Special Economic Zones as Catalysts for the Development of Regional Value Chains within the AfCFTA Framework

By Danilo Desiderio

Special Economic Zones (SEZs) have surged into the spotlight, sparking vital discussions about their potential to reshape Africa’s economic landscape. Their role as catalysts for regional value chains within the African Continental Free Trade Area (AfCFTA) was a key focus at the Economic Commission for Africa’s (ECA) 57th session in Addis Ababa, held alongside the Conference of the African Union Ministers of Finance, Planning and Economic Development in March 2025.

An ECA concept note, designed to guide these discussions, highlights the dramatic growth of SEZs across the continent. From a mere 20 in 1990, the number exploded to 237 by 2020, with concentrations in Kenya, Nigeria, Ethiopia, and Egypt.

However, this proliferation has not translated into uniform success. The zones’ ability to attract foreign direct investment (FDI), foster knowledge transfer, create jobs, and improve trade balances has been inconsistent, hampered by persistent challenges like weak cross-industry linkages and inadequate infrastructure.

The Current State of African SEZs: Challenges and Opportunities

A 2024 study by Global Sovereign Advisory (GSA) further illuminates the complexities. Compared to other regions, African SEZs exhibit less specialization and diversification.

The study points to an over-reliance on tax incentives, while neglecting crucial non-fiscal incentives such as streamlined business registration, land benefits, and robust infrastructure.

This imbalance diminishes their appeal to potential investors. GSA’s research also suggests that the most successful SEZs tend to thrive in countries with low labor costs and preferential access to major consumer markets, facilitated by free trade agreements like AGOA.

Notable examples include Tanger-Med in Morocco, Mauritius, and Ethiopia.

The ECA concept note suggests a shift towards a “new generation” of SEZs, emphasizing innovation, sustainability, value chain integration, increased African content, and alignment with national and regional development goals. Transboundary SEZs, located at the intersection of two or more countries, represent a particularly intriguing model.

These zones encourage collaboration in attracting investments through coordinated tax policies and incentives. The Johor-Singapore SEZ, launched in January 2025 by Malaysia and Singapore, serves as a prime example, spanning an area nearly double the size of Shenzhen, China.

Algeria, in February 2024, announced plans for transboundary SEZs with all its neighbors, mirroring projects like the SKBO (Mali, Côte d’Ivoire, and Burkina Faso) and the Moyale cross-border SEZ, as documented in the UNCTAD report on African Special Economic Zones.

However, many African transboundary SEZ projects have faced setbacks, including abandonment due to political instability or funding shortfalls, as seen with Moyale. More recently, the Democratic Republic of Congo (DR Congo) and Zambia have embarked on a collaborative transboundary SEZ for electric battery and vehicle production.

A 2021 BloombergNEF study projects that constructing a cathode precursor plant in this zone would be three times cheaper than in the United States and yield 30 percent fewer greenhouse gas emissions compared to China. This initiative holds the potential to bridge industrial gaps across the continent, leveraging the extensive inter-industry linkages of batteries and electric vehicles.

An article published today in The East African sheds light on the AfCFTA’s regulatory impact on SEZs. Many of Africa’s current SEZs evolved from Export Processing Zones (EPZs), which mandated that companies export most or all of their production.

SEZs, in contrast, do not have this requirement. Article 9 of Annex II to the AfCFTA Protocol on Trade in Goods addresses SEZs, allowing goods manufactured within them to qualify as “originating goods” if they meet the criteria outlined in Annex 2. The AfCFTA Ministerial Regulation 1/2023, adopted at the 11th Council of Ministers of Trade in Gaborone in February 2023, aims to open African markets to goods produced within SEZs.

This regulation addresses concerns from member states like Tanzania and Senegal about unfair competition, establishing that “Trade Remedies, the Competition Policy Protocol, and the Infant Industries Protection provision shall be applicable to the goods from the special economic zones.” It also affirms that “Any state party shall have the right to regulate Special Economic Zones (SEZs) in accordance with their domestic laws.“

Towards a Unified Framework: Maximizing the AfCFTA’s Potential

Despite their potential, websites like Bilaterals express concerns that SEZs, especially when they are used as EPZs in Africa, have hindered rather than accelerated industrialization. Critics argue that EPZs have been misused for simple assembly rather than value-added manufacturing.

The reduced oversight within SEZs has also created opportunities for illicit activities, including smuggling, tax evasion, and money laundering. Concerns about public health arise due to the potential for unregulated additives in products destined for export, bypassing local quality controls.

Bilaterals cites Ghana as an example, where EPZ companies reportedly mix imported inputs and additives to produce tomato paste for regional markets, potentially harming local producers and consumers.

To ensure the competitiveness of SEZs under the AfCFTA, a unified regulatory framework is essential. The current provision allowing individual states to regulate SEZs according to their domestic laws contradicts the goal of a single market. A harmonized framework would:

• Attract Investment: Reduce regulatory uncertainty and make Africa a more attractive destination for FDI.
• Promote Intra-African Trade: Facilitate the seamless movement of goods and services between SEZs.
• Enhance Efficiency and Transparency: Streamline administrative processes and reduce corruption.
• Facilitate Knowledge Sharing: Encourage the exchange of best practices and innovation.

By addressing these challenges and embracing a unified approach, Africa can unlock the true potential of its SEZs and drive sustainable economic growth.

Danilo Desiderio serves as the CEO of Desiderio Consultants Ltd in Nairobi, Kenya, specializing in African customs, trade, and transport policies. He is a customs and trade expert at the World Bank and a senior associate to the Horn Economic and Social Policy Institute (HESPI).