China’s Investment in Special Economic Zones in Africa
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zones is that investor interest has come primarily from Chinese companies. Thus, in the absence of proactive efforts to promote integration, Chinese enclave zones are a real risk. Despite these risks and the challenges experienced to date, these zones have the potential to deliver benefits to both parties. Benefits for African economies should include those associated with foreign investment more generally: employment, transfer of more advanced technologies, spin-offs to local firms and foreign exchange earnings from exports. The more African firms invest in the zones, the greater the opportunity for technology transfers and spin-offs, although technical skills also can be taught on the job to African employees of Chinese firms. Furthermore, the zones should contribute to the government revenue, at least moderately. For Chinese enterprises, benefits include the reduction in transport costs from being closer to African or European markets, lower labor costs in some cases, cluster economies, as well as the discussed incentives. Chinese zone developers expect to profit from the increased value of the land, fees, and rents. Some (Lekki, Mauritius) have planned extensive residential, commercial, and entertainment areas, making the zones multiuse.
Maximizing Benefits The partnership to develop SEZs is part of a long-term process of strategic engagement between China and Africa. It offers a significant opportunity to contribute to job creation, industrialization, and poverty reduction in the region. To fulfill this potential, however, the projects must be successful from a business, social, and environmental perspective. This will require a partnership framework that includes the following elements: • High-level commitment and active engagement from host governments: As noted, China learned many aspects of SEZ management through building zones with overseas partners. These lessons were widely applied throughout China’s SEZs and have become common practice. African governments have been less strategic at managing the projects as learning experiences. Few participate actively in the management of the projects or have set up specific programs aimed at developing SEZ expertise over the long term. Assigning specific individuals, preferably Mandarin-speaking, to work with Chinese development teams can help, as can high-level participation on boards. • Ensuring the provision of quality off-site infrastructure: Worldwide, getting zones off the ground has proven difficult in part because of