Special Economic Zones: a tool for economic transformation in Africa?

Special Economic Zones (SEZs), as a policy tool in the context of the African Continental Free Trade Area (AfCFTA), are one of the most debated topics this year. Currently, more than 230 SEZs established across the continent offer local and foreign investors the opportunity to take advantage of state-of-the-art infrastructure, links to major logistics hubs, and generous tax incentives, to conduct their manufacturing activities under particularly competitive conditions. Yet, opinions regarding their ability to drive African development are mixed. This is due to the fact that not always these zones have produced positive results in terms of attraction of foreign direct investment (FDI) and know-how, creation of jobs and improvement of trade balances of African nations through increased exports.

The role of SEZs was recently discussed during the fifty-seventh session of the Economic Commission for Africa (ECA) held in Addis Ababa from 17 and 18 March 2025 on the occasion of the Conference of the African Union Ministers of Finance, Planning and Economic Development. At this event, panellists highlighted the importance of developing a “new generation” of SEZs in Africa, with improved links to transport networks, energy systems and digital connectivity. Moreover, they raised the importance of developing training, education and coaching programs within SEZs to enhance skills improvement (a concept already proposed by UNCTAD in a paper published last year), as well as support services aimed at increasing the performance and success of businesses operating within these zones. Among these services, a key role is played by financial services for de-risking investments within SEZs.

From 21 to 22 April, another forum dedicated to SEZs will open in Djibouti: the AfCFTA Regional Conference on Special Economic Zones. The event aims to bring together representatives from AfCFTA State Parties, the Intergovernmental Authority on Development (IGAD), SEZ authorities, financial institutions, and the private sector to explore how SEZs can contribute to accelerate industrialization, trade facilitation, and regional economic cooperation within the framework of the AfCFTA.

In particular, the experience of Djibouti will be discussed as a potential model for economic transformation in the continent, having this country established a number of SEZs primarily focusing on free trade and logistics to leverage its strategic location at the intersection of major shipping routes. Among them, the Djibouti International Free Trade Zone (DIFTZ), inaugurated in July 2018 and still expanding, is the largest SEZ in Africa, strategically located near to Djibouti's major ports and hosting logistics, marine, construction, automotive, and home electrical industries.

Article 9 of Annex II on Rules of Origin of the AfCFTA Protocol on Trade in Goods enables goods produced within SEZs to qualify as "originating goods" and be traded at preferential duty rates under the AfCFTA, provided they satisfy the rules of origin set forth in this Annex. This concept is reiterated in the Ministerial Regulations on SEZs n. 1/2023, adopted at the 11th Council of Ministers of Trade held in Gaborone, Botswana, from 11-12 February 2023. These Regulations were issued to safeguard African domestic markets from unfair competition of businesses operating within SEZs. Their main objective is to prevent SEZs from becoming a loophole and being misused by companies established therein. These businesses could in fact take advantage of SEZs to introduce duty-free into AfCFTA State parties products originating from third countries subjected to minimal processing or simple assembling or repackaging operations, circumventing the AfCFTA rules of origin.

The Ministerial Regulations n. 1/2023 will be among the main topics of discussion at the AfCFTA Regional Conference on SEZs. While there is no explicit indication that the AfCFTA Ministers of Trade will revise these Regulations, there is a growing awareness that SEZ models in Africa are evolving from traditional export processing zones towards more integrated zones focusing on innovation, sustainability, and deeper value chain integration, as pointed out during the fifty-seventh ECA session of 17-18 March 2025. This evolution might necessitate further updates to the Regulations.