By Sherif Tarek/The Africa Report
Africa’s new free trade agreement can catalyse industrialisation in special economic zones, says the head of Morocco’s Tanger Med Zone, but only if it gets the infrastructure and business model right.
Morocco’s Tanger Med, Africa’s largest and most developed industrial port complex, has been for years playing the “role of the locomotive” for the development of African special economic zones (SEZs), a drive that the free trade agreement will consolidate, says Tanger Med Zones (TMZ) managing director Ahmed Bennis.
The implementation of the Africa Continental Free Trade Area (AfCFTA), according to observers, could take a decade or more, given numerous stumbling blocks including the lack of governance and infrastructure, red tape and recurrent political disturbance.
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However, Bennis, who’s also the secretary general of the Africa Economic Zones Organization (AEZO), sounded an optimistic note. He says he expects the AfCFTA to be implemented “very fast”, citing hefty gains the African SEZs and economies could reap when the agreement comes into effect.
“It’s going to be a game changer for the African economies,” Bennis tells The Africa Report on the sidelines of the AEZO annual meeting, which took place last month in the Moroccan Mediterranean city of Tangier.
“Tanger Med is playing a key role in supporting SEZ development across the continent. We were behind the set-up of AEZO and we are still well involved in supporting different initiatives with our African brothers and sisters.”
AEZO, founded in 2015, has members from more than 40 African nations and is supported by the African Union, the African Development Bank, the United Nations Conference on Trade and Development (UNCTAD) and the United Nations Industrial Development Organization (UNIDO), among others.
Intra-Africa
According to AEZO’s policy brief that was released last February, “by agreeing to partake in AfCFTA, countries, directly and indirectly, agree to accept SEZ-originating products as part of this ecosystem”.
Some countries have decided to import benchmarks from Asia, Europe and the US, even though they don’t fit into the African context.
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The AfCFTA implementation would see Africa’s over 200 operational SEZs, whose overall value stands at nearly $5bn, cater to the continent’s domestic needs and not just those of the global export market, Bennis says.
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“Most of the African special economic zones were export-oriented. Players from the activity sectors that were considering exporting to markets in direct vicinity were successful,” Bennis says, citing SEZs in Morocco, Egypt and Tunisia – which primarily target Europe – as well as economic zones in West Africa.
“Now there is some interest to be more and more involved in the African regional integration and attract not only investors considering exports to the European Union, the US or the Middle East but also companies that are interested in addressing the African market,” says Bennis. “This is our (Tanger Med’s) roadmap for the next five years.”
The AfCFTA could further boost the manufacturing sectors African SEZs have been focusing on – such as automotive, electronics and textile – and widen the scope of areas that benefit from African SEZ activities, Bennis says.
Agribusiness, he adds, could be significantly revitalised amid the free trade agreement, with Africa alarmingly suffering from food insecurity.
Cut off
The perennial lack of infrastructure constitutes one of the stern challenges that should be tackled for Africa’s SEZs – which offer more favourable conditions and incentives to investors, such as tax exemptions – to engage with the continent effectively.
“We have to enhance the linkages between the SEZs and local markets,” Bennis says. “Quality infrastructure is one of the main fundamentals to develop a comprehensive SEZ proposition.
“AEZO deploys a very comprehensive action plan consisting of several surveys, workshops and capacity-building initiatives to address different issues, including the infrastructure set-up,” he adds.
“Some countries are struggling today to develop the right infrastructure” to be connected to the ecosystem, due to difficulties to finance such projects.
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The pandemic, followed by the Ukraine war, has rated import-dependent economies deeper into junk territory, with many African nations suffering a severe liquidity crunch.
Customised, not replicated
AEZO’s “main challenge” for the past five years, Bennis says, has been to develop the right business model for African SEZs, which could alleviate for the finance constraints, Bennis says.
“Some countries have decided to import benchmarks from Asia, Europe and the US, even though they don’t fit into the African context,” he says.
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The legal framework, fundamentals for good governance and rules for the interaction between an SEZ and its stakeholders, customs administration and local authorities ought to be customised, not replicated. “We were able to do that in several countries” including Niger where AEZO “supported the government to design the whole concept of SEZ”, says Bennis.
Most of the SEZ projects that have been developed over the last decade in Africa were through public-private partnerships, according to AEZO’s statistics. “Having the private sector onboard boosts the financial institutions’ confidence in this kind of project,” Bennis says.
“The African Development Bank, Afreximbank, and many others are keen to support the development of quality infrastructure and bankable projects,” he says. “It all depends on the business model.”
Tech shift
Investors from the US, Europe and Japan are interested in pumping more investments into TMZ, Bennis says without revealing further details. He says an ongoing shift to the technology sector makes it “very difficult” to assess the value of the potential investments.
“We are moving from labour-intensive activities to more technology-intensive activities. Thus, the profile of the new investors is different and so will be the investment volume,” he says.
Exports from Tanger Med’s special economic zones (SEZs) are valued at nearly $14bn per annum. This is nearly a quarter of Morocco’s overall exports, 56% of which were shipped to EU countries last year.
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Tanger Med, whose SEZs span 5,000 hectares, hosts around 1,200 multinational companies from different sectors, with automotive comprising 65% of the total investment.
Morocco has been heavily investing in the automotive sector over the past years as Tanger Med boasts a Renault-Nissan plant with an annual production capacity of 400,000 cars. The North African country’s trade deficit declined 6.1% year on year in the first 10 months of 2023, according to official data, with automotive registering the highest export increase at 30.5%.
But Bennis says, “I believe for the next five years, we are going to have more investments into the technology sector.” With the world’s special economic zones gradually turning to tech and AI, Africa won’t buck the trend, he adds.
