Lovemore Chikova THE INTERVIEW
Special Economic Zones are a new model of development economics that has been adopted by many developing countries in recent years, although the concept is also popular among developed countries. The special trading areas are envisaged to create employment, attract foreign direct investment and create a private sector led and import-oriented economy. The new dispensation led by President Mnangagwa views special economic zones as an important part of its reform process. The Zimbabwe Special Economic Zones Authority (ZIMSEZA) has been leading the process of establishing the special economic zones. In this interview with our Assistant Editor Lovemore Chikova (LC), ZIMSEZA chief executive Edwin Kondo (EK) speaks on the special economic zones and the reform process.
LC: Mr Kondo, tell us the processes you have gone through so far in setting up the special economic zones.
EK: The Zimbabwe Special Economic Zones Act was promulgated in 2016 and the board commenced their meeting in June 2017 where they set out their sub committees which included the appointment of the chief executive officer. I came on board from South Africa in May of 2018 with a specific mandate, one of which was to put in place the legal instrument to operationalise special economic zones. We then came up with regulations and we did them in August of 2018. That’s nine months ago. When the regulations came on board, we then said to ourselves the first starting point is the strategic plan. We went to Bulawayo in September 2018 to develop the Zimseza strategic plan (2018 to 2023), which we did. The planning involved all the stakeholders in the Ministry of Finance, Ministry of Industry, ourselves, it was a multi sectoral approach.
LC: How will the coming in of the Zimbabwe Investment Development Agency (ZIDA), which will repeal the Zimbabwe Special Economic Zones Act, affect this strategic plan?
EK: The strategic plan is a five-year plan which runs from 2018, last year in October, to 2023, which plan was immediately almost overtaken by events. ZIDA came on board and the Government, and rightly so, wants to put a one-stop shop to deal with investment into this country. ZIDA will incorporate the Zimbabwe Special Economic Zones Authority, the Joint Venture Unit in the Ministry of Finance and Economic Development and the Zimbabwe Investment Authority. At first they wanted ZIDA to include other organisations such as Zimtrade and others, but it has been trimmed down to those core components.
The ZIDA Bill is in Parliament and we hope we can get on with it, particularly for the investor because the investor wants to have policy consistency, which means a constant law actually. We are hoping that it is expedited and the Office of the President and Cabinet is pushing for that, which is the right thing to do because of the three components within the ZIDA Bill. The special economic zones is one of them which remains a key pillar. If you read through the Zanu-PF manifesto, the special economic zones have a strategic thrust going forward. If you read through the Transitional Stabilisation Programme, special economic zones are the way to go. So, it remains actually key for the three pillars of economic development for this country. Special economic zones are going to continue within ZIDA because we are a key component of the investment agency.
The ZIDA Bill has a whole section outlining the special economic zones. The organisation will probably go under some changes because right now we are a stand-alone entity just like the Zimbabwe Investment Centre is a stand-alone entity. The Joint Venture Unit is a department of the Ministry of Finance. So, that cannot continue as we will probably be structured into ZIDA, probably as divisions or as subsidiaries. But the work will continue on the special economic zones.
LC: What work has been done so far in terms of setting up the special economic zones?
EK: We are nine months old, we can’t just take off running with the first day. We have commenced, but we have to follow the necessary procedures to do appraisals for due diligence, licencing, for gazetting – its very detailed. In other words, it’s an institution that is still in its infancy, but we are building it not so much in terms of numbers, but the capacity. We have started to get operational support from Treasury to start operating. We have designated certain areas for certain purposes in terms of business advantage because Zimbabwe is very strategic in terms of the resources it has to supply, not only the Southern African countries, but also the other countries.
We declared six public sector special economic zones. We have Beitbridge which want to make Zimbabwe a land-linked country. Bulawayo is a traditional manufacturing hub for the country and we have two areas there – the Belmont-Kelvin-Donnington Corridor and the Umvumila area close to the Joshua Nkomo International Airport for manufacturing and logistics. We are also considering Victoria Falls in terms of tourism, but there is a lot of work that goes into planning. In Harare, Sunway City has been declared by Government over the years that we have got about 1 220 hectares. That is where your PPC is and we designated that as a high tech and manufacturing area because we want integrated operations to encourage value chains in industries within this phase. Beira is almost 300 kilometres from Mutare and we are looking at that corridor to be a very good export corridor for this country. We want to develop a dry port in Mutare and to be able to handle logistics there. We are looking at Mutare for logistics, services, manufacturing and also horticulture.
