Industrial Ecosystems with Richmond Kwame Frimpong: Effective good governance for economic growth via Africa’s SEZs

The concept of special economic zones (SEZs) is to create industrial hubs with less regulation and lower taxes than the rest of the country through trade or manufacturing. Special Economic Zones with greater levels of governance have been found to have higher rates of growth than those without it. Good governance at the level provided by special economic zones helps generate employment and investment opportunities that facilitate sustainable development.

Special economic zones are areas granted exemptions from certain countries’ national laws to promote trade and allow for foreign direct investment, primarily through financial services or manufacturing industries (FDI). These areas can be located within a country’s border or outside same depending on the goals desired by the government. Special economic zones are an attractive option for foreign investors because they overcome the regulatory and tax burdens that can be found in other countries. This creates a comparative advantage for the country attracting FDI due to lower labour costs and fewer regulations.

It is imperative that African countries build effective governance systems to spur economic growth. This is especially true for special economic zones in African countries, which have been established to attract international investment. SEZs have been shown to be productive for developing economies because they are able to provide desirable goods at lower prices than what is available domestically.

In sub-Saharan Africa, Ghana has seen a boom in its economy since the creation of its SEZs like the matured Meridian Industrial Park located in the Tema Free Zones Enclave. This zone has attracted foreign investment and has allowed for the employment of thousands of Ghanaians. Although this is a positive sign for Ghana’s economy, there is still a need for improvement to make these zones more inclusive.

The Dawa Industrial Zone, located 25km east of Tema, also has the potential to provide twice as much needed economic boost and enable active industrialisation. Another enduring effect of industrialisation is that it increases taxpayer revenue from taxes. This revenue increases government revenues so that it can have a larger budget for public investment in education and infrastructure projects.

Most of the benefits of a good governance system are derived from the greater transparency, market efficiency, and legal predictability those systems provide. Better governance can increase private sector productivity and development. The efficiency of economic activity is improved through a reduction in corruption, which contributes to increased economic growth as well as directly improving welfare through reducing other costs, such as transaction costs, through its reduction or avoidance.

Better governance has major positive impacts on human development by accelerating long-run economic growth, increasing incomes and wealth, and reducing poverty. It also helps attract foreign investment into countries that have poor governance to continue improving their conditions for development. It plays a crucial role in promoting economic growth, particularly in special economic zones (SEZs). Governance refers to the processes, institutions and rules by which a society makes and enforces decisions. Good governance in SEZs can be promoted through several key elements, including:

1. Transparency and accountability: Transparency in decision-making and financial management can help ensure that resources are allocated efficiently and effectively.
2. Legal and regulatory framework: A well-designed legal and regulatory framework can provide a predictable and stable environment for businesses to operate in and attract investment.
3. Access to information: Providing easy access to relevant information can help businesses and investors make informed decisions, and can also help to promote transparency and accountability.
4. Stakeholder participation and consultation: Encouraging participation and consultation with stakeholders, including businesses, workers and local communities can help to ensure that their needs and concerns are taken into account in decision-making.
5. Improved public services: Providing improved public services, such as infrastructure and education, can create a conducive environment for economic growth.

Effective promotion of good governance in SEZs can be achieved through a combination of top-down and bottom-up approaches. Top-down approaches include the development and implementation of policies and laws while bottom-up approaches include the participation of different stakeholders.

There are several ways that Africa’s Special Economic Zones (SEZs) can be effectively promoted:

1. Improved infrastructure: Investing in infrastructure, such as transportation, energy and communication networks, can help to create a more conducive environment for economic growth in SEZs.
2. Improved access to finance: Providing businesses and investors with access to financing can help to support economic growth in SEZs.
3. Building partnerships: Building partnerships between the government, private sector and other stakeholders can help to promote investment and economic growth in SEZs.
4. Promoting transparency and accountability: Transparency in decision-making and financial management can help to promote good governance in SEZs and attract investment.
5. Encouraging private sector participation: Encouraging private sector participation in the development and management of SEZs can help to promote investment and economic growth.
6. Provide training and skill development: Providing training and skill development opportunities can help to improve the competitiveness of businesses operating in SEZs and can also help to attract investment.
7. Monitoring and Evaluation: Establishing a system for monitoring and evaluating the performance of SEZs can help to identify successes and areas for improvement, and ensure that resources are being used effectively.

It’s worth noting that the effectiveness of these promotion strategies will depend on the specific context and conditions of each country; so, the promotion of SEZs in Africa will require tailored approaches that take into account the unique characteristics and needs of each country. Here are a few key aspects notable of the Dawa Industrial Zone in Ghana:

1. Sector(s)-focused accommodation: The DIZ has been demarcated to suit specialised industry groupings, such as the automotive assembling industry, pharmaceutical, steel manufacturing, warehousing and logistics, textiles and garments, technology and agro-processing industry inter alia. This helps to attract investment and promote economic growth in the various sectors.
2. Strategic location: The DIZ is strategically located near major transportation routes, which helps to make it more accessible to businesses and investors. It is 25km east of Tema, with a 61km proximity to the international airport and 41km to the habour.
3. Good infrastructure: The DIZ has good infrastructure, including transportation, energy and communication networks, which helps to create a more conducive environment for economic growth.
4. Strategic partnership: The DIZ has been developed through a strategic partnership between the Government of Ghana and private investors, which helps to promote investment and economic growth.

In order to maintain their position as an attractive place for investment and growth, Ghana and other developing African countries must continue to strive toward efficient governance in all aspects of their economy, including the running of its special economic zones.

The writer is an award-winning financial advisory, trade and transformation consulting professional, with almost two decades of enterprise leadership experience across EMEA.