have on a number of occasions borne the brunt of unrest and been
harmed in violent clashes, and in some situations, lives have even been
lost.
208
B. ROBINSON
7.5.4
Labour Legislation
Post-Apartheid labour legislation was developed through a consultative
process by the National Economic Development and Labour Council
(NEDLAC): The labour Relations Act of 1995 (LRA); the Basic Conditions of Employment Act of 1997 (BCEA); The Employment Equity Act
of 1998 (EEA); and the Skills Development Act of 1999 (SDA) are the
result. At the heart of these laws was the objective of supporting South
Africa as it reintegrated with the global economy after years of sanctions,
and to address the country’s labour market inequalities and high unemployment. A rocky path followed with years of painful negotiations and
revisions.
The current legislation is severely criticised for being excessively restrictive on business, and as a result, impacts negatively on the propensity of
job creation. South Africa ranks at 101 out of 141 in terms of the burden
of government regulation in terms of The Global Competitiveness Report
2019. The Report details labour market competitiveness on a number of
criteria, and South Africa scores poorly on most criteria, especially in the
area of hiring and firing practices; cooperation in labour-employer relations; flexibility in wage determination; active labour market policies; and
the ease of hiring foreign labour.
The right to strike is protected in both the South African Constitution
section 23 (2) (c) and the Labour Relations Act 66 of 1995 section 64
(1). The right to strike is a fundamental feature of employees’ rights in
a democracy, just as is the freedom of association, the freedom to join
and organise trade unions, the freedom of assembly, and the freedom
of speech. The right to strike is an important element of collective
bargaining, the threat of which encourages discourse between employers,
their associations and employees and their unions. It is a valuable tool in
correcting the power imbalance between employees and employers.
So, while there is not a problem with the provisions on the right to
strike in the Act, the problem arises when there are ‘illegal’ strikes, when
violence occurs, or when damages are incurred. The Act does deal with
unprotected strikes which do not follow certain procedures and where
there is misconduct. In this case the employer can obtain an interdict
against the employees and claim compensation for the loss suffered—
they can also dismiss the employees involved. Trade unions are obliged
to take reasonable steps to persuade employees not to engage in unlawful
action or could find themselves liable. Therefore the Labour Relations
7
LABOUR: OBSTACLES AND OPPORTUNITIES
209
Act does seem to take a proactive stance in regard to mitigating violence
described in previous sections, although this does not seem to be having
the effect it should have, and violent labour protests are still a problem
in South Africa even with legislative protection—Mthembu suggests the
labour court needs additional powers to sanction and terminate violent
strike action (Mthembu 2018).
Policies, legislation and the labour market in South Africa seems to
be constantly at odds as described in this section, and there are increasingly calls for labour market reform to encourage large-scale investment
to facilitate job creation in the country. Until then, the current status quo
in the country is likely to continue dampening job creation efforts in the
country and weighs heavily on the ability of Special Economic Zones to
attract investment.
7.5.5
Overview of Special Economic Zones in South Africa
We now turn our attention to Special Economic Zones and consider their
success and contribution to development priorities including job creation
and skills transfer.
South Africa has a number of Special Economic Zones, sometimes
categorised in terms of their primary area of economic growth, such
as trade or industrial development, with different regional development
priorities. Their geographic location is depicted on Fig. 7.9.
Richards Bay is strategically located near the Mozambican border,
within easy access to the rest of East Africa, and is relatively close to the
economic hub of Johannesburg. An excellent position for the purposebuilt Richards Bay IDZ. The zone has been earmarked for mineral
storage and beneficiation, and general industrial development for export
orientated growth.
The East London IDZ, located in the Buffalo City Metropolitan
Municipality comprising the cities of East London, King William’s Town,
and Bhisho the Eastern Cape provincial Capital, boasts good infrastructure, and a river port. The area has a high-level of unemployment,
especially in the neighbouring rural areas of the ‘Wild Coast’, thus in need
of job creation interventions. The IDZ is principally a specialist industrial park focussing on the automotive, agro-processing and aqua culture
industries.
Coega IDZ, Nelson Mandela
Bay (Port Elizabeth)
East London IDZ
Fig. 7.9 South African Special Economic Zones (Map data: Google Maps, AfriGIS)
Saldanha Bay IDZ
MaluƟ-A-Phofung
SEZ, Harrismith
OR Tambo SEZ,
Johannesburg
Musina / Makhado
SEZ, Musina
Dube TradePort, Durban
Richards Bay IDZ
210
B. ROBINSON
7
LABOUR: OBSTACLES AND OPPORTUNITIES
211
Saldanha Bay IDZ is relatively new having been established in 2013
with a focus on oil and gas exploration and production industries operating in sub-Saharan Africa. It aims to attract engineering, logistical,
repairs and maintenance, and fabrication industries, and is well situated
just two hours from the city of Cape Town in the Western Cape. The
Zone has 12 signed leases with a combined investment value of over R3
Billion (South African Special Economic Zones 2019).
The Atlantis Special Economic Zone was a City of Cape Town initiative
to create a ‘greentech’ manufacturing hub and seeks to capitalise on the
city’s existing renewable energy and green technology sector.
The Dube TradePort in the Province of KwaZulu-Natal was established as a catalyst for global trade as a portal between the province and
the world. Its facilities include King Shaka International Airport, a cargo
terminal, warehousing, offices, retail sector, hotels and agricultural area.
It is conveniently located between the two biggest seaports in Southern
African, namely Durban and Richards Bay, and is linked with South Africa
through an extensive road and rail network. It has 35 operational investors
with a value of R1.8 Billion and has created 3331 direct jobs. It has
a pipeline of 36 investments with a value of R10.2 Billion. One of the
more significant investors is MaraPhone which is expected to create 1500
jobs during a five-year period. The Dube TradeZone and Dube AgriZone
are areas designated as industrial development zones, with the TradeZone focusing on manufacturing and value-addition in the automotive,
electronics and fashion industries (South African Special Economic Zones
2019).
The new Maloti-A Phofung Special Economic Zone is situated in
the Province of the Free State, positioned halfway between the Port
of Durban and the economic hub of Johannesburg and the Gauteng
Province. It is a base for exporters facilitating logistics solutions for freight
to and from the port. It is earmarked for general manufacturing and
agro-processing as the province has a strong agricultural sector.
The OR Tambo Industrial Development Zone is still in the development stage. Situated near the OR Tambo International Airport, it is
envisaged to support growth of the beneficiation of precious metals and
minerals and is export-oriented.
The Musina/Makhado Special Economic Zone in the Limpopo
Province currently comprises two locations, one of which focusses on
the industrial cluster of light industry and agro-processing, the other on
metallurgical and mineral beneficiation. A third cluster is planned for the
212
B. ROBINSON
petrochemical industry. The position is strategically on the route between
South Africa and Zimbabwe and offers proximity and access to the South
African Development Community (SADC).
The Coega Special Economic Zone is the largest of South Africa’s
Special Economic Zones and will be evaluated in more detail below.
The Zone is the flagship Special Economic Zone in South Africa, and
in the financial year of 2018/2019 had 45 operational investors with a
combined investment value of R11,579 billion (South African Special
Economic Zones Programme 2019). It is based in one of the poorest
provinces of the country with high unemployment rates, yet with the
well-established infrastructure of neighbouring city of Port Elizabeth,
the SEZ position is well situated regionally to potentially address this
unemployment concern.
The Coega Special Economic Zone (Nelson Mandela Metropolitan
Municipality) and the East London IDZ (Buffalo City Metropolitan
Municipality) are considered key stakeholders of the Eastern Cape
Province’s Department of Economic Development, Environmental Affairs
and Tourism. Their role is encapsulated in the Eastern Cape Provincial
Industrial Development Strategy of 2012.
Sectors for development, many of which are in the Coega Special
Economic Zone and East London IDZs, that have been earmarked by the
Department include the chemical and petrochemical sector, capital goods
sector, energy, green industry and carbon projects, a tooling cluster, and
a strong automotive sector focus due to the existing auto-makers of
Volkswagen and Mercedes Benz being situated in the province.
The Coega Special Economic Zone has been successful in attracting
some flagship investors from China, such as FAW and BAIC. Chinese
investment has seen the endorsement by Chinese political figures. Former
Ambassador Lin Songtian of the People’s Republic of China in the
Republic of South Africa visited the Coega Special Economic Zone in
Port Elizbeth and the East London Industrial Development Zone, as
well as the Premier of the Eastern Cape and Mayor of Port Elizabeth,
on the 18th to 19th of September 2017. At the Coega Zone, he visited
the production facilities of China’s FAW Group and BAIC Motors, and
committed the Chinese Embassy to actively promoting Chinese investment in the zones (Embassy of the People’s Republic of China in the
Republic of South Africa 2017). The Ambassador’s visit followed that of
Former Vice President Li Yuanchao, the Vice President of the People’s
Republic of China in 2016.
7
LABOUR: OBSTACLES AND OPPORTUNITIES
213
We can now turn our attention to an evaluation of the South African
labour environment, and consider how the Special Economic Zones, with
specific reference to the Coega Special Economic Zone, fares against the
Chinese Model of Special Economic Zones.
7.5.6
Evaluation of the South African Special Economic Zones
Against the Pillars and Protocols of China’s Model of Special
Economic Zones
This evaluation considers both the external environment which is outside
the direct control of South African Special Economic Zone operators
and investors’ control and mostly a function of government intervention and support, and the Pillars and Protocols that the operators and
investors are able to influence. It is not limited to the labour market,
which has been the primary focus of the chapter, in order to provide a
more comprehensive understanding of South African Zones (Fig. 7.10).
There is dichotomy in these pillars of leadership support, government
support and government policy (Fig. 7.10). One the one hand, the South
African government has enacted legislation governing Zones and government policy has promoted the establishment of Special Economic Zones
though billions of Rands worth of investment. The political will is there
and there seems to be a good understanding of the contribution these
Zones could have on socio-economic development.
Fig. 7.10 Evaluation of Pillars 1, 2, and 3 of the Chinese Model of Special
Economic Zones: Leadership support, policital will, and government policy
214
B. ROBINSON
On the other hand, planning of these zones was sometimes haphazard,
and policies were not implemented in a coordinated manner. The lack
of incentives provided for zone investors was a significant shortcoming,
while the political might of trade unions within the government created
a labour environment that constrained investment (Fig. 7.11).
Position, position, position (Fig. 7.11). All the Zones in South Africa
are positioned strategically. The Coega Special Economic Zone is situated in the Nelson Mandela Metropolitan Municipality, home to the 5th
largest city in South Africa, Port Elizabeth, an industrial orientated city.
That in itself provides investment opportunities. It is home to two ports,
the Port of Port Elizabeth and the new deep-sea Port of Ngqura which is
situated in the Zone itself. It has good connections to road and rail infrastructure linking the city to the rest of South Africa, and its two ports and
city airport provide easy access to international markets. It is also a beautiful city with all the modern conveniences, which provide an enjoyable
lifestyle for those relocating to the city as a result of investment in the
Zone.
Proximity to existing industrial nodes has also been considered in the
location of zones. Graham Taylor of Coega Development Corporation,
in his article ‘SEZs—Carpe Diem for Industrial Development’, suggests
that success of SEZ programmes are a function of enabling investors
Fig. 7.11 Evaluation
of Pillar 4 of the
Chinese Model of
Special Economic Zones
in Africa
7
LABOUR: OBSTACLES AND OPPORTUNITIES
215
to ‘pluck’ (as in Carpe Diem’s ‘to pluck the day’ meaning) opportunities for industrial development in geographic areas, rather than them
attempting to capitalise on short-term windows of incentives provided by
government in ‘fluid policy environments’ (2012: 119). Taylor mentions
two such locality opportunities in existing industries for Coega investors:
Automotive, agro-processing and logistics.
Coega is perfectly situated in the country’s automotive heartland and
lends itself to investments in this sector. Volkswagen Group South Africa
was established in Uitenhage, an industrial town in the Nelson Mandela
Metropolitan Municipality in 1946 and is today Germany’s largest investment in South Africa. It is also home to the manufacturer IZUZU and
there are approximately 150 vehicle component manufacturers in the
province. It made perfect sense for the Chinese automaker BAIC to therefore invest in the Zone. Daimler Chrysler is situated nearby in the Buffalo
City Municipality in the same province of the Eastern Cape. In addition, the Eastern Cape Province had a strong agricultural sector, hence
agro-processing opportunities are rife and investments in the Zone in this
sector have begun to materialise (Fig. 7.12).
This Chapter has been dedicated to ‘people’ (Fig. 7.12) from the
perspective of the labour market. It has described how the South African
Fig. 7.12 Evaluation
of Pillar 5 of the
Chinese Model of
Special Economic Zones
in Africa
216
B. ROBINSON
labour market offers a surplus of labour, including many young jobseekers. However skills, especially critical skills are often lacking. Productivity issues have been highlighted and the volatility of the labour market
and communities being an issue of concern. Labour legislation makes it
difficult to hire and fire, while strong and politically aligned trade unions
push up wages.
With regards Special Economic Zones, Bernstein (2014: 33) confirms
that they offer an opportunity for attracting foreign investment,
contributing to economic growth and creating employment, yet this
hasn’t happened to the extent it could have done in South Africa. For
Special Economic Zones to be successful in South Africa, Bernstein advocates that the focus should be on low-skilled industries and promoting
flexible employment relationships.
As had been found in other Special Economic Zones visited in Africa,
wage levels tend to be higher in the zones that outside the zone as a
result of training and skills transfer. The same applies in South African
Special Economic Zones, but in the Coega Special Economic Zone for
example, the reason is very different. The Zone is government owned
and the operators set wage rates for different categories of workers that
are higher than outside the zone. The Zone Labour Agreement that stipulates these wages has been motivated from the perspective of creating a
stable business environment, mostly free of community protest action and
labour unrest—labour stability comes at a price: Higher labour costs.
The assumption is that an SEZ should incentivise investment, and one
of the important considerations for investors is the cost of labour—if the
cost of labour is higher outside the SEZ, it would act as a disincentive
to investment. In the South African context, it seems as though there is a
problem in this regard, as labour is sometimes significantly more expensive
inside the SEZ than outside. A comparative analysis was conducted on
three of the many categories of SEZ wages per sector and national wages
and detailed in Table 7.5. It confirms the substantial differences between
wage rates of the zone and the minimum wages of the country.
The importance of integration (Fig. 7.13) is critical for Special
Economic Zones’ success:
Connections must be drawn between the dots of disparate development
initiatives with the view to stimulating agglomerative economies. When
viewed in isolation, dots do not make a developmental picture, but when
R44.50
R44.50 × 9 h per day × 22 days = R8811.00
Task Grade D (Kitchen supervisor, driver,
security officer Grade B)
Task Grade E (Senior clerk, chef, security
officer Grade A)
Task Grade A (Watchman, security officer
Grade E, general assistant)
Service providers
SEZ rate (from 1 Sept 2017)
Entry rate: R25.02
Zone rate: R26.94
Calculating the monthly wages at 22 days per
month at the Zone rate: R26.94 × 9 h per day
× 22 days = R5334.12
R37.76
R37.76 × 9 h per day × 22 days = R7476.48
Type of occupational task
Industry sector
Minimum wage as per Department of
Labour for Security Officer Grade B:
R4668.00
Minimum wage as per Department of
Labour for Security Officer Grade A:
R5209.00
Minimum wage as per Department of
Labour for Security Officer Grade E:
R4102.00
Department of Labour Minimum
wages (from 1 Sept 2017)
Table 7.5 Comparative analysis of SEZ wages per sector and municipal wages (Coega Industrial Development Zone:
Zone Labour Agreement 2017 and Department of Labour South Africa 2017)
7
LABOUR: OBSTACLES AND OPPORTUNITIES
217
218
B. ROBINSON
Fig. 7.13 Evaluation
of Pillar 6 of the
Chinese Model of
Special Economic Zones
in Africa
viewed in an integrated manner, strong, long-term growth prospects can
be realised. (Taylor 2011)
One area in which integration is essential is logistics—Zones must be integrated into the logistics network of the country. As mentioned before,
most zones in South Africa are strategically positioned and linked to ports
and the national road and rail network. It has to be mentioned though
that the road and rail network in Africa has deteriorated significantly over
the past couple of decades due to poor maintenance and investment.
The Special Economic Zones Act of 2014 described earlier makes
specific reference to integrating the zone with the host province’s growth
strategies, as well as integration with the local economic development of
the host municipality. It also requires that investments be aligned to the
national governments economic and industrial development policies. Has
this happened in the case of Coega? Perhaps not to the extent it should
have done.
7
LABOUR: OBSTACLES AND OPPORTUNITIES
219
April (2016) investigated South African Special Economic Zones and
contends that for the South African government to achieve their SEZ
vision, there needs to be a necessary step of “good governance interoperability”—this entails a range of flexible and accessible linkages between
different government departments within the localities of municipalities.
These linkages enable investors in the zone to operate efficiently with
streamlined local government processes and support. In evaluating the
Coega Special Economic Zone amongst others, April found that these
linkages were lacking, and recommended the implementation of aspects
of the ‘One-stop Shop’ models for reducing bureaucratic red-tape to
improve efficiencies within local government.
The South African government has invested in some of the best infrastructure (Fig. 7.14) found in Africa to support their Special economic
zones. These are detailed in Chapter 9. Critical services are also prioritised
and generally utilities and services are modern and efficient.
Fig. 7.14 Evaluation
of Pillar 7 of the
Chinese Model of
Special Economic Zones
in Africa
220
B. ROBINSON
Fig. 7.15 Evaluation of the protocols of the Chinese Model of Special
Economic Zones in South Africa
South Africa has, however, been grappling with power supply issues
since 2009, and ‘loadshedding’ has been introduced on numerous occasions to protect the integrity of the countries power grid. This is a major
concern for investors that require uninterrupted power supply—one casualty was the loss of anchor tenant Rio Tinto who abandoned their plans
to construct an aluminium smelter in Coega (Fig. 7.15).
References
African Development Bank. 2020. African Economic Outlook 2020 [Online].
Available from https://www.afdb.org/en/documents/african-economic-out
look-2020. Accessed 27 Feb 2020.
7
LABOUR: OBSTACLES AND OPPORTUNITIES
221
Alexander, P., C. Runciman, T. Ngwane, B. Moloto, K. Mokgele, and N. Van
Staden Frequency and Turmoil: South African Community Protests 2005–
2007. SA Crime Quarterly, 63.
April, Y. 2016. Assessing Preconditions for Effective Special Economic Zones
from a South African Local Governance Perspective. Journal of Public
Administration and Development Alternatives 1 (2): 59–75.
Bernstein, A. 2014. South Africa’s Key Challenges: Tough Decisions and New
Directions. The Annals of the American Academy of Political and Social Science
652: 20–47.
Department of Employment and Labour. 2019. Industrial Action Report 2018
[Online]. Accessed from: http://www.labour.gov.za/DocumentCenter/Rep
orts/Annual%20Reports/Industrial%20Action%20Annual%20Report/2018/
Industrial%20Action%20Report%202018.pdf. Accessed 31 May 2020.
Department of Higher Education and Training. 2019. Skills Supply and Demand
in South Africa. Pretoria [Online]. Accessed from: http://www.dhet.gov.za/
SiteAssets/Report%20on%20Skills%20Supply%20and%20Demand%20in%20S
outh%20Africa_%20March%202019.pdf. Accessed 26 May 2020.
Department of Labour. 2017. Private Security Sector Minimum Wages. Accessed
from: http://www.labour.gov.za/DOL/downloads/legislation/sectoral-det
erminations/basic-conditions-of-employment/privatesecuritywages_120917.
pdf. Accessed 20 Sept 2018.
Du Toit, M. 2020. South African Describe the Pain of Unemployment. The
Conversation, February 13. Accessed from: https://theconversation.com/
south-africans-describe-the-pain-of-unemployment-130250. Accessed: 26
May 2020.
Embassy of the People’s Republic of China in the Republic of South Africa.
2017. H.E. Ambassador Lin Songtian Visited Coega and East London
Industrial Development Zone in South Africa, September 20.
Industrial Development Zone (IDZ) Programme. 2008. The Department of
Trade and Industry. Pretoria.
Industrial Policy Action Plan. 2010. 2010/11–2012/13 Industrial Policy Action
Plan. Department of Trade and Industry. Accessed from: http://pmg-ass
ets.s3-website-eu-west-1.amazonaws.com/questions/Q1569Annexure.pdf.
Accessed 25 May 2020.
Industrial Policy Action Plan 2018/19–2020/21. 2018. The Department of
Trade and Industry. Accessed from: https://www.gov.za/sites/default/files/
gcis_document/201805/industrial-policy-action-plan.pdf. Accessed 25 May
2020.
Marumo, P., and M. Sebolaaneng. 2019. Assessing the State of Youth Unemployment in South Africa: A Discussion and Examination of the Structural Problems Responsible for Unsustainable Youth Development in Africa. Gender &
Behaviour 17 (3): 13477–13485.
222
B. ROBINSON
Minimum-Wage.org. 2021. International [Annual] Minimum Wage Rates 2021
[Online]. Accessed from: https://www.minimum-wage.org/international.
Mthembu, N. 2018. A Critical Evaluation on How We Can Address Violent
Strikes in South Africa: What Does the Labour Relations Act Require
(Unpublished Master’s dissertation). University of KwaZulu Natal, South
Africa.
Nel, E., and C. Rogerson. 2013. Special Economic Zones in South Africa:
Reflections from International Debates. Urban Forum 24: 205–217.
Paret, M. and C. Runciman. 2016. The 2009+ South African Protest Wave.
Working USA: The Journal of Labor and Society 19: 301–319.
Productivity SA. 2020. Accessed from: https://productivitysa.co.za/what-we-bel
ieve. Accessed 26 May 2020.
South African Special Economic Zones Programme. 2019. Mail & Guardian
Special Report, July 26. Accessed from: https://mg.co.za/article/2019-0726-00-south-african-special-economic-zones-programme/. Accessed 25 May
2020.
Special Economic Zones Act. 19 May 2014. Act No. 16 of 2014: Special
Economic Zones Act, 2014. Government Gazette of the Republic of South
Africa. 587 (37664).
Stats SA. 2020. Results from Wave 2 Survey on the Impact of the COVID -19
Pandemic on Employment and Income in South Africa. Department of Statistics South Africa [Online], 20 May. Accessed from: http://www.statssa.gov.
za/publications/Report-00-80-03/Report-00-80-03May2020.pdf. Accessed
26 May 2020.
Stats SA (2). 2020. Quarterly Employment Statistics. Department of Statistics
South Africa [Online], March 31. Accessed from: http://www.statssa.gov.za/
publications/P0277/P0277December2019.pdf. Accessed 26 May 2020.
Tang, X. 2010. Bulldozer or Locomotive? The Impact of Chinese Enterprises
on the Local Employment in Angola and the DRC. Journal of Asian and
African Studies 45 (3): 350–368.
Taylor, G. 2011. Joining the Dots: New Growth path Opportunities for the
NMBM and Regional Economy. Perspectives 3: 54–62.
Taylor, G. 2012. SEZs—Carpe Diem for Industrial Development. Perspectives on
Real Economy Issues 4: 118–126.
The Global Competitiveness Report 2019. 2019. World Economic Forum
[Online]. Accessed from: http://www3.weforum.org/docs/WEF_TheGlobal
CompetitivenessReport2019.pdf. Accessed 31 May 2020.
The New Growth Path. 2010. South African Government, November 23.
Accessed from: https://www.gov.za/about-government/government-progra
mmes/new-growth-path. Accessed 25 May 2020.
The World Bank Group. 2020. GDP Growth (Annual %)—South Africa. © World
Bank [Online]. Accessed from: https://data.worldbank.org/indicator/NY.
7
LABOUR: OBSTACLES AND OPPORTUNITIES
223
GDP.MKTP.KD.ZG?locations=ZA. Accessed 6 May 2020. License: Creative
Commons Attribution License (CC BY 3.0 IGO). http://creative-commons.
org/licenses/by/3.0/igo/.
The World Bank Group. 2021a. Primary, Secondary and Tertiary Completions Rate, Total (% of Relevant Age Group—Sub-Saharan Africa. © World
Bank [Online]. Accessed from: https://data.worldbank.org/indicator/SE.
PRM.CMPT.ZS?locations=ZG. Accessed 13 July 2021. License: Creative
Commons Attribution License (CC BY 3.0 IGO). http://creative-commons.
org/licenses/by/3.0/igo/.
The World Bank Group. 2021b. Unemployment, Total (% of Total Labor Force)
(Modelled ILO Estimate)—Sub-Saharan Africa. © World Bank [Online].
Accessed from: https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS?
locations=ZG. Accessed 13 July 2021. License: Creative Commons Attribution License (CC BY 3.0 IGO). http://creative-commons.org/licenses/by/
3.0/igo/.
Zimmerman, D. 2010. The Role of Industrial Development Zones in South Africa’s
Industrial Development and Capacity (Unpublished Master’s research report).
University of Stellenbosch, South Africa.
CHAPTER 8
The Social and Environmental Impact
of Special Economic Zones in Africa
Economic development due to China’s investment in African Special
Economic Zones inherently has the potential to contribute to societal development. Poverty reduction and improved living standards are
promoted by more wealth in the economy, provided this economic
growth is inclusive. Economic growth also has the propensity to initially
contribute to environmental degradation before regulatory standards
are effectively managed and technology is adopted that manages these
negative externalities.
These issues are explored in this Chapter. The social contribution of
China to Africa in general, and the Special Economic Zones visited during
the research field visits in particular, with a special section exploring the
Chinese perspective of living in these zones, are investigated. It then
considers China’s own attempts to reduce environmental damage through
strict regulatory intervention, and its successes in this regard. China–
African policy is contemplated to determine the commitment China and
Africa have towards environmental issues in Africa and muses whether
Chinese home country policies have led to a shift of polluting industries
to Africa. The case study of Ethiopia’s Eastern Industrial Park in presented
to derive some contextual insights on this debate. The chapter concludes
with considering the pillars and protocols that Special Economic Zones
in Africa possess as benchmarked against the Chinese Model of Special
Economic Zones.
© The Author(s), under exclusive license to Springer Nature
Singapore Pte Ltd. 2022
B. Robinson, African Special Economic Zones,
https://doi.org/10.1007/978-981-16-8105-9_8
225
226
B. ROBINSON
8.1
The Social Dimension of China in Africa
The book authored by Kobus Jonker and I entitled ‘China’s Impact
on the Africa Renaissance—The Baobab Grows’ (2018) emphasised the
contribution China has had and will continue to have on Africa’s organic
growth trajectory. While this dynamic has direct implications for building
human, natural, institutional, production and financial capital and the
resultant economic wealth that may accrue to African nations, social and
cultural wealth can also be generated.
And social wealth is sorely needed in Africa. All African countries are
experiencing high levels of poverty, sometimes even food scarcity; poor
living standards; comparatively low longevity; many countries are engaged
in active warfare, internal conflict, or still suffering from the ravages
of wars from decades before; remnants of colonialization linger; human
rights are trampled upon; lack of health and educational opportunities prevail; high unemployment levels; and economic inequality persists.
These all have a profound impact on the well-being of ordinary African
citizens.
China in its relationships with developing economies often emphasises
the fact that China itself is a developing economy and has had to grapple
with the problems of poverty, food scarcity, poor living standards and
the like as it embarked on efforts towards their ‘moderately prosperous
society’. China’s successes are often perceived as being replicable, so not
only can China provide direct interventions for societal upliftment, but it
can also share its experience in the hope of shortening the learning curve
for African Nations.
