China's special economic zones in Africa: lots of hype, little hope

hello and welcome to another edition of the China in Africa podcast I’m Eric Olander and as always I’m joined by caboose van Statten of its University in Johannesburg South Africa very good afternoon to you covers good afternoon copies today we’re gonna talk about s easy special economic zones and this has been a topic that has come in and out of our conversation over the years with various guests as we’ve talked about special economic zones being proposed by the Chinese in places like Ethiopia in Zambia in Nigeria and then there’s the case of Mauritius and in some ways Mauritius offers an interesting cautionary tale about SE zezĂ© but I think before we get into this conversation let me just kind of back up and talk about what is an SEC and why it’s so important to the Chinese you know the Chinese are using their own development model and this is a theory that’s been propagated by none other than Deborah Belgium who talks about how the Chinese in Africa rather than using the Western development model have been kind of relying on their own experience in their own instincts and special economic zones are very important part of their economic history over the past 30 years what China did back in the oh gosh I want to say late 80s early 90s I think it was the early 90s as when it started is they created five designated areas one was Schengen for example right on the border with Hong Kong where it really was a special economic zone and what that meant was there were different tariffs for manufacturers to come in and out there was easier for foreigners to settle there the rules were kind of loosened if you will and there were special treatment for the people and the businesses in those areas and what that did is it created a lot of economic activity so what the Chinese have been doing is taking that model to Africa and really talking it up naturally a lot of people are very excited about it but in Mauritius it all went wrong and one person who’s been covering this is James Wan who is the former editor at think Africa press and the new editor of African arguments which is the online publication of the Royal African society and it’s an online magazine that features news analysis essays and everything that you liked about think Africa press well now go check out Africa arguments James you’ve been on the show before so we’re thrilled to have you back yeah it’s great to be back well and it’s also wonderful to bring you back on this particular topic because we’re going to be talking about Mauritius and you yourself are of Mauritian descent am i correct yeah that’s right okay I am from Russia it’s wonderful so you’ll be able to speak with a little bit of authority in the subject now you’ve done a couple reporting trips there when you go back to see to see some of your relatives and the like and one of them that you talked about was this 2006 announcement of a special economic zone that was announced back then with the Chinese private company a 10 Li spinning tell us the little bit of the background of the sec before we get into the details of why it all went wrong mm-hmm okay yeah so it was at the FO CAC in 2006 that huge in Tao kind of announced that he wanted to set up with China wanted to set up a handful of special economic zones across Africa and that led to different governments and companies kind of pitching their versions basically and one of those I mean a lot of those kind of made a lot of sense like an Ethiopian one where you know there’s cheap labor lots of cheap labor and a big kind of internal market or Zambia with its kind of rich copper reserves but Mauritius also proposed one based on kind of a very different kind of set of advantages I suppose so yeah it was between the Russian government and this company called gently spinning and the idea was that this special economic zone with its kind of low regulations and taxes would attract kind of higher-end industries that Mauritius wants to diversify into so things like ICT is kind of specialists like manufacturing pharmaceuticals that kind of thing and you know they pushed it pretty hard and eventually they got the approval from Beijing and there was a lot of Hope where people said or at least the government said it was going to create you know 40,000 jobs it was gonna help Mauritius add value and diversify further but yeah but it didn’t quite work out that way it was essentially roads laid out and go kind of crazing between them and nothing much else right yeah so it’s a it’s an area I think it’s 211 hectares which isn’t huge by most standards but when you’re talking about this tiny kind of speck in the Indian Ocean it’s it’s quite a lot of you know it’s a