LC: Are these the only areas you are targeting for the special economic zones? I see you are not in other provinces.
EK: The projects I have mentioned above are within five provinces, we still have another five provinces to cover which are Mashonaland Central, Mashonaland West, Mashonaland East, Midlands and Masvingo. What we have done is to sit with the provincial ministers and we said to them please identify the technical working groups, which are the groups to drive the development of a particular special economic zone. Anywhere in the world, technical groups will comprise of other Government agencies and in our case they comprise stakeholders such as ZESA, ZINWA, EMA, RBZ and many others. The committees also identify the infrastructure development and put management structures in place, so there are a lot of things going on.
Last week, I talked with the Minister of Finance and Economic Development and he was excited to talk about Chirundu’s potential as a special economic zone. The Minister for Mashonaland Central Provincial Affairs was also excited to talk about Kanyemba. Masvingo is busy taking about Tugwi-Mukosi Dam and in the Midlands they are busy taking about steel plants. So, those are the potential areas we have been talking about and they have been driven by the strategic plan.
LC: You seem to be making some progress Mr Kondo, but many people are concerned with the results, the benefits driven from the economic special zones and when they will start enjoying them.
EK: We are part of the national priority programmes driven from the Office of the President and Cabinet and all of our special economic zones are priority projects. I must hasten to say special economic zones are long term because there is a lot of planning and detailed work that goes in before you actually see the buildings. For example, we will develop what we call the management structures, which is the mode everywhere, including in China, for instance.
We are also busy with the technical working groups that comprise the Government technical departments that sit, cost and discuss the design of the infrastructure. The special economic zones must have dedicated power, water and data. These days, data is probably also important just like water. So, we are busy putting in place all the technical working groups. There is a lot of work that is happening behind the scenes, just working on infrastructure and we do not see that in the newspapers because it is basic, but it must be there. We are also busy with technical issues like having a feasibility study.
A feasibility study tells us that a special economic zone is not going to be a white elephant and that the type of infrastructure will not be wasted.
In South Africa, they do not build a special economic zone without a 70 percent uptake because that is the critical issue in terms of sustainability and in this country we do not want to build white elephants because we will have wasted resources.
It needs about a year for a detailed masterplan, which needs to have detailed engineering workforces, detailed funding requirements, detailed construction requirements and so forth. We are also doing that behind the scenes for the six projects we mentioned before. Special economic zones are not short term or even medium term by definition. If you go to China, they started the special economic zones in 1978. They started bearing fruits of what they did in 1978 in recent years.
In South Africa, for example, and this is factual which you can check, they started 14 years ago I think, if not earlier. Their concept was industrial parks. They have got one special economic zone in Port Elizabeth. They have got four that are probably 50 percent out of the 10. In South Africa, all special economic zones are declared after utilities are put in place.
So, I am just giving you the fact that these things take time. In Africa, in other models like Kigali in Rwanda, they have got one, Ethiopia has the industrial park where President Mnangagwa recently visited, Zambia has two and others are under development.
LC: How feasible and viable are the special economic zones as a concept of industrialisation and modernisation?
EK: Special economic zones are a concept that is catching on like veld fire in the world. Though from an academic point of view there is a lot of debate around them. Countries like those in Europe declare them and they go on to make them the best and they can declare the whole country as a special economic zone, but there is debate on that approach. Of interest is the private sector special economic zones that we have declared. We declared private sector special economic zones with the potential to bring into this country US$1,7 billion in the next five years. There will be transfer of key skills with over 2 500 highly trained staff. There will also be over 45 000 jobs created in the economy with the attendant general socio-economic benefits to the economy of Zimbabwe. Though we are trying to move away from the Export Processing Zones model, we are going to put the investors into zones that we declare as areas that have investors within them. They are strictly individual investors. This is very important because we are saying the modern concept has shown that those driven by the private sector are motivated by profit-making, so they are successful. The reason simply being that the private sector has a profit motive, while public sector tends to have socio-economic imperatives.