The Forum on China–Africa Cooperation’s (FOCAC) Beijing Action
Plan of 2019–2021 provides useful insights into China and Africa’s reciprocal undertakings regarding social development in Africa. Some of these
are summarised in Table 8.1.
There are a number of examples of direct humanitarian efforts of China
in Africa. The Ebola epidemics in West Africa saw a range of medical interventions that contained the spread; provided health facilities; provided
health care; trained medical staff and saved numerous lives. Humanitarian
aid during the displacement of people due to conflict and food scarcity is
another example—consider the support China provided for refugees from
Somalia living in Kenya.
More recently, China’s assistance to Africa during the COVID-19
pandemic is noteworthy. While the coronavirus pandemic may have
8
THE SOCIAL AND ENVIRONMENTAL IMPACT …
227
Table 8.1 Social Development Cooperation (FOCAC Beijing Action Plan of
2019–2021)
4.1.1 China will enhance assistance to African countries, LDCs in particular, to deepen
South–South cooperation and promote common development
4.1.2 The African side applauds China’s efforts in helping African countries reduce
poverty, improve people’s livelihood and implement the 2030 Agenda for Sustainable
Development under the Assistance Fund for South–South Cooperation. China will
share more of its development practices with Africa, support cooperation with Africa on
economic and social development planning, and continue its support through the Fund
to African countries for achieving the SDGs and Agenda 2063 of the African Union
4.1.4 China will extend US$15 billion of grants, interest-free loans and concessional
loans to Africa. For those of Africa’s least developed countries, heavily indebted and
poor countries, landlocked developing countries and small island developing countries
that have diplomatic relations with China, the debt they have incurred in the form of
interest-free Chinese government loans due to mature by the end of 2018 will be
exempted
4.2 This section provides a range of cooperation undertakings to improve medical
health and public access to public health
4.3 The Action Plan provides details of China’s support for improving access to quality
education and skills transfer. This includes a range of scholarships and exchange
programmes and the roll out of Confucius Institutes in Africa
4.4 This section relates to the sharing of China’s Poverty Reduction Experience—some
details are as follows:
4.4.1 The African side appreciates China’s active efforts in implementing the
China–Africa poverty reduction plan, the “Happy Life” and other poverty alleviation
projects to help Africa improve rural public service, enhance skills training for better
employment, improve the environment and living conditions of rural communities, and
protect the health and well-being of African women and children. The African side
appreciates China’s exemption of outstanding interest-free government debts owed by
African LDCs maturing by the end of 2015
4.4.2 China will continue to support the poverty reduction efforts of Africa to deliver
a better and happier life to African people
4.4.4 China will continue to organize workshops on poverty reduction policies and
practices tailored to the needs of African countries, offer degree education on poverty
reduction and development for African countries, and help train specialized personnel
from Africa. China will continue to create new models of training to maximize the
effect and put in place a China–Africa poverty reduction training and exchange network
originated in Wuhan, China, the relatively quick response by Chinese
authorities and the severe lockdown restrictions they imposed in the
country, cushioned the population from what could have been a devastating spread of the virus in the early stages of transmission when effective
treatments were less known.
China then turned its attention to the international community. Past
US President Donald Trump went as far as accusing China for the
228
B. ROBINSON
spread of the virus and calling it the ‘Chinese virus’ or ‘kung flu’.
China counteracted, affirming its support of the World Health Organisation, accused by the USA and others of bias towards China. China
adopted the knick-named ‘masked diplomacy’, initially providing personal
protective equipment (PPE) to 18 countries in Africa mostly in West
Africa; sent medical teams to support health services in Ethiopia and
Algeria; while also providing technical and medical advice on treating
COVID-19 in Mozambique. Private Chinese individuals contributed as
well, with the much-publicised donations of medical equipment and
supplies to Africa’s Centre for Disease Control and Prevention. African
countries burdened by economic troubles were also supported—debt
service suspension agreements were reached with 12 African countries
and waivers were provided on matured interest-free loans for 15 African
countries.
An ‘Extraordinary China–Africa Summit on Solidarity Against
COVID-19’ was held in June 2020, with representatives from China, the
African Union, and various African leaders. The Summit was focussed on
addressing the threats the pandemic posed on the health and economic
welfare of African countries with various undertakings by China to
support mitigating the damaging effects of the various lockdown interventions and lives lost to COVID-19. It made the commitment that
should China develop a vaccine against the coronavirus, it would make
this available to developing countries.
It is not all rosy though. There have been criticisms against Chinese
investors in Africa. The mining sector is one area that has received negative publicity in this regard: accusations of evictions and displacement
of communities; damage to communal land; lack of community engagement; and exploitation of workers and harmful working conditions.
8.2
Evidence from Special Economic Zones
The social impact of foreign investment is not always that easy to discern.
While the number of jobs that may have been created would be recorded,
and estimations made of how many people in households may derive
benefit from this employment revenue, other benefits for society are more
subtle in nature. Chapter 7 considered the importance of job creation
as a result of the Chinese investment in Special Economic Zones, while
this section provides insights from observations and discussions on other
aspects of societal benefits as a result of such Chinese investments.
8
8.2.1
THE SOCIAL AND ENVIRONMENTAL IMPACT …
229
Enterprise Development
From an enterprise development perspective and resulting social benefits
thereof, the zones were found to have sourced most of the raw materials
required in their production from local suppliers, thus stimulating the
establishment of small, medium and larger enterprises. For example, the
Eastern Industrial Park sourced wood for furniture production, and sand
and stone for cement production. Unfortunately, there were limitations to
local procurement, with investors finding it difficult to source many basic
manufactured products such as pipes, tools, electrical parts and packaging
materials necessitating some importation of goods. The industrialisation
of the zone supported other smaller industries, some of which are within
the zone, but many others are from companies nearby. This contributes
to an eco-system of industrial growth for the region, not just for the zone
itself. In time, perhaps, this eco-system would grow resulting in import
substitution with local companies producing a wider range of goods and
services for the zone’s investors.
8.2.2
Local Communities and Urbanisation
Speaking to a representative of the Ethiopian zone, I was told how the
local community benefited from the migration of employees and business visitors to the area, with restaurants, bars, guest houses and hotels
mushrooming in the area, creating a vibrant and diversified urban town
alongside the zone. A similar positive occurrence happened at the Lekki
Free Trade Zone, and not only was there a positive impact on job creation
for local communities, but the migration of people to the area ‘decentralised the congestion of Lagos’ and was going to ‘change the face of
Lagos and Nigeria’ according to one investor.
8.2.3
Infrastructural Benefits
Infrastructural investment by Special Economic Zones investors provided
the essential infrastructure necessary for the functioning of the zones, but
which had direct benefits to the local communities as well. For instance,
building access roads to the zones were agreed to by the Nigerian state
governments, but these didn’t always materialise, resulting in the zones’
investors having to upgrade roads at their own cost to ensure efficient
logistics. This improved transport facilities for local communities as well.
230
B. ROBINSON
Fig. 8.1 Road to Nigeria’s Ogun-Guangdong Free Trade Zone
Figure 8.1 illustrates how poorly maintained the roads are to the OgunGuangdong Free Trade Zone—the Zones investors confirmed that they
will be partly rebuilding this road which will be invaluable to the local
community’s access to the city of Lagos.
8.2.4
Access to Services and Facilities
Ethiopia’s Eastern Industrial Park provided a 1-Stop service for investors
that included a bank and police station. Employees working in the zone
thus benefited from access to these facilities as well as the added safety
and security that the police presence and 300 security guards (at the
time of visiting the Zone) offered for investors and those working there.
This security is important noting that security issues have in the past
been faced by the zone, such as anti-government protests. Other zones
visited in Nigeria and Zambia had a similar security component to their
zones. These interventions contributed to safety and security in the areas
in which they situated, directly benefitting local communities.
The Lekki Free Zone had its own clinic with health services provided
for free to all employees. The Chambishi multi-facility Economic Zone
went one step further, sponsoring an entire hospital, Sinozam Friendship
Hospital, to support the zone’s employees, but which provided advanced
medical services for the towns in the copper belt region (Fig. 8.2). Zones
8
THE SOCIAL AND ENVIRONMENTAL IMPACT …
231
Fig. 8.2 The Sinozam Friendship Hospital
often provided other benefits to employees, such as meals and transport
within the zone.
8.2.5
Conflict with Local Communities
There was some degree of conflict with local communities, mostly as a
result of land rights and ownership concerns of these communities. Local
settlements within the Nigerian Free Trade zones were pointed out to me
as we travelled through and alongside the two zones visited. The Nigerian
Ogun-Guangdong Free Trade Zone had experienced particular problems
of land encroachment by communities, often in the form of locals plating
crops, resulting in only 50% of the envisaged zone having been allocated. Small protests, such as people lying in the road obstructing traffic
within the zone, and disputes over ‘our family land’ were problematic,
compounded by disputes amongst the ‘5-kings’ who didn’t recognise
the others. Poor land surveying and record-keeping had also led to the
232
B. ROBINSON
Fig. 8.3 Land encroachment in the Chambishi multi-facility Economic Zone—
crops planted by a local land-rights claimant
‘overlapping’ of land due to incorrect coordinates. State governments was
either unwilling or unable to assist the zone in addressing these problems,
instead telling the zone’s investors to simply ‘take the land’. In Zambia’s
Chambishi multi-facility Economic Zone, ‘compensating’ the locals was
sometimes resorted to in order to have the locals vacate the lands on
which they had recently planted crops (Fig. 8.3).
8.3 The Chinese Diaspora in Africa, Chinese
Migration and Integration in local Communities
Chinese migrant labour is not new in Africa. For example, during the
Gold rush in South Africa, over 60,000 unskilled Chinese labourers came
to South Africa to address the shortage of manpower on the mines. One
can still find latter generations of Chinese throughout the country. But
the current level of Chinese working and living in Africa, and Africans
8
THE SOCIAL AND ENVIRONMENTAL IMPACT …
233
in China, attests to the significant interest China has developed in the
continent since the 1990s.
It is suggested that more than half a million Africans now live and work
in China, and guestimates of China in Africa is around one to two million
people. The Chinese in Africa range in occupation from traders and small
retailers, to corporate investors, and labour in Chinese companies. Many
live and work in the various Special Economic Zones operated by the
Chinese.
Chinese investors and their employees have adapted remarkably quickly
to the countries in which they have chosen to locate their enterprises.
Language is quickly learned, local customs are understood and adopted,
and the nuances of conducting business are assumed.
There is also a reciprocal learning and appreciation process that takes
place. While Confucius Institutes and exchange programmes throughout
Africa are driven by China’s government and various bilateral and FOCAC
agreements, what happens in the Special Economic Zones may be on a
smaller scale, but they are just as valuable in improving cultural understanding and acceptance. Travelling to Nigeria just after the Chinese
New Year, the various companies in the zones had gone out of their
way to decorate their entrances and offices with Chinese ornaments
and new years celebrations (Fig. 8.4). More than that though, some
Chinese companies encourage employees and their families to celebrate
with them, and in some cases, Chines investors attended local festivities,
thus contributing to a better appreciation of their respective fascinating
cultures and traditions.
It is not always that easy though with many living in the zones
describing the ‘culture-shock’ of moving to Africa. A Chinese investor
said the following: ‘When Chinese come work in Africa, we sacrifice a
lot. My wife has to stay in China; family very important to our life…
I’m the only child—I have to support my parents; I can’t bring them
here’. While all the zones had Chinese restaurants, there is little entertainment. While some of the Zones may have sporting facilities, or the
residential compounds provide sports and recreational facilities—Chambishi multi-facility Economic Zone residential village has walkways, a dam
with thatched social area, a large swimming pool, and huge hall for sports
and social events (Fig. 8.5)—there is little else available. The Chinese
seldom venture into the neighbouring cities, and if so, it is primarily for
supplies or business purposes, certainly not for socialising. Spending 6–
10 months in Africa, only returning to China for a month, if difficult for
234
B. ROBINSON
Fig. 8.4 Lekki Free
Trade Zone restaurant
with Chinese
decorations
Fig. 8.5 Recreational facilities at Chambishi multi-facility Economic Zone’s
residential complex for Chinese employees
8
THE SOCIAL AND ENVIRONMENTAL IMPACT …
235
most Chinese working within the zones. Not all Chinese investors and
workers were negative though. Speaking to an investor of a small service
company, he declared Zambia as being good: ‘business is good, tired of
city life in China’, preferring the friendly people, landscape, climate and
more laid-back Zambian pace of life. In actual fact, he had encouraged
family to come visit and tour Zambia.
When I posed the question of what the biggest difference was between
China and Nigeria, one interesting response was that in China people
are of the ‘same tribe, same language’, but in Africa, there are just so
many tribes, cultures, traditions and religions. One example provided by
a ceramic factory owner at Ogun-Guangdong Free Trade Zone in Nigeria
was the difficulty of operating 24 hours, with the Christian component
of the workforce unwilling to work Sundays and those of the Islam faith
adhering to Friday prayers. Once the investor understood these differences, he adapted the work schedules to alternate between Christian
and Muslim employees to allow them to participate in their respective
religious activities. Language is also an obvious problem—most of the
Chinese engineers and operators were unable to speak any English. The
work ethic differed as well, with one Chinese investor explaining that ‘the
way they think and work: totally different… Chinese work hard and fast,
push Nigerians to do the same, leads to lots of arguments’.
Having considered the social aspect of these Chinese Special Economic
Zones in Africa, attention is now directed towards the environmental
impact of these zones.
8.4 China’s Economic Growth
and Environmental Degradation
There is a common perception that there has to be a trade-off between
economic growth and the environment: As economies grow rapidly due
to industrialisation there is an expectation that pollution will proliferate.
Economists have even adapted the Kuznets Curve, a graphical depiction
of the growth of inequality as economies grow, to a representation of
pollution and waste similarly increasing as economies grow. This pollution epidemic then flattens out, and eventually decreases due to increased
environmental sensitivity by communities and regulatory interventions to
protect the environment.
China, it seems had followed this route as it embarked on its own
miraculous economic growth trajectory, achieving the not-so-welcome
236
B. ROBINSON
global achievement of emitting the greatest level of greenhouse gases,
and is now home to some of the world’s most polluted cities.
One such region is the Beijing-Tianjin-Hebei region with an annual
average fine particulate matter (PM2.5) concentration of 93 µg per cubic
meter (µg/m3 ) in 2014, far exceeding the national PM2.5 standard of
35 (µg/m3 ) and the World Health Organization (WHO) PM2.5 standard of 10 (µg/m3 ) (World Bank 2018). Policies for economic growth,
even policies for improving the lifestyles of people, have sometimes failed
in the past to adequately address pollution effects. For instance, an analysis on the Huai River Policy that aimed to provide indoor heat did not
include pollution abatement equipment and the authors suggest this led
to a “staggering loss” of 2.5 billion life years in Northern China (Chen
et al. 2013: 12941).
China has for some time acknowledged the problem and seems intent
on addressing it.
8.4.1
Paris Agreement
The Paris Agreement of 2015, which came into effect on the 4th of
November 2016 (Paris Agreement 2015), is an outcome of the United
Nations Framework Convention on Climate Change, a global intervention that aimed to address the threat of climate change. It made special
mention of developing countries that were particularly vulnerable to
the consequences of climate change and considered the funding and
technology transfer needed to address the special needs of least developed economies. Articles of the convention mentioned some specific
targets, such as ensuring global temperatures were less than 2 °C above
pre-industrial levels and limiting temperature increases to 1.5 °C above
pre-industrial levels.
Parties to the Convention were required to set their own specific
national targets (National Determined Contributions [NDCs]) in terms
of greenhouse gas emissions. In addition, a commitment to supporting
developing countries in the implementation of their targets was detailed,
which included Article 9 that specified an obligation of developed country
parties to the Convention providing financial resources to assist developing countries in mitigating greenhouse gas emission, and for other
countries to voluntarily provide such support; Article 10 detailed cooperative support for technology development and transfer; and Article 11
8
THE SOCIAL AND ENVIRONMENTAL IMPACT …
237
addressed capacity development in developing countries, especially those
least developed countries most susceptible to climate change.
The implication of the above is that parties to the convention, both
developed and developing countries have a global responsibility to reduce
not only their own greenhouse gas emissions, but also support other
countries, especially developing and least developed countries in mitigating their own greenhouse gas emissions. There are two obligations for
China to consider in this regard related to their relationship to African
countries:
1. China should set its own target of mitigating its own greenhouse
gas emissions
2. China should support developing and least developed countries,
such as is the case in many African countries, in achieving their
targets through financial assistance, technology transfer and capacity
development.
This would also imply, at the very least, that China’s footprint in Africa,
through its developmental support and foreign direct investment, is
responsible in terms of mitigating greenhouse gas emissions.
8.4.2
China’s Policy Commitment to Mitigating Climate Change
The seems to be echoed in China’s Intended Nationally Determined
Contributions (INDC) submission (2015). The submission highlights
the fact that China itself, is also a developing country going through
rapid industrialisation and urbanisation as it attempts to achieve economic
development, eliminate poverty and improve the well-being of its citizens,
while at the same time it seeks to protect the environment and mitigate climate change. It goes further to describe this responsibility from
a national and global perspective:
To act on climate change in terms of mitigating greenhouse gas emissions
and enhancing climate resilience, is not only driven by China’s domestic
needs for sustainable development in ensuring its economic security, energy
security, ecological security, food security as well as the safety of people’s
life and property and to achieve sustainable development, but also driven
by its sense of responsibility to fully engage in global governance, to forge
238
B. ROBINSON
a community of shared destiny for humankind and to promote common
development for all human beings.
The submission then details specific actions that China has embarked
upon, or intends to embark upon, to combat climate change. These
actions are detailed in Table 8.2.
Table 8.2 A summary of China’s Intended Nationally Determined Contributions (INDC)
In 2009, China committed to the 2020 goal of lowering carbon dioxide emissions per
unit of GDP by 40–45% from the 2005 level; increase the share of non-fossil fuels in
primary energy consumption to 15%; and increase forested area by 40 million hectares
and forest stock volume by 1.3 billion cubic meters compared to the 2005 levels
China has implemented the following plans: The National Program on Climate
Change; the Work Plan for Controlling Greenhouse Gas Emissions during the 12th
Five-Year Plan Period; the Comprehensive Work Plan for Energy Conservation and
Emission Reduction for the 12th Five Year Plan Period; the 12th Five Year Plan for
Energy Conservation and Emission Reduction; the 2014–2015 Action Plan for Energy
Conservation, Emission Reduction and Low-Carbon Development; and the National
Plan on Climate Change (2014–2020)
By 2014 China achieved the following: Carbon dioxide emissions per unit of GDP was
33.8% lower than 2005 levels; the share of non-fossil fuels in primary energy
consumption was 11.2%; forested area and forest stock volume increased by 21.6
million hectares and 2.188 billion cubic meters compared to the 2005 levels; the
installed capacity of hydro power was 300 gigawatts (2.57 times that of 2005); the
installed capacity of on-grid wind power was 95.81 gigawatts (90 times that of 2005);
the installed capacity of solar power was 28.05 gigawatts (400 times that of 2005); and
the installed capacity of nuclear power was 19.88 gigawatts (2.9 times that of 2005)
By 2030, China’s intends to achieve the following: Achieve the peaking of carbon
dioxide emissions around 2030 and making a concerted effort to peak early; to lower
carbon dioxide emissions per unit of GDP by 60–65% from the 2005 level; to increase
the share of non-fossil fuels in primary energy consumption to about 20%; and increase
the forest stock volume by about 4.5 billion cubic meters from the 2005 level
The submission also details the following intended policies and measures to combat
climate change: Implement proactive national strategies on climate change; improve
regional strategies on climate change; build a low-carbon energy system; build an
energy efficient and low-carbon industrial system; control emissions from the building
and transportation sectors; increasing carbon sinks; promote a low-carbon ‘way of life’;
enhancing climate resilience; innovating a low-carbon development growth pattern;
supporting science and technology improvements around climate change; providing
financial and policy support; promoting a carbon emission trading market; improving
statistical and accounting systems for Greenhouse gas emissions; stakeholder
participation; and promoting international cooperation on climate change
8
THE SOCIAL AND ENVIRONMENTAL IMPACT …
239
The business community has responded positively towards the environmental policies considering the profitability of some of the initiatives. The
Pearl River Tower in the Guangzhou municipality is a zero carbon emission building, and urban planners have developed low-carbon districts
and zones, such as the Lile Island in Hainan Province; the Shouan township in Chengdu; the Yujiabao financial district in Tianji; the Wangjiadun
Green Central Business District in Wuhan; and a number of townships in
Huizhou in Guangdong Province (Li et al. 2013: 534).
8.4.3
China’s Water Scarcity and Water Pollution
While air pollution can be considered as probably the most dangerous
of pollutants due to the negative impact on Climate Change, there are
many forms of pollution that can have an enormous negative impact
on earth’s resources and the quality of peoples’ lives, such as water,
soil, noise and light pollution. Water and soil pollution are particular
outcomes of industrialisation which compromises access to safe drinking
water and water available for agricultural purposes, while soil pollution
from industrial waste negatively impacts land use and contributes to
erosion, deforestation and desertification.
China is a water-scarce country, and the added effect of industrialisation on water and soil pollution has exacerbated the problem. Coupled
to a high population and rapid urbanisation, and land and agricultural
usage patterns, water pollution is a serious problem and it is estimated
that a third of China’s lakes and rivers are polluted to such an extent
that they are not suitable for human use. This has many unfortunate
outcomes. One of which is that China’s ability to feed its huge populations is compromised, the other is the health risks that are associated with
such pollution—the relationship between water pollution and waterborne
diseases has been well documented, and recent research points towards a
correlation between water pollution due to industrialisation in China, and
instances of digestive cancers (Ebenstein 2012: 200).
President Xi has been a key motivator for a balanced approach to development that incorporates an ecological awareness and focus in creating a
‘Beautiful China’ and describes “Clear waters and green mountains” as
invaluable assets (Xi 2017: 426).
China’s water-related policies are extensive. Table 8.3 describes policies
directed at improving water quality in cities.
240
B. ROBINSON
Table 8.3 Chinese water-related policies (Adapted from Key Water Policies,
Chien 2019)
Policy
Objective
Implementation Plan for the War on Urban
Black and Smelly Water Body Control
Reduce the water cleaning rate to over
90% for cities by the end of 2020
Special Action Plan for the Environmental
Protection of National Drinking Water Sources
Cities are to complete a campaign for
environmental protection by 2019
Opinions on Innovation and Improvement of
the Price Mechanism for Promoting Green
Development
Improve pricing mechanisms on urban
water supply
Assessment Standards for National
Water-saving Cities
Requirements to qualify as a
water-saving city
Table 8.4 Chinese industry and technology-related policies (Adapted from Key
Policies: Industry and Technology, Chien 2019)
Policy
Objective
Three-year Action Plan for Resolutely Winning
the War on Pollution Prevention and Control
of Industry and Communication Industry
Water use to be improved to prevent
pollution
Notice on Promoting Financial Support for
Industrial Green Development in
Country-level Regions
Support of innovative green
development
Notice on Issuing the Appraisal Indicator
System of Clean Production for 14 Sectors
Revision and consolidation of
indicator systems for cleaner
production
Action Plan for the Pollution Prevention and
Control of Waste Lead-acid Batteries
Specific intervention to promote green
development of the lead-acid industry
Policy is also directed towards industry and technology. Table 8.4
describes some of the key policies in this regard:
With the drive to cleaning up its act, is China’s policy inadvertently
contributing to environmental damage elsewhere?
8
8.5
THE SOCIAL AND ENVIRONMENTAL IMPACT …
241
Is China Shifting Environmental
Risks to Emerging Economies?
There has been much debate around China’s environmental impact
in Africa, from mining in environmentally sensitive areas, depletion of
natural resources, dams and other large-scale infrastructural projects’
impact, and evaluations of the negative externalities of Chinese financing
models, such as the Angola-mode type framework agreements. The
discussion in this book, however, is limited to the context of industrialisation through Special Economic Zones, and as such, this environmental
debate centres around these zones.
Many African countries, indeed, many developing nations throughout
the world, are desperately trying to ensure sustainable economic growth
through industrialisation and export growth. Thus, many are keen on
attracting Chinese investments to their shores. The question arises as to
whether they would compromise environmental security for the sake of
economic development, and even if this may not be their intention, do
they have the governance structures in place to protect the environment?
The motivation for Chinese investors to consider Africa is complex
and varied, and include factors such as ‘cheap’ labour, attractive incentives, lucrative markets, and potentially, a less environmentally regulated
environment—the ‘flying geese syndrome’. The greater the focus of
China on achieving its ‘Beautiful China’ objective through its environmental policies, the greater the propensity for polluting industries to find
‘friendlier’ regulatory environments. Coupled to recent pollution enforcement efforts in China, such as 40% of China’s factories being shut down
after inspection by environmental bureau officials, and 80,000 factories
being fined and criminal offences laid (Nace 2017), many factory owners
don’t consider there to be many options available to them, except to move
production elsewhere.
Sometimes this has been termed ‘outsourcing pollution’. Mike O’Sullivan (2017) describes how China has changed from itself being an
‘outsourced’ pollution recipient during the country’s high levels of
production of goods destined for USA and Western Europe markets
and estimates that this resulted in 110,000 premature deaths in China.
As China becomes a consuming nation, the pattern continues, but the
outsourcing of pollution now occurs between China and newer industrialised economies where manufacturing takes place. Another term used is
‘exporting pollution’—Dexter Roberts (2014) uses the term in explaining
242
B. ROBINSON
how Hebie Province are embarking on plans to move 20 million tons of
steel and 30 million tons of cement production to Africa, Latin America,
Eastern Europe and other parts of Asia.
Other manufacturing concerns have similarly moved to Africa, and
some quickly raised environmental eyebrows. The China–Africa Overseas
Leather Products SC tannery was closed within 40 days of beginning
operations in Ethiopia due to pollution complaints; the Jeronimo Group
Industries & Trading PLC, a subsidiary of the Chinese glove-maker Phiss,
was accused of dumping waste into rivers in Somaliland (Shinn 2016: 40).
While it is clear that China is taking a positive environmental stance in
its home country, what is the Chinese environmental position in Africa as
this shift of industry continues to the continent?
8.5.1
China’s Declarations Towards Environmental Support
in Africa
The Forum on China–Africa Cooperation (FOCAC) is a useful source
for information on China’s policies and commitments to Africa. One of
the outcomes of the 2018 FOCAC summit held in Beijing is the Forum
on China–Africa Cooperation Action Plan (2019–2021). The Action Plan
details an array of joint commitments between China and African countries including diplomatic and cultural exchanges, economic cooperation,
infrastructure development, social development, and peace and security
cooperation.
From an environmental perspective, the Action Plan has two areas
worth detailing: (1) Energy and Natural Resources in terms of infrastructural development. (2) Environmental Protection and Tackling Climate
Change as an element of Social Development Cooperation.
The Energy and Natural Resources aspect of cooperation are detailed
in Table 8.5. It details various exchanges between China and Africa
including technological, the establishment of various centres to facilitate
these exchanges, and general support for the improvement of Africa’s
energy sector through infrastructural investment. Various sections have
been highlighted to illustrate that the cooperation will focus mostly on
renewable energy provision that supports sustainable development and
the environment.
