Foreign Direct Investment Attractiveness in Africa: The Role of Special Economic Zones

ABSTRACT The aim of this article is to analyse the effects of adoption, spread, characteristics and location of special economic zones (SEZs) on the volume of foreign direct investment (FDI) in Africa, and the channels through which the SEZs affect FDI inflows. Using an original dataset covering the period from 1973 to 2019 and employing dynamic panel data estimation methods, the results reveal that countries that have adopted SEZs have been successful in attracting more FDI compared to those that have not. Similarly, the greater the number of SEZs in a country, the higher the volume of FDI received. A more specific analysis highlights certain characteristics of SEZs that are beneficial for increasing the volume of incoming FDI. These include the adoption of special or free zones, multisectoral functionality, an area of more than 500 ha and a public–private partnership governance model. Also , the results reveal that human capital, technological development, robust legal framework and the quality of regulations are initial conditions that have enabled economies to ensure the positive effect of SEZs on attracting FDI. However, the availability of electricity access infrastructure, the proximity to port areas and the ease of administrative procedures are factors that have so far prevented some countries from benefiting from the adoption of SEZs.