Learning from experience: Special Economic Zones in Southern Africa

Special Economic Zones (SEZs) have become common across Southern Africa in the past 20 years. In line with experiences in the rest of the world, they have had at best marginal success. Their essential premise is that it should be more efficient and effective to establish an enclave with world-class administration and infrastructure than to address cross-cutting blockages to growth. In East Asia, this approach was able to build on a broader national industrialization trajectory. In Southern Africa, by contrast, it has proved unable to offset the main constraints on investment. These centre on deep inequality both within and between countries, which leads to continual contestation over economic measures and limited domestic demand, combined with mining dependency, which reduces the scope for substantial linkages through local suppliers or downstream manufacturers. As a result, the SEZs face uncertain and slow regulatory environments, are often unable to deliver on their promises of improved infrastructure and financial incentives, and do little to promote broader industrialization across the region. The case of SEZs underscores the need to develop effective methodologies to test whether policy solutions developed in very different circumstances are viable in Southern Africa. The paper suggests that such a methodology must start with an explicit identification of the problem to be solved and its causes. That lays the basis for evaluating policy options, including those tried abroad, using a theory of change and impact assessments that take into account the differentiated benefits and costs for different stakeholders.