In addition to cleaner energy and sustainable use of natural resources,
the Action Plan often refers to environmental issues throughout the document, for instance, in terms of the ocean economy and the plans for
8
THE SOCIAL AND ENVIRONMENTAL IMPACT …
243
Table 8.5 FOCAC Energy and Natural Resources commitments (FOCAC
Action Plan [2019–2021])
China and Africa will enhance policy dialogue and technological exchanges on energy
and resources, coordinate each other’s energy and resource strategies, conduct joint
research, and formulate energy development plans that are operable and based on local
conditions. The two sides will work together for the establishment of a China–Africa
Energy Cooperation Center in Africa to further advance energy exchanges and
cooperation
The two sides encourage and support Chinese and African companies, while upholding
the principle of mutual benefits, to work together in energy trade and the investment,
development and operation of energy projects, carry out demonstration projects in
green energy financing, and explore green and sustainable ways of energy
cooperation. China will support the development of renewable energy, mainly solar
energy in Africa as well as the use of battery storage and strengthening of the
electricity grid
The Chinese side supports Africa’s capacity-building in the energy sector, and will
provide professional training for personnel from competent authorities, research
institutions and key companies of relevant countries to improve Africa’s capabilities in
developing and managing their own energy systems
The Chinese side will, on the basis of respecting the will of African countries, explore
third-party cooperation with Africa in the energy sector, where each side can leverage
their strengths, provide policy recommendation for Africa’s energy development, and
work for progress of relevant projects
The two sides will actively consider the joint establishment of a China–Africa
Geoscience Cooperation Center for joint research on national resources sustainability
and environment, in order to gain greater ability for the sustainable development
and utilization of national resources by the respective countries
coastal and marine economic zones, emphasis is made that such development and cooperation should promote “sustainable approaches that are
environmentally, socially and economically effective”.
Table 8.6 specifically refers to environmental protection and the
mitigation of climate change detailed in the Action Plan.
The commitments are far reaching, and include a strategic approach
through the China–Africa Green Development Plan, to practical interventions around issues such as mitigating the risks of climate change; pollution control; smart cities; low-carbon development; forest management;
combating desertification; protecting wildlife including specific efforts
to combat illegal trade in wildlife; and supporting disaster management
when environmental disasters occur (highlighted).
244
B. ROBINSON
Table 8.6 FOCAC Environmental
(FOCAC Action Plan [2019–2021])
and
Climate
Change
commitments
The African side appreciates China’s efforts in actively implementing the China–Africa
green development plan to improve Africa’s capacity for green, low-carbon and
sustainable development, and also China’s efforts in implementing projects on clean
energy, wildlife protection, environment-friendly agriculture and smart cities, and
China’s support in Africa’s endeavor toward green, low-carbon and sustainable
development
China has decided to undertake 50 projects for green development and ecological
and environmental protection in Africa to expand exchanges and cooperation with
Africa on climate change, ocean, desertification prevention and control, and
wildlife protection. China will also work with Africa to raise public awareness of
environmental protection
The two sides will work together to set up a China–Africa environmental cooperation
center, and deepen environment cooperation through more policy dialogue and joint
research on environmental issues and stepping up exchanges and cooperation on the
environment industry and technical information sharing, among others. China will
continue to implement the China–Africa Green Envoys Program to strengthen
Africa’s human capacity for environmental management, pollution prevention and
control, and green development, and continue to enhance capacity-building and
promote the green development of Africa
The two sides will promote cooperation on sustainable forest management, and
conduct practical cooperation in the trial, demonstration and extension of programs
between Chinese and African governments and research institutes to achieve
sustainability in forest management and contribute to global ecological
governance
The two sides will work together to build a China–Africa Bamboo Center and actively
support Africa’s capacity-building in the sustainable management of bamboo and
rattan resources, the innovative development of bamboo and rattan industries, the
development of their products and poverty alleviation, and relevant industrial policy
and standardization. The two sides will work to carry out international bamboo and
rattan demonstration projects and improve Africa’s ability to utilize rattan and bamboo
resources in a sustainable manner and to modernize the industry
China will support Africa in its capacity-building for the prevention and treatment of
desertification. China welcomes African countries to use its model and technology of
desertification treatment in light of their real needs and apply it locally through
demonstration projects
(continued)
8
THE SOCIAL AND ENVIRONMENTAL IMPACT …
245
Table 8.6 (continued)
The African side highly appreciates Chinese government’s support for Africa’s efforts
to protect wildlife resources and crack down on poaching and illegal trade in
wildlife, and its own initiative to stop domestic commercial ivory processing and
sale. The two sides will enhance cooperation in the protection of wildlife, and better
communicate and consult each others’ positions on inter-governmental agreements,
international conventions and other multilateral occasions. China will continue to
collaborate with African countries on improvement in capabilities for wildlife
protection, provide ecological protection training opportunities and explore
cooperation on demonstration projects, combat illegal trade in wildlife and wildlife
products, and incentivize those who have made outstanding contribution in
anti-poaching and combating the illegal trade of wildlife
China will continue to provide Fengyun meteorological satellite data, products and
necessary technical support for African countries, and to provide meteorological and
remote-sensing application equipment, education and training support for African
countries, in order to contribute to the implementation of the integrated African
Strategy on Meteorology (Weather and Climate Services), and to better equip African
countries for disaster prevention and mitigation as well as climate change response
China will deepen pragmatic cooperation with African countries under the framework
of Climate Change South-South Cooperation, and help African countries
strengthen climate change adaption capabilities through providing assistance in kind
and capacity-building training to jointly meet the challenge posed by climate change
The two sides will improve the multi-tiered dialogue mechanism on disaster prevention,
mitigation and relief, and expand exchanges over risk monitoring and evaluation of
drought, application of anti-drought technology, community-level drought
resistance capabilities, emergency response, and post-disaster reconstruction
China will hold regular workshops and training sessions on disaster risk management,
application of disaster relief and mitigation technologies, and public awareness
campaigns for disaster management teams, technical professionals and communities
from Africa. China will, depending on the situation, send experts to local communities
to guide and organize such training and capacity-building activities
In times of disaster emergency, China will provide quick mapping service using space
technology upon the request of African countries
8.5.2
Chinese Special Economic Zones in Africa
and the Environment
A couple of examples have previously been detailed of Chinese companies having been accused of contributing to environmental degradation in
Africa, but what is less clear is the extent to which investments in Special
Economic Zones have had an environmental impact. Does the structure
of Zones with their more regulated environment and the move towards
246
B. ROBINSON
more socially responsible investment, reduce negative environmental
externalities?
Unfortunately, data and information regarding the environmental
impact of these zones is scant, and mostly revolves around strategic documents and requirements for environmental impact assessments. Bräutigam
and Tang (2011) mention the following available information in that
regard: The Chambishi Multi-facility Economic Zone’s master plan
requires an environmental appraisal and certification by the International
Standards Organisation (ISO) 14,000 standards; and construction in the
Mauritius’ Junfei Economic and Trade Cooperation Zone was subject
to environmental impact assessments and certification from Mauritian
authorities, which often resulted in delays.
The question remains as to whether these types of requirements and
regulations have any real impact. There is, of course, a responsibility
on the African side to find a balance between economic stimulus and
infrastructural development outcomes, and crafting appropriate Special
Economic Zone policy that provides effective legal and regulatory mechanisms to protect the environment. Not doing so will waste the lesson
learned from China where many SEZs faced serious environmental challenges (Zeng 2016). These regulatory interventions would need to be
capacitated to ensure effective implementation, such as an adequate
budget and interagency coordination. Enforcement is critical to ensure
standards are met. Farole (2011) suggests that at national policy level,
Special Economic Zones provide an opportunity to experiment with
policy innovations to improve upon environmental compliance issues.
Farole also suggests that most national SEZ programs struggle to
provide effective capacity and authority to the regulators to monitor and
enforce environmental compliance in the zones. This creates the opportunity for abuse of the system and negative externalities—this is a particular
concern as these zones have the potential for significant negative environmental impact—reference to the problem of wastewater in Lesotho is
made.
Other examples of environmental problems as a result of the Chinese
Special Economic Zones are difficult to find: Farmers complained of a
variety of crops being damaged as a result of acid rain from the Chambishi
Copper Smelter, which was subsequently ordered to shut down by the
Zambia Environmental Agency in 2013, only to be re-opened once remedial rehabilitation and operational procedure were introduced to reduce
sulphur dioxide emissions (António and Ma 2015).
8
THE SOCIAL AND ENVIRONMENTAL IMPACT …
247
This preliminary overview suggests that Chinese investments in African
special economic zones may have had a lesser detrimental effect on
the environment than investments outside of the zones such of those
Chinese investments in the resource sectors of oil, mining and forestry
sectors, most of which are inherently environmentally sensitive; or other
investments in infrastructure, such as dams and road and rail, also with
significant potential negative environmental impact.
Whether this is due to the nature of the industries in the zones or a
more effective regulatory environment on zone activities remains unclear.
The commitment to responsible environmental agency and compliance
by the zone management and investors could play an important role.
There may also be a greater degree of alignment between their activities
and that of policies back home in China or their respective provinces.
Conditions of financing, such as China’s Exim Bank’s guidelines on
social and environmental impact and the bank’s monitoring of compliance, could similarly have an impact on Chinese firm’s environmental
orientation—non-compliance may result in loans being retracted.
There are examples of an environmentally responsible commitment by
Chinese investors in Africa special economic zones: The Zambia-China
Economic and Trade Cooperation Zone carried out a comprehensive
impact assessment to ensure compliance with Zambian environmental
laws and regulations (United Nations Development Programme 2015).
And of course, the investments in these zones in sectors such as renewable
energy, may also have long term positive environmental impact.
Shinn (2016), while debating China’s environmental impact in Africa,
does acknowledge that “in all fairness, if a Chinese investment has no
notable negative environmental impact, it rarely receives attention, and
good practices are usually ignored by environmental groups and the
media.”
To contextualise these issues, a case study of Ethiopia is provided in
the section which follows.
8.6 Case Study:
Ethiopia---An Environmental Perspective
A World Bank study (2010) on the effects of climate change on Ethiopia
highlights the fact that the country is heavily dependent on rainfed agriculture, and that its geographical location and topography makes the
country highly vulnerable to the impact of climate change. The country
248
B. ROBINSON
has for decades suffered from mercurial rainfall—the country has experienced numerous severe droughts and floods. Global warming promises to
exacerbate the problem. The study considered various scenarios of climate
change impact, with their Dry2 scenario resulting in a reduction of annual
rainfall over 2045–2055 of 10–25% in the central highlands and 0–10% in
the south, and 25% in the North of the country. The potential impact of
this vulnerability is concerning—47% of Ethiopian GDP is a function of
agriculture; the damage to the road transport system from flooding could
disrupt supply chains; and the ability of dams to provided hydropower
and irrigation may be compromised. The study estimates that under a
Dry2 scenario, GDP losses could be between 6 and 10%.
Ethiopia is also a party and has indicated its intention to limit the country’s greenhouse gas emissions in 2030 to 145 MtCO2 or lower, which
equates to a 255 MtCO2 reduction from the ‘business-as usual’ scenario
(expected trajectory of emissions without intervention) in 2030—a 64%
reduction (Federal Democratic Republic of Ethiopia’s Intended Nationally Determined Contribution 2015). This sectoral reduction is illustrated
in Fig. 8.6.
Ethiopia has developed the Climate Resilient Green Economy Strategy
(CRGE) to assist in achieving the ambitious target, and the strategy is
integrated into the Second Growth and Transformation Plan. There is
a proviso though: “Ethiopia’s INDC is contingent upon an ambitious
multilateral agreement being reached among Parties that enables Ethiopia
to get international support and that stimulates investments” (2015: 1).
The Chinese government and Chinese investors have introduced a
number of initiatives to assist Ethiopia in combatting climate change: In
2020, China provided Ethiopia with a microsatellite to assist the country
in researching the effects of climate change by monitoring droughts,
floods, water resources and forestry; Chinese funded and built wind
farms (Adama I and II) for cleaner energy production; and Chinese
and other funders financed the contentious Gibe III dam to generate
much-needed hydroelectric power for Ethiopia and the region—while
hydroelectric power is low-carbon by its very nature, concerns have
been raised regarding the negative impact this may have on communities
downstream and the environmental damage caused by such large scale
dams.
As has been previously suggested, Ethiopia is a water scarce country,
which makes it particularly susceptible to climate change. These limited
8
THE SOCIAL AND ENVIRONMENTAL IMPACT …
249
Fig. 8.6 Federal Democratic Republic of Ethiopia’s Intended Nationally Determined Contribution (INDC) (2015: 1) of greenhouse gas emission reduction
resources are further pushed to the limits by urbanisation and industrial
development.
Ethiopia has 12 river basins, two of which are dry, eight are water
deficit basins and only two are water surplus basins. The Awash river
basin stretches from the west of Addis Ababa to the Djibouti border—
about 1250 km in length. It is the most utilised water basin, and the
most polluted. This basin and its various reservoirs supply Addis Ababa
and a variety of large cities with domestic water—this would include water
for industries such as those in the Eastern Industrial Park. Water demand
continues to grow thanks to urbanisation and population growth, while
supply decreases due to increased use and natural causes. Water wastage
is commonplace as water is subsidised and provided at no or low cost to
the consumer, and there is little effort made to conserve water. The basin
also provides water for irrigation purposes in agricultural areas—irrigation inefficiency and mismanagement of water resources in this sector is
also problematic. Water pollution from industry has also been flagged:
250
B. ROBINSON
toxic metals from tanneries; quantity of waste-water from the sugarcane
industry with a high pollutant concentration etc. (Adeba et al. 2015).
Water scarcity also has also contributed to land disputes, especially when
property rights are insecure (Di Falco et al. 2019).
Air pollution is another area of concern. Indoor air pollution and the
resultant health risks posed is a result of approximately 95% of households
utilising biomass fuels—wood, dung, charcoal, and crop residues—for
energy needs at home (Sanbata et al. 2014). While there has been a
number of studies on indoor air pollution, outdoor air pollution including
studies on the impact on industrialisation, are limited on Ethiopia (Tefera
et al. 2016). What has been found is that up to two-thirds of outdoor
pollutants are geological materials—the dusty streets in Addis Ababa
attests to the problem—while carbon monoxide levels were found to
have higher concentrations during peak morning and afternoon traffic
congestion.
Ethiopia does have regulatory policy in place regarding pollution.
Some of the policy on climate change has been addressed, but what about
water scarcity and pollution? The country’s constitution, article 92/1
required the government to endeavour to ensure that all Ethiopians live
in a clean and healthy environment. This provides Ethiopians with the
right to a clean and healthy environment and a duty on the government
to ensure this that is the case. The country also introduced the Conservation Strategy of Ethiopia and the Environmental Policy of Ethiopia
(Federal Democratic Republic of Ethiopia 1997). The numerous environmental policy objectives include preventing the pollution of land, air and
water in the most cost-effective way. The policy recognises the trade-offs
that may need to be made between economic growth and environmental
protection: “When a compromise between short-term economic growth
and long-term environmental protection is necessary, then development
activities shall minimize degrading and polluting impacts on ecological
and life support systems. When working out a compromise, it is better
to err on the side of caution to the extent possible as rehabilitating
a degraded environment is very expensive and bringing back a species
that has gone extinct is impossible”. It also addresses water resources,
requiring the protection of water resources including a provision to
recycle waste-water. Specific mention is made of industrial waste and
pollution and adhering “to the precautionary principle of minimizing and
where possible preventing discharges of substances, biological materials or
their fragments from industrial plants”. The policy continues to provide
8
THE SOCIAL AND ENVIRONMENTAL IMPACT …
251
much more detail in this regard. In addition, standards have been set for
air quality, an Environmental Protection Authority has been established,
and various other policy initiatives have been made.
Whether this policy has been effectively implemented, and whether
the regulatory bodies have been established or capacitated to monitor
and enforce the various policies, is questionable. Tefera et al. (2016)
suggests that “the progress achieved so far in adopting wastewater treatment facilities seems to lag behind the target period. In addition, there
is an inadequate supply of air treatment plants in the industrial sectors
that emit pollutant to the environment”. Yale University’s Environmental
Performance Index 2020 (Wendling et al. 2020) ranks Ethiopia 134th of
180 countries. Various sub-indexes are also provided and Ethiopia ranks
as follows: Air quality 90th; Heavy metals 166th; Climate Change 166th;
Pollution Emissions 166th; Waste Management and Water Resources, one
of the pool of countries with a score of 0. These rankings suggest that the
country is struggling to improve environmental standards in the country.
8.6.1
Ethiopia’s Eastern Industrial Park
Once on the outskirts of frenetic Addis Ababa, travelling to Ethiopia’s
Eastern Industrial Park (EIP) is seamless along a modern 3-lane highway,
with much evidence of Chinese investment in the form of industry along
the route (Fig. 8.7).
Arriving early in the morning at the change of shift, it becomes immediately apparent that thousands of Ethiopians are employed at the Zone.
Working shifts over 24 hours, the zone never sleeps as approximately
15,000 Ethiopians and 1500–2000 Chinese provide the manpower for
the 96 companies in the zone (at the time of my visit in 2019). The
second phase of development is expected to ramp up this number to
100,000 Ethiopian employees (Fig. 8.8).
Eastern Industrial Park has been successful in attracting investors
(Figs. 8.9, 8.10, 8.11) encouraged by its superior reliable services and
infrastructure, as well as abundant low-cost labour; political stability; security; large market; weather—“Djibouti is too hot”—; and “people are
friendly”. The 96 companies are mostly Chinese owned, although increasingly, other foreign companies are starting to invest. The industries they
represent are varied including technologically advanced pharmaceutical
companies such as SSP; textile industries producing clothing for the local
Ethiopian market such as denim company Lida Textile; and the flagship
252
B. ROBINSON
Fig. 8.7 The imposing entrance to Eastern Industrial Park
investment of Huajian Shoe Factory with brands such as GUESS, Calvin
Klein and others.
The Zone aims to provide what was termed ‘1-stop service’ for
investors—a bank, police station, investment office, and a customs office
are all found in the zone. The reduces bureaucracy and facilitates transactions.
As with many Chinese Special Economic Zones in Africa, the Zone is
almost entirely self-sufficient. It has its own substation, its own wells, and
own sewerage system.
It is difficult to determine the exact water usage of the Eastern Industrial Zone and the impact this may have on the water basin, and the
same applies for the impact the Zone has on water and air pollution.
it would, however, be difficult to deny that some of the industries would
require significant water resources for production, and that there would
be potential resultant pollutants. A study by Dadi et al. (2017) did find
that large concentrations of biological oxygen demand (BOD), chemical
oxygen demand (COD), total suspended solids, and pH were prevalent in
textile industries in the region—these were above the discharge limit set
by the Environmental Protection Agency. A study at Kombolcha, where
the Chinese built Kombolcha Industrial Park is situated, found tanneries
(Cr) and steel processing (ZN) effluents discharged into rivers exceeding
8
THE SOCIAL AND ENVIRONMENTAL IMPACT …
253
Fig. 8.8 Location of the Eastern Industrial Park (Google Earth)
the Ethiopian emission guidelines. While Pb effluents were high from the
tannery, these did not exceed the guidelines (Zinabu et al. 2018).
30 of the companies that have invested in the Zone are textile
companies. They are mostly small companies, some family owned. Their
investment has been galvanised by the more than 110 million population in Ethiopia—a lucrative market for their products (the logistical costs
of transport makes exporting prohibitive). The dying process of denims
(one of the factories visited) requires a lot of water, and the wastewater is
discharged. The standards for the quality of the discharged water is low
from a regulatory perspective: “water must not be coloured”. The onus
of responsibility therefore rests on the textile factory owner.
254
B. ROBINSON
Fig. 8.9 SSP pharmaceutical
Fig. 8.10 Huajian shoe factory
Similarly, the air pollution controls by the Ethiopian authorities are
lax for companies operating in the Zone: “no black smoke”. And there
was no discernible black smoke, but there was certainly smoke. Whether
pollutants would be within an acceptable range is unclear.
8
THE SOCIAL AND ENVIRONMENTAL IMPACT …
255
Fig. 8.11 Lida Textile—denim manufacturer
The Chinese investors that I spoke to acknowledged that many Chinese
printing and textile companies shifted their production to countries such
as Ethiopia due to the increased environmental regulation in China,
and poor regulation and/or enforcement in other developing economies.
Management of the Zone suggested that industries in the Eastern Industrial Zone were unlikely to introduce environmental controls voluntarily
in light of an ineffective environmental regulatory environment, although
they could be influenced by home country requirements—an example was
made of European companies operating in the Zone that were required
to comply with their home country’s or global environmental standards.
As indicated earlier in the chapter, it does seem that there has been less
evidence of environmental degradation within Special Economic Zones
than outside of these zones. In the case of the Eastern Industrial Zone,
this may be a function of a well-managed zone and some regulatory
oversight of the zones environmental impact by Ethiopian authorities.
This could be further improved in a number of ways: Ethiopian
environmental standards need to be enhanced especially around monitoring environmental impact and enforcement of regulations; Chinese
Zone management being more proactive in reducing negative environmental impact; and for Chinese policy to inculcate better environmental stewardship by Chinese firms in other countries when faced with
256
B. ROBINSON
Pillar 5:
People
Protocol 7:
Environmental
consideration
• Enterprise development
• Local community
development and
urbanisation
• Infrastructural benefits
• Access to services and
facilities
• Conflict with local
communities
Pillar 6:
Integration
• Fewer cases of environmental
damage within SEZs than
outside
• Poor policing of environmental
standards
• Reliance on firms to selfregulate environmental issues
• Integration with
neighbouring cities
• Positive migration and
urbanisation
• Integration with local
communities
• Relatively small scale
Protocol 10:
Social System
• Infrastructure has positive
spin-offs for local
communities
• Failure of government to
Infrastructure meet their infrastructural
obligations
Pillar 7:
• The social system was
continually improved
• Companies played a role in
improving well-being
• Engagement and integration
between Chinese and local
communities
Fig. 8.12 The African SEZ pillars and protocols of the Chinese Model of
Special Economic Zones in Africa
a weak environmental regulatory framework—‘walk-the-talk’ regarding
their commitment to global environmental issues.
8.7
Pillars and Protocols
The Special Economic Zones fulfilled the pillars and protocols of the
Chinese SEZ model in the following ways with regards social and
environmental issues (with reservations in italics) (Fig. 8.12).
References
Adeba, D., M. Kansal, and S. Sens. 2015. Assessment of Water Scarcity and Its
Impacts on Sustainable Development in Awash Basin Ethiopia. Sustainable
Water Resources Management 1: 71–87.
António, N., and S. Ma. 2015. China’s Special Economic Zones in Africa:
Context, Motivations and Progress. Euro Asia Journal of Management 44
(25): 79–103.
Bräutigam, D., and X. Tang. 2011. African Shenzhen: China’s Special Economic
Zones in Africa. The Journal of Modern African Studies 49 (1): 27–54.
Chen, Y., A. Ebenstein, M. Greenstone, and H. Li. 2013. Evidence on the
Impact of Sustained Exposure to Air Pollution on Life Expectancy from
China’s Huai River Policy. Proceedings of the National Academy of Sciences
of the United States of America 110 (32): 12936–12941.
Chien, T. 2019. Key Water Policies 2018–2019: China Water Risk, March 19.
Accessed from: http://www.chinawaterrisk.org/resources/analysis-reviews/
key-water-policies-2018-2019/. Accessed 8 May 2019.
8
THE SOCIAL AND ENVIRONMENTAL IMPACT …
257
China’s Intended Nationally Determined Contributions. 2015. United Nations
Climate Change. Accessed from: https://www4.unfccc.int/sites/submis
sions/INDC/Published%20Documents/China/1/China’s%20INDC%20-%
20on%2030%20June%202015.pdf. Accessed 5 Feb 2019.
Dadi, D., T. Stellmacher, F. Senbeta, S. Van Passel, and H. Azadi. 2017. Environmental and Health Impacts of Effluents from Textile Industries in Ethiopia:
The Case of Gelan and Dukem, Oromia Regional State. Environmental
Monitoring and Assessment 189: 11.
Di Falco, S., J. Laurent-Lucchetti, and G. Kohlin. 2019. Property Rights, Land
Disputes and Water Scarcity: Empirical Evidence from Ethiopia. American
Journal of Agricultural Economics 102 (1): 54–71.
Ebenstein, A. 2012. The Consequences of Industrialization: Evidence from Water
Pollution and Digestive Cancers in China. The Review of Economics and
Statistics 94 (1): 186–201.
Farole, T. 2011. Special Economic Zones in Africa: Comparing Performance
and Learning from Global Experience. Washington: The International Bank
for Reconstruction and Development/The World Bank. © World Bank
[Online]. Accessed from: http://documents.worldbank.org/curated/en/996
871468008466349/pdf/600590PUB0ID181onomic09780821386385.pdf.
Accessed 23 Apr 2020. License: Creative Commons Attribution License (CC
BY 3.0 IGO). http://creative-commons.org/licenses/by/3.0/igo/.
Federal Democratic Republic of Ethiopia Environmental Policy. 1997.
Accessed from: http://archive.basel.int/legalmatters/natleg/documents/eth
iopia01.pdf. Accessed 20 Jan 2021.
Federal Democratic Republic of Ethiopia’s Intended Nationally Determined
Contribution. 2015. United Nations Climate Change. Accessed from:
https://www4.unfccc.int/sites/submissions/INDC/Published%20Docu
ments/Ethiopia/1/INDC-Ethiopia-100615.pdf. Accessed 6 Feb 2019.
FOCAC Action Plan. 2019–2021. 2018. FOCAC, September 12. Accessed from:
https://www.focac.org/eng/zywx_1/zywj/t1594297.htm. Accessed 23 May
2019.
Jonker, K., and B. Robinson. 2018. China’s Impact on the African Renaissance—
The Baobab Grows. Singapore: Palgrave Macmillan.
Li, W., S. Grimm, and H. Esterhuyse. 2013. China–Africa Cooperation: Joint
Engagement in Adaptation to Climate Change. In Climate Change: International Law and Global Governance, ed. O. Ruppel, C. Roschmann, and K.
Ruppel-Schlichting, 529–547. Nomos Verlagsgesellschaft mbH.
Nace, T. 2017. China Shuts Down Tens of Thousands of Factories in Widespread
Pollution Crackdown. Forbes, October 24. Accessed from: https://www.
forbes.com/sites/trevornace/2017/10/24/china-shuts-down-tens-of-tho
usands-of-factories-in-widespread-pollution-crackdown/#356770e46661.
Accessed 13 May 2019.
258
B. ROBINSON
O’Sullivan, M. 2017. High Consumption, Trade Shift Harmful Effects of Pollution. VOA News, April 11. Accessed from: https://www.voanews.com/a/pol
lution-trade-study/3804203.html. Accessed 13 May 2019.
Paris Agreement. 2015. United Nations Climate Change. Accessed from:
https://unfccc.int/sites/default/files/english_paris_agreement.pdf. Accessed
5 Feb 2019.
Roberts, D. 2014. China’s Plan to Export Pollution. Bloomberg Businessweek, November 28. Accessed from: https://www.bloomberg.com/news/art
icles/2014-11-27/chinas-pollution-solution-move-factories-abroad. Accessed
13 May 2019.
Sanbata, H., A. Asfaw, and A. Kumie. 2014. Indoor Air Pollution in Slum
Neighbourhoods of Addis Ababa Ethiopia. Atmospheric Environment 89:
230–234.
Shinn, D. 2016. The Environmental Impact of China’s Investment in Africa.
Cornell International Law Journal 49: 48–67.