considerable part of the island and there were kind of small-scale farmers they’d plant have been planting there that had to be removed and the agreement was that the government would build the infrastructure around the site and the companies would be responsible for building the infrastructure on site and that basically has been done so yeah we knew when you go around there are these big roads well lived you know smooth tarmac really you know amazing roads but there’s basically nothing else there so people people he is that the only the only thing that’s really used for is people kind of go there if they want to have a little cultural occasion they want somewhere that’s kind of nice and quiet or you see people like practicing their three-point turns on it a new occasion you know what every road there I could imagine the Chinese kind of pitch on this and they you know the PowerPoint presentation is like look at Shenzhen 1990 look at gen gen today special economic zone this could be your city you know fill in the blank here and and it’s interesting to me because the SCC’s have run into problems in Zambia they’ve run into problems in a lot of places in Africa so something is clearly going wrong between the pitch and the execution and and I’m just kind of let’s take the the Mauritius example because when I look at I mean I had to I have to be honest with you I had to go back on to Google Maps and look where Mauritius was on the map you you were being generous I think when you called it a speck in these in the Indian Ocean I mean this thing is tiny I mean it makes it makes you know Madagascar look huge again you know so it’s tiny and so one has to think okay what was anybody thinking that this was going to be a good launch pad for the Chinese into the rest of Africa or elsewhere we what was the the strategic value for a company likes you know Tinley spinning and the Chinese to be there and why did the the Marisha pnes think that this would actually come to fruition hmm well from Marissa’s perspective I think there were kind of two things so firstly it basically this kind of model worked really well for it in the 70s and 80s so back then they had not special economic zones but they called export processing zones and they set up these yet in the 70s and that attracted quite a few Chinese and particularly Hong kong-based textile factories were and the advantage for them as well as the kind of low tax and no regulations was that there was cheap labor and also market access kind of preferential market access to Africa Europe at the u.s. because of things like the multi fiber trade agreement and that actually worked really well from Russia’s and allowed it to diversify from being what was essentially a mono crop sugar based economy into also having quite a thriving textile industry so one of the arguments when the government announced it was kind of just looking back at history and saying you know we did it we did it in the 70s and 80s we’re doing it again the other thing is that yeah so I think from Mauritius perspective it it perhaps rightly thinks that it does have various advantages so you know back in the 80s it was cheap labor and market access now it can argue that it’s when it comes to Africa it’s you know the most stable democratic country you know it always comes top of the Moby brew hidden governance indicators it’s got a well-educated population a multilingual population and I think it kind of wants to set itself up as like a stepping stone between Africa and China so it can kind of say like we’re technically African and we have access to all those markets but we’re also you have all the advantages of you know setting up in a European country like it’s very easy to do business educated workforce good infrastructure this than the other I was wondering so why didn’t it work I mean when you list the reasons like that it all sounds very convincing why what was the problem in the end hmm so I think it was I think one of the problems was just that it kind of happened in awkward time so it was agreed upon in 2006 I think and then they started they started building stuff and then in the kind of 2007 eight financial crash everything kind of stalled and slowed down they were worried about whether they’d be able to

attract businesses I think Tenley spinning the the main company involved was having some kind of liquidity problems so it kind of stalls and then when the Mauritian government met with the Chinese government to try to kind of hurry a hurry it up again who Jintao essentially handed a responsibility to one of the provinces that got to other big Chinese companies involved and they were quite strange choices they were both like big kind of resource extraction companies and they essentially took majority shareholding over the over the SE set and it kind of changed its aims from being this kind of high-tech hub into being more of a kind of hospitality place and I think that doesn’t really attract Chinese business people because that’s not I mean they’re not I I think one of the ideas was that companies would set up in Mauritius where everything’s very you know nice and beautiful and works really well great infrastructure but they’d really be doing business in Africa but kind of as we can see from big Chinese companies going straight into Africa where you know things may be a bit more uncertain like they’re not they’re not really afraid of taking some risks so if so I think that was one of the reasons that it was kind of the reformulations of it you know it’s me it’s interesting because on what we’ve been hearing for the past year or two is how the Chinese may be kind of shying away from some of the riskier areas like South Sudan the DRC and opting for more stable areas now we’ve always interpret that as being South Africa Tanzania Kenya whatnot so it seems like Mauritius would be ideal but I guess the the distance is and the size of the island you know gets in its way and works against it let’s step back from Mauritius a little bit and kind of draw on some of your broader African experience to kind of look at someone looking at what happened with this s easy as they look at the other cases of se Z’s that have run into problems particularly in Zambia and Nigeria in Ethiopia what are what lessons should someone walk away with and take from the experience in Mauritius I mean I think I think what’s important is I mean what I think what didn’t really work that well in Mauritius is the fact that the the partners involved I think didn’t always have exactly the same kind of incentives and the same plans so that meant that when it started to kind of filter and other partners got involved it kind of changed and I think right from the start the Beijing wasn’t really that excited about to Mauritius s he said I mean I think it was very strongly pushed by the Russian government itself and I think when these as he said to work best it’s when corporations partner with governments and those corporations have very clear idea of what it is they’re able to get what it is that kind of they what they want to do with that and one of the problems with the SE said in Mauritius as well as that the main companies involved when used to they weren’t specialists in kind of setting up these kinds of zones so I think that expertise also also comes into is also extremely important corpus let me ask a question to you about the kind of perception the optics of a Chinese scz in we’re saying se ZM s he’s dead by the way so you can tell who’s American and who’s who’s Brit but you know the optics of it all because you know that there’s all this sensitivity about you know we Chinese neocolonialism Chinese kind of taking over Chinese you know blah blah blah blah but yet this idea that China has a kind of a specific territory zoned off for itself it’s got its name it’s got his companies there do you think that that could cause potential problems in just in terms of the marketing perception and the difficulties that the Chinese would have in communicating what exactly this is and how kind of critics may look at it as yet another encroachment on African agency in sovereignty I think essentially there is that problem I think it especially comes in relationship a you know I think there has been perceptions that that SCC’s tend to you know kind of also mean that that labor laws are relaxed you know the labor laws are kind of I’ve endured within within their territory so that of course plays into wider issue wider concerns about you know Chinese companies and to and to which extent is a follow African labor law um but you know kind of as always in Africa it

