In 2020, Mwanda Phiri was working as a research fellow at the Zambia Institute for Policy Analysis and Research, a public policy think tank based in the capital, Lusaka. That year, she co-authored a report into the performance of four African special economic zones (SEZs) — the Lusaka South and Lusaka East multi-facility economic zones in Zambia, and the East London and Coega industrial development zones in South Africa.

Her research, which argued that SEZs in the region have largely failed to deliver the expected levels of growth in foreign direct investment, caught the attention of the Charter Cities Institute (CCI), a US-based research organisation. The institute seeks the advancement of charter cities worldwide, especially in developing countries where the challenge of rapid urbanisation has long been evident. Fast-forward two years and Ms Phiri now spearheads CCI’s work in Africa.

Prime location

The modern idea of charter cities — privately built and governed cities — was first propagated in a 2009 TED Talk by US economist Paul Romer. Although the movement has had little to show by way of completed and fully operational cities, and some key players differ on several salient points, the idea is still very much alive today. Given Africa’s challenges with rapid urbanisation and poor local government capacity, organisations such as CCI view the region as the prime global location for new city experimentation.

Traditional SEZs and charter cities are both demarcated geographical areas that seek to attract local and foreign investment, with financial spillovers and policy lessons flowing to the rest of the country over time. However, charter cities go further by seeking powers to experiment with governance and political institutions, thus, their advocates argue, creating a more stable environment for attracting and retaining long-term investments than their often unpredictable host countries.

According to the UN, about 1.4 billion Africans will live in urban centres by 2050, up from about 600 million people today. At present, most cities on the continent are not designed to withstand such a rise in demand for urban infrastructure. Significant housing shortages and the inability of local municipalities to provide adequate amenities means private players are entering this space to counteract these challenges. Private charter city builders include real estate developers Rendeavour and Thebe Investment Management, as well as Future Africa, a private investment fund. In Malawi, it is the government that is pushing for the creation of charter cities under its Secondary Cities Plan.

“We’re really [trying to fix] the major bottlenecks to doing business, attracting investment, and creating spaces where people can live,” Ms Phiri says. “We found in our research that even within current SEZs, simple things like getting an electricity connection would take as long as a year, which goes against the value proposition of SEZs.”

Success stories

But that is not the case everywhere, as shown by the likes of Morocco and Mauritius, which have achieved notable success with their SEZ programmes. According to the UN Conference on Trade and Development, overall exports from Morocco grew by $2bn from 2010 to 2016 thanks to the country’s SEZ policies. And because of the Renault Tanger Med Zone and the Atlantic Free Zone, the share of automotive exports rose from 2% to 16% during the same period. Meanwhile, an export-processing zone enabled Mauritius to diversify away from sugar exports and become one of Africa’s biggest knitted-textile manufacturers.

Charter city proponents often look east for inspiration — to Asia and China’s Shenzhen city in particular. Shenzhen was China’s first SEZ and thanks to the reformist policies of president Deng Xiaoping in the late 1970s, evolved from being a fishing backwater to one of Asia’s leading financial and technological hubs. Its success served as a blueprint for similar, market-oriented reforms in specific areas across the country.  

For African city developers who are inspired by Shenzhen’s story of radical transformation, CCI acts as an umbrella under which they can gather to lobby for rule changes within their own countries. CCI’s governance handbook itemises 16 areas that charter city developers and policy-makers must consider when creating a regulatory domain that allows for the establishment of effective charter cities. Key devolved areas include tax policy and administration, dispute resolution, and immigration policy. 

Influential voices within the African tech community are emerging as important actors in the development of charter cities in the region. “It [recently] became clear that the current Zambian SEZ policy wasn’t written with the tech industry in mind,” says Mwiya Musokotwane, CEO of Thebe Investment Management — the developer of Nkwashi, a charter city under construction 36 kilometres east of Lusaka. “So, over the last few years, we’ve been lobbying to [make that change] and we’ve made significant traction.”

As fDi reported back in April, Mr Musokotwane and other Zambian tech entrepreneurs are seeking to make their country the preferred destination for venture capital-backed African tech businesses.

Another tech-inspired city under development is Talent City in Nigeria, the brainchild of Iyinoluwa Aboyeji, the co-founder of Andela and Flutterwave, two African tech ‘unicorns’ (companies valued at more than $1bn). Both Talent City and Nkwashi are part of CCI’s Next 50 African Cities Coalition, a network of African charter cities.

Other cities in the network include Alaro City in Nigeria, Kiswishi City in the Democratic Republic of Congo and Tatu City in Kenya, all being developed by Rendeavour, Africa’s biggest urban real estate developer, founded by the millionaire Stephen Jennings.

Other solutions

Victoria Delbridge, head of the Cities That Work programme at the International Growth Centre, is critical of the plans. She agrees with many of the issues identified by CCI and its supporters, but rejects the notion that giving political powers to private actors is the way to resolve Africa’s urbanisation ills. She questions why any national government would want a charter city in their country.

“If a charter city succeeds, it makes the host country look bad because the government wasn’t able to make their other cities succeed. Equally, if it fails, the whole country [bears some of the risk],” she posits.

There is also the issue of optimal resource allocation. “With the scarce resources that are available to address the challenges and opportunities that rapid urbanisation brings, [the money being spent on charter cities] could be invested in solutions with existing cities,” she argues.

Ms Delbridge’s pushback reveals one of the problems inherent when assessing the likely success of charter cities. There are currently no completed, fully operational charter cities anywhere in the world, which makes it difficult to discuss the likely success of charter cities in Africa with any confidence. CCI’s emphasis on homegrown solutions can be viewed as sensible flexibility, but it also provides charter city advocates with wriggle room in debates, enabling them to always cite a new example as the exception that proves the rule. 

In an upcoming book on the impact of cities on development and migration policies, Ms Delbridge writes: “In the unlikely event that a [political] settlement can be found [between governments and charter city builders], to enforce the agreed tenets of charter cities across political regime changes poses further threats to the continuity of rules and regulations.”

Honduras’s recent decision to repeal its charter city law after president Manuel Zelaya was ousted proves this point: one that charter city advocates ignore at their peril. Meanwhile, the challenges facing Africa’s cities continue. Migration, climate change and economic slowdown are problems that all need solving. It remains to be seen what policy decisions African governments make in response to the charter city movement’s overtures.

This article first appeared in the December 2022/January 2023 print edition of fDi Intelligence.