Tefera, W., A. Asfaw, F. Gilliland, A. Worku, M. Wondimagegn, A. Kumie, J.
Samet, and K. Berhane. 2016. Indoor and Outdoor Air Pollution-Related
Health Problem in Ethiopia: Review of Related Literature. Ethiopian Journal
of Health Development 30 (1): 5–16.
United Nations Development Programme and the International Poverty Reduction Center in China. 2015. Comparative Study on Special Economic Zones
in Africa and China [Online]. Accessed from: http://www.cn.undp.org/
content/dam/china/docs/Publications/UNDP-CH-Comparative%20Study%
20on%20SEZs%20in%20Africa%20and%20China%20-%20ENG.pdf. Accessed
7 Jan 2021.
Wendling, Z., J. Emerson, A. De Sherbinin, D. Esty, D. et al. 2020. 2020
Environmental Performance Index. New Haven, CT: Yale Center for Environmental Law & Policy. Accessed from: https://epi.yale.edu/#:~:text=
The%202020%20Environmental%20Performance%20Index,environmental%
20health%20and%20ecosystem%20vitality. Accessed 20 Jan 2021.
World Bank. 2010. Economics of Adaptation to Climate Change: Ethiopia.
Washington, DC: © World Bank. https://openknowledge.worldbank.org/
handle/10986/12504. License: CC BY 3.0 IGO.
World Bank. 2018. Helping China Fight Air Pollution. © World Bank,
June 11. Accessed from: http://www.worldbank.org/en/news/feature/
2018/06/11/helping-china-fight-air-pollution.print. Accessed 22 Jan 2019.
License: Creative Commons Attribution License (CC BY 3.0 IGO). http://
creativecommons.org/licenses/by/3.0/igo/.
Xi, J. 2017. The Governance of China II . Beijing: Foreign Languages Press Co.
Ltd.
8
THE SOCIAL AND ENVIRONMENTAL IMPACT …
259
Zeng, D. 2016. Global Experiences of Special Economic Zones with Focus
on China and Africa: Policy Insights. Journal of International Commerce,
Economics and Policy 7 (3): 1650018.
Zinabu, E., P. Kelderman, J. Van Der Kwast, and K. Irvine. 2018. Impacts and
Policy Implications of Metals Effluent Discharge into Rivers Within Industrial
Zones: A Sub-Saharan Perspective from Ethiopia. Environmental Management
61: 700–715.
CHAPTER 9
African Governments’ Enabling
(or Constraining) Influence on Special
Economic Zone Investment by the Chinese
China’s government policy towards Africa is an important stimulus for
Chinese entrepreneurs to invest in Africa. Yes, China’s positive orientation towards a country frees up financial and other resources to support
investment and protect investments from threats such as nationalisation
of foreign assets, but more than that, often there is a sense of patriotism
by Chinese investors who wish to support Chinese policy, such as the
ongoing ‘go-out’ (sic) and ‘One Belt One Road’ policy. The influential
provincial governments in China often enter into reciprocal association
agreements with cities and states in other countries, and these also engendered investors to invest in particular projects. This happened to some
extent with investors from Guangdong province supporting the OgunGuangdong Free Trade Zone in Nigeria, where personal relationships
amongst Chinese colleagues from the province facilitated knowledge of
investment opportunities in the Nigerian state.
So, while Chinese government policy goes a long way in encouraging
investment in African SEZs, when speaking to Chinese investors in African
Special Economic Zones, there was a common perception that African
governments’ political structure and development policy was sometimes a
concern and hindered Chinese in investing more in Africa.
© The Author(s), under exclusive license to Springer Nature
Singapore Pte Ltd. 2022
B. Robinson, African Special Economic Zones,
https://doi.org/10.1007/978-981-16-8105-9_9
261
262
B. ROBINSON
While this chapter will not address issues such as government policy
towards the environment or labour issues which have been covered in
other Chapters, it will highlight particular areas of interest that were
identified when speaking to zone operators and investors: these include
political leadership commitment to Special Economic Zones; political
stability, security and safety; government policy; corruption; infrastructure; service delivery; and ease of business. A case study on South African
SEZ’s infrastructure is also provided, before concluding with an evaluation of the pillars and protocols benchmarked against the Chinese model
of Special Economic Zones.
9.1
Political Leadership Commitment
to Special Economic Zones
The political leadership commitment, by the Chinese and their African
counterparts, was evident in the early stages of Chinese Special Economic
Zones in Africa. This was often supported by bilateral coordination
committees with official representatives from the countries, which operated at a strategic policy level (Bräutigam and Tang 2011).
Host country support in Africa for Special Economic Zones, however,
varies considerably—some governments go the extra mile, others do not
provide any support, and then the problematic mercurial nature of policy
or commitments not being met in some nations. Political leadership plays
a pivotal role in this regard.
Some examples of these differences are provided in my observations
and insights gained from discussions with zones’ operators and investors,
as well as some literature from other sources.
9.1.1
Ethiopia
The general sentiment in the Eastern Industrial Park was reasonably positive towards the Ethiopian, and China’s, government support for Zones
in the country. The level of support was evidenced by the fact that
the Eastern Industrial Park had been visited on a number of occasions
by high-ranking Chinese and Ethiopian Government officials, and this
produced good publicity for the Zone in China which encouraged further
investment, thus supporting the Zone’s operator’s marketing efforts.
9
AFRICAN GOVERNMENTS’ ENABLING (OR CONSTRAINING) …
263
In its early days, the Eastern Industrial Park was regarded by government as an industrial park with no significant incentives or support
for the Zone’s Chinese investors and operators. This resulted in the
investors facing bureaucracies, inefficiencies, high costs for transport, and
currency shortages. Ethiopian legislation also precluded the operators
from sub-leasing land to investors in the zone.
Fei and Liao (2020) describe how a sudden shift in government attitude and policy changed the status quo, and they provide a number of
examples of the positive nature of these changes: Special Economic Zones
were identified in development plans as a key strategy for promoting
agriculturally based, manufacturing-driven and export-oriented industrialisation; it supported SEZ development by the federal government or
through public–private partnerships; provisions on government control
of Special Economic Zones were removed; implementation strategies
focussed on creating an enabling environment for Zones; and a wide
range of policies were enacted to attract investors from tax exemptions
to logistical support.
9.1.2
Zambia
The Zambian Government, visibly supported by the Zambian President,
with the help of the Chinese Government and Chinese Financial Institutions, encouraged and facilitated the Chinese owned Zambia-China
Economic and Trade Cooperation Zone.
This has however changed thanks to the change of governments over
time. The zone operators spoke of the difficulty this created: There was
a perceived lack of understanding by officials of what Special Economic
Zones’ objectives were and what policy instruments were necessary for
them to be successful—“some haven’t even heard of a Zone before”.
This led to a lack of support for the Zone’s activities, and incentives for
investing, being reduced.
According to the Zone’s operators, government had unrealistic expectations of the Special Economic Zone. “They want investment, but don’t
know how it works to attract investment”. One example that was provided
as a disincentive to invest, was property tax, where the more they invested
in property, the more tax they paid.
264
B. ROBINSON
One investor in a fuel company mentioned the lack of engagement by
government with them and other industrial players. He complained that
the government kept increasing the fuel price without any consultation,
or even notification, explaining how he often found out about the price
increase, after the fact, though social media. The disclosure by government of the bulk purchase price of fuel was also a bone of contention, as
this made profit margins known to the general public, which led to resistance by consumers who didn’t understand the higher cost being charged
at retail level.
9.1.3
Nigeria
The differences in political willpower are clear between Nigeria, Ethiopia
and Zambia. There are also differences between regional government
support, such as the differences in Federal State support in Nigeria. Two
Special Economic Zones were visited in Nigeria, one in Lagos State where
Lekki Free Trade Zone is situated, the other in Ogun State where the
Ogun-Guangdong Free Trade Zone is home.
The Lagos State leadership have driven the establishment of the
Lekki Free Trade Zone, and while there are certainly shortcomings, the
zone operators do commend the State Government for their support.
The Lagos State Government recognised the need for diversifying the
economy, industrialising, and adopting an export orientated development
approach. Lagos State was ready to embark on a path of internationalisation and the Chinese Government realised that this signified an opportune
time to reach out and support investment in the region. The Zone
also has a significant Nigerian ownership stake, with 40% of the zone’s
ownership being in Nigerian hands, with Nigerians sitting in important
leadership positions.
There was some mention of certain obligations being unmet, resulting
in the downscaling of the initial project scope. It seems the Chinese
investors and government waited to ensure their investment was met with
Lagos Government commitment to certain infrastructural investments.
The Ogun-Guangdong Free Trade Zone receives much less support
than their counterparts in Lagos State, where broken promises, poor to
non-existent service delivery, and lack of engagement, characterise the
relationship between the Ogun State government and the Zone’s operators—“they (government) just don’t put the effort in” was a comment
9
AFRICAN GOVERNMENTS’ ENABLING (OR CONSTRAINING) …
265
from one of the Zone operator’s employees. Another investor stated that
“85% of tax income for the state comes from this industrial area (the
Zone and surrounding industrial area), but the state does nothing”. Even
though the state government hadn’t lived up to their commitments, they
were “already ready to collect dividends” from the Zone’s investors. The
issues of friction with communities mentioned in the previous chapter,
and the unwillingness of the State Government to intervene, is another
example of the perceived lack of support the Zone operators experience.
9.2
Political Stability, Security and Safety
Initially this section was going to be subdivided into political stability and
security and safety, but their interrelationship for Special Economic Zones
is relevant—political instability, state security and the safety of people and
property in zones are closely associated.
Unfortunately, most African Nations are in some form of political flux
or another. Take for example, West Africa. A World Bank Group report
commissioned on the stability and security of West Africa (Marc et al.
2015) found that most armed conflicts since independence had been
intrastate conflicts and included five large civil wars. While the trend
of large-scale civil wars seems to be dissipating and political stabilisation improving, there are still major threats that compromise the security
of these nations: election related violence; longstanding ethno-national
conflict, drug trafficking, maritime piracy, and extremism. These problems
are exacerbated by a number of factors, such as the large and growing
population of youth, and migration.
The major investments in Chinese Special Economic Zones in Africa
have been in countries that are relatively peaceful and with stable political systems. These were often mentioned by zones’ management and
their investors as being a critical deciding factor in Chinese investment
in Africa.
Not that the zones visited had been without their fair share of
problems: At the Eastern Industrial Park in Ethiopia there had been antigovernment protests, resulting in Chinese investors having been hurt. The
government provides federal guards for the zone, but to ensure the safety
and security at the zone, the operators employ about 300 of their own
guards.
266
B. ROBINSON
This was a common theme at all the Chinese operated zones in
Africa—A strong security presence of government and private security
personnel.
In Nigeria, security was, and remains, a particular concern. The OgunGuangdong Free Trade Zone’s initial investment was going to be in Imo
State, but during one of their exploratory visits to the State, some of the
Chinese contingent were hijacked. This resulted in the eventual change
of the Zone’s site to Ogun State. Even there, security is a constant
concern—I was escorted to the zone with an armed Special Protection
Unit (SPU) soldier to ensure my personal safety. Hijackings remain a
constant problem in Nigeria, and often Chinese expatriates are targeted.
Hijackers normally demand ransom, or the kidnappings are fuelled by
fundamentalist religious groups—one of the worst atrocities was in 2014
when Boko Haram kidnapped 276 female students from the town of
Chibok, and while some escaped or were freed over time, some still
remain missing.
Sometimes the cost for state security personnel and soldiers were also
borne by the Zone’s operators, as was the case at the Ogun-Guangdong
Free Trade Zone. While they had 180 security guards, 18 conventional
police and 6 SPU’s, management at the Zone indicated that this simply
wasn’t enough, and that they would probably have to double the number.
9.3
Government Policy
Industrial policy with a specific focus on Special Economic Zones as an
instrument of such policy, is a key driver of the adoption and success
of Special Economic Zones by African Nations. Previous chapters 5 and
6 describe the policies that attract foreign investment and that are key
success factors for Special Economic Zones, however, at this stage, it
is necessary to highlight how policies are sometimes dichotomous in
nature resulting in conflicting incentives and disincentives for investment.
Some of these that were of major concern to Chinese operated Special
Economic Zones in Africa are detailed below.
9.3.1
Export Orientation
The export orientation of the Ethiopian government in the face of foreign
reserve constraints, was a serious problem for existing zone operators and
a deterrent to new zones been established.
9
AFRICAN GOVERNMENTS’ ENABLING (OR CONSTRAINING) …
267
The Ethiopian government required some zones and their investors
to produce solely for export, and many companies had promised and
agreed to do just that. Yet sometimes this just wasn’t feasible, for instance,
the logistical costs of transporting manufactured goods from land-locked
Ethiopia through the Port of Djibouti, made the end product price
non-competitive in the global market for some goods.
The policy also negated the economic rationale of importsubstitution—namely the production of goods locally that were previously
imported, thus reducing the need for importing, which would in turn
contribute to stabilising Ethiopia’s foreign reserve position. For instance,
much of the textile manufacturing that was evident in the Eastern Industrial Park was almost entirely for the local Ethiopian market, which
resulted in the country not needing to import these goods. This in addition to the obvious job creation and skills transfer that could also be an
outcome of such industries. The policy also fails to recognise that industrial investment in Ethiopia could be motivated by the sheer size of the
domestic 110 million plus population/market.
The second, much larger, phase of the Eastern Industrial Park, was
subject to much stricter export requirements which could deter the
investment the zone hoped to attract.
Another point worth making, is that the foreign currency problem
makes it difficult for zone investors to access foreign currency in order
to import raw materials and other goods necessary for production. Dollar
accounts by investors may involuntarily be changed to Ethiopian Birr.
Some companies have even closed as a result. It also restricts the ability
to repatriate profits, thus de-incentivising investment—who would choose
to invest when the fruits of the investment cannot be harvested?
There didn’t seem to be such pressure on Nigerian SEZs to produce
for export, with investors viewing this as advantageous. Many invested
due to the sheer size of the Nigerian market, and their view was that them
producing for the local market was better than having these consumer
goods imported from elsewhere in the world. They also suggested that
local production resulted in wider products ranges and cheaper products
for the Nigerian consumer—“previously had to import ceramic tiles and
was expensive, now a lot cheaper”. And of course, job creation was an
important outcome, with this ceramic manufacturer directly employing
2000 workers.
268
B. ROBINSON
9.3.2
Import Restrictions
Trade barriers do, however, exist in Nigeria which frustrate the ability of
Chinese investors to run their operations efficiently, or enjoy the benefits
of tax incentives provided to the Zones.
A packaging company described the policy confusion they had experienced: Importing raw materials (pulp) was duty free, but after production
into a carton box, they weren’t able to sell the product. The reason for
this is that it is illegal to import a carton box. The fact that the raw materials had been imported resulted in the end product, the carton box, being
deemed an import. So, they couldn’t sell the product. This resulted in the
company been unable to operate for the first two years of their existence.
They had managed to eventually ‘change’ the system in order for them to
be allowed to sell the product. While they could carry themselves during
that period, they provided two examples of Chinese companies who had
eventually disinvested from the country because of this policy.
9.3.3
Currency Fluctuations
Currency is included as a policy item as countries do manipulate exchange
rates and often use foreign exchange reserves to prevent currency depreciation. A weak currency is normally regarded as good for exporters who
earn more in local currency terms and bad for importers who have to
pay more for goods in local currency terms. Since 2013, most African
countries have lost 20% of their currency value, making it more and
more expensive to import goods. Currency volatility has resulted in costs
of cross-border transactions increasing significantly and contributed to
liquidity shortages alluded to earlier (Nizard 2018). While not always
under the control of government, the issue of currency fluctuations was
a major concern for investors in Zambia’s Zone. The Zambian Kwacha’s
mercurial exchange rate made it difficult for financial planning.
9.3.4
Policy Uncertainty
Policy uncertainty was another concern raised by Chinese investors which
made it difficult to plan their operations and investments—“same-day
policy will change”.
9
AFRICAN GOVERNMENTS’ ENABLING (OR CONSTRAINING) …
269
A simple example was given. The ‘green-card’ renewal (working-visa)
increased unexpectedly from US$1000 to US$2000. This was a tremendous increase in costs for some companies who employ Chinese nationals
in Nigerian firms.
A similar issue was experienced by the Zambia-China Economic and
Trade Cooperation Zone. While the government provided a number of
incentives to lure investment, these have changed. There was a perception
that there were effectively no incentives available to the investors.
9.4
Corruption
It is a well-known that African Nations all struggle with corruption.
Considering the Corruption Perception Index of 2020 published by
Transparency International, it becomes evident the seriousness of the
problem. Sub-Saharan Africa scores the worst among the world’s regions
with an average of 32 (100 being corruption free and 0 being completely
corrupt). The Corruption Perception Index Map illustrates the degree of
corruption in shades of yellow to red, red being significantly more corrupt
that yellow—the African continent stands out with the darker shades of
red. Figure 9.1 indicates the least and most corrupt countries in Africa in
terms of the index.
The Global Corruption Barometer Africa 2019: Citizen’s Views and
Experiences of Corruption provides even greater detail on the problem.
The survey is extensive, covering 35 African countries with 47,000 participants. The findings are disturbing: 55% believed corruption had increased
in the previous 12 months while 23% thought it had decreased; 59%
believed their government were doing a poor job of tackling corruption
and 34% thought their government was making progress in dealing with
corruption; a quarter of participants who had utilised a public service
in the preceding 12 months had had to pay a bribe which equates to
approximately 130 million people, with the percentage being as high as
80% for participants in the Democratic Republic of Congo; while 67% of
participants were fearful of retaliation if they reported corruption.
Corruption is hindering Africa’s economic, political and social development. It is a major barrier to economic growth, good governance and basic
freedoms, such as freedom of speech or citizens’ right to hold governments
to account. (Global Corruption Barometer Africa 2019)
270
B. ROBINSON
Fig. 9.1 Corruption Perceptions Index 2020: sub-Saharan Africa
While there is a view and some empirical research (Quazi et al. 2014)
supporting the hypothesis that corruption increases Foreign Direct
Investment in Africa—the so-called ‘helping hand’ of corruption facilitating commerce when institutional capital is lacking, there is also much
evidence to refute this view. The ‘grabbing hand’ of corruption can be
a huge unknown variable for investors and does detract from investors
willingness to invest in Africa.
The countries in which initial Chinese Special Economic Zones were
situated were mostly those with ‘reasonable’ levels of perceived corruption: Mauritius is one of the best scores at 53; Ethiopia at 38; Egypt and
Zambia at 33; and Nigeria at a lower 25. While Nigeria was low, it is
still a far cry off from the bottom-rung score of 12 for South Sudan and
Somalia. There are concerns that some of these countries are heading
down the slippery slope of corruption, such as Zambia dropping five
points of the Corruption Perceptions Index since 2013.
9
AFRICAN GOVERNMENTS’ ENABLING (OR CONSTRAINING) …
271
And those Chinese that have invested in Special Economic Zones do
experience this ‘grabbing hand’ of corruption. The Ogun-Guangdong
Free Trade Zone had been severely impacted by corruption. As one of
the Zone’s managers quipped, the zones may be “duty-free, but due to
corruption, the duties are sometimes higher”. More detail of how this
has had costly ramifications on Zones’ investors are detailed later in this
chapter.
9.5
Infrastructure: Promises
Made; Promises Broken
The road and rail infrastructural differences between African Nations
varies significantly, sometimes necessitating much investment in infrastructure for Zones to be feasible and efficient. The question is, who will
foot the bill? Bräutigam and Tang (2011) describe how the infrastructure outside of the Zones’ perimeters are normally the host country’s
responsibility, and the internal infrastructure, the responsibility of the
Zone’s investors. This is not always the case though, for example,
in Mauritius, the host government and the Jinfei consortium shared
some of the external infrastructural costs. In Egypt, the government
undertook to reimburse 30% of the cost of the Zone’s internal infrastructural investment. Some countries, such as South Africa, have reasonable
infrastructure, and have in many cases invested in the zones’ internal
infrastructure.
The countries’ governments of the countries visited for the purposes
of writing this book will be evaluated in terms of their commitment and
carry-through on promises made in providing suitable infrastructure for
the Zones.
9.5.1
Ethiopia
Ethiopia’s government has embraced China’s willingness to invest in
major infrastructural projects, resulting in some of the following major
transport investment: the Addis Ababa modern light rail urban commuter
‘tram’ system; an extensive road network of urban and national roads; and
the important Addis Ababa to Djibouti railway line that serves to connect
land-locked Ethiopia to the world (Figs. 9.2, 9.3, and 9.4).
272
B. ROBINSON
Fig. 9.2 Ethiopia’s Chinese built light-rail system in Addis Ababa
Fig. 9.3 The imposing new railway stations on the outskirts of Addis Ababa
and Dire Dawa
While these projects improve the efficiency of the city of Addis Ababa
and support the logistics of importing and exporting, the road infrastructure has also directly linked the city to the Eastern Industrial Park
(Fig. 9.5).
9
AFRICAN GOVERNMENTS’ ENABLING (OR CONSTRAINING) …
273
Fig. 9.4 Queues to board the modern carriages from Dire Dawa to Addis
Ababa
Fig. 9.5 The 3-lane highway between Addis Ababa and the Eastern Industrial
Park
274
B. ROBINSON
9.5.2
Zambia
Zambia has reasonably good roads (the Chinese have contributed to the
building of much of the more recent road infrastructure) and a railway
line traverses the zones, thus connecting the Zone to essential routes to
transport goods and materials. In the zone itself, no infrastructure was
provided by the Zambian government, with the zone operators having
to build all the roads and ensure their own water, sewerage and power
provision.
9.5.3
Nigeria: Promises Broken
Nigeria’s government, in this case the federal states, scored poorly in
terms of delivering on their commitment to provide access road transport to the zone, and certainly no infrastructure was provided within the
zone.
While travelling by motor vehicle to the Lekki Free Zone in Lagos
state is along rutted and congested roads, these were still manageable,
and it was about a 2-hour journey to travel the 70 kilometres to reach
the zone. This wasn’t the case when travelling the 65 kilometres to the
Ogun-Guangdong Free Trade Zone in Ogun State. A journey of 3 hours
to reach the zone, and 5 hours to return.
The road weaved through chaotic urban scenes, eventually disintegrating into gravel roads in a terrible state. The fact that trucks would
have to use these roads to transport goods between the Zone and the city
of Lagos and its port, seemed improbable. Yet they did, with one truck
wreckage identifying the risks of daily transport on these roads. There was
evidence of roadworks—a concrete bridge structure that seemed abandoned, and then closer to the zone, the road suddenly improved. I was
later to learn that these roads were been built by the Chinese Zone operators themselves out of sheer necessity due to the inaction of the Ogun
State—a promise broken (Figs. 9.6 and 9.7).
9
AFRICAN GOVERNMENTS’ ENABLING (OR CONSTRAINING) …
275
Fig. 9.6 Seemingly abandoned rail or road construction
Fig. 9.7 Truck weaving through the rutted roads
9.6
Inadequate Service Delivery
In Special Economic Zones in China, on a scale second to none, the
government has invested in infrastructure and service delivery capacity.
The zones are exceptionally well planned, and everything needed to
enable the zones’ success are generally provided.
Most African zones don’t receive that level of infrastructural investment and service delivery. There are exceptions, such as the case study
of South African Zones that follows, where the state has invested significantly in infrastructure.
276
B. ROBINSON
This lack in investment and service provision results in many zone
operators in Africa having to invest in basic services simply to be able
to operate—roads, power, water, waste are the most important, and
expensive of these (Fig. 9.8).
The unreliability of electricity provision is ubiquitous with Africa for
those lucky enough to have electricity—only 43% of Africans have access
to electricity (Blimpo and Cosgrove-Davies 2019).
Companies operating in Africa struggle with poor reliability of power
provision. Figures 9.9 and 9.10 provides a stark comparison of African
companies versus other in the world when it comes to electrical outages
and the necessity for independent power generation through the use of
generators.
Country differences are stark with business access to electricity in many
African countries having less than 30% access reliability—many of these
are in countries where Chinese Special Economic Zones operate such as
Ethiopia, Zambia and Nigeria (Fig. 9.11).
This has had a negative impact on Africa’s Special Economic Zones’
attractiveness to investors: South Africa’s Eskom, a state-owned enterprise
mismanaged and crippled by corruption for many years, is grappling to
re-build the once superior electricity supplier for the country and some
of its neighbours. Loadshedding is the new reality. This has led to the
Fig. 9.8 Lekki-Free Zone Water Treatment Plant
9
AFRICAN GOVERNMENTS’ ENABLING (OR CONSTRAINING) …
277
Fig. 9.9 Percentage of firms experiencing electrical outages (Blimpo and
Cosgrove-Davies 2019: 19)
Fig. 9.10 Percentage of firms owning or sharing a generator (Blimpo and
Cosgrove-Davies 2019: 19)
loss of investment such as the cancellation of Rio Tinto Alcan’s proposed
US$2.7 billion smelter investment in the Coega Special Economic Zone,
which held the promise of securing over 1000 jobs.
278
B. ROBINSON
Fig. 9.11 Access to reliable electricity by firms (Blimpo and Cosgrove-Davies
2019: 20)
These power limitations has resulted in many of the Chinese
Special Economic Zones in Africa investing in their own power provision (Figs. 9.12 and 9.13). The cost of producing the power and the
cost to investors is sometimes higher than the cost of purchasing from
the national power grid, but the premium price paid for access to reliable
electricity is for many a logical compromise. Consider a kiln that requires
24-hour operation: a power shutdown would have a number of costly
9
AFRICAN GOVERNMENTS’ ENABLING (OR CONSTRAINING) …
Fig. 9.12 Ogun-Guangdong Free Trade Zone Power Plant
Fig. 9.13 Lekki-Free Zone Power Plant
279
280
B. ROBINSON
outcomes such as damage the product and result in labour hours lost;
and the resultant loss of orders due to unreliability of production.
Independent power provision provides the Chinese Zones in Africa
with an enormous competitive advantage for attracting investment. In
Ogun State, it was estimated that the government’s National Electric
Power Authority (NEPA), now replaced by the Power Holding Company
of Nigeria (PHCN), was only able to provide about 3–4 hours of power
per day—the Zone is therefore one of the few location options for a
company wishing to invest in the state.
Even having their own power plant wasn’t without its challenges. At
the Ogun-Guangdong Free Trade Zone, a gas pipeline fed the gas to the
powerplant. However, the quality of the gas was sometimes substandard,
and the reliability of supply of the gas was often erratic—“One month
every year, no gas”—or the pressure too low. Terrorist attacks on the
supply gas lines were one reason. The manager at the Power Plant mused
on another—while Nigeria has vast petroleum resources, the government
didn’t supply these to its own people, preferring to export these natural
resources.
The gas supply problem resulted in the Power Plant having to have
a backup of diesel power generation, which was more expensive. Some
companies in the Zone had opted to invest in their own power generation to secure their supply. This relatively more expensive supply detracted
from the Zones global competitiveness for FDI from Chinese and other
investors.
Zambia’s local power provision by the state-owned Zambia Electricity
Supply Corporation was also unable to keep with demand, resulting
in 12–15 hours of loadshedding per day. The Chinese investors in the
Zambia-China Economic and Trade Cooperation Zone have invested
US$27 million in building a sub-station to provide power for its investors.
Interestingly, the power station is connected to the national grid and there
is an undertaking by the Zambian government to pay this amount back
(Fig. 9.14).
