The vacant stands and incomplete infrastructure of the Sunway City special economic zone (SEZ) in the Ruwa suburb of Zimbabwe’s capital Harare speak volumes about the current shortcomings of the country’s SEZ programme. 

It is the lack of basic infrastructure, from power to water infrastructure, that is preventing investors from setting up shops within the country’s SEZs, according to the Zimbabwe Investment Development Agency (Zida), a reconstructed state agency tasked with promoting local and foreign investment. 

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Zida was created in 2020 to become a one-stop shop centre by integrating three investment authorities: the Zimbabwe Investment Authority, the Zimbabwe Special Economic Zones Authority and the Joint Ventures and Public Private Partnerships Unit that was resident within the Ministry of Finance.

Varying states of completion

The agency says there are currently four types of zones in operation: the state-owned (public) SEZs, privately-owned SEZs, premise-based SEZ (individual businesses operating under an SEZ regime) and industrial areas designated as SEZs, sheltering about 15 SEZs in total. 

Of the five public SEZs, the Beitbridge SEZ and Sunway City SEZ are partially developed, with some areas already occupied and used by businesses. The remaining three zones — the Masuwe SEZ in Victoria Falls, Fernhil SEZ in Mutare and Imvumela SEZ in Bulawayo are yet to have bulk utility infrastructure although economic feasibility studies are complete and identification of developers is underway.

Of the three privately owned SEZs, the Nkonyeni SEZ is yet to commence any development as it awaits approval of its zone subdivision layout plan from the government. Ecosoft SEZ and Hunyani Business Park have begun steady progress towards the development of bulk utilities for the zone which include power, water and sewers.

Of the premise based SEZs, six are now fully operational — mainly because they are individual businesses located in existing industrial areas. There is only one occupant in the industrial SEZ. 

New national strategy

Duduzile Shinya, Zida’s acting CEO, tells fDi that basic infrastructure development was a constraint on several of the public sector sites as the entities were still to establish their funding and partnership models, but no other major challenges have been cited as SEZ development is in its infancy. 

“In an effort to ensure that all gazetted zones become fully functional, we have started the process of engaging the SEZ developers [the local city governments],” she says.

Most zones are concentrated around Harare because the existing zones around the city were gazetted after private entities applied for the status, but Zida says it is currently crafting a national SEZ strategy that will assist in determining the need for additional zones countrywide.

Citing 2019 figures, the latest available, Ms Shinya indicated that around $49m worth of foreign direct investment (FDI) and more than $92m in domestic capital was injected into the licensed private SEZs. 

“By the end of 2019, 2969 jobs had been created in the SEZs with over 10,000 estimated as indirect employment opportunities. $114m had been realised as exports proceeds by the end of 2019,” she said.

Carrot vs stick

Godknows Nyangwa, a partner with the Harare-based MawereSibanda law firm, said that concessions — among them exchange control exemptions, non-payment of duty on raw materials, corporate tax holidays for the first five years of operation and a corporate tax rate of 15% thereafter — make the zones attractive for investment. 

The Zida Act places the burden of building the general network of infrastructure on developers, and the investors

Godknows Nyangwa

He noted, however, that one of the things holding back investment in the zones was the onus put on developers and investors to create the requisite infrastructure.

“SEZs attract foreign investors if the zone has a strong [road, rail and power infrastructure] that facilitates easy movement of goods and services in and out of the zones. The Zida Act places the burden of building the general network of infrastructure on developers, and the investors themselves operating in the SEZ,” he said. 

“Putting this burden on investors has proven to be ineffective in promoting SEZs, as investors are not keen to invest in these infrastructures. World over, it is usually the responsibility of the host country’s government to do so. Another challenge is that areas are effectively granted SEZ status without first securing a developer who would develop the zone.”

He added that SEZ operations have also been challenged by the general performance of the economy, which has not provided the necessary enabling operating environment for them to perform. “Inconsistency in policy-making and currency volatility have been stumbling blocks,” he noted. 

However, David Norupiri, managing director of Davipel, a local food processing company in the Sunway City SEZ for the past three and half years, has mostly good words about operating in the zones. 

“The Zida Act is being applied and the government is availing all the benefits in the law to us. The benefits we are getting — if we’re importing, we don’t need any licence to bring in any equipment, or any raw materials. All our imports in terms of raw materials don’t pay duty. We have not seen anywhere where the government is deviating. The only challenges we have at the moment are water shortages and serious power cuts, which everyone is facing,” he says. 

Mr Norupiri says Davipel had grown quite significantly since joining the SEZ, and is investing in a new feed manufacturing plant by mid-2022. 

A 2021 Unctad handbook on SEZs in Africa reports that although they were adopted late in Africa, they are now gaining traction, with at least 37 of the 54 countries having established at least one. The number of SEZs on the continent rose from around 20 in 1990 to 237 in 2020, driven mainly by the need for nations to attract FDI and promote industrial growth. 

Figures compiled by the free zones consultancy firm Adrianople show that about 58% of Africa’s SEZ are active, 7.6% inactive while 34% are under development. Unctad mentions that the performance of the SEZs has so far been below expectations; many SEZs, it said, have remained isolated enclaves, failing to dynamise the surrounding industrial context because of poor policies.

This article first appeared in the February/March 2022 print edition of fDi Intelligence. View a digital edition of the magazine here