LC: In terms of private sector driven investors you mentioned above, which areas are they interested in?
EK: We may do statistics that we will publish on the private sector investors as we go, but what has happened now is that there has been a lot of interest in the mining sector, the agriculture sector and Victoria Falls in particular, which is a tourism hub. In terms of interest, it’s from all over the world, but in particular Europe, America, Asia and India, but from an actualization point of view we are seeing a lot of commitments coming from China. Firms declared as private sector special economic zones so far are Surewin, Trade Kings, Nkonyeni, Varun, VSLink, Chingases, Colmin, Shepco, Lentsloane, Ecosoft, Afrochine and Prospect Lithium.
LC: The private sector driven model of special economic zones you have outlined seems to favour the big companies. What happens to Small to Medium Enterprises (SMEs) that have the potential to uplift the economy?
EK: The Zimbabwe Special Economic Zones Act mandates us and covers the following; attraction of foreign direct investment and mobilisation of domestic investment. We do not discriminate the two. We want exports generation so that we can deal with the balance of payments. We need to ensure that in the special economic zones, investors like SMEs are in there. Part of the challenges I am getting now is that people will say why did you licence someone that will just employ 20 people. Even in China where such zones have been successful, that is part of the special economic zones. This is because if we say we are going to licence the big ones only, that will be discrimination against the smaller ones. The law right now says we must find a way to improve the SMEs, to include the youths, to include women because they have been traditionally marginalised.
Another issue of emphasis is value addition and beneficiation, particularly for minerals. The President was in the papers last week talking about granite, that we do not want to be exporting blocks, we want them to be polished here. Why should value addition not be happening here? So, our mandate is also value addition and beneficiation, and obviously out of all that we get overall industrialisation of the country.
LC: In 1998, I participated at a ground breaking ceremony for an export processing zone (EPZ) in Beitbridge. That was the end we heard about it in terms of progress.
EK: The EPZ model focused on one aspect, which was just exports. The weaknesses of that model is mainly focusing on that one aspect. Like I said, in our strategic plan we clearly identified that we want to move away from the EPZ model to special economic zones. The impact on social economic development with the special economic zones model is much broader because it can include anything, anyone can be a special economic zone. It is much broader for the economy, rather than just EPZ which was largely manufacturing. Special economic zones include services which can make exports. Hospitals in this country, for example, are losing a lot of money when people track down to South Africa or India for treatment, why don’t we bring it here and have the whole of Africa come to Zimbabwe for treatment.
While I was at the British embassy last week, there was a reception there, I was talking to someone. I said Zimbabwe is well known for education, we are always touting that this country has a 98 percent literacy rate. Then I said why don’t we go to UK, take all the universities in UK, bring them here and give then 1 000 hectares in Mazowe and then we become the educational hub for Africa. And everyone sitting there said you are 100 percent correct because everyone knows Zimbabwe is the country with a higher literacy rate. The point I am illustrating is that special economic zones, and you know it from China, are not necessarily about manufacturing. You can have a five-man band which is doing a Call Centre or IT as a special economic zone. Think of Apple, Microsoft and they can generate billions. We do not always necessarily need a massive 200-hectare factory as a special economic zone.
LC: Before investors come, especially for special economic zones, they always first look at the incentives. Have you come up with the right incentives to entice such investors?
EK: We already have two types of incentives, physical incentives which cover issues of duty, raw materials, taxes, Pay As You Earn and many others. We also have non-physical incentives and those cover issues of visas, ease of doing business, facilitation from a one-stop shop, for example now we are dealing with one or two of our licencees that come through us to intermediate for them with the Reserve Bank, to intermediate for them with ZIMRA when it comes to duties and so forth. They do not want to go from one office to another.
LC: Are these incentives the best?
EK: We have to start from somewhere. The best incentives are actually non-physical becaus
e those are everlasting. If we have the best operating environment, the best facilitation, no hustles and no red tape in the country, they are actually the best, but you still need physical incentives to hook your customers.