9
AFRICAN GOVERNMENTS’ ENABLING (OR CONSTRAINING) …
281
Fig. 9.14 The Zambia–China Economic and Trade Cooperation Zone Power
Station
9.7
Ease of Business
Red tape stifles the entrepreneurial spirit—difficulties in opening a
company; outdated and burdensome regulations; inefficient state departments; fees, penalties and paperwork—all make business operations slow,
inefficient and costly.
The World Bank Group publishes an annual global report on the ease
of doing business. ‘Doing Business’ according to their report refers to the
ease of opening a business; getting a suitable location; accessing finance;
dealing with day-to-day operations; and operating in a secure business
environment—these are depicted in Fig. 9.15.
Fig. 9.15 What is measured in Doing Business (Doing Business 2020)
282
B. ROBINSON
Table 9.1 12 areas of business regulation (Doing Business 2020)
Indicator set
What is measured
Starting a business
Procedures, time, cost, and paid-in minimum
capital to start a limited company for men and
women
Procedures, time, and cost to complete all
formalities to build a warehouse and the quality
control and safety mechanisms in the
construction permitting system
Procedures, time, and cost to get connected to
the electrical grid; the reliability of the
electricity supply; and the transparency of tariffs
Procedures, time, and cost to transfer a
property and the quality of the land
administration system for men and women
Movable collateral laws and credit information
systems
Minority shareholders’ rights in related-party
transactions and in corporate governance
Payments, time, and total tax and contribution
rate for a firm to comply with all tax
regulations as well as postfiling processes
Time and cost to export the product of
comparative advantage and to import auto parts
Time and cost to resolve a commercial dispute
and the quality of judicial processes for men
and women
Time, cost, outcome, and recovery rate for a
commercial insolvency and the strength of the
legal framework for insolvency
Flexibility in employment regulation
Procedure and time to participate in and win a
works contract through public procurement and
the public procurement regulatory framework
Dealing with construction permits
Getting electricity
Registering property
Getting credit
Protecting minority investors
Paying taxes
Trading across borders
Enforcing contracts
Resolving insolvency
Employing workers
Contracting with the government
Their Doing Business 2020 report does not paint a good picture for
Africa. Only two African countries score in the Top 50 rankings out of
190 countries in the survey—Mauritius (13) and Rwanda (38). Other
notable countries were South Africa at an ‘average’ of (84) and Zambia
at (85), but many Africa countries found themselves towards the end of
the list: Nigeria (131), Ethiopia (159) and the usual culprits right at the
bottom of the list, Eritrea (189) and Somalia (190).
9
AFRICAN GOVERNMENTS’ ENABLING (OR CONSTRAINING) …
283
If one considers Table 9.1, regulatory complexity, and its complementary inefficiency, is a key detractor to doing business. Simply registering
a business, accessing electricity, obtaining permits, being able to trade
across borders, employment regulations etc., when easy bolsters business,
when difficult, becomes burdensome and a deterrent to foreign direct
investment (Doing Business 2020).
Three issues faced by zone operators and investors in respect of ease of
business are highlighted below: the high level of bureaucracy; the value
of an internal Special Economic Zone customs office; and an example of
the impact of an inefficient and corrupt logistical environment on cross
border trade.
9.7.1
Bureaucracy
Bureaucracy was burdensome to most people at the zones. In Ethiopia
a zone operator described the frustration of having to go into Addis
Ababa four times to meet a government employee, and each time, he was
a no-show—‘It takes patience’. An investor said that nobody wants to
finish on time—no “tension”—when referring to an example of it taking
2 months to have a fixed telephone line installed by the state-owned
telecommunications company.
9.7.2
Customs Office
The Ethiopian Eastern Industrial Park had an efficient 1-stop service that
included banks, police station, investment office, and customs office.
The customs office was regarded as essential for the Zone’s efficiency. The customs office would allow containers to be directly imported
without the necessity of going through multiple phases of import, and
significantly reduced bureaucracy. The customs office includes over 20
Ethiopian customs inspectors, supervisors and administrative clerks to
manage the responsibilities of trade by the Zone.
Nigeria followed a similar route with the Lekki Free Zone, which
sports a functional customs processing division with an electronic customs
platform, although this wasn’t the case for the Ogun-Guangdong Free
Trade Zone.
284
9.7.3
B. ROBINSON
Port Efficiency and Corruption: A Case of Ogun-Guangdong
Free Trade Zone
While this could probably have come under the heading of infrastructure, service delivery, or corruption; the port efficiency, or lack thereof,
was a critical issue for the Ogun-Guangdong Free Trade Zone and
posed a significant risk to the sustainability of the Zone. The Zone
relied on importing critical materials and equipment, much of which was
unobtainable in Nigeria, and which had to be imported from China.
It can take three months to get a container through the port!
It was described to me as a traffic jam in the port: “When container
arrives, you have to send a truck. But the queue to get in and out, then
you have to return the container and go through the same queues”.
This has resulted in the transport fees of containers increasingly fourfold in the year prior to my visit. In addition, terminal and shipping
charges had been increased as well.
And then the corruption further exacerbates the problem. For instance,
bribes are requested by the clearance agency. One investor called it the Xfactor: “You don’t expect it, but it happens”. He then continued to relay
a recent experience: With an armed police escort from the Port of Lagos
to the Zone, the truck driver was stopped (referring to it as the ‘illegal
toll’) and asked on five occasions to pay a bribe.
There are of course, some good examples of where government has
made a commendable effort to enable successful Special Economic Zones
and improve the ease of doing business in Africa. The following case study
is one of those, detailing the South African government’s commitment to
providing world class infrastructure in its Special Economic Zones.
9.8 Case Study: Government Commitment
to Infrastructure of SEZs in South Africa
South Africa’s transport infrastructure is amongst the best in Africa with
an extensive rail and railroad network, although there has been a gradual
decline in the quality of rail transport, resulting in greater reliance on
more expensive road transport for the transport of goods. Port infrastructure is also good with a number of deep-sea terminals, where a number
of special economic zones has been established.
In addition, the government has invested tremendously in providing
these zones with superior infrastructure. The Coega Special Economic
9
AFRICAN GOVERNMENTS’ ENABLING (OR CONSTRAINING) …
285
Zone in Nelson Mandela Bay Municipality is one example, where the
government has built access highways and access roads, as well as invested
in the deep-water Port of Ngqhurha with various port facilities including
container shipping infrastructure. The Port itself was the result of an
investment of R10 billion (Coega Development Corporation 2021a)
(Figs. 9.16 and 9.17).
The Coega Development Company that operates this Special
Economic Zone is wholly owned by the Eastern Cape Provincial Government, the province in which the zone is situated, a province considered
to be one of the poorest in South Africa. The position of this zone and
the East London Industrial development zone is indicative of national,
regional and local governments’ desire to leverage the zones to facilitate
a diversified economy that engenders socio-economic development.
The Coega Special Economic Zone is considered the most successful
of the South African Zones in terms of attracting investment and job
creation. With the metropolitan area already sporting Volkswagen South
Africa’s manufacturing plant, the zone has always sought to attract other
automotive manufacturing companies and has been relatively successful
in doing so. FAW and Isuzu and supporting industries have set up shop
Fig. 9.16 Coega new access road system—waiting for investors
286
B. ROBINSON
Fig. 9.17 Deepwater Port of Ngqhurha
in the zone, but the most significant of such automotive investors is the
Beijing Automotive Industry Holding Co., Ltd., branded as its acronym,
BAIC.
BAIC is a Chinese state-owned enterprise which invested in the region
of ZAR 11 Billion (US$770 million [ZAR1 = $0.07]) in BAIC South
Africa. The South African Industrial Development Corporation, a state
development finance institution, owns 35% of the project (Fig. 9.18).
Fig. 9.18 BAIC SA’s sprawling plant at the COEGA SEZ
9
AFRICAN GOVERNMENTS’ ENABLING (OR CONSTRAINING) …
287
BAIC SA’s plant is a Completely Knocked Down (CKD) Assembly
Plant which includes an assembly plant, body shop, painting workshop,
assembly of composed parts, car body interior decoration, testing, paint
repair, and after sales service. The first phase of capacity is 50,000
vehicles, and the second phase, 100,000 vehicles (Coega Development
Corporation 2021a).
The socio-economic impact promises to be impressive. According to
BAIC (Coega Development Corporation 2021a), direct jobs created is
in the region of 1500, while the economy-wide job creation is estimated
at 10,600 jobs. The economy-wide GDP impact in the province due to
construction is estimated at R945.1 million (US$66 million [ZAR1 =
$0.07]).
So, why did BAIC select the Coega Special Economic Zone? A number
of reasons are apparent. The South African market is one of these with
40% of vehicle output earmarked for this market. The South African base
will also be a springboard into the rest of Africa, with 60% of production
intended for export to other African Nations.
It was also motivated by bilateral relations between the two countries,
and is attributed as being an outcome of the Forum on China-Africa
Cooperation (FOCAC) Summit of 2015 held in Johannesburg, South
Africa, and since then the investment has received visible support by the
Chinese and South African Governments.
Another likely reason for the BAIC investment though, was that the
Coega Development Zone offered the best infrastructure necessary in
Africa for such a plant to be efficient and competitive with access to
local and international markets. Coega details some of their infrastructural competitiveness for attracting investment in their ‘Top 10 Reasons
to Invest at Coega’ (Coega Development Corporation 2021b). Some of
these are presented in Table 9.2.
This chapter has illustrated both the enabling and disenabling impact
of government, its leadership, and policy interventions on Chinese investment in Special Economic Zones in Africa.
9.9
Pillars and Protocols
The pillars and protocols relevant to government evidenced in African
SEZs have been benchmarked against those found in the Chinese SEZ
model in Fig. 9.19.
288
B. ROBINSON
Table 9.2 Abridged top 10 reasons to invest at Coega (Coega Development
Corporation 2021b)
Reason to invest
Detail
World class infrastructure
All infrastructure is in place including roads, bulk water
and sewer networks, telecommunications sleeve networks,
electrical substations (HV and MV), and overhead power
lines (although, noting the power limitations discussed
earlier)
• The zone is strategically positioned on the main
Southern Hemisphere east–west shipping routes
• It is served by two ports with exceptional container
capacity and is the hub of container traffic served by the
world’s top shipping lines; and has superior container,
vehicle, breakbulk and bulk terminals
• It is complemented by direct road and rail links to the
rest of South and Southern Africa (noting, again, the
constraints of the poor rail infrastructure within the
region)
• ICT Solutions for supply chain management, budgeting,
procurement and financial management
• Customs Control Areas (CCA) in the Logistics and
Automotive Zones
• In-house expertise in delivering infrastructural projects of
all sizes within budget and on time
• Full human relations support including recruitment,
training and managing labour relations
• Assistance with visa applications, work and study permits,
applications for municipal services
• Assistance with applying and optimising the benefits of
incentives
• Facilitation of environmental approvals and license
requirements for project development
• Customs services to assist with all South Africa Revenue
Services (SARS) Customs Registrations and permit
processes in preparation for approval of facility for
operational phases
• The Zones ‘Package of Plans’ approach allows statutory
approvals for Site Development Plans and Building Plans
to take place with 10 days
• Systems are in place to assist investors with skills
development
• Advanced system for registering work-seeker and
competency-based recruitment functionality
• Apprenticeship training centre
Other reasons to invest are also detailed, such as the range
of incentives, robust governance to mitigate corruption,
and the environmental attributes and lifestyle offered in the
beautiful Nelson Mandela Bay Municipal area and its cities
Regional and international logistics
World class support systems
One-Stop Investor Services Centre
Skills development
Other
• Poor provision of services
• Unreliable power
provision
• Results in zone operators
to invest in basic service
infrastructure
• Contributes to increased
costs
• IntegraƟon of the zones with
ciƟes and infrastructure was
someƟme lacking
• Lack of integraƟon between
local, regional and naƟonal
government
Export
orientaƟon
Protocol 11:
• The SEZs mostly had a
strong focus on exports
• Excessive focus on exports
problemaƟc:
• DiĸculƟes in imporƟng
• Reduced importsubsƟtuƟon
manufacturing
• Most Chinese SEZs in Africa
provide their own internal
infrastructure
• External infrastructure not
Pillar 7:
always provided, or
obligaƟons not met by
Infrastructure government
• ExcepƟons, such as South
Africa, which invests in SEZ
infrastructure
Government
support
Pillar 2:
• Government support varies
from significant to minimal,
and tends to change over
Ɵme and due to leadership
changes
• Diīerences in support can
vary between naƟonal,
regional and local level
• PoliƟcal stability influences
investment in SEZs
Diversified
industries
Protocol 12:
Ease of
business
Protocol 2:
Government
Policy
Pillar 3:
• Some degree of
diversificaƟon
• Tended to be focussed on
the manufacturing sector
and not the service
industry
• BureaucraƟc
• Ineĸcient government
administraƟon
• Service delivery
ineĸciency
• CorrupƟon
• SEZ policy driven by industrial
policy
• Policy uncertainty
• ConflicƟng incenƟves and
disincenƟves
• Export orientaƟon limiƟng FDI
• Import restricƟons
• Currency fluctuaƟons problemaƟc
• CorrupƟon not eīecƟvely
addressed
Fig. 9.19 The African SEZ pillars and protocols of the Chinese Model of Special Economic Zones in Africa
Modern
Service
Industry
Protocol 6:
IntegraƟon
Pillar 6:
Leadership
support
Pillar 1:
• PoliƟcal leadership support
varies significantly between
countries
• Support deteriorates, or
improves, over Ɵme
• Support can fluctuate with
change of leadership
9
AFRICAN GOVERNMENTS’ ENABLING (OR CONSTRAINING) …
289
290
B. ROBINSON
References
Blimpo, M., and M. Cosgrove-Davies. 2019. Electricity Access in SubSaharan Africa: Uptake, Reliability, and Complementary Factors for Economic
Impact. Agence française de développement/The World Bank. Africa
Development Forum series. Washington, DC: © World Bank [Online].
Accessed from: https://openknowledge.worldbank.org/bitstream/handle/
10986/31333/9781464813610.pdf?sequence=6&isAllowed=y. Accessed 17
Feb 2021. License: Creative Commons Attribution License (CC BY 3.0
IGO). http://creative-commons.org/licenses/by/3.0/igo/.
Bräutigam, D., and X. Tang. 2011. China’s Special Economic Zones in Africa.
The Journal of Modern African Studies 49 (1): 27–54.
Coega Development Corporation. 2021a. [Online]. Accessed from: http://www.
coega.co.za/Default.aspx.
Coega Development Corporation. 2021b. Top 10 Reasons to Invest at Coega
[Online]. Accessed from: https://www.coega.co.za/files/2020/Top_10-Rea
sons_to_Invest_at_Coega.pdf.
Corruption Perception Index 2020 by Transparency International is Licensed
under CC-BY-ND 4.0. Accessed from: https://www.transparency.org/en/
cpi/2020/index/nzl. Accessed 25 Apr 2021.
Doing Business. 2020. Comparing Business Regulation in 190 Economies. World
Bank [Online]. Washington, DC: World Bank. https://openknowledge.wor
ldbank.org/handle/10986/32436. License: CC BY 3.0 IGO.
Global Corruption Barometer Africa. 2019. Citizen’s Views and Experiences
of Corruption by Transparency International Is Licensed Under CC-BY-ND
4.0. Accessed from: https://www.transparency.org/en/publications/gcb-afr
ica-2019. Accessed 25 Apr 2021.
Fei, D., and C. Liao. 2020. Chinese Eastern Industrial Zone in Ethiopia:
Unpacking the Enclave. Third World Quarterly 41 (4): 623–644. https://
doi.org/10.1080/01436597.2019.1694844.
Marc, A., N. Verjee, and S. Mogaka. 2015. The Challenge of Stability and Security in West Africa. Africa Development Forum. Washington, DC: World Bank;
and Agence Française de Développement. © World Bank. https://openknowl
edge.worldbank.org/handle/10986/22033. License: CC BY 3.0 IGO.
Nizard, R. 2018. Currency Risk in Africa: Easing in 2018, but Reserves Have
Melted, Coface Economic Publications [Online]. Accessed from: https://
www.coface.com/News-Publications/Publications/Currency-Risk-in-Africaeasing-in-2018-but-reserves-have-melted. Accessed 26 Apr 2021.
Quazi, R., V. Vemuri, and M. Soliman. 2014. Impact of Corruption on Foreign
Direct Investment in Africa. International Business Research 7 (4): 1–10.
PART IV
The African Model of Special Economic
Zones
CHAPTER 10
Towards Impactful Special Economic Zones
in Africa
This book has considered Special Economic Zones in China and the
lessons that their successes, and sometimes failures, have for African
Special Economic Zones; the factors that attract investment in zones by
the Chinese and others; the socio-environmental impacts of zones, and
the enabling or constraining impact host governments and their policy
interventions have had on the success of these Zones. Chinese owned
and operated Zones in Africa, and non-Chinese African Zones have been
evaluated through a variety of case studies and the sharing of insights
from investors garnered during visits to a variety of Zones on the African
continent.
Special Economic Zones that have been relatively successful and that
provide insights into the face of African Special Economic Zones of the
future are reflected upon in this chapter—these are the Special Economic
Zones in Mauritius and Rwanda.
Taking the lessons from the Chinese Model of Special Economic
Zones and introducing some home-grown lessons from the Mauritian and
Rwanda case studies, the Pillars and Protocols are revisited and reflected
upon in terms of their propensity to attract Chinese investment to Africa’s
Special Economic Zones. Three new Arches are introduced to the model,
which is then renamed the African Model of Special Economic Zones.
© The Author(s), under exclusive license to Springer Nature
Singapore Pte Ltd. 2022
B. Robinson, African Special Economic Zones,
https://doi.org/10.1007/978-981-16-8105-9_10
293
294
B. ROBINSON
10.1
Rwanda’s Kigali Special Economic Zone
Rwanda. What image is the first that comes to mind? Unfortunately, probably the Rwandan genocide. The country has had a turbulent past with
Hutu and Tutsi tensions often spilling over into violent ethnic conflict.
The Hutus make up the majority of the population, but Tutsi’s historically dominated the political arena, initially through a monarchy, and then
through political means. This was the case during the country’s colonial period under the German and Belgian empires and continued after
their independence in 1962. Tensions escalated into a full-scale civil war
in 1990, quelled by an uneasy ceasefire in 1993. The shooting down of
past-President Habyarimana’s plane in 1994 that killed him, changed all
that, and sparked one of the worst genocides ever.
We will never know how many people were killed during the period
of 100 days—estimates vary between 800,000 and 1,000,000 of the
7 million plus population of the time. Most of those that were killed
were Tutsis, with the perpetrators principally being Hutus. The Tutsidominated Rwandan Patriotic Front managed to eventually regain power
which resulted in a mass exodus of Hutus to neighbouring countries. The
period that followed was one of reconciliation and justice, and the country
slowly re-built itself.
10.1.1
From Ashes to Rejuvenation
While the genocide will forever be a part of the country’s history, the
country of 1994 and the 2020’s is vastly different. Visit Rwanda is the
country’s official website, and the website declares ‘Rwanda is open for
tourism’. The country has not hidden its past, and instead has created
opportunities for future generations to learn from past mistakes, while
allowing survivors and those affected by the genocide the opportunity to
heal—the Kigali Genocide Memorial and others are remembrance memorials to the atrocities of the past. While dark tourism may be an attraction
for some visitors, the country has gone out of its way to promote is natural
beauty and wildlife. It has re-populated game reserves with the Big 5,
it has become a beacon of wildlife preservation through initiatives such
as the Kwita Izina Gorilla Naming Ceremony, and it sports world class
accommodation along the banks of Lake Kivu. The country promotes
tourism through a number of avenues including through the sponsorship
of the Arsenal football team.
10
TOWARDS IMPACTFUL SPECIAL ECONOMIC ZONES IN AFRICA
295
President Paul Kagame is regarded as a visionary African leader who has
spearheaded the revival of Rwanda’s socio-economic development. While
not without his detractors, having been accused of political repression, he
has focussed on an array of initiatives that have made a huge impact on
the country. Tourism is one of the industries that he has focussed on with
its ability to absorb labour, but there has been an array of other initiatives, including Special Economic Zones. Cumulatively, these efforts have
resulted in phenomenal and stable increases in the GDP of the country
(Fig. 10.1), and in 2019 the GDP growth for the country was a healthy
9.46%.
As a land-locked country, dependant on overland transport through
Uganda and Kenya for trade purposes, a lack of natural resources, and
a reputation for instability, the country had and still has many hurdles
on the road to achieve its objective of transitioning from a Low Income
Fig. 10.1 Rwanda’s GDP from 1960 to 2020 (Word Bank 2021)
296
B. ROBINSON
to becoming a Middle Income Country by 2035 and High Income
Country by 2050. Rwanda’s 7 Years Government Programme: National
Strategy for Transformation (NSTi) 2017–2024 (2021) is a key development policy of the country. The NST1 rests on three ‘Pillars’ of economic
transformation, social transformation, and transformational governance.
Economic transformation in the NST1 prioritises the creation of 1.5
million jobs; increase sustainable urbanisation from 18.4 to 35%; and
modernise and increase the productivity of agriculture and livestock.
The wording then gets interesting, and paints a farsighted vision for
a modern, technologically advanced, diversified, services oriented, and
green economy. The transformation aims to establish Rwanda as a globally competitive knowledge-based economy; promote industrialisation with
an export base of high-value goods (air-transport favours high-value for
such a landlocked country) and services with the aim of growing exports
by 17% per annum; increase domestic savings; position Rwanda as a hub
for financial services to promote investment; and promote sustainable
management of the environment and natural resources towards being a
green economy.
10.1.2
Facilitating Investment Through a Business-Friendly
Environment
The Rwanda Development Board (RDB) (2021) is the Rwandan government’s key tool to do this. It is under the direct supervision of the Office
of the President, signifying the priority attached to its operations. It was
established in 2008 and was the result of a merger of eight government
institutions, and in so doing, significantly reduced red-tape and bureaucratic hurdles, in a type of one-stop shop. The RDB claims to have been
modelled on international best practice. It provides the services of investment promotion, investment deals negotiation, tourism and conservation,
skills development, one-stop investors’ services, and export and Special
Economic Zone Development.
The RDB (2021) website declares a number of reasons for investors
to consider Rwanda for investment. These include the economic growth
prospects and stability of the economy of the country; the businessfriendly environment of the country; low levels of corruption and government transparency; an educated youthful population with a growing
number of tertiary graduates; and a well-connected airline. In addition, it
10
TOWARDS IMPACTFUL SPECIAL ECONOMIC ZONES IN AFRICA
297
has positioned itself as 4IR ready, with the best network readiness in the
region and 95% 4G LTE network coverage with over 7000 km of fibre.
The country prides itself on an investor friendly environment, ranking
38 on the World Bank’s Ease of Doing Business Index, and is 2nd in
Africa in this regard. It assesses and revises its business environment on
an annual basis and introduces investor-friendly reforms where shortcomings are identified. Business registration is free and quick—6 hours to
register a business. The one-stop center assists with investment and postinvestment support—a dedicated team will guide the investor throughout
the process. Visas and work permits are relatively easy to obtain on arrival,
with exclusions allowed for residents of African Union member countries.
Incentives are significant. A seven-year tax holiday is provided for
investment of more than US$50 Million. Corporate income tax is 15%
if 50% of production is exported outside the region or investment is
in specific high priority sectors; and 0% tax is payable if the regional
headquarters are in Rwanda. Accelerated first-year depreciation rate of
50%. Duty free imports of machinery and inputs within the East African
Community. There are specific incentives geared towards priority industries, for instance, ICT firms are allowed VAT exemptions on IT equipment. There are no restrictions on foreign ownership; no restriction on
capital flows; and capital gains tax exemptions are provided on the sale or
transfer of shares.
Chinese investment in the country are clearly discernible: The Kigali
City Tower, the tallest building in Kigali, was built by the Chinese as well
as numerous public and private buildings; public service facilities; and
many roads and other infrastructure are thanks to the Chinese government and Chinese investors. The fact that Kigali has so little in terms
of minerals and other extractive resources and their landlocked status
that limits exports in any case, supports the view that while China does
covet Africa’s abundant resources, this is not the only motivation for their
investment.
10.1.3
The Kigali Special Economic Zone
Special economic zones are one way the country intends achieving its
ambitious objectives. The country introduced Special Economic Zones
regulations in 2010 providing the framework for zones, and the Rwandan
Development Board proactively marketed the licensing of Zones in the
hope of attracting developers and operators of Special Economic Zones.
298
B. ROBINSON
The Kigali Special Economic Zone (2020) (Fig. 10.2) was a merger
between the previous initiatives of the Kigali Free Trade Zone and the
Kigali Industrial Park. Prime Economic Zones Ltd is the promoter, developer and operator of the zone with socio-economic development objectives as the primary goal—job creation and skills transfer; technological
transfer; increased tax revenue thanks to an increased tax base; environmental protection; industrial development including sectors requiring
specialised infrastructure; import substitution; and export growth and
diversification. It has accessed over US$100 million to develop the zone in
two phases. The first phase provided for the provision of superior service
infrastructure of roads, power, water, as well as fibre optic cables, with a
total of 97 plots over 98 hectares. The second phase of about double the
size, with one particular plot earmarked as an ICT Park.
The Zone has been relatively successful in attracting foreign investors
in the following industries: Construction, manufacturing, agro processing
and food processing, beverages, textiles clothing and leather, wholesale
Fig. 10.2 Kigali Special Economic Zone
10
TOWARDS IMPACTFUL SPECIAL ECONOMIC ZONES IN AFRICA
299
pharmacy services, import and distribution, printing, removal services,
transport services, and a university. A number of companies are hightech firms—a particular focus of Rwanda’s economic development policy
mentioned before. Many companies target the local market, indicating a
focus not solely of export, but import substitution.
An interesting resident of the Kigali zone is Carnegie Mellon University Africa (2021). The presence of the university signifies a strong focus
towards developing critical skills, in this case engineering skills in the
country. The University offers technological programmes, namely the
Master of Science in Electrical and Computer Engineering; Master of
Science in Information Technology; Master of Science in Engineering
Artificial Intelligence; and an option to specialise in a particular area of
innovation.
Chinese investors began investing in the zone early in its history,
and investments include textile factories, paper companies, construction
companies and more, including the Beijing Construction Engineering
Group and China Star Construction (Fig. 10.3).
The Kigali Special Economic Zone is relatively new and continues to
evolve, but early indications seem to be that it is attracting investment
by the Chinese and global firms, and it is contributing to job creation
Fig. 10.3 China Star Construction in the Kigali Special Economic Zone
300
B. ROBINSON
Fig. 10.4 Carnegie Mellon University Africa in the Kigali Special Economic
Zone
and skills transfer, and investments such as the Carnegie Mellon University Africa (Fig. 10.4) is entrenching the zone as an innovation hub for
Rwanda, the region, and the continent. So, the question can be posed,
what has facilitated the relative success of the Zone?
10.1.4
Critical Success Factors of the Kigali Special Economic
Zone—A Reflection of the Chinese Model of Special Economic
Zones
To answer the question above, let’s consider the Pillars and Protocols of
the Chinese Model of Special Economic Zone, but only in terms of what
sets the zone and the country context apart from its peers—these are
illustrated in Figs. 10.5, 10.6, 10.7, 10.8, 10.9, 10.10, and 10.11.
