Africa's China-backed Special Economic Zones

In the last generation, Chinese living standards have improved dramatically in large part due to its shift toward a manufacturing-based, export led economy centered around Special Economic Zones (SEZs). The Chinese Government has now endorsed six similar zones in Africa, which could mark the beginning of similar prosperity yet to come for the continent.

From Guangdong to Zambia

Flashback to 1980. Then, the average Chinese citizen was in a worse economic position in comparison to his counterparts on the African continent. China's per-capita GDP was a mere $313, not far off from that of Tanzania - a figure below the African average. It is around this time that China began its economic restructuring, including the creation of SEZs to attract foreign investment and to improve domestic manufacturing. China's output has since risen to become the world's third largest. The value of its exports has become greater than that of any other country. As a consequence, its per-capita GDP has increased nearly 13-fold from just a generation ago.

Africa too began a number of trials with its own SEZs in the 1990s but with limited success. Favorable tax incentives and labor policies to designated regions in over 20 countries including Mozambique, Cameroon and Uganda failed to deliver results anything near that of China's experience. Limited infrastructure and political uncertainties have seemingly impaired Africa's ability to mirror the SEZ achievements of other countries. Africa has yet to retain significant investment from abroad or to expand its export base beyond basic raw materials to the manufacturing sector.

Now, certain African attempts to further their economies through SEZs have the backing of China. The Chinese Ministry of Commerce has recently approved six new SEZs in Africa, all of which are still under construction. The Oriental zone of Ethiopia will focus on electrical machinery and metallurgical products; the Jinfei zone of Mauritius, on textiles and hi-tech manufacturing. Two have been approved in Nigeria - the Ogun and Lekki - to foster growth in a wide range of industries from construction materials to furniture to transportation equipment. In Zambia the focus will be on copper, appliances and tobacco in its two zones - Chambishi and Lusaka. There are also discussions for more China-endorsed SEZs for Angola, Ethiopia, Mozambique, Tanzania and Uganda.

Scepticism persists as to whether these SEZs will effectively advance the economies of the nations in which they are located. An over-reliance on Chinese management and materials is a concern. So too, that the regions with special legislative treatment will remain detached from the overall domestic economy, failing to spread their benefits. But as China's experience can attest, SEZs also have the potential to bring great prosperity to the next generation.

The ChinAfrica Econometer is produced by THE BEIJING AXIS, a cross-border business bridge to/from China in three principal areas: Strategy, Sourcing & Investment.

For more information, please contact: Barry van Wyk

barryvanwyk@thebeijingaxis.com

www.thebeijingaxis.com