Tuesday, February 5, 2019

A Tale of Two Free Zones: Learning from Africa’s Success



Africa’s population is projected to double over the next generation to more than two billion people. Free trade zones offer some possibilities for the continent’s governments to create the jobs necessary to meet the aspirations of their youthful populations. Success is not only dependent on cheap labour, though this helps.
To ensure these zones are more than just sweatshops, Ethiopia and Morocco show that the full package of policy aspects has to be addressed, including: political stability, free trade deals, logistics to and through ports, integrated value chains, and tax and other incentives. Crucially, if countries are to quickly move up the industrial ladder enabling higher incomes, then improving skills is a crucial component.

Ethiopia’s Industrial Parks: Hard Yards, But what’s the Alternative?



Hawassa. Some 270 kilometres south of Addis Ababa, the picturesque Rift Valley city has relied on agriculture as source of income and employment, the regional Sidama coffee one of Ethiopia’s best-known brands, and the name of the local football side.
That was until the establishment of the Hawassa Industrial Park (HIP), inaugurated by then Prime Minister Hailemariam Desalegn in June 2017. Flanked by Lake Hawassa, HIP is the largest government industrial park, built at a cost of US$250 million in just nine months by the contractor, the Chinese Civil Engineering Construction Corporation (CCECC). The first phase covers 140 hectares with 52 factory sheds, housing 20 textile and apparel firms from 11 countries. By the start of 2019 Hawassa’s factories employed 23 000 local workers and 700 expats. Though it was not the first, other government industrial parks are today modelled on Hawassa, which itself incorporated lessons from the first park at Bole Lemi in Addis. Five of 11 government parks are to date in operation (with six due to be inaugurated in the next six months) and two of four privately-owned examples. Together the five operational government industrial parks host 36 companies, providing 45 000 jobs that did not, ten years before, exist. A town of 350 000, Hawassa’s GDP has alone increased four-fold in just two years. The parks have been Ethiopia’s response to the challenge of unemployment and the need for economic diversification. ‘I assigned a team led by Dr Arkebe [Oqubay]’ – now the chairman of the Ethiopian Industrial Parks Corporation (EIPC), recalls Hailemariam. ‘We made a study of the successes and failures of industrial parks around the world, looking at Nigeria, Mauritius, Taiwan, Vietnam, Singapore, South Korea, and of course to China.

Tangier: Marching to a Different Beat

Casablanca is just a four-hour flight from Lagos. But it’s a world away. Instead of paralysing traffic, we move quickly on a multi-lane highway towards Rabat, not a pothole in sight. Instead of sprawling tin and wooden slums the expressway is dotted with cranes atop new multi-story housing settlements stretching out toward the horizon. Instead of clusters of yellow Lagosian danfo taxis clustered at informal stops hindering the flow, Morocco’s roadside amenities and its péage would not be out of place in Europe; neither Casablanca’s surly immigration officers. As you leave the city, instead of bush and mounds of garbage, there are ploughed fields, acres of which are under a different sort of plastic, greenhouses producing for Europe’s tables just 14kms away across the Gibraltar Strait from Tangier. For a while, the 350km road from Casablanca to Tangier hugs the TGV rail-line opened in November 2018 after ten years of planning and construction cutting the journey to a fuss-free two hours. Traditions remain. Women in jellaba and men in Obi-Wan Kenobi-style pointy-hatted amama tend sheep on the verges of the motorway. And neither is it perfect. Poverty levels remain high in the rural areas. Four million of Morocco’s 36 million today live near or in poverty, three-quarters of them in the rural areas. Tangier is at the epicentre of this merging of European modernity and Berber tradition, which has so far worked to Morocco’s advantage, the economy touching 5 per cent growth for nearly 15 years, driven by foreign investors and they, in turn, by a carefully-sweated combination of policy, stability and infrastructure. Tangier’s modernisation has hinged around the development of a new port, known as Tangier Med, three ‘free zones’ (the original Tangier Free Zone opened in 2000, Renault Tangier Med, and Tangier Automotive City), and two industrial parks at Tetouan. With US$8 billion in investment to date, together these employ 80 000 with US$7 billion in turnover, making this the largest free zone in Africa. To these developments has been added a 45 000-seat sports stadium in the centre of the city, an expanded new business district, and renovated tourist infrastructure.
Once famed for its tangerine production, today Tangier is better known for its sweet Renaults. In 2018 the Kingdom produced 430 000 passenger vehicles, second only on the continent to South Africa, which produced 600 000. Nearly all are exported to Europe from Tangier Med. The 300-hectare Tangier plant employed 6 700 workers and produced 318 600 cars in 2018, making it the third-largest Renault plant worldwide. With a significant onsite government training centre, great pride is taken in the upskilling of the workforce. Peugeot too will soon open a factory in the free zone in Kenitra, with a capacity of 300 000 units per annum and 200 000 drive-trains. But the value also comes from the associated automotive component manufacturers, including the likes of Magnetti Marelli, Federal Mogul, Hands and Valeo. None are household names, but nine of the largest 15 auto parts firms worldwide are represented in Tangier.


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About The Author


Dr Greg Mills heads the Johannesburg-based Brenthurst Foundation, established in 2005 by the Oppenheimer family to strengthen African economic performance. He holds degrees from the Universities of Cape Town and Lancaster and was the National Director of the SA Institute of International Affairs from 1996 to 2005.

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