10
TOWARDS IMPACTFUL SPECIAL ECONOMIC ZONES IN AFRICA
Fig. 10.5 Pillar 1 of
Leadership support
Pillar 1:
Leadership
support
Fig. 10.6 Pillar 3 of
supportive government
policy
• President Paul Kagame has
personally driven the
economic transformaƟon
of Rwanda
• Rwanda Development
Board under direct
supervision of the
Presidents Oĸce
Pillar 3:
Government
Policy
Fig. 10.7 Protocol 1
of a phased approach
Protocol 1:
Phased
approach
Fig. 10.8 Protocol of
ease of business
Protocol 2:
Ease of
business
Fig. 10.9 Protocol 4
of innovation and
learning
Protocol 4:
InnovaƟon
and learning
301
• Closely aligned to socio-economic
policy
• Clear objec ves and long – term
outlook
• Willingness to experiment and make
mistakes – thus informing future
efforts
• Modelled on internaƟonal
best pracƟces
• Annual business
environment revision and
investor-friendly reforms
• Reduced bureaucracy
• Significant support for
investors
• Simplified local
government
administraƟon
• Kigali could be considered a
‘Pilot city of innovaƟon’
• High-tech focus with appropriate
ICT infrastructure
• InnovaƟon a priority
• Carnegie Mellon University
Africa – criƟcal skills terƟary
educaƟon
302
B. ROBINSON
Fig. 10.10 Protocol 7
of environmental
consideration
Fig. 10.11 Protocol
12 of diversified
industries
Protocol 7:
Environmental
consideraƟon
Protocol 12:
Diversified
industries
• Environmental issues are
an important consideraƟon
• SEZ is not exclusively
focussed on industrialisa on
and export
• Factors such as import
subs tu on and job crea on
also priori sed
• SEZ focussed on wide range of
related industries
10.2 Mauritius: An Island
of a Special Economic Zone
Borrowing a reference previously used in the book Kobus Jonker and
I authored entitled China’s Impact on the African Renaissance, Nobel
Prize laureate VS Naipul referred to Mauritius in 1972 as an overcrowded
barracoon (barracks on slave ships) and that the country’s ‘problems defy
solution’, while another Nobel prize winning economist James Meade
suggested in 1968 that ‘the outlook for peaceful development is weak’.
There was good reason for such views of Mauritius at the time. The
country had recently acquired independence and the period before independence was marred by racial tensions within the multicultural society.
Population growth was a concern, and with a monoculture of sugar
production, there was scant hope that the economy could be revitalised
significantly to provide hope for the well-being of the population.
The selection of Mauritius and Rwanda as the final Chapter’s case
studies was deliberate. Both of the countries were in a terrible state after
the genocide of Rwanda and the racial tensions of Mauritius. Neither
had much of an economy, with Rwanda’s subsistence agricultural sector,
and Mauritius’ main industry being limited to the sugar industry. Neither
country has much in terms of minerals and energy resources. The populations were mostly unskilled with limited educational facilities. And both
were isolated, Rwanda was land locked with poor logistical access to the
world’s markets, and Mauritius is an archipelago of islands deep in the
10
TOWARDS IMPACTFUL SPECIAL ECONOMIC ZONES IN AFRICA
303
Indian Ocean. Yet, both countries have defied the odds and become two
of Africa’s flagship economies, and both have adopted Special Economic
Zones as a key tool in economic development.
Mauritius is, however, the benchmark, with undoubtedly the most
successful adoption of the Special Economic Zone framework than
elsewhere on the continent.
10.2.1
Sailing Ahead in Economic Development
The ‘Mauritius Miracle’ is what it is now called—the way the country
managed to engender a harmonious multi-cultural environment and
achieve phenomenal socio-economic growth. It is now classified as an
Upper Middle Income country.
How did this happen? Firstly, the ethnic tensions didn’t immediately dissipate. After elections, political tensions were high. The country
was initially characterised by violent strikes, protests, political shenanigans, and a state of emergency, but democratic principles and political
freedom eventually took its course and the country settled down. It is
now regarded as a beacon of hope for multiculturalism, where the various
ethnic groups and religions have aligned themselves towards bettering the
well-being for all.
If one takes a look at the GDP trajectory (Fig. 10.12), it has shown a
phenomenal increase since the 1980s. Quite similar in fact to Rwanda’s
growth spurt, although GDP growth doesn’t quite match that of Rwanda’s, but varies between a satisfactory 3–5% GDP growth per annum since
2010, with GDP growth rate of 3.015 in 2019.
How did the country achieve this commendable growth? From the
early days of independence, Mauritius invested heavily in the education
of its people. In 2019 it had a 99% gross primary school enrolment and
99% completion rate; 89% lower secondary completion rate; and a relatively high 40% gross tertiary school enrolment (The World Bank 2021).
The country has transitioned to a well-skilled labour force which has
allowed it to diversify into the services sector, and services now accounts
for the bulk of its GDP. And improving peoples’ lives has always been
the heart of their social policy as the country embraced a comprehensive
social welfare system. If one considers the Human Development Index,
Mauritius scored 0.804 in 2020 which is in the ‘very high human development category’, indicative of the success they have achieved in this
regard (Human Development Report 2020).
304
B. ROBINSON
Fig. 10.12 GDP Mauritius (The World Bank 2021)
It has also leveraged the limited natural resources it had. The established sugar industry allowed it to develop its export market and bring
in foreign exchange, helped along by preferential trade agreements. The
natural beauty of the country lent itself to diversifying into the tourism
market, and the islands now support a successful tourism industry.
The economy has been well managed through conservative fiscal and
monetary policy. Good governance and strong institutions contribute
towards it providing an enabling environment for business. If one
considers the Corruption Perceptions Index (2020), sub-Saharan Africa
achieved a low 32/100, while Mauritius achieved 53/100, and ranked
52 out of 180 countries, much higher than most of its African peers.
10
TOWARDS IMPACTFUL SPECIAL ECONOMIC ZONES IN AFRICA
305
The country was proactive in providing incentives for foreign direct
investment and encouraged the investment by exporters through duty
free imports of supplies and investor friendly labour market regulations.
And, it made use of Special Economic Zones.
10.2.2
Export Processing Zones
Mauritius was a pioneer of Special Economic Zones in Africa having
experimented with them since the 1970s after the Export Processing
Zone Act was passed. What was interesting, and quite different from
many of the other Special Economic Zones in Africa, is that the zone
concept was not restricted to a specific geographical area, but rather, the
legislation and benefits applied to the entire country. At this early stage,
fiscal incentives were introduced, which included protective import duties
on certain supplies and equipment, various rebates on import duties, and
long-term concessionary loans. Ease of business was facilitated through
a range of initiatives. Tax incentives on manufacturing inputs immediately provided the zone with a competitive edge for export-orientated
industries. Complementing the competitive edge was that at that stage,
labour rates were quite low, although this changed over time. Government also invested significantly in improving infrastructure to support the
zone, as well as provided marketing backing for products manufactured in
the zone. Interestingly, the sugar and textile industry provided the capital
needed to support and stimulate the zone (Zafar 2011).
The initial phase was geared towards manufacturing and contributed
significantly to GDP growth due to capital accumulation, and unemployment reduction—employment growth averaged 5.2% and unemployment
dropped from 20% in the early 1980s to approximately 2% in the late
1980s. By the end of the 1980’s more people worked in the zone than
in the agricultural sector and manufactured goods’ contribution to GDP
tripled. Most goods were exported to Europe due to preferential trade
agreements for the country, while Asian countries were facing restrictions
in their countries through trade barriers such as quotas (Zafar 2011).
The 1990s saw growth continue, but mostly as a result of total factor
productivity, thanks to economic reforms and human capital improvements, and demand for manufactured goods, especially textiles and
clothing goods. While the Zone initially had a focus on some primary
industries, such as these industries, this quickly evolved. With having a
306
B. ROBINSON
strong export focus, the zone encouraged investment by a range of industries, allowing for much diversification. Early on in its history, the zones
began exploring the services sector, and had great success in the banking
and financial services sector, as well as the ICT services sector. This is
evidenced by the decline of primary sector production from 23% of the
economy in 1976 to 6% in 2010; the secondary sector increased from 23
to 28% for the same period; and the tertiary sector saw a boost from 50
to 70% of GDP, again for the same period (Zafar 2011).
Today, Mauritius continues to attract investment and grow through
a number of incentives and opportunities the country has to offer: It
provides global market access through the various preferential tariffs and
trading blocs membership such as the African Growth and Opportunity
Act (AGOA) and the Southern African Development Community where
various exemptions and reductions are provided on corporate tax. There
are no duties on exports, and while there is VAT on exports, these are
reimbursable on exportation of the end product. Accelerated depreciation allowances are available. No registration duty or land transfer duty
is payable on land for high-tech manufacturing. High-tech industries are
offered investment tax credits. Tax incentives for Research and Development Rebates are offered on sea- and air-freight expenses. Ease of
business includes simple procedures for recruitment of foreign labour with
an 8-year work permit allowance. Property purchases by non-residents is
allowed (Mauritius Economic Development Board 2021).
This trend continues. Mauritius now shares its insights and experiences with other African countries wishing to establish Special Economic
Zones, and through its Economic Development Board and the Mauritius
Africa Fund, Mauritius is assisting with the Senegal Cargo Villa, the Ivory
Coast’s Technology Parks, Ghana’s Technology Park; and Madagascar as
it introduces SEZ legislation.
10.2.3
The Jinfei Economic and Trade Cooperation Zone: Not
Living up to Expectations
The relationship between China and Mauritius goes back centuries. From
the 1700s, Chinese migration to Mauritius occurred on a staggered basis,
many entering various trades on the islands and becoming increasingly
important to the economy of the country. While not a huge population,
the Sino-Mauritian population add to the cultural diversity of the country.
The Mauritian Export Processing Zone provided another boost to this
10
TOWARDS IMPACTFUL SPECIAL ECONOMIC ZONES IN AFRICA
307
migration, as more Chinese were attracted to the opportunities that the
country had to offer. On an economic and diplomatic level, the relationship between the two countries has also continued to grow in strength,
with the investment in Mauritius by the Jinfei Economic and Trade Cooperation Zone, and the Free Trade Agreement that came into being on the
1st of January 2021—the first between China and an African nation.
While the Export Processing Zones have been a huge success for
Mauritius, historically, Mauritian exporters have struggled to penetrate
the Chinese market. There are a number of reasons for this according to
Iqbal Khan (2020). One is that Mauritian wages increased more rapidly
than even China’s wage rates, which was exacerbated by the introduction of minimum wages in Mauritius. This made input costs for products
expensive, thus uncompetitive for the Chinese market. To address this,
some Mauritian exporters have begun outsourcing production to countries such as Madagascar—close to Mauritius and with much lower wage
rates. Another reason is the scale of production. Chinese importers generally require huge volumes of products, while Mauritius simply isn’t able
to produce on such a scale. Finally, China and Mauritius export many
similar products, for instance, textiles, so there would be little need to
import products from Mauritius as China already produces these goods
for export.
The Jinfei Economic and Trade Cooperation Zone had a rocky start for
some of the reasons mentioned in the previous paragraph, and over time
has failed to attract the wished-for level of investment. It was launched in
2006 as one of the five Chinese owned and operated zones in Africa. It
was regarded as a springboard into Africa and was originally intended to
attract light industry exporting to Africa. The global economic crisis in
2008 also played a role, negatively impacting investment. It didn’t live up
to expectations in terms of investment and job creation. And it certainly
doesn’t compare well with the other Chinese Special Economic Zones
in Africa evaluated in this book, such as the Ethiopian Eastern Industrial
Park, the Chambishi Multi-facility Zone in Zambia, and the Lekki and
Ogun-Guangdong Free Trade Zones of Nigeria.
The Mauritian government eventually retracted 80% of the land leased
to the zone (Khan 2020) and a strategic re-think was required. One
outcome of the Zone has been the Jinfei Smart City, established through
a collaboration between China and Mauritius, and completion is expected
in 2022. It aims to be a ‘pioneer for innovation and high-end technology
308
B. ROBINSON
in Mauritius’. It comprises a residential area (Eden Square) and conference, leisure and tourist area (Noah Wealth Center). It encompasses four
primary sectors of culture and tourism; finance and business; logistics and
education (Jinfei Smart City 2021).
While the Jinfei Economic and Trade Cooperation Zone may have
disappointed both the Chinese and Mauritian government and the earlier
investors in the zone, it is important to note that Mauritius, as a countrywide zone, did attract Chinese investors. Mauritius is also a viable entry
point for export into Africa, and which Chinese investors are attracted to.
Statistics Mauritius (2018) provides some insights in this regard (Figures
are in Mauritian Rupees: 0.023 US$ = 1 Mauritian Rupee, 29 July 2021).
In 2018, total exports were 80,569 million rupees of which re-exports
were 16,648 million rupees. China does not feature in the Top 20 Countries exported to except in terms of re-export where China was the final
destination for 614 million rupees worth of goods. Imports from China
are significant at 25,162 million rupees, just below the higher value of
imports from India at 31,799 million rupees. It is worthwhile reflecting
on Mauritian trade regionally, and exports to COMESA are 7914 million
rupees and 13,384 to SADC. Dentons (2017) raise the interesting question as to how much of these imports from China are destined for African
nations—unfortunately data on this unclear, but it could be significant,
highlighting the potential Mauritius has as a springboard for China into
Africa.
Chinese Foreign Direct Investment remains significant and was only
second to France in 2016 at US$70 million (Dentons 2017). Some of
the larger Chinese multinationals have set up shop in Mauritius: Huawei
established itself in 2002 and has 300 employees with a localisation rate
of 50%; China Construction Eight Engineering Division won the bid to
expand the Mauritius Sir Seewoosagur Ramgoolam International Airport
in 2009; ZTE Corp and Sinohydro Corp have established offices; China
State Construction Engineering Corp and China International Telecommunication Construction Corp. have a foothold in the country; and the
China Development Bank has a workgroup in Mauritius (CGTN 2018).
There is also a Chinese Business Chamber that represents over 300 businesspeople and professionals with Chinese business interests on the Island
and aims to be a point of contact for potential investors in the country
(Mauritius Finance Network 2021). Chinese investment shows little sign
of abating.
10
TOWARDS IMPACTFUL SPECIAL ECONOMIC ZONES IN AFRICA
10.2.4
309
Mauritius of the Future
Mauritius isn’t resting on its laurels and continues to consider new and
innovative ways to attract investment, be competitive, and improve the
well-being of the people.
While writing this final Chapter, South Africa had just experienced its
worst civil unrest since apartheid years, characterised by violence, extensive looting destroying billions of Rands worth of business capital and
resulting in mass infrastructural damage, and a killing spree that left
hundreds of people dead. An article appears shortly thereafter in an online
media report entitled ‘The cost and time it takes South Africans to move
to Mauritius’ (Businesstech 2021).
Mauritius has for a long time been South Africans preferred holiday,
and a favourite honeymoon, destination. It is a short flight from Johannesburg and no visa is required. Mauritius is aggressively marketing their
country to South Africans wishing to migrate away from the perceived
safety and security issues and the some of the governments transformation policies, but who also wish to be in close enough proximity to South
Africa to visit family and friends. It is targeting those with skills, expertise,
an entrepreneurial spirit, and … money.
To obtain residency requires less that R6 million (US$420,000 at an
exchange rate of ZAR1 = $0.07) to buy a luxury property, and in so
doing, receive residency for three generations. The tax rate of 15% in
Mauritius for individuals is a lot less than the tax scale of 18–45% for
South Africans, the 45% rate being for income of over R1,656,601 per
annum. There is also no capital gains tax or estate duty.
This is just one innovative ploy the Mauritian government is employing
to lure money, skills, and foreign direct investment to the country. It
continues to evolve its Special Economic Zone model to ensure its relevance and attractiveness in a competitive global environment. It is a
benchmark that other African nations aspire towards.
10.2.5
Key Learnings from Mauritius in Terms of the Pillars
and Protocols of the Chinese Model of Special Economic Zones
The key learnings from the Mauritius case study in terms of the Pillars and
Protocols of the Chinese Model of Special Economic Zones are illustrated
in Figs. 10.13, 10.14, 10.15, 10.16, 10.17, 10.18, 10.19, and 10.20.
310
B. ROBINSON
Fig. 10.13 Pillar 3:
Government Policy
Pillar 3:
Government
Policy
Fig. 10.14 Pillar 4:
Location
Pillar 4:
LocaƟon
Fig. 10.15 Pillar 5:
People
Pillar 5:
People
Fig. 10.16 Pillar 6:
Integration
Pillar 6:
IntegraƟon
• Closely aligned to socio-economic
policy
• Adapted to changing economic
circumstances
• Policy evolved
• Willingness to experiment and
make mistakes – thus informing
future eīorts
• Springboard into Africa
• Provides investors an
opportunity to take
advantage of preferenƟal
trade policies with countries
and regions of the world
• A strong focus on educaƟon
• Resultant high-level of skills
• Supported high-tech and
services industries
• Limited labour market
regulaƟons
• The approach of the zones
was integrated
• The Zone was not
geographically delimited,
but applied to the enƟre
country.
10
TOWARDS IMPACTFUL SPECIAL ECONOMIC ZONES IN AFRICA
Fig. 10.17 Protocol 1:
Phased approach
Protocol 1:
Phased
approach
Fig. 10.18 Ease of
business
Protocol 2:
Ease of
business
Fig. 10.19 Protocol
12: Diversified industries
Protocol 12:
Diversified
industries
Fig. 10.20 Protocol
10: Social System
Protocol 10:
Social System
10.3
311
• Phased approach
developed as lessons were
learnt and mistakes made
• Adapted to economic
change internally and
externally
• Ease of business
prioriƟsed in the early
versions of the Zone
• SEZs were not exclusively
focussed on
industrialisaƟon
• Not exclusively focussed
on exports
• Supported a wide range of
industries
• The social system was key
consideraƟon by
government
• Zone were integral to
inclusive development
objecƟves
The Lessons and Investments
from China for Africa
This final section of the book attempts to bring together the various issues
that have been evaluated and discussed throughout. It does this from
the African perspective of the lessons learned from the Chinese Model of
Special Economic Zones and the critical issues for Chinese investors in
Africa. From this evaluation, some wisdom is drawn of how the model
312
B. ROBINSON
can be contextualised to the African context to contribute to more effective Special Economic Zones on the continent—these are represented
as Arches that complement the Chinese Special Economic Zone model,
encapsulated as the African Model of Special Economic Zones.
10.3.1
Pillar 1: Leadership Support
‘Shenzhen Speed’—originally ascribed to the erection of the Guomao
high-rise building in the city and which is now synonymous with the
phenomenal success of this Chinese Special Economic Zone—has its
Chinese leaders to thank for the accomplishment of the building and
the zone. Xi Jinping, and the visionary leaders before him such as Deng
Xiaoping, provide the top governmental support to ensure success.
Chinese investors in Special Economic Zones in Africa were bolstered
with confidence when they perceived both their and their African counterparts’ leadership, were supporting the zones. Such support often resulted
in funding opportunities, business opportunities, good marketing, and
reduced the risk of operating businesses in foreign African countries.
While a critical issue for Chinese investors, this leadership support
in Africa was not always evident—leadership sometimes changed as
did leadership understanding and support of the zones; and political
leaders occasionally reneged on their initial commitments. Leadership was
sometimes conflicted between political aspirations and socio-economic
objectives, such as instances in South Africa, where labour policies were
influenced by the political might of unions within political alliances.
Yet if we consider Rwanda with President Kagame at the helm, we
note a country with clear leadership vision. Personal attention and support
for the development institutions that house the Special Economic Zones
provided an enabling environment for the zone to thrive. Rwanda, therefore, serves as an example of how Special Economic Zones can and
should be supported to ensure their ability to contribute to a country’s
sustainable development objectives.
10.3.2
Pillar 2: Government Support
Government support is obviously closely related to leadership, but it is
more than just one person that can make a difference to the effectiveness of Special Economic Zones in Africa, the entire government has
to act in unison in their support in zones. And this applies to national,
10
TOWARDS IMPACTFUL SPECIAL ECONOMIC ZONES IN AFRICA
313
regional and local government structures, where unfortunately in Africa,
there sometimes seems to be a dichotomous approach to policy towards
zones.
From the case studies, it appears as though some countries provided
exceptional support for special economic zones, providing the necessary fiscal incentives, good infrastructure, and introduced interventions
minimising red tape and bureaucratic hurdles, while others did not. These
were all critical issues for Chinese investors in their investment decision.
Needless to say, government should not be an impediment to special
economic zones. Corrupt and incompetent government officials in Africa
were found to compromise infrastructural support—the broken promises
of infrastructural provision—while corruption increased costs doing business. The Ogun-Guangdong Free Trade Zone was severely impacted by
such problems which would likely limit future investment in the zone and
may even result in disinvestment by existing investors.
Political stability in the country and within regional and national political structures is a critical condition for investment. It can be assumed
that the relative stable government and peaceful situation in Mauritius
and Rwanda contributed to Chinese willingness to invest in these countries. This aspect warrants a new support structure in the African Model
of Special Economic Zones, namely African Arch 1 of Peace, safety and
security (Fig. 10.21).
Fig. 10.21 African Arch 1: Peace, safety and security
314
B. ROBINSON
10.3.3
Pillar 3: Government Policy
Government policy towards Special Economic Zones in China was integrated into its general socio-economic objectives. It was also organic
in nature. It constantly evolved over time as lessons were learnt and
circumstances changed, while maintaining a long-term perspective that
contributed to stability. Policy makers were not afraid of making mistakes,
these mistakes informed future policy. That is why this particular Pillar is
represented as cyclical in nature.
Policy was sometime clear in Africa, sometimes ambiguous, and at
times policy makers lacked understanding or insight into the role of
Special Economic Zones in their development objectives. This policy
uncertainty was a significant deterrent to investment by Chinese investors!
This makes sense. If an investment is made in a Zone based on fiscal
incentives that it promises, investors want to be assured that these incentives remain in place during the duration of their long-term investment.
Failure to do so could have serious consequences on the projected returns
on the investment.
Conflicting policy or poorly considered policy was also a problem. Take
for instance the export orientation of Ethiopia’s Special Economic Zones.
Instead of considering the value of import substitution and benefits of job
creation, export conditions on zones were stifling investment. They also
made little sense as certain industries were simply not able to compete
internationally for a number of reasons, such as the cost of transport due
to Ethiopia’s landlocked position and the distance to the port.
Countries such as Rwanda and Mauritius have followed some of the
examples set by China and introduced Special Economic Zone policy
that is in harmony with clear socio-economic objectives that the country
has set. Both have also allowed for a regular process of evaluation,
thus learning from successes and failures of their policy, and allowed for
flexibility in adapting to a rapidly changing global world.
10.3.4
Pillar 4: Location
Location is of paramount importance, and China selected locations based
on the criteria of access to domestic, regional and international markets.
Shenzhen was earmarked due to its proximity to Hong Kong, which
allowed for relatively easy distribution of goods produced to the global
10
TOWARDS IMPACTFUL SPECIAL ECONOMIC ZONES IN AFRICA
315
market, but also facilitated Foreign Direct Investment from Hong Kong
to Mainland China.
Location was mostly well chosen by African Special Economic Zones.
Location to the domestic market was an important consideration for some
investors who wanted to sell goods on the domestic market, although this
was not always possible due to the export orientated policy of the country.
Regional access was also a consideration for investors, such as Mauritius
being regarded as a springboard into Africa. Unfortunately, trade with
neighbouring countries was often constrained by trade barriers or poor
infrastructure. Adoption, and more importantly, implementation of the
African Continental Free Trade Area (AfCFTA) holds much promise to
free up regional trade. Such a trading bloc could negotiate preferential agreements with other trading blocs. The Chinese Belt and Road
Initiative (BRI) could complement AfCFTA and facilitate significant trade
between African nations and the rest of the world. The importance of unrestrained trade warrants the inclusion of the second African arch, namely
African Arch 2: Inter and Intra-African continental trade (Fig. 10.22).
While access to markets was one consideration, some zones were
selected for other, justifiable, reasons: Being close to industrial hubs facilitates an efficient supply chain and provides a market for goods; raw
materials availability in the area; for mining companies, zones would
need to be in the heart of the mining activity where mineral resources
are found. Labour supply in the area was important, both from the
perspective of investors requiring human resources, but also from the
Fig. 10.22 African Arch 2: Inter and Intra-African continental trade
316
B. ROBINSON
host country perspective, where zones could contribute to the alleviation of unemployment and hold promise of skills transfer. Safety of the
area is also a critical consideration, and often Chinese zone operators had
to employ their own ‘army’ of security personnel to ensure the safety of
investors and their employees—this is reflected in the first African arch
mentioned earlier.
10.3.5
Pillar 5: People
An entire prior Chapter has been dedicated to people. Two aspects were
considered, namely the importance these zones had in reducing unemployment and improving the well-being of people—the social upliftment
and well-being of a ‘harmonious’ society has always been pivotal in
China’s zones—and the value placed on labour by Chinese investors.
To summarise, relatively cheaper labour in many African countries
attracted investment as wages in China increased when development took
hold. The problem was that while labour supply may be in surplus, labour
may not have the literacy, skills or education needed by companies—this
stifled productivity. If there were a lack of skills, Chinese companies that
would consider investing would be labour-intensive in nature where skills
were not too critical—hence the number of assembly-type operations in
Special Economic Zones. Chinese investors, contrary to public opinion,
do not want to employ Chinese labour as wages are higher, and the costs
of flights, visas and accommodation can be cost prohibitive even with
their skills and resultant productivity being higher.
Chinese investors did invest time and effort into upskilling workers,
and this naturally led to an increase in wages, as Chinese firms tried to
retain employees they had trained. This saw a natural outcome of wages
been higher in the zone than outside the zone. In the case of South Africa,
some zone operators negotiated wage levels in the zone than were higher
than minimum wages in the country. The justification for doing so was
that it reduced volatility and community resistance, but the question was
raised as to whether the higher wage made the zone less competitive than
other zones globally in attracting Chinese investment.
Localising labour with critical skills were a problem in countries with
a compromised education system, or where the skills provided by educational institutions were inappropriate to the needs of companies. It would
10
TOWARDS IMPACTFUL SPECIAL ECONOMIC ZONES IN AFRICA
317
be difficult for Chinese companies to ‘upskill’ when essential basic education is lacking. This resulted in the situation where Chinese companies
were sometimes left with no choice but to employ Chinese labour,
this was especially true for engineering type professions. Some Chinese
companies sent local African employees to China for training programmes
in an attempt to address the shortage of critical skills and may even
provide Chinese language lessons while there to reduce language barriers.
There was also the move by some Special Economic Zones to invest
in specialised training facilities and facilitate higher education in innovation related fields—such as the apprenticeship training offered at the
Coega Special Economic Zone in South Africa and the Carnegie Mellon
University Africa in Rwanda.
Investment by Chinese operators in African zones, and Chinese investments within these zones contributed to job creation, as well as other
benefits. It supports local enterprise development with most Chinese
companies wishing to access supplies and raw material from local businesses. It supported SMME development by locals, the example was given
of the rise of guest houses and restaurants near the Ethiopian Eastern
Industrial park to cater for businesspeople visiting the area. The infrastructural investment contributed to better access to services and facilities for
local communities—roads built for accessing the zone would contribute
to ease of transport for locals. There were also negative impacts, with
some conflict with local communities being noted.
10.3.6
Pillar 6: Integration
The zones in China are so integrated with cities that they are cities
themselves. Shenzhen is one giant Special Economic Zone. This was
less evident in African Special Economic Zones, except of course for
Mauritius, where the Export Processing Zone was countrywide and wellintegrated throughout the economy, and integral to its socio-economic
objectives.
