Special Economic Zones (SEZs) are often promoted as economic game changers, particularly in regions struggling to diversify exports, create jobs, and boost investments. SEZs are tax-free enclaves where businesses thrive, foreign investment flows freely, and industrialisation accelerates. Globally, over 5,000 SEZs are in operation. In Africa, more than 220 zones cover roughly 140,000 hectares, with investment potential estimated at $2.6 trillion.
While there is vast potential in this, questions surrounding their inclusiveness, transparency, and sustainability are beginning to challenge their reputation.
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Nigeria’s SEZ model is anchored by mega-projects like the Lekki Free Zone, bolstered by infrastructure such as the Lekki Deep Sea Port and the Dangote Refinery. As of 2023, the country reported attracting over $66 billion in foreign direct investment (FDI) through its free zones, alongside ₦620 billion ($1.3 billion) in domestic capital. According to The Nigeria Export Processing Zones Authority (NEPZA) claims these zones have helped generate around 35,000 direct and indirect jobs. In 2024, Nigeria’s Special Economic Zones alone attracted $1 billion in FDI, creating an estimated 13,720 jobs.
Most of the investment flows into capital-intensive sectors like oil and heavy manufacturing, where automation limits employment. Critics argue that many zones function as elite enclaves, disconnected from the broader economy, with few supply chain linkages to local SMEs.
Ethiopia, building on its manufacturing vision, adopted a comprehensive SEZ law in April 2024, Proclamation No. 1322/2024. The legislation not only formalises the country’s investment criteria and fiscal incentives but also integrates SEZs into national development strategy. The country currently has 11 zones, most of which were formerly industrial parks now converted to SEZs. Between July 2024 and March 2025, these zones generated $83 million in exports and helped reduce $90 million in imports through local sourcing.
Still, performance has been uneven. The Hawassa Industrial Park, once a model for eco-friendly textile production, and employing over 35,000 workers, lost momentum after the U.S. suspended the African Growth and Opportunity Act (AGOA) privileges in January 2022. The park was heavily reliant on AGOA and when this happened, earnings dropped sharply. Though the park recovered $32 million in exports in a single quarter, many workers remain underpaid and face job insecurity.
In Zambia, the Multi-Facility Economic Zones (MFEZs) was introduced with Japanese support in 2005. These zones offer tax holidays, duty-free imports, and other business-friendly incentives. By 2023, Zambia had secured over $5.6 billion in total investment through its zones. The Lusaka South MFEZ, for instance, saw investments grow from $567 million in 2020 to $877 million in 2021. As of the end of that year, more than 90 companies were operational within these zones, with 9,300 permanent jobs created.
Zambia’s MFEZs may have achieved moderate success, but most firms operate as satellite branches of foreign conglomerates, with limited technology transfer or local capacity building. Infrastructure challenges , especially unstable power supply, continue to constrain productivity.
The Silent Cost of SEZ Expansion
Land remains the most contentious aspect of SEZ development. While formal expropriation has been limited in countries like Ethiopia and Zambia, the quiet acquisition of large tracts of land, often under state leases, raises concerns over long-term displacement and land speculation. In Ethiopia’s Bahir Dar SEZ, for instance, land designated for public infrastructure was leased with limited community consultation. In Nigeria, resistance from coastal communities near Lekki has grown, with activists calling for compensation and environmental assessments.
This disconnect between zone development and public accountability often leads to resentment. Communities who relinquish land in the name of national development seldom see their children working in the very factories erected on their soil. The opacity of land deals, often struck behind closed doors, compounds distrust in government institutions.
Who Oversees the Free Zones?
Governance challenges represent a crucial fault line. Tax incentives, ranging from 5 to 10-year holidays, are often granted with limited oversight. Critics fear that SEZs have become regulatory black holes where corporations operate with near-immunity. In Nigeria, recurring complaints include inconsistent power supply, bureaucratic gridlock between NEPZA and other agencies, and currency instability. Ethiopia faces a different problem: a shortage of trained personnel to enforce environmental and labour standards within newly converted SEZs. Zambia, too, lacks strong third-party monitoring mechanisms, leading to concerns about the credibility of self-reported data.
Towards a New Definition of Success
The African Union has outlined a vision of industrial development embedded in the Action Plan for Accelerated Industrial Development of Africa (AIDA), which calls for inclusive, sustainable, and high-employment growth. Yet, for SEZs to align with that vision, countries must move beyond the dollar-value of investment to deeper, structural reform.
Zones must be integrated into national economies, not operate apart from them. They should link upstream with farmers and suppliers and downstream with consumers and logistics chains. Without that integration, they risk becoming isolated economic islands, rich in infrastructure, poor in impact. Policymakers must also shift focus from just attracting foreign capital to building local capacity. That includes vocational training, technology transfer frameworks, and start-up incubation within zones.
Between Promise and Pitfall Lies Policy
Africa’s tax-free zones offer a powerful metaphor for the continent’s development dilemma. They are both an opportunity and a warning. When carefully planned, transparently governed, and locally rooted, SEZs can catalyse industrial revolutions. But when rushed, politicised, or disconnected from social and environmental realities, they become modern mirages, impressive from afar, hollow within.
Nigeria, Ethiopia, and Zambia now stand at a defining juncture. The infrastructure is rising. The capital is flowing. The global appetite for African production is intensifying. But unless the next phase of SEZ development centres people, not just profit, these zones may succeed on spreadsheets but fail in the hearts of citizens they were meant to uplift.
