“It’s not easy for a Special Economic Zone (SEZ) to succeed. It’s very difficult. You can establish a SEZ and no company may come.We established one and for 12 years no company came,” warned Japanese economic expert and executive advisor to government in Laos, Motoyoshi Suzuki, in May 2016, on Zimbabwe’s planned SEZs.
Financial Matters with Tinashe Kaduwo
Zimbabwe accelerated its drive to establish a number of SEZs with pilot projects in Bulawayo, Sunway City in Harare and the Victoria Falls as well as diamond cutting and polishing in Mutare. Government further gazetted a number of economic zones in various towns and cities. The zones are managed by the Zimbabwe Special Economic Zones Authority (Zimseza), which was established by the government last year.
“In addition, as well as to operationalise the SEZs, the board has been constituted, however, on a part-time basis with modest remuneration allowances to avoid becoming an additional burden on the budget,” Finance minister Patrick Chinamasa said in the 2018 national budget.
Clearly to date, since the SEZ policy was first mooted in 2015, there has been no movement in these zones as investors do not see any real benefits of moving to those designated zones. The words of the Japanese economic advisor Suzuki are coming to life. Zimbabwe for years has had a checkered history when it comes to maintaining policy consistency and predictability. Lack of long term macro-economic planning, that is shared across the political divide, given the upcoming July 30 elections, may prove to be the breaking point in the success of SEZ implementation. According to the 2018 National Budget, the Zimseza board is on a part-time basis, which raises concerns over government’s political will and commitment to the success of the initiative. In 2016, Suzuki advised that it was important that government enjoyed the confidence of potential investors. “You must be predictable. No sudden turns. The investors have to trust your government. Sudden change is not good. Keep your promises. Keep your word,” he said. One of the most critical success factors of SEZs around the globe is that they are hinged on a clear strategy of development which is fully integrated in the national industrial policy and long-term macro-economic plan. This clearly implies that SEZ programmes should be part of the broad national development agenda, centred on the country’s shared national vision. They should be designed to best complement and support comparative advantages, as validated through a detailed strategic planning, feasibility and master-planning process. This is the key to ensure their viability and long-term sustainability based on real market demand not just political rhetoric. Proper planning is needed and according to Suzuki, mixing small to medium enterprises (SMEs) in the same zones as big companies may fail to produce the desirable results. “We don’t allow big companies to join SMEs in SEZ. SMEs won’t stay because they don’t want to compete with big companies. The big firms intimidate the small ones so they are not welcome,” Suzuki said in May 2016, referring to Laos in Japan.
Government, therefore, needs to institute a sound legal and regulatory framework. A predictable and transparent legal and regulatory framework ensures clarity of roles and responsibilities of various parties and provides protection and certainty to the developers and investors. Such a framework also helps to ensure that the zones attract the right investments and are implemented with high standards. Understandably, government developed the Special Economic Zones Act, which is being continuously polished to avoid unpredictable risks, such as political setbacks or interference and land speculation, among other factors.
Given the great complexity and potential risks of zone programmes, strong and long-term government commitment is needed to ensure policy continuity and the adequate provision of necessary infrastructure. The zones have to be truly “special” and provide services that are not available outside of zones and can be used to pilot policy and regulatory reforms to support economic development. This will help attract the needed investment and broader development envisaged by these zones.
Kaduwo is an economist at Econometer Global Capital. — firstname.lastname@example.org or email@example.com