Many of the other Special Economic Zones in Africa were not well
integrated. They tended to be on the outskirts of the cities, and while
there may be some integration with industrial areas, they were generally
not well integrated with the cities themselves. Sometimes cities would
be competition with the zones rather than complementing each other
activities.
318
B. ROBINSON
There was at times a lack of integration with transport logistics that
severely compromised the ease of zone investors to trade. Poor road
infrastructure was a huge problem in Nigeria, while countries such as
South Africa were struggling with deteriorating rail infrastructure.
10.3.7
Pillar 7: Infrastructure
China perfected infrastructure. The government ensured that the countries Special Economic Zones were equipped with everything needed—
power, water, roads, ports, etc.
Infrastructure supporting Special Economic Zones in Africa varied
considerably. Rwanda and South Africa invested in outstanding internal
and external infrastructure for their zones, but in other countries, this
was not the case. Chinese zone operators in Africa have been let down on
occasion by host country governments who promised infrastructure, such
as roads to connect the Ogun-Guangdong Free Trade Zone to ports,
but reneged on these undertakings. The Zone operators were left with
the situation that they either had to invest significantly in such external
infrastructure or just manage with what was in place.
Internal infrastructure was either provided for by the host government,
or as is the case in Chinese owned zones in Africa, the operators invested
heavily in internal infrastructure. And it wasn’t just investing in roads.
The lack of services and utilities in many countries resulted in these zones
having to invest in power plants, water treatment plants, boreholes etc.
As a result, these zones often found themselves to have gained a competitive edge in terms of infrastructure that they could offer investors—an
uninterrupted power supply for a ceramic factory in Nigeria was a critical
condition for the investment.
ICT infrastructure provided in Rwanda’s zone, and the move towards
‘Smart cities’ in Mauritius, signifies a move by these countries and their
zones to become leaders in the high-tech and services industry, and
ensure their competitiveness as the fourth industrial revolution takes
place.
10.3.8
Protocol 1: Phased Approach
Twelve protocols featured in the Chinese Model—these are the necessary interventions to ensure that Special Economic Zones are effective in
achieving their desired development outcomes.
10
TOWARDS IMPACTFUL SPECIAL ECONOMIC ZONES IN AFRICA
319
The first protocol is that of Special Economic Zones having a phased
approach, and this phased approached is continuous in nature. It requires
that Special Economic Zones continually evaluate their activities and
learn from their past successes and failures as they re-craft the zone
going forward. It also requires that zones constantly benchmark themselves against other zones and change and adapt based on what they
have learned from others. Rwanda has modelled their Special Economic
Zone on international best-practices, and annually conduct revisions and
investor-friendly reforms—this will stand them in good stead as the zone
evolves.
Some African zones have not adequately acknowledged nor addressed
their weaknesses. There also seems to be a lack of experimentation. These
are both important if such zones are to evolve as they develop and adapt
to a world of economic shocks.
What is interesting about China and Mauritius, is that both countries
have actively gone out and shared their experiences on Special Economic
Zones with other countries and zones. African countries struggling with
their own zones or considering such zones, would be well advised to take
advantage of such assistance to improve their zones’ performance and
potential of success.
10.3.9
Protocol 2: Ease of Business
Bureaucracy stifles entrepreneurship. China in the early years of their
Special Economic Zones dispensation recognised that the bureaucracy
necessitated by a planned economic system, was its very own downfall.
As the country introduced market reforms it actively sought to simultaneously reduce the red tape of doing business and simplify local government
administration.
Investors are attracted to countries that facilitate and encourage efficient business practices. Whether this be in the opening of a business,
acquiring licences, and trading, the ease of business contributes to business success. Many zones in Africa have recognised this, and with the
support of government, in-house one-stop shops and customs offices
have been introduced. Apart from easing bureaucracy, they often serve
to guide investors, and in Chinese Special Economic Zones in Africa,
having access to Chinese-speaking staff goes a long way in cementing
an investment commitment.
320
B. ROBINSON
In general, though, most Chinese investors reflected on the difficulty they often faced in doing business in Africa. Something as simple
as installing a land-line telephone could be complex, time-consuming
and frustrating. Incompetent government administration, service delivery
inefficiency, and corruption were regular complaints described by Chinese
investors.
10.3.10
Protocol 3: Preferential Policies
Preferential policies contribute to the competitiveness of Zones—and it is
a very competitive environment with hundreds of Zones throughout the
world vying for investors.
If one considers Chapter 6 which listed the various preferential policies and incentives, it becomes clear how different they are, and how
complex they can be. Preferential policies, such as fiscal and other incentives, obviously need to be contextualised to the objectives of such zones,
but often they almost appear to be restrictive, rather than encouraging
investment. An investor would also struggle to make sense of many of
the policies that are publicly available, and a number of zones do not have
publicly accessible information. In the day and age of digital information,
it seems that many zones in Africa are not promoting themselves as they
should. It would be interesting to know whether potential investors have
been consulted in the development of many of these policies to determine the optimal balance of policies to attract investment and achieve the
socio-economic objectives of the zone.
10.3.11
Protocol 4: Innovation and Learning
Special Economic Zones should be ‘pilots of innovation’ as was the case
on China, where the zones evolved quite quickly from heavy industry
to high-tech. Strategic industries were incubated and eventually, so-called
‘smart-cities’ emerged.
Most African zones lag behind other zones in developing countries in
terms of innovation and learning, the exception being zones such as the
Kigali Special Economic Zone. It has made innovation a priority and partnered with the Carnegie Mellon African University to support specialised
skills development in this regard, while having a high-tech focus, and
providing appropriate ICT infrastructure.
10
TOWARDS IMPACTFUL SPECIAL ECONOMIC ZONES IN AFRICA
10.3.12
321
Protocol 5: Favourable Investment Climate
A favourable investment climate refers to providing the correct balance
of incentives, services, infrastructure and market access; and encouraging domestic and foreign investment through public, private and
public–private partnerships.
Many investors are specifically attracted to the large and emerging
markets that African countries offer. Making these accessible to Chinese
and other investors will contribute to investment, job creation and
import-substitution. A favourable investment climate also refers to the
ease in which profits and capital invested in host countries can be repatriated—some countries provide assurances in this regard. Legislation
requiring localised ownership and associated requirements are a significant disincentive, with investors resistant to relinquishing a share of
their ownership and control. Political and social volatility similarly make
investors wary due to the associated risks to their investments.
It also refers to making foreign expatriates feel welcome, what China
referred to as giving foreigners ‘national treatment’. Many Chinese owned
and operated Special Economic Zones in Africa went out of their way
to provide a homely environment for Chinese workers in the zones—
kitchens and restaurants serving Chinese cuisine; hostels with entertainment and sports facilities for Chinese workers where they can socialise.
The Chambishi Multi Facility Economic Zone was a prime example of
how this can be done. Host countries can also contribute in this regard by
making the transition to a different country and new culture as seamless
of possible and encourage the re-settlement of foreigners—as evidenced
by Mauritius in their efforts to attract the wealthier investor and resident.
10.3.13
Protocol 6: Modern Service Industry
A modern service industry can be interpreted in two ways. Firstly, in terms
of basic services, these should be available, reliable, efficient and costeffective. Creating a culture of innovation in Special Economic Zones
requires more than this just basic services. It requires an efficient banking
and financial services sector; it requires cutting edge ICT services.
This is lacking in many of the zones in Africa and this limits their
Special Economic Zones’ ability to move the economy from heavy
industry dependence towards more advanced technologies and a diversified economy.
322
B. ROBINSON
10.3.14
Protocol 7: Environmental Consideration
Development and environmental protection are paradoxical. Kuznets’s
curve describes how development correlates with environmental degradation until a point is reached where factors such as responsible consumer
and business behaviour, and increased environmental standards and
policing, reduce damage to the environment. China can attest to this. As
China improves its own internal standards, coupled to the shift of production facilities to lesser developed economies due to cheaper factors of
production and other reasons, there is a real risk that polluting industries
will be shifted to Africa.
Some African nations may not have the legislation, policing or political will to ensure environmental protection, and there is no doubt that
unscrupulous businesses would take advantage of this, and not adhere
to global environmental standards or live up to their own responsibilities in this regard. This concern was raised in the case of the Eastern
Industrial Park in Ethiopia. While China is attempting to rein in those
guilty of environmental damage in China and elsewhere, it is critically
important that Africa takes ownership of the issue. As African countries,
regional bodies, and as a continent, Africa needs to be proactive and be
accountable for its own future, whether that be environmental, social
or economic. This brings us to the third African arch, namely African
accountability (Fig. 10.23).
Environmental issues were an important consideration for Chinese
Special Economic Zones as they evolved, and a similar approach can and
should be taken with African Special Economic Zones. China has been at
Fig. 10.23 African Arch 3: African accountability
10
TOWARDS IMPACTFUL SPECIAL ECONOMIC ZONES IN AFRICA
323
the forefront of renewable energy technology and reducing harmful emissions, and readily shares this knowledge with Africa. African governments
should also be giving the environment precedence in the establishment
of Special Economic Zones, and China can contribute knowledge and
expertise in this regard.
10.3.15
Protocol 8: International Cooperation
China, from being inward focussed, rapidly changed as their Special
Economic Zones were gaining traction to an outward focus. This entailed
developing international cooperation and goodwill.
This is fortunate for Africa as it benefits from greater attention from
China, and through interventions such as the Forum of China-Africa
Cooperation (FOCAC), the BRICS association, and emerging nations
playing a greater role in the United Nations and other global bodies,
Africa is well positioned to take its rightful place in the global arena.
10.3.16
Protocol 9: Address Shortcomings
There are a number of Pillars and Protocols that allude to the necessity for
Special Economic Zones to learn from their mistakes and address shortcomings—the necessity to have phased approach, for government policy
to evolve, and to be experimental and innovative.
China has numerous shortcomings and still does, but it does try to
address these shortcomings. Pollution was mentioned earlier, but similarly, corruption has been a significant problem which the country is
tackling. With such a large population, urbanisation and resultant congestion is a problem. Special Economic Zones in China have been leveraged
to address some of the negative externalities that development creates,
for instance, governance controls were integrated in the zones to reduce
corruption; and spatial planning and improved services assisted with
ensuring better urban efficiencies.
African Special Economic Zones should reflect on their weaknesses
and evolve over time to address them, and government can facilitate this
process. Akin to China, many African cities suffer from an urbanisation
problem, with congested, crowded, and polluted cities. The Lekki Free
Trade Zone in Nigeria was found to be contributing to a new industrial
hub outside of Lagos, and people were moving out of the city to be closer
324
B. ROBINSON
to this area of growth and for job opportunities, thus contributing to
some alleviation of the problems associated with an overcrowded Lagos.
10.3.17
Protocol 10: Social System
The Social System protocol relates well with the Pillar of integration. As
an objective of Special Economic Zones is to improve the lot for society, it
makes sense that there is a strong correlation between the two. As China’s
Special Economic Zones developed, the Chinese government was able to
gradually introduce and improve social welfare interventions.
This doesn’t seem to be as well integrated in African Special Economic
Zones, apart from the obvious job creation outcome. Initiatives by Zone
operators and investors to social initiatives were limited. Clinics may be
one example that was found at most Chinese operated zones in Africa, and
the Chambishi Multi Facility Zone in Zambia has a hospital for its staff,
but also provided health services for the wider community. There didn’t
seem to be much in the way of corporate social investment by investors
in the zones.
There are exceptions though. The Coega Special Economic Zone in
South Africa has a strong societal focus, and was very involved in job
creation, support of SMMEs, skills development and other corporate
social investment efforts directed towards the surrounding townships.
The zone recognised that it was interrelated with these communities and
had a role to play in their upliftment. The second example would be
Mauritius. The socio-economic development of the country was strongly
associated with the establishment of the Export Processing Zone, which
in turn was closely related to the welfare improvements the country could
offer its people. There was also a reciprocal relationship. As the welfare
system grew in substance, it had the benefit of improving education levels
in the country, which in turn supported the evolving services industry and
innovative high-tech industries.
10.3.18
Protocol 11 and 12: Export Orientation and Diversifies
Industries
The export orientation of China’s Special Economic Zones was the
stimulus that it needed as it opened to the global market, but that
evolved over time, and investors gradually entered China and serviced
the domestic market, and there was also a strong focus on diversification.
10
TOWARDS IMPACTFUL SPECIAL ECONOMIC ZONES IN AFRICA
325
Some countries in Africa, such as Ethiopia, have adopted a strong
export orientation at the expense of diversification into related industries of those already established, or that provided import-substitution
effects. This has been motivated by currency problems and severe balance
of payment deficits been experienced by the host country, rather than
having a good rationale for doing so. This constrains investment into
industries that could effectively cater to this market, create employment,
and compete against imports. It also constrains diversification.
Diversification also seems to be limited in Africa due to a dominance
of heavy industry, or to traditional low-skilled labour-intensive industries.
This is mostly due to the lack of specialised skills, but also an indication of inappropriate policy interventions by host governments. Special
Economic Zones can serve as a catalyst to change this and bring in innovative technologies as is the case in Rwanda. Providing the necessary ICT
infrastructure and providing access to tertiary education in innovative
sectors can provide the impetus for change.
10.4 The African Model
of Special Economic Zones
The Chinese Model of Special Economic Zones that has been described
and applied throughout this book provides numerous insights and lesson
for Special Economic Zones in Africa. While the African country context
is critical to consider in determining an appropriate Special Economic
Zone intervention, these Pillars and Protocols will always be relevant.
Three additional African Arches have been added to the model and
refer to important attributes that need to be provided in the African
context to ensure African Special Economic Zones’ global competitiveness, without which, will severely curtail their ability to attract Chinese
and other investors, and thus limit their contribution to sustainable development. These are peace, safety and security; reduced trade barriers and
promotion of inter and intra-continental trade; and African accountability. These are presented in Fig. 10.24—The African Model of Special
Economic Zones.
Protocol 2: Protocol 3: Protocol 4:
Ease of PreferenƟal InnovaƟon
policies
business
& learning
Protocol 5:
Favourable
Investment
Climate
Protocol 6:
Phased
approach
Fig. 10.24 The African Model of Special Economic Zones
Protocol 1:
Phased
approach
Protocol 7: Protocol 8: Protocol 9:
Modern InternaƟonal Addressing
shortservice
cooperaƟon
comings
delivery
Sustainable development
Protocol 10: Protocol 11: Protocol 12:
Social
Export
Diversified
system
orientaƟon industries
326
B. ROBINSON
10
TOWARDS IMPACTFUL SPECIAL ECONOMIC ZONES IN AFRICA
327
References
7 Years Government Programme: National Strategy for Transformation (NSTi)
2017–2024. 2021. Accessed from https://www.nirda.gov.rw/uploads/tx_
dce/National_Strategy_For_Trsansformation_-NST1-min.pdf.
Businesstech. 2021. The Cost and Time it Takes South Africans to Move to
Mauritius, July 24. [Online]. Accessed from https://businesstech.co.za/
news/trending/508294/the-cost-and-time-it-takes-south-africans-to-moveto-mauritius/.
Carnegie Mellon University Africa. 2021. [Online]. Accessed from https://www.
africa.engineering.cmu.edu/index.html. Accessed 25 July 2021.
CGTN. 2018. Graphics: A Quick Look at China-Mauritius Economic Cooperation, July 28. [Online]. Accessed from https://news.cgtn.com/news/3d3
d514e3241544d79457a6333566d54/share_p.html. Accessed 22 July 2021.
Corruption Perceptions Index. 2020. Transparency International. [Online].
Accessed from https://www.transparency.org/en/cpi/2020/index/nzl.
Dentons. 2017. Mauritius—the Gate for Chinese Investment into Africa, August
16. [Online]. Accessed from https://www.dentons.com/en/insights/art
icles/2017/august/16/mauritius-the-gate-for-chinese-investment-into-africa?
utm_source=Mondaq&utm_medium=syndication&utm_campaign=LinkedInintegration. Accessed: 27 July 2021.
Human Development Report. 2020. UNDP: The Next Frontier: Human Development and the Anthropocene. [Online]. Accessed from http://hdr.undp.
org/sites/all/themes/hdr_theme/country-notes/MUS.pdf.
Jinfei Smart City. 2021. Jinfei Smart City. [Online]. Accessed from http://www.
jinfeismartcity.com/index.html. Accessed 27 July 2021.
Khan, I. 2020. Mauritius: China-Mauritius Relations—After False Starts, How
the Free Trade Agreements CAN Deepen Economic Ties. All Africa / L’Express, December 31. [Online]. Accessed from https://allafrica.com/stories/
202012310773.html. Accessed 29 June 2021.
Kigali Special Economic Zone. 2020. Rwanda Development Board. [Online].
Accessed from https://rdb.rw/wp-content/uploads/2020/09/SEZAR-Cat
alogue.pdf.
Mauritius Economic Development Board. 2021. Attractiveness of Mauritius.
[Online]. Accessed from https://www.edbmauritius.org/manufacturing-tra
ditional-industries. Accessed 27 July 2021.
Mauritius Finance Network. 2021. Chinese Business Chamber. [Online].
Accessed from https://www.mauritius-finance.com/en/business/associati
ons/433-chinese-business-chamber. Accessed 28 July 2021.
328
B. ROBINSON
Rwanda Development Board. 2021. Rwanda Development Board. [Online].
Accessed from https://rdb.rw/. Accessed 24 July 2021.
Statistics Mauritius. 2018. Mauritius in Figures 2018. Ministry
of
Finance
and
Economic
Development
Statistics
Mauritius.
[Online]. Accessed from file:///C:/Users/brobinson/OneDrive%20%20Nelson%20Mandela%20University/Downloads/MIF_Yr18.pdf.
The World Bank. 2021. Mauritius Country Data. [Online]. © World Bank.
Accessed from https://data.worldbank.org/country/MU. Accessed 27 July
2021. License: Creative Commons Attribution License (CC BY 3.0 IGO)
(http://creativecommons.org/licenses/by/3.0/igo/).
Visit Rwanda. 2021. Visit Rwanda. [Online]. Accessed from https://www.visitr
wanda.com/.
Zafar, A. 2011. Mauritius: An Economic Success Story. Africa Success Stories
Project. [Online]. © World Bank. Accessed from https://documents1.
worldbank.org/curated/en/304221468001788072/930107812_201408
2530900808/additional/634310PUB0Yes0061512B09780821387450.pdf.
Accessed 28 July 2021. License: Creative Commons Attribution License (CC
BY 3.0 IGO) (http://creativecommons.org/licenses/by/3.0/igo/).
Index
A
absolute advantage, 137
accessibility, 156
advanced technologies, 68, 138, 321
Africa’s Centre for Disease Control
and Prevention, 228
African accountability, 322, 325
African Continental Free Trade Area
(AfCFTA), 24, 89, 109, 158,
168, 315
African Development Bank, 16, 21,
170
African Growth and Opportunity Act
(AGOA), 112, 168, 306
African Model of Special Economic
Zones, 293, 312, 325
African Passport, 24
African Renaissance, 10, 23
African Tree of Organic Growth, 10,
28
African Union (AU), 16, 22, 89, 91,
105, 131, 227, 228, 297
Agenda 2063, 16, 22
agribusiness, 109
agricultural bank, 170
agricultural modernization, 87
agriculture, 21, 30, 37, 41, 93, 106,
107, 182, 247, 249, 263, 305
agro-processing, 123, 209, 211, 215,
298
aid, 16
AIDS, 92
Algeria, 9, 18, 98, 127–129, 228
America, 21
Angola, 9, 26, 78, 90, 95, 98, 99,
118, 124, 168, 176, 178–180
Angola-mode, 17, 98, 241
Armenia, 169
arts and culture, 22
Asia, 21, 77, 111, 242
Asian, 305
assembly, 287, 316
assembly industries, 122
assembly plants, 162
assets, 11
attracting investment, 3
Australia, 169
automobile, 129
© The Editor(s) (if applicable) and The Author(s), under exclusive
license to Springer Nature Singapore Pte Ltd. 2022
B. Robinson, African Special Economic Zones,
https://doi.org/10.1007/978-981-16-8105-9
329
330
INDEX
automotive, 27, 121, 209, 211, 212,
285
aviation, 109
B
balance of payment, 18, 325
Bangladesh, 113, 114
Beautiful China, 239, 241
Beijing, 102
Beijing Action Plan
2018, 100
2019–2021, 89, 90, 92, 100, 226
Belarus, 169
Belt and Road Initiative (BRI), 71,
77, 92, 103, 104, 107, 108, 315
beneficiation, 209, 211
of mineral and natural resources,
201
Benin, 118, 168, 176, 178–180
bilateral, 89, 129, 233, 262
bilateral financial cooperation, 77
bilateral relations, 108, 169, 287
bilateral trade, 88
Blue/Ocean Economy, 23
blue economy, 107
Botswana, 15, 26, 130, 168, 176,
179–181
bottlenecks of infrastructure, 98
Brain-Drain, 196
Brazil, 102, 103
bribery, 143
BRICS bank, 19
BRICS (Brazil, Russia, India, China
and South Africa), 19, 88, 323
BRICS Plus, 102, 103
Broad-Based Black Economic
Empowerment (B-BBEE), 163,
196
broken promises, 313
bureaucracy, 20, 49, 154, 219, 252,
263, 283, 296, 313, 319
bureaucratic red tape, 148
Burkina Faso, 17, 168, 176, 178–180
Burundi, 78, 113, 168, 176, 178–180
business climate, 70
business confidence, 191
business environment, 216
business-friendly, 296
business services, 27
C
Cabo Verde, 176, 179, 180
Cambodia, 127
Cameroon, 113, 118, 141, 143,
150–152, 155, 166, 168, 176,
178–180
Canada, 169
capacity building, 18, 106
capacity development, 237
Cape Verde, 113, 168
capital, 11, 13
capital equipment, 163
capital flows, 297
capital formation, 66
capital gains tax, 140
capital gains tax exemptions, 297
capital markets, 15, 16
Central Africa, 14, 160
Central African Republic, 168, 176,
178, 179
certificates of origin, 129
Chad, 168, 176, 178–180
chemicals, 27
children, 90
China, 4
China-Africa Developmental
Financing Forum, 107
China-Africa Development Fund
(CADF), 104, 125, 126
China-Africa Financial Cooperation
Consortium, 107
China-Africa Fund for Industrial
Cooperation, 104
INDEX
China-Africa Green Development
Plan, 243
China Development Bank, 126, 170
China’s economic policy in Africa,
102
China’s Model of Special Economic
Zones, 80
China’s policy, 139
Chinese developers, 128
Chinese diaspora in Africa, 232
Chinese expatriates, 167, 266
Chinese investment, 293
Chinese labour, 149, 189
Chinese Liberation Army, 38
Chinese loans, 99
Chinese market, 307
Chinese migration, 232
Chinese Ministry of Commerce
(MOFCOM), 95, 126
Chinese Model of Special Economic
Zones, 61, 311, 325
Chinese owned and managed Special
Economic Zones, 152
Chinese owned and operated, 293
Chinese policy, 111
Chinese policy towards Africa, 169
clean energy, 20
climate action, 28
climate change, 28, 93, 236–238,
242, 243, 247, 248
colonialization, 226
commercial financial institutions, 146
common development, 104, 227, 238
common prosperity, 104
Communist Party, 35, 169
community, 228, 229, 231, 265, 316,
317
community development, 99
community problems, 157
community unrest, 205
Comoros, 168, 176, 178, 179
comparative advantage, 29, 137
331
competitive, 137, 287, 305, 307, 316
competitive advantage, 160, 280
competitive edge, 318
competitiveness, 318, 320
concessional loans, 100, 227, 305
conditionality, 17
conflict, 4, 226, 231, 265, 294, 317
Confucius Institute, 91, 227, 233
Congo, 124, 168
construction, 97, 118, 298
consumer goods, 94
consumer products, 27
consumption, 69
cooperation, 131
cooperation programmes, 108
Coronavirus, 14
corporate governance, 16
