From trade corridors to innovation zones: The future of SEZs

By Richmond Kwame Frimpong

 Unlike traditional Special Economic Zones, which prioritizes manufacturing, Innovation Zones(IZs) emphasize knowledge transfer, technological advancement and the creation of a robust innovation ecosystem.

These zones are designed to foster collaboration between businesses, research institutions, and government entities, ultimately driving technological advancements and productivity.

One of the primary catalysts for the emergence of Innovation Zones is the rapid advancement of digital technologies. The Fourth Industrial Revolution, characterized by artificial intelligence (AI), blockchain, and the Internet of Things (IoT), has transformed how businesses operate and innovate.

As industries become increasingly digitalized, there is a pressing need for regions to adapt and create environments conducive to innovation. The African Union’s Agenda 2063 envisions a continent that harnesses technology and innovation for sustainable development, making the establishment of IZs a strategic imperative for African countries.

The Role of Innovation Zones in Economic Development

Job Creation and Skills Development

The transition to IZs has the potential to create high-quality jobs and promote skills development in Africa. According to the McKinsey Global Institute, up to 50% of jobs in Africa could be at risk due to automation and digitization by 2030.

To mitigate this risk, it is essential to invest in workforce development and reskilling initiatives. IZs can serve as hubs for training and education, equipping the workforce with the skills needed for the jobs of the future.

For example, Rwanda’s Kigali Innovation City aims to create a vibrant ecosystem that includes tech companies, universities, and research institutions. This initiative not only seeks to attract foreign investment but also emphasizes education and training to build a skilled workforce that meets the demands of a digital economy.

The initiative’s focus on STEM (Science, Technology, Engineering, and Mathematics) education reflects the growing recognition of the need for a skilled workforce to drive innovation.

Attracting Foreign Direct Investment (FDI)

Innovation Zones play an important role in attracting FDI by providing a conducive environment for enterprises to grow. Global competition for investment has increased, and countries must differentiate themselves by providing unique value propositions. African countries can attract global investors looking for access to new markets and innovative talent by building innovation-focused IZs.

For example, the African Continental Free Trade Area (AfCFTA) is expected to establish a united market of 1.3 billion people, increasing the attractiveness of African countries to investors. Countries can position themselves as hubs for innovation and commerce by matching their IZ aims with the AfCFTA’s objectives, so boosting their economic growth.

This alignment can lead to increased job creation, technology transfer, and overall economic development within the region. By leveraging the opportunities presented by the AfCFTA and innovation-focused IZs, African countries can establish themselves as key players in the global economy.

In Ghana, the Dawa Industrial Zone is positioning itself as a key player in the country’s industrial and innovation agenda. Designed to serve a broad spectrum of industries, Dawa combines a robust infrastructure with digital technologies, aligning with the African Continental Free Trade Area (AfCFTA) to provide an attractive destination for foreign investment.

Its strategic location near Ghana’s port facilities also enhances its capacity to facilitate regional and international trade, making it an essential hub for industries seeking to capitalize on the benefits of innovation zones in Africa.

Integrating Sustainability in Innovation Zones

The transition from special economic zones to industrial zones has a number of significant benefits, one of which is the possibility of incorporating sustainability into economic development initiatives.

In the past, traditional SEZs frequently ignored environmental considerations, which resulted in negative effects on the ecosystems and communities in the surrounding area. IZs, on the other hand, have the ability to prioritize sustainable practices, which helps to ensure that economic growth does not come at the expense of environmental improvement.

A framework for incorporating sustainability into economic development is provided by the Sustainable Development Goals (SDGs) of the United Nations. As an illustration, Goal 9 places an emphasis on the significance of constructing infrastructure that is resilient, developing industry that is both inclusive and sustainable, and encouraging entrepreneurialism.

It is possible for African nations to establish a route that is conducive to long-term economic progress if they connect the goals of their IZs with the Sustainable Development Goals (SDGs).

Among the most noteworthy examples is the Konza Technopolis in Kenya, which has the objective of becoming a green metropolis that makes use of technology and innovation for the purpose of maintaining sustainable growth.

