The Investment Climate in Africa’s SEZs
Impact of SEZ Corporate Tax Incentives on a Simulated Large Investor 7.0
9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0
6.0 4.0 3.0
percent
5.0
2.0 1.0 Se ne ga l Ta nz an ia Ba Do ng la m de in ica sh n Re pu bl ic Ho nd ur as Vi et na m
Ni ge ria
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Ke ny
Gh
a
0.0 an a
US$, millions
Figure 5.6
147
NPV tax without incentive (US$m) NPV tax with incentive (US$m) value of incentive as % net present value of revenue (right axis) Sources: Author’s calculations based on data from individual country SEZ authorities and World Bank Doing Business data (www.doingbusiness.org) for national corporate tax rates.
based on net present value (NPV) of cash flows over a 20-year period10 (see Figure 5.6). The NPV of the tax incentive for a large SEZ investor could be up to US$20 million and for a small investor, up to US$6.6 million. This is equivalent to 4 percent of revenues for a large investor and nearly 6 percent for a small investor. With the exception of Nigeria, the average benefit of the tax incentive offered in the African SEZs was lower (1%–3%) than in the four non-African zones in the survey (2%–3.5%).
Conclusions In this chapter, we summarized the results of a 10-country survey of investors in special economic zones, with a specific focus on SEZs in Africa. The main purpose was to understand how SEZs are performing in addressing the investment climate issues that matter most to investors. We focused on the five issues that investors said were the most important criteria in making investment location decisions: (1) cost and quality of utilities; (2) access to transport infrastructure; (3) business regulatory environment; (4) tariffs, duties, and rules of origin; and (5) level of corporate taxes. The first three criteria are critical components of the “doing