corporate income tax, 297
corporate social investment, 324
corporate tax, 140, 306
corrupt, 283, 313
corruption, 14, 53, 78, 98, 143, 202,
204, 262, 269, 284, 288, 296,
304, 320, 323
cost of doing business, 143
cost of labour, 216
Côte d’Ivoire, 17, 21, 26, 118, 176,
178, 180
COVID-19, 14, 38, 92, 130, 196,
226
creating employment, 181
crime, 106, 196
critical services, 219
critical skills, 162, 196, 216, 299, 316
cross-border investment, 77
cross border trade, 283
Cuba, 123
cultural exchange, 77, 86
Cultural Revolution, 37
cultural wealth, 13
culture, 23, 25, 31, 87, 93, 108, 235,
242, 321
332
INDEX
of doing business, 152
cultures and traditions, 233
culture shock, 165, 233
currency, 139, 164, 263
currency exchange, 165
currency fluctuations, 268
currency problems, 325
customs, 198, 202, 288
customs controlled area, 145, 198
customs duties, 139, 140
customs duties for export, 143
customs inspection, 155
customs office, 149, 252, 283, 319
customs procedures, 107
customs requirements, 140
cyber security, 25, 91
D
dams, 241
debt burden, 15, 78
debt distress, 15
debt forgiveness, 99
debt reduction, 21
debt-traps, 99
decolonisation, 23
defence, 41
deforestation, 239
demand-side reforms, 69
democracy, 23, 109, 303
Democratic Republic of the Congo
(DRC), 9, 14, 17, 90, 99, 118,
124, 168, 176, 178, 180, 269
Deng, Xiaoping, 38, 41, 312
depreciation allowances, 140
desertification, 93, 239, 243, 244
develop finance, 21
developing countries, 104, 109, 236
developing nations, 105
development assistance, 108
development finance, 13, 16, 20, 107,
109
development finance institutions, 16,
146, 169
development institutions, 312
development policy, 261
digital economy, 70, 109
diplomacy, 242
Disease Control and Prevention, 92
diversification, 14, 24, 62, 93, 97,
100, 101, 264, 285, 296, 298,
304, 306, 324
diversified economy, 104, 321
diversity, 3, 29
Djibouti, 18, 26, 78, 113, 118, 124,
130, 141, 152, 155, 156, 158,
161, 164, 166, 168, 267
domestic and regional market, 156
domestic capacity, 31
domestic consumption, 66
domestic demand, 15
domestic economy, 65
domestic market, 156, 159, 315
domestic restructuring, 125
Dominican Republic, 113–115
duties and levies, 144
duty free, 144, 169, 268, 271, 297,
305
duty free imports, 139, 140, 143
E
ease of doing business, 30, 62, 139,
148, 262, 281, 284, 297, 301,
305, 306, 319
East Africa, 14
East African Community, 168
Ebola, 14, 92, 226
e-commerce, 109
economic base reform, 51
Economic Community of West
African States, 168
economic conditions, 191
economic cooperation, 20, 77, 86,
88, 103, 104, 106, 107, 242
INDEX
economic development, 225, 303
economic growth, 10, 14, 17, 27, 37,
97, 182, 201, 209, 216, 235,
250, 269
economic growth and diversification,
13
economic participation, 13
Economic Partnership Agreements
(2021), 168
economic performance, 3
economic policy, 191, 197
economic reforms, 305
economic slowdown, 80
economic transformation, 105
education, 21, 27, 28, 70, 87, 91,
162, 177, 186–188, 193, 196,
226, 227, 296, 302, 303, 316,
324
education and skills, 12
Egypt, 9, 14, 15, 88, 102, 117,
126–129, 270, 271
electricity, 153
electricity supply, 202
Emerging Market and Developing
Economies (EMDEs), 108
Emerging Market Economies (EME),
108
emerging market investors, 27
emerging markets, 109
employability, 13, 90
employment, 18, 99, 115, 175, 204,
216, 227, 251, 305, 325
employment regulations, 283
enabling environment, 263
energy, 27, 97, 101, 106, 108, 109,
212
enforcement of regulations, 255
enterprise development, 99, 229, 317
entrepreneurs, 261, 281, 309
entrepreneurship, 13, 16, 30, 70
333
environment, 74, 78, 90, 92, 101,
108, 148, 199, 227, 235, 237,
242, 296, 302, 322
environmental agency, 247
environmental compliance, 246
environmental consideration, 62
environmental controls, 255
environmental degradation, 225, 235
environmental impact, 241, 247, 255
environmental impact assessments,
246
environmental negligence, 66
environmental policy, 250
environmental protection, 242, 244,
250, 298
environmental regulation, 255
environmental security, 241
environmental standards, 322
environmental support, 242
environmental sustainability, 10, 13,
23
Equatorial Guinea, 113, 176, 178,
179
equipment, 161
Eritrea, 90, 113, 118, 176, 178, 180,
282
Eswatini, 88, 100, 102, 168, 176,
179, 180
Ethiopia, 9, 10, 15, 17, 22, 26, 90,
102, 127–130, 154, 156, 158,
168, 175, 176, 178, 179, 184,
186, 189, 228, 230, 247, 248,
250, 251, 262, 264, 267, 270,
271, 276, 282, 283, 325
ethnic, 303
Europe, 21, 77
European Union, 168, 169
European Union’s Coutanou
Agreement, 94
exchange programmes, 227, 233
exchange rates, 268
excise duty, 146
334
INDEX
excise tax, 144
EXIM bank, 98
expatriate labour, 149, 181
experiment, 73, 323
experimental approach, 65
experimentation, 319
expertise, 186
export diversification, 99
export growth, 241, 298
Export-Import Bank of China (EXIM
Bank), 88, 146, 169
export market, 160, 304
export orientated growth, 209
export orientated policy, 315
export orientation, 62, 144, 156,
264, 266, 324
export-oriented, 263, 305
Export-processing Zones (EPZs), 39,
43
export(s), 66, 88, 93, 107, 113, 125,
137, 167, 169, 201, 268, 272,
296, 297, 299, 307, 308, 314
extractive industry, 97
F
facilities, 230
factor markets, 70
fair competition, 109
favourable investment climate, 62
fertility rates, 4
finance, 97, 103, 109, 247, 281
financial assistance, 237
financial constraints, 16
financial incentives, 139
financial industry, 52
financial inflows, 27
financial initiatives, 139
financial institutions, 87, 263
financial integration, 77
financial security, 151
financial services, 27, 109, 296
financing models, 107, 241
fiscal, 304
fiscal deficit, 15
fiscal incentives, 305, 313, 314
fiscal policy, 15
Five Pillars, 86
flying geese syndrome, 241
FOCAC Beijing Action Plan of
2019–2021, 89, 103
food scarcity, 226
food security, 101, 106, 237
foreign currency, 267
foreign currency accounts, 165
foreign currency bank accounts, 167
Foreign Direct Investment (FDI), 11,
18, 26, 27, 50, 65, 66, 72, 95,
97, 113, 117, 161, 198, 270,
283, 305, 308, 309, 315
foreign exchange, 126, 268, 304
foreign expatriates, 321
Foreign Investors, 52
foreign labour, 208, 306
foreign ownership, 164, 297
foreign ownership limitations, 139
foreign reserve, 267
foreign strategies, 86
foreign technologies, 71
Forum on China-Africa Cooperation
Action Plan (2019–2021), 242
Forum on China-Africa Cooperation
(FOCAC), 88, 102, 226, 287,
323
Four Modernisations, 41
Fourth Industrial Revolution, 73, 92,
318
fragile economies, 4, 99
fragile states, 4
France, 308
Free Movement of People, 24
free trade agreement, 87, 168
Free Trade Zones (FTZs), 43
INDEX
G
G20, 105
Gabon, 26, 98, 113, 118, 124, 141,
144, 146, 147, 150, 151, 155,
162, 166, 168, 176, 178, 179
Gambia, 113, 118, 168, 176, 178,
180
GDP, 287
GDP growth, 4, 14, 38, 66, 67, 182,
197, 295, 303, 305
gender, 23, 194
gender equality, 27
Generalized System of Preferences of
the United Nations Conference
on Trade and Development
(UNCTAD) (2021), 169
General Resources Account, 18
geo-political, 132
geo-political competition, 11
geopolitical partnerships, 108
Germany, 4, 177
Ghana, 14, 113, 114, 116, 118, 141,
144, 147, 149–152, 155, 158,
161, 164, 166, 168, 176, 179,
180
Gini coefficient, 4
Global Competitiveness Report, 208
global economic slowdown, 66
global economy, 71
global environment, 89
global environmental standards, 255
global investment, 26
globalisation, 86, 139, 198
global market, 267
global stability, 18
global trade routes, 158
global warming, 11, 248
going global, 117
going out, 77, 117, 130
Going out to the Outside World, 52
governance, 13, 28, 199, 202, 203,
219, 237, 241, 288, 304
335
governance and regulatory, 12
governance risks, 78
government, 261
governmental support, 73
government borrowing, 19
government intervention, 213
government ownership, 199
government policy, 4, 29, 62, 213,
266, 301, 314
government reforms, 71
government regulation, 208
government support, 62, 213, 312
government transparency, 296
Grand Inga Dam, 24
Great Leap Forward, 37
Green city, 74
green development, 87, 92, 104, 240,
244
green economy, 296
green energy, 243
greenhouse gas emissions, 236
Guinea, 130, 168, 176, 178, 179
Guinea-Bissau, 168, 176, 178, 179
H
Hainan, 40
Harmonious Society, 53
harmonious world, 104
health, 21, 27, 87, 90, 226, 227
health care, 92, 104
higher education, 193
Highly Indebted Poor Countries
initiative, 21
high-skill, 181, 192
high-speed telecommunications, 155
high-speed train, 24
high-tech, 50, 56, 188, 299, 306,
318, 320, 324
high-value goods, 296
hijacking, 266
Honduras, 115
336
INDEX
Hong Kong, 42, 54, 314
human capital, 70
Human Development index, 9
humanitarian, 108
humanitarian efforts, 226
humanitarian support, 90
human resources, 161
human rights, 23, 101, 226
I
Iceland, 169
ICT, 321
ICT infrastructure, 318, 320, 325
ICT Park, 298
ICT services, 306
import duties, 305
import restrictions, 268
import(s), 66, 88, 93, 107, 137, 267,
268, 272, 308
import-substitution, 161, 267, 298,
299, 314, 321, 325
import tariffs, 129
import taxes, 144
incentives, 125, 140, 145, 199, 214,
241, 263, 266, 269, 288, 297,
305, 306, 321
inclusive, 53, 109, 225
inclusive economic growth, 20
inclusive growth, 10, 22, 23, 29, 106
inclusive international trade, 109
income opportunities, 4
income tax reforms, 15
independence, 89
India, 102, 103
Indonesia, 127
industrial capacity, 87, 104, 107
industrial clusters, 38, 42
industrial development, 197, 209,
249, 298
Industrial Development Zones, 39, 43
industrial growth, 229
industrial hubs, 156, 315
industrialisation, 50, 87, 103–105,
197, 200, 202, 203, 229, 237,
239, 241, 263, 296
industrial nodes, 214
industrial parks, 39, 105
industrial policy, 69, 70, 197, 266
industrial waste, 239
industry, 27, 37, 41, 122
inequality, 4, 14, 27, 28, 163, 191,
197, 203, 226, 235
infectious diseases, 108
inflation, 14, 15, 164
informal employment, 182
informal sector, 15
information, 151
infrastructural bottlenecks, 15
infrastructural projects, 99
infrastructure, 12, 13, 15, 16, 20, 23,
26–28, 30, 53, 57, 62, 77, 80,
87, 97, 99, 103, 104, 106, 109,
129, 139, 151, 156, 198, 199,
201, 202, 214, 219, 229, 251,
262, 264, 271, 274, 275, 284,
287, 288, 297, 298, 305, 309,
313, 315, 317, 318, 321
infrastructure development, 242, 246
in-house customs office, 154
innovation, 13, 27, 28, 52, 65, 68,
70, 74, 109, 202, 299, 301, 307,
321
innovation and learning, 62, 320
innovative, 80, 309, 323–325
innovative cultures, 65
institutional autonomy, 65
institutional development, 202
institutions, 28, 304
integrated approach, 62
integration, 23, 216, 317
intellectual property rights, 70
Inter and Intra-African continental
trade, 315, 325
INDEX
interest free concession, 18
interest-free loans, 227
interest rate, 15
internal reserves, 19
International Bank for Reconstruction
and Development (IBRD), 17
international best-practices, 319
international cooperation, 62, 238,
323
International Development
Association (IDA), 17
International Monetary Fund (IMF),
16, 18, 100, 105, 108
international trade, 11, 18
investment, 95, 103, 105, 109, 113,
175, 261, 262, 264, 271, 280,
285, 293, 296, 306, 307, 313,
314, 319
investment climate, 321
investment decision, 139
investment-friendly, 109
investment incentives, 65
investment promotion, 296
investor confidence, 66
investor friendly, 305
investor-friendly reforms, 319
investors, 298
Ivory Coast, 168
J
Japan, 169
job creation, 160, 161, 175, 190,
197, 208, 209, 228, 229, 267,
285, 287, 298, 299, 307, 314,
317, 321, 324
job market, 196
justice, 28
K
Kazakhstan, 169
337
Kenya, 17, 26, 78, 113, 114, 116,
118, 124, 141, 146, 148,
150–152, 155, 158, 168, 176,
179, 180, 226, 295
knowledge-based economy, 296
Korea, 36
Kuznets’s curve, 235, 322
L
labour, 68, 94, 98, 241
labour cost, 161
labour disputes, 162
labour-employer relations, 208
labour environment, 214
labour force growth, 66
labour intensive, 42, 111, 137, 186,
187, 316, 325
labour legislation, 161, 175, 189,
208, 216
labour market, 181, 209, 213, 215,
305
labour market policies, 208
labour market reform, 209
labour office, 187
labour productivity, 161
labour regulations, 149
labour supply, 315
land, 68
land claims, 157
land reforms, 65
land utilisation, 53
language, 235
language barriers, 162, 317
Latin America, 111, 242
law and order, 13
law enforcement, 90
leadership, 264
leadership support, 62, 213, 301, 312
learning, 65, 66
Lesotho, 18, 26, 115, 168, 176,
179–181, 246
338
INDEX
lesser-developed countries, 169
Liberia, 90, 111, 113, 168, 176, 178,
179
Libya, 14, 91
licenses, 143, 148, 319
life expectancy, 4
lifestyle, 139, 165, 288
literacy, 177
living conditions, 19, 90
living standards, 196, 225, 226
loadshedding, 220, 276
local government administration, 319
localisation, 188
localisation quotas, 149
localised ownership, 321
localising labour, 316
local labour, 189
local work force, 157
location, 62, 156, 209, 214, 281, 314
location advantages, 65
location of the zone, 139
logistical infrastructure, 153
logistical support, 263
logistics, 218
low-carbon, 87
low-income countries, 18
low-skill, 192, 325
low-skilled industries, 216
M
Macao, 42
Macau, 54
macroeconomic environment, 18
macroeconomic stability, 29
Madagascar, 113, 119, 141, 144,
146, 147, 168, 176, 178–180
Malaria, 92
Malawi, 113, 119, 141, 144, 146,
147, 150, 152, 158, 164, 166,
168, 176, 179
Mali, 17, 90, 113, 168, 176, 178–180
management, 139
management positions, 188
managerial staff, 186
manufacturers, 184
manufacturing, 14, 97, 104, 109,
120, 182, 211, 263, 285, 305
manufacturing industries, 198
manufacturing sector, 42, 201
Mao, Tse-tung, 35
maritime, 107
market, 12, 241, 251, 253, 267, 287,
314, 315
market access, 169, 321
market competition, 69, 70
market failures, 16, 69, 70
market opportunities, 139, 156
market-oriented economic reforms, 65
market reform, 38, 319
market restrictions, 70
market system, 51
masked diplomacy, 228
Mauritania, 14, 113, 168, 176,
178–180
Mauritius, 9, 26, 111, 113, 119,
126–130, 141, 144, 147, 155,
158, 161, 164, 166, 168, 176,
179–181, 270, 271, 282, 293,
302, 306, 309, 314, 317–319,
324
Mauritius Miracle, 303
metals, 97
Mexico, 128
migration, 108, 156, 194, 229, 265,
307, 309
military cooperation, 90
minerals, 97
minerals beneficiation, 120
minimum wage, 187, 307
mining, 123, 241, 315
mining industries, 97
mining sector, 188, 228
INDEX
Ministry of Commerce of China
(MOFCOM), 125
moderately prosperous society, 85,
226
modern agriculture, 23
modern economies, 30
modern service delivery, 62
modern service industry, 321
MOFCOM Trade and Economic
Cooperation Development Fund,
126
monetary policy, 14, 15, 18, 77, 164,
304
Mozambique, 17, 90, 113, 119, 124,
141, 152, 168, 176, 178–180,
228
multilateralism, 89, 108
multilateral policy, 169
multilateral trading system, 109
multiplier effect, 11
mutually beneficial cooperation, 86
N
Namibia, 15, 26, 90, 113, 120, 142,
144, 146, 147, 155, 158, 166,
168, 176, 179–181
natural resources, 97, 101, 106, 241,
280, 295, 296, 304
New Development Bank (NDB), 16,
19
New Zealand, 169
Niger, 17, 168, 176, 178–180
Nigeria, 9, 10, 15, 95, 113, 114, 116,
120, 124, 126–130, 142, 144,
147, 148, 151, 152, 154, 156,
160–162, 164–166, 168–170,
175, 176, 178, 179, 181, 186,
188, 229, 231, 233, 235, 261,
264, 266–270, 274, 276,
282–284, 318
Nigeria Trust Fund, 21
non-intervention policy, 100
339
North Africa, 14
Norway, 169
numeracy, 183
O
ocean economy, 242
offshore banking facilities, 166
oil & gas, 118, 120
oil & gas, 97
oil exports, 14
One Belt One Road Policy, 169, 261
One-China, 100
One-Stop Investor Services, 288
one-stop shops, 148, 219, 296, 319
1-stop service, 252, 283
Open-Door Policy, 40
opening-up, 35, 40, 44, 47, 69, 77,
90, 169
open markets, 109
organic growth, 10, 226
Organisation for Economic
Co-operation and Development
(OECD), 16, 19
outsourcing pollution, 241
owned, 285
ownership, 264
ownership and management of zones,
151
ownership quota restrictions, 163
ownership structure, 113
P
Pakistan, 123, 127
Paris Agreement of 2015, 236
patriotism, 261
peace, 22, 28, 313, 325
peace and security, 87, 104, 242
peaceful, 265, 313
peacekeeping, 108
peacekeeping efforts, 90
peace security and stability, 23
340
INDEX
people, 62
people-to-people, 104
people-to-people exchanges, 93
performance standards, 200
permits, 283
permits and licenses, 148, 149
personal income taxes, 140
phased approach, 62, 318
piracy, 91
policy, 28, 106, 129, 132, 246, 247,
256, 261, 293, 313, 325
policy coherence, 202
policy coordination, 77
policy environment, 199
policy framework, 199
policy support, 68
policy uncertainty, 140, 268
political equality, 86
political leadership, 262
political stability, 251, 262, 265, 313
political support, 130
political will, 213, 322
political willpower, 22, 264
polluting industries, 225, 241, 322
pollution, 74, 92, 235, 239, 240,
249, 250, 323
pollution control, 243
poor regulation and/or enforcement,
255
population, 265, 267, 323
population growth, 4, 159, 302
port efficiency, 284
port facilities, 153, 158
port handling charges, 143, 144
port infrastructure, 284
poverty, 4, 14, 17, 18, 27, 39, 41,
87, 89, 163, 191, 196, 203,
225–227, 237
poverty reduction, 4
Poverty Reduction and Growth Trust
(PRGT), 18
power, 129, 274, 276, 278, 280, 318
power and utilities, 27
power plants, 153
power relations, 108
power supply, 220
practical skills, 187, 196
preferential financing, 139, 146
preferential interest rates, 146
preferential policies, 62, 320
preferential rates and duties, 94
preferential trade agreements, 304,
305
preferential trade arrangements, 167
price and margin controls, 144
private investment, 49
private investors, 117
private sector, 21, 199, 200
private security, 153
production, 287, 307
production capacity, 13, 103, 105
production frontier, 68
productive capacity, 137
productivity, 13, 29, 30, 66, 70, 162,
175, 182–184, 186, 187, 189,
191, 196, 216, 296, 305, 316
professionals, 195
promises broken, 271, 274
property tax, 140, 263
prosperity, 85, 106
protectionist measures, 109
protests, 231, 265, 303
public finances, 18
public financial management, 29
Public-Private Partnerships (PPPs),
30, 66, 117, 263, 321
public resources, 4
public service, 227
public utilities, 21
Q
qualification mismatch, 194
quality of material, 163
INDEX
quota-free, 169
quota restrictions, 143
R
radical economic transformation, 203
rail infrastructure, 318
railroad, 284
railway, 153, 271, 274
raw materials, 24, 37, 97, 129, 139,
144, 146, 156, 161, 163, 229,
267, 268, 315, 317
Real Estate, Hospitality and
Construction (RHD), 27
red tape, 150, 219, 281, 296, 313,
319
reform, 86
refugees, 226
regional access, 315
regional development, 71
regional integration, 31
regional markets, 129
regional organizations, 87
register, 297
registering businesses, 148, 283
regulatory, 246, 281, 282
regulatory intervention, 225, 235
renewable energy, 106, 211, 242, 323
rental rates, 139, 145
repatriate profits, 139, 164, 267
Republic of Congo, 18, 176, 178,
180
Republic of Korea, 127
research, 90, 106, 243, 306
residence permits, 152
residency, 309
resource curse, 99
resource exploitation, 4
resource mobilization, 15
resources, 11, 68
retail, 14, 27
return on investment, 151
341
revolution, 38
rights and duties, 13
risk, 284, 312, 321
risk assessment, 151
road and rail infrastructure, 129
road infrastructure, 274, 318
road network, 271
roads, 153, 288, 297, 317
road transport, 274, 284
rural, 4, 90, 182
rural areas, 52
rural communities, 227
rural development, 16
Russia, 102, 128
Russian Federation, 103, 169
Rwanda, 9, 10, 26, 78, 90, 113, 121,
144, 146, 147, 150, 151, 168,
176, 179, 180, 282, 293, 294,
297, 302, 312, 314, 318, 325
S
safety, 157, 265, 313, 316, 325
safety and security, 230, 309
São Tomé and Príncipe, 100, 168,
176, 179, 180
savings, 13
scarce skills, 13
school enrolment, 10
science and technology, 41, 162
science, technology and innovation,
23
secondary, 103
security, 86, 106, 153, 251, 265,
266, 313, 316, 325
security and safety, 262
semi-skilled, 162, 184, 186
Senegal, 111, 113, 121, 137, 142,
144, 147, 150, 168, 176,
178–180
service delivery, 206, 262, 264, 275,
284, 320
342
INDEX
service industry, 121, 318, 324
services, 230, 321
services oriented, 296
services sector, 306
Seychelles, 18, 26, 113, 168, 179,
180
Shanghai, 40
Shantou, 40, 57
Shenzhen, 40, 43, 314, 317
Shenzhen Speed, 47, 312
shift production, 186, 255
shortcomings, 62
Sierra Leone, 26, 90, 121, 130, 142,
144, 147, 168, 176, 179, 180
Silencing the Guns, 24
skilled, 162, 186
skilled labour, 138
skills, 13, 30, 90, 162, 169, 183, 186,
191, 201, 316
skills development, 28, 109, 288,
296, 320, 324
skills levels, 177
skills shortage, 188, 190
skills training, 162, 227
skills transfer, 13, 99, 175, 177, 188,
209, 227, 267, 298, 300, 316
smart cities, 106, 243, 307, 318, 320
SMEs, 16, 71, 104
SMME, 99, 163, 317, 324
social and cultural, 12
social and political enviro, 157
social challenges, 3
social development, 10, 90, 242
social impact, 28
Socialism with Chinese Characteristics
and the Chinese Dream, 85
socialist, 51
social networks, 66
social policy, 17
social progress, 21
social security, 51, 69
social stability and harmony, 51
social system, 62, 324
social wealth, 226
societal benefits, 228
societal development, 225
socio-economic, 101, 132, 161, 191,
285, 314
socio-economic development, 3, 169,
213, 295, 298, 324
socio-economic growth, 202, 303
socio-economic indicators, 3
socio-economic objectives, 312, 317,
320
socio-environmental, 293
Somalia, 26, 89, 176, 226, 270, 282
Somaliland, 3
South Africa, 4, 9, 14, 20, 26, 88, 89,
102, 113, 121, 124, 130, 142,
145–147, 150, 151, 154, 155,
158, 160, 162, 163, 168,
175–177, 179–181, 190, 205,
232, 271, 275, 276, 282, 284,
309, 312, 318, 324
South African Development
Community (SADC), 212
Southern Africa, 14
Southern African Development
Community, 168, 306
South Sudan, 9, 10, 14, 78, 168,
176, 178, 179, 270
Sovereign-Guaranteed Loans, 21
sovereignty, 89
Soviet Union, 36
specialist skills, 181, 187
stability, 296, 314
stable political systems, 265
stamp duty, 145, 146
standard of living, 23
State-owned Enterprises (SOEs), 14,
47, 49, 69
state security, 153
strategic industries, 320
strike action, 204
INDEX
strike activity, 129
strikes, 189, 205, 208, 303
structural adjustment loans, 21
structural challenges, 66
structural change, 183
structural reforms, 29, 68, 109
structural transformation, 31
subsidies, 139
subsidizes utilities, 139, 145
subsistence agricultural sector, 302
subsistence agriculture, 182
subsistence farming, 4
substitution effect, 185
Sudan, 15, 18, 21, 90, 98, 113, 122,
124, 142, 143, 145, 147, 155,
158, 164, 166, 176, 178, 180,
181
supply chain, 77, 156, 248, 315
supply-side reforms, 69
sustainable development, 22, 23, 26,
27, 65, 80, 87, 100, 104, 109,
237, 243, 312
sustainable economic development,
16, 21
sustainable economic growth, 18, 241
sustainable growth, 3
Swaziland, 181
Switzerland, 169
T
Taiwan, 36, 42, 88, 100, 102
Tanzania, 26, 113, 114, 116, 122,
124, 142, 145–147, 155, 161,
164, 167, 168, 176, 178–181
taxation, 107
tax exemptions, 139, 263
tax-free dividends, 140
tax holiday, 129, 139, 297
tax holidays and allowances, 140
tax incentives, 139, 140, 268, 306
tax rates, 140
343
tax rebates, 126
tax revenue, 298
TB, 92
technical, 109, 186
technical skills, 188
technicians, 195
technological capacity, 43
technological exchanges, 106
technological industries, 188
technological transfer, 298
technology, 13, 65, 68, 73, 92, 104,
201, 225, 239, 242, 296
technology hub, 74
technology parks, 124
technology sector, 162
technology transfer, 104, 106, 201,
236, 237
telecommunications, 21, 27
10 Concepts of Shenzhen, 53
Ten Cooperation Programs with
Africa, 86
Ten Systems, 50
terrorism, 91, 106
terrorist, 280
tertiary, 103
textile industry, 94, 160, 251
textile(s), 101, 122, 253, 267, 298,
299, 305, 307
Thailand, 127
The Miracle of China, 46
Think Tanks, 93
Tianjin New Area, 40
Tibet, 36
Togo, 113, 122, 142, 148, 150, 167,
168, 176, 179, 180
tourism, 14, 107, 121, 122, 294,
296, 304
tourist, 54, 308
trade, 93, 103, 107, 109, 283, 295
trade balance, 93
trade barriers, 268, 305, 315
trade deficit, 101, 108
344
INDEX
trade facilitation, 104
trade hub, 158
trade policy, 66, 202
trade surplus, 137
trade tensions, 66
trade union activity, 162
trade unions, 203, 208, 214, 216
trade volumes, 94
trade war, 137
training, 162
training institute, 188
transport, 21, 299
transport and logistics, 27, 202
transportation, 107
transport costs, 24, 160
transport facilities, 229
transport infrastructure, 20, 78, 284
transporting, 267
transport investment, 271
transport logistics, 37, 318
Trump, Donald, 131, 137, 227
Turkey, 169
20+20 Cooperation Plan, 91
U
Uganda, 26, 78, 113, 122, 142, 145,
148, 150, 155, 158, 167, 168,
176, 178, 179, 295
unemployment, 181, 191, 195, 196,
203, 208, 212, 226, 305, 316
unionisation, 189
unions, 312
United Kingdom, 169, 177, 181
United Nations 17 Sustainable
Development Goals, 27
United Nations Framework
Convention on Climate Change
(2015), 236
United Nations (UN), 89, 90, 105,
108, 323
United States’ African Growth and
Opportunity Act (AGOA), 94
United States (US), 4, 66, 123, 130,
169, 177, 181, 228, 241
UN peacekeeping, 91
unskilled, 162, 184, 186, 302
unskilled labour, 181
urban, 52, 182, 274
urban development, 20
urbanisation, 182, 229, 237, 239,
249, 296, 323
US markets, 168
utility, 149
utility services, 148
V
value chain, 30, 66, 109, 125
value proposition, 199
VAT, 140, 198, 306
VAT exemptions, 139, 140, 143, 297
Venezuela, 128
Vietnam, 113, 114, 127
violent protests, 207
visa, 297, 309, 316
visa restriction, 149
W
wage levels, 94, 175, 216, 316
wage rates, 181, 186, 307
wages, 184, 185, 316
water, 129, 153, 274, 318
water pollution, 239
water resource, 20
water scarcity, 239, 250
water treatment, 276
well-being, 11, 19, 23, 27, 28, 57,
90, 203, 226, 227, 237, 302,
309, 316
West Africa, 14, 228, 265
Western Africa, 160
Western Europe, 27, 241
Western Sahara, 3
wildlife protection, 93
INDEX
Win-Win, 103
win-win cooperation, 89
women, 23, 90, 227
working conditions, 228
work permit, 149, 297, 306
work stoppages, 207
work visa, 152
World Bank, 16, 100, 105, 108
World Bank Group, 17
World class infrastructure, 155, 284
World Health Organisation, 228
World Trade Organisation, 43, 108
X
Xiamen, 40
Xi, Jinping, 73, 77, 85, 108, 239, 312
Xiong’an New Area, 73
345
Y
young, 216
youth, 23, 108, 194, 195, 265, 296
youth employment, 162
Z
Zambia, 26, 78, 95, 113, 123, 124,
127–130, 143, 145, 146, 148,
151, 158, 162, 164, 167, 168,
170, 175, 176, 179, 180, 186,
188, 230, 235, 246, 247, 263,
264, 268–270, 274, 276, 280,
282
Zhuhai, 40, 54
Zimbabwe, 14, 15, 89, 90, 95, 113,
123, 150, 164, 176, 177, 179,
180, 212
zone infrastructure, 153