The initiative places an emphasis on energy efficiency, waste management, and sustainable mobility, so establishing a pattern for how urban areas can contribute to the environmentally sustainable development of the environment while simultaneously promoting economic growth.

When it comes to innovation zones, Kenya’s Silicon Savannah serves as a prime example of how they can drive economic revolution. It is a mix of government support, investments in infrastructure, and a thriving ecosystem for entrepreneurs that has been the driving force behind the expansion of Nairobi’s technology sector.

The goal of this effort is to establish a technological city of world-class caliber that is attractive to businesses from all over the world, and the Konza Technopolis is an essential component of this endeavor.

As of the year 2021, the Kenyan technology ecosystem had spawned more than 400 new technology firms, which had made a substantial contribution to the creation of new jobs and the expansion of the economy.

Through the achievements of businesses such as M-Pesa, a mobile payment platform, Kenya has established itself as a frontrunner in the field of financial technology innovation. For other African nations who are interested in establishing their very own innovation zones, the lessons that were learnt from the Silicon Savannah can serve as a roadmap.

The island nation of Mauritius has successfully made the shift from a traditional special economic zone (SEZ) model to a more integrated approach that places an emphasis on innovation and sustainability.

A number of programs that are focused on innovation have been developed in the country, one of which is the Mauritius Research and Innovation Council (MRIC), which encourages research and development in a variety of fields.

The Green Economy Strategy of Mauritius strives to establish a low-carbon economy while simultaneously strengthening the country’s resilience to climate change. This strategy is evidence of Mauritius’s commitment to sustainable development.

Mauritius has established itself as a model for other African nations who are exploring ways to strike a balance between economic growth and environmental care by incorporating sustainability into its innovation agenda.

Challenges and Opportunities

Although the move to innovation zones may have the potential to bring about benefits, there are a number of obstacles that need to be overcome before they can be successful in Africa.

The absence of sufficient infrastructure, which includes dependable energy sources, modes of transportation, and digital connectivity, is one of the most significant challenges. A deficit in infrastructure finance that ranges from $68 billion to 108 billion annually, as reported by the African Development Bank, serves to impede the continent’s efforts to expand its economy.

Additionally, the regulatory environment in many African countries can be difficult to understand and tedious to navigate, which discourages investment. In order for IZs to achieve success, it will be necessary to streamlined regulatory processes and create a climate that is hospitable to business.

In order to maximize the use of resources and skills in the process of fostering innovation, governments should also encourage public-private collaborations.

In spite of these challenges, the Transformation into Innovation Zones has brought up a significant number of chances. As the demand for creative solutions and environmentally responsible practices continues to rise on a global scale, Africa has the potential to emerge as a frontrunner in these areas.

African countries have the potential to build innovation ecosystems that drive economic growth and development by capitalizing on their youth population, abundant natural resources, and special cultural history.

Again, in addressing the infrastructure challenges commonly associated with African Innovation Zones, the Dawa Industrial Zone has leveraged its proximity to the Tema Port, one of Ghana’s most critical logistics hubs.

Additionally, Ghana’s government has implemented business-friendly policies within the zone, facilitating smoother regulatory processes and positioning Dawa as a key solution to overcoming common barriers to innovation zone success in Africa.

Conclusion

As evidenced by initiatives like Kigali Innovation City and Konza Technopolis, these zones not only facilitate high-quality job creation and skills development but also attract foreign direct investment through robust ecosystems that foster collaboration among businesses, research institutions, and governments.

Furthermore, the integration of sustainability into the IZ framework aligns with global goals, showcasing how innovation can drive economic growth while preserving the environment. Alth

gh challenges such as inadequate infrastructure and complex regulatory environments remain, the potential for African nations to harness their resources and youth demographic to establish thriving innovation ecosystems presents an unparalleled opportunity for sustainable development and economic resilience.

The writer is a growth and turnaround business leader with nearly two decades of multi-industry expertise across Europe, the Middle East and Africa. Specialized in Upstream financial Advisory, International Trade & Development, Economic Integration & Digitalization, Industrial Ecosystems & Special Economic Zones’ Development.

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