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AfCFTA considers Special Economic Zones

25 Jun, 2020 - 00:06 0 Views

The Herald

Sitshengisiwe Ndlovu
Africa’s dependence on global value chains has exposed the continent due to the advent of the novel coronavirus pandemic that has paralysed world markets  and claiming lives in excess of 400 000.

The continent  has to re-think the industrial development value chains to achieve business  resilience  during this Covid-19 pandemic.

One of the long-term objectives of the AfCFTA is to boost  intra–Africa trade  beyond the current 18  percent that pales in the shadow of 36 percent in comparison with Africa  trade alongside other  global countries.

The  Africa  Regional  Integration  Index  Report of  2019  identifies infrastructure development  and productive capacity development  as key in implementing the AfCFTA.

A   number of recommendations have been identified in the report which  include innovation, revamping  regional supply  chains across sectors, increase in technology uptake, higher quality inputs and adopting  current modern marketing techniques.

These strategies resonate with the continent more so as Africa seeks to move away from depending on commodities, recover from  over reliance on global supplies chains.

The Special Economic Zones  (SEZ) are being considered strongly by the AfCFTA as one of the recovery strategies from Covid-19.

The SEZ concept has been around for more than 50 years all over the world including Africa. The marauding coronavirus has not spared the vulnerable Special Economic Zones in Africa due to the  links with global supply chains.

The decline of   international trade   by 13 percent   has ushered   a niche for Africa  however, this time, the SEZ’s focus will be more  on the  huge African  markets that will be created by the AfCFTA.

Covid-19 has also  ushered a new dispensation where multi-lateralism is under severe threat while economic nationalism and hegemony is slowly ascending.

Africa has to be inward looking for markets through intra–Africa trade. In addition  to spur industrialisation, the  AfCFTA   will expect Member States to pool resources together to exploit  the economies of scale factor and the comparative advantage when designing Special Economic Zones.

This strategy may pay off regionally as well as when lobbying the international markets.

However, the success of economic contribution in countries is not without controversy. Some researchers have bemoaned the presence of Special Economic Zones   especially in developing countries.

The United Nations Conference on Trade and Developmen (UNCTAD) research reveals that due to the much desired investment, SEZs are an attractive conduit to lure quality foreign direct investment (FDI).

It is important to mention that firms operating in  SEZs can be domestic, foreign owned  being  joint ventures. Furthermore, the firms can be owned  privately, publicly or foreign owned.

The service, infrastructure and management of the SEZs determine whether it is   low end or high  end.

These entities may enjoy a wide range of privileges from import tax on raw materials and capital goods for the manufacture of goods for export.

It is also common to grant SEZs   rebates on utilities and grant tax concessions that could last five years. Nevertheless, labour laws are also relaxed   in SEZs in comparison with   the national labour regulations of the countries.

Research reveals that most   SEZs fail to observe labour laws because of relaxed supervision on their activities.

It is these privileges that are enjoyed by the SEZs that  spark criticism on them  and  raise questions over  the economic contribution of SEZs to developing countries. According to the World Bank   findings of 2011, SEZs   in Africa fail to deliver on their mandate. The Zones have been portrayed as under achievers in Africa. Other literature   attributes this failure to poor governess, lack of resources and lack of competitive strategies.

Article (3) (e) of AfCFTA   emphasises   socio–economic inclusivity for the development of Africa as one of  its  principal objective.

Gender equality is central in all the operations of AfCFTA. Literature   by UNCTAD reveals  how  traditional  Special Economic Zones were  notorious of  segregating women to unskilled positions that had  no prospects for personal growth, training and promotion.

Increasingly, SEZs   have reinvented themselves through the lens of Sustainable Development Goals to avoid their traditional pitfalls. Emerging SEZs are multi-industry in outlook and driven by huge appetite for high  tech innovation.

These new SEZs have moved beyond labour intensive manufacturing processes, focusing on the preservation of   environment, urban regeneration, use of scientific methods and regional development.

Furthermore, in other studies, some SEZs have regulations in place that promote gender equality and have incorporated child care and schooling facilities.

It is with this view that the AfCFTA   focuses on SEZs as part of the strategic interventions to accelerate Africa’s industrialisation that will create employment and economic diversification while leaving none behind.

The AfCFTA with a market of US$2,5 forecast a boost of 50 percent intra–Africa trade and welfare gains amounting US$16 billion.

Goods and services produced within SEZs will be subject to AfCFTA rules of origin. This   has been a matter of concern to Member States  because of the apparent unfair competition induced by incentives that are obtaining within the SEZs.

These incentives may be interpreted as subsidies that cause injuries in the domestic market of other countries.

In the event of such disputes the WTO Agreement on Subsidies and Countervailing Measures is in place to address such disputes.

Incorporating  SDGs  in  designing  Special Economic Zones within the AfCFTA  while  leaning on WTO regulations will catapult  industrialisation in Africa  and ensure   quick  recovery of  Africa’s  economies  from the impact of Covid-19.

Most importantly, the perception that  Special Economic Zones  are rent-seeking at the expense of the nation will also change.

Sitshengisiwe Ndlovu is the president of OWIT ZIMBABWE: MBA/UNCTAD: Trade and Gender Linkages/IAC Dip/Cert: Trade in Services and SDGs: Robert Schuman Center of Advanced Studies/IDEPCert: Making the African Continental Free Trade Agreement Work. She writes in her personal capacity: For more on trade matters visit her Blog on website:owitzimbabwe.org

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