Are Industrial Zones in Africa Delivering on Their Promise?

Despite rapid growth in special economic zones across Africa, most have yet to deliver. A few show promise, but many remain underused, poorly planned, and disconnected from local economies. Without deeper reforms, their promise risks fading into another missed opportunity.

In recent years, many African countries have set up industrial zones often called special economic zones (SEZs), hoping to jumpstart factories, jobs, and exports. In this respect, governments saw SEZs as tools to industrialize by offering tax breaks and ready infrastructure to investors. It is true that this strategy was inspired by Asia’s success. For example, Chinese SEZs helped transform China’s economy, accounting for about 22% of GDP and 60% of exports while creating tens of millions of jobs. Of course, African leaders hoped for a similar miracle in their own countries. Nonetheless, the question remains: are Africa’s industrial zones actually delivering on their promise?

For starters, there has certainly been a boom in these zones across Africa. The number of SEZs on the continent has surged to around 237 in 37 countries. Kenya alone has over 60 zones, and Nigeria has nearly 40. More broadly, this shows an eagerness to use zones as a shortcut to development. And yet, simply having more zones doesn’t mean they are all working as intended. In fact, most of these zones have so far fallen below expectations. Many have not met their targets for attracting investment or creating jobs. It might be said that just building industrial parks is not enough; however, the hype around them led people to expect dramatic results quickly.

It is true that a few industrial zones in Africa have delivered notable successes. Specifically,  countries like Morocco, Ethiopia, Mauritius, and Djibouti have seen some zones thrive. Tangier in Morocco is often highlighted – its zone attracted hundreds of companies and tens of thousands of jobs, becoming a major export hub. Thanks to zones, Ethiopia’s foreign investment inflows also climbed sharply in the 2010s. Admittedly, these examples show that zones can work under the right conditions. Nevertheless, those success stories are exceptions rather than the rule. More broadly, African SEZs have struggled to replicate the broad-based industrial boom seen in Asia or even in parts of Latin America.

While it may be correct that industrial zones offer benefits like jobs and exports, it still appears to be the case, however, that their overall impact on African economies remains limited. In practice, manufacturing still makes up a small share of Africa’s exports despite all the new zones. Between 2015 and 2020, less than 25% of African exports were manufactured goods, whereas 61% of what Africa imported were manufactures. This imbalance suggests that the promise of industrialization through zones has yet to materialize. Similarly, the contribution of zones to employment is tiny in most countries. Only about 1–5% of national industrial jobs come from SEZs on average. I accept that zones have created some jobs and opportunities. In spite of this, the more so critical fact is that unemployment and underemployment remain high in many African nations, and the zones have not made a big dent in those problems.

So why are many zones not delivering as hoped? Equally important, what obstacles are holding them back? To be sure, there are multiple practical challenges. For starters, some zones were built in less-than-ideal locations. It might be said that notwithstanding generous incentives, an inland zone far from any port will struggle to attract export-oriented factories. Indeed, a recent report notes that many African zones are not near seaports, which makes it hard for firms there to ship goods competitively. High transport costs eat away the advantage. Moreover, unreliable infrastructure has been a common issue. In many cases electricity is costly or inconsistent, and supply chains for inputs are weak. Such issues raise costs for businesses and deter investors. Alas, governance problems have also played a part – some zones suffer from red tape or poor management despite being meant to offer “simplified” procedures. It is true that governments hoped to create business-friendly bubbles, but if the wider business environment remains difficult or corrupt, zones alone cannot fix that. Admittedly, African zones often haven’t been integrated into the local economy. Nevertheless, without strong links to local suppliers and markets, zones risk becoming enclaves with limited broader impact.

In any case, the design of many zones may also limit their success. Most African SEZs are multi-industry zones trying to host all types of businesses. Of course, this can dilute focus. Few countries developed specialized zones that leverage a specific local strength – Ethiopia’s textile-focused park and Gabon’s wood-processing zone are among the rare examples. In this respect, the lack of specialization may mean fewer synergies and less know-how transfer among companies. Similarly, heavy reliance on tax breaks has been a quick fix, but tax holidays alone cannot overcome fundamental disadvantages like poor logistics. Companies might come for the tax perks and leave when conditions don’t improve. And yet, if too many incentives are given, the gains to the host country (like tax revenue or linkages) are even smaller. It is a tricky balance that many African zones have not gotten right.

Nonetheless, it’s not all doom and gloom. Some recent efforts aim to turn things around. For example, policymakers are looking at better ways to align these zones with Africa’s new continent-wide free trade area. Specifically, there is a push to ensure companies in SEZs can sell across African markets under the African Continental Free Trade Area (AfCFTA) agreement. To that end, reforms are being discussed so that zones aren’t isolated or inadvertently penalized by regional trade rules. There is also a growing recognition that building a successful industrial zone requires more than ring-fencing a plot of land and offering tax cuts. It requires investing in infrastructure, reliable power, skilled workers, and connecting zone firms with local suppliers. Further, governments and investors are learning from past mistakes. In fact, new zones are increasingly planned with specific industries in mind and with private partners who bring expertise, as seen in some East African countries.

Notwithstanding these improvements, the promise of industrial zones in Africa is still a work in progress. It might be said that SEZs are a necessary piece of the industrialization puzzle, however they are not a silver bullet on their own. I accept that creating an industrial zone can jump-start activity quickly. Despite this, sustainable development still demands broader economic reforms and infrastructure that extends beyond the zone’s fences. While it may be correct that industrial zones delivered miracles in places like Shenzhen decades ago, it still appears to be the case, however, that Africa’s conditions are different and require a more tailored approach. In any case, the core lesson is clear. African industrial zones have so far only partially delivered on their lofty promises. Instead of abandoning them, countries are rethinking how to make these zones work better. The hope is that with realistic expectations and better planning, industrial zones can gradually fulfill their role in Africa’s economic story – but it’s evident that promise and reality are not yet fully aligned.