always bumps up against the need to create more jobs you know kind of so there’s always this kind of double discourse off on the one hand our work is being exploited on the other hand you’re not gonna have no one has enough work to do you know so it very much depends then on on which of those discourses you play the hardest in particular society you know kind of an and and who are who are pushing those two different those four different messages you know constitu move on from there James I was wondering do you foresee that there is a future for this for the the Mauritian one you know kind of midway through July there was I I caught a press release saying that there’s a the American government signed a new member of our memoranda of understanding with Jeanne Fay and you know kind of end that it’s going to be a smaller smaller zone they reconfiguring the shape and it’s going to be light manufacturing and dry for 300 dry port facilities and so on and so on you know kind of is just throwing more money oops throwing more good money after bad or do you do you see that there’s a way to actually make this work I think they kind of have to make it work into to an extent they kind of have to do something with the land and the infrastructure they’ve built and I think so when I said my understanding of the way they’re trying to reconfigure it is actually take away a lot of the Chinese ownership of it and make it actually 80% I think it is 80% government and in only 20 percent owned by the June fair company that was kind of set up to run it and I think I think that could be really beneficial and I think if they do look towards things like manufacturing and poor infrastructure which obviously – I mean when it comes to port obviously it’s it’s near the sea so it’s got an advantage there and I think in terms of light manufacturing you need the kind of infrastructure and expertise in education and mic trained workforce to do that so again Mauritius compared to most of the rest of the continent has those advantages so I think yeah I mean I think there’s definitely potential I don’t think that the whole idea of it was doomed from the start and I think maybe making it less of a kind of Chinese as he said and more of a you know just a harp in the same way that Mauritius is trying to develop herself as a hub for kind of biotechnology research and pharmaceuticals I mean I think there’s potential that you mentioned you mentioned that that who Gentile the former president made an issue of se C’s during the third forum on China Africa cooperation back in 2006 the sixth form on China Africa cooperation is coming up in December Xi Jinping will be in Johannesburg with what I presumed to be every African leader and head of state do you think that and based on what you’ve seen over the past ten years or nine years or so do you think that Xi Jinping will bring up se Z’s and keep that on the agenda I don’t know about that I mean it seems to have been the idea rhythm seems to have been a bit of a mixed bag I’d say across the continent I mean I don’t know nearly as much about you know the ones in Ethiopia Nigeria and Zambia but my understanding is that is that they’ve all been kind of slower to take off than originally envisioned but that some of them are I think particularly the one in Ethiopia and Nigeria have started to progress in the way that was hoped I mean I yeah I mean I don’t know really about that and how the parts of placing in presidencies I did but yeah I mean do you what do you guys think I tend to think they’re they’re gonna hold on to this idea and they may not put it front and center but I think it’ll be as part of their their economic engagement platform Kobus what’s your what’s your guess yeah I would guess the same thing yes it’s actually very difficult for me to say you know kind of seeing that that they haven’t been doing so well in in Africa I would not be surprised if they kind of get sidelined I’m kind of you know quietly quietly side like you know here’s the only reason I don’t think that will happen is it’s so core to their own experience and again I’m going back to broader games kind of thinking here of how they developed that to abandon that entirely maybe kind of some refutation of their own development experience maybe but I wonder if they still needed you know I mean there’s so many Chinese companies in you know convenes in so many sectors at once in Africa do you really still need a specific zone with specific enough

labor laws and tax goals or are they just like arriving and setting up shop in you know kind of where where other companies well if they can get preferential tax treatment they’re gonna take that I mean certainly they want to get lower they want to lower their taxes there’s a one one thing to think about hey if everybody you want have some background on this James did an excellent piece called rise install China stepping stone to nowhere which is about the experience of the SEC in it wasn’t in Port Louis but it was in Mauritius it’s a fantastic article over an African business so just go to African business magazine dot-com will also put a link to that in our show notes on our site at China Africa project calm and you know James listen thank you so much for joining us to talk about the issue of sec s we will keep the topic alive especially going into the folk axe summit in December until then though if we’d like to follow your new adventures that you’re embarking on over at the Royal African society and also on Twitter what’s the best way for everybody to stay in touch with you yeah you can follow me on Twitter at James jae-hwan and you can follow African arguments on twitter at africa arguments and once again that’s african arguments if i’m correct on the website let me just pull up the website african arguments calm no african arguments org really one of the best resources out there for all things africa and so we’re just we wish you the very best as you embark on this new adventure and we’re really looking forward to being in touch with you going forward and really talking more about both mauritius and in what you’re doing over to african arguments okay and if people want to follow what you’re doing these days what’s the best way for them to stay in touch with you you’ll see me on our facebook page which is slash china-africa project and we aggregated twenty four-hour-a-day feed of china-africa news so if you want to stay on top of china african use that to where you find it and also i’m on twitter studnets st ad and squ and you can find me on Twitter as well I made a Olander gol aan de R I’m also on Weibo at I’ve got a personal way boy at Weibo calm down Pete salawa and also drunk face young move so you can follow us if you speak Chinese over on Weibo and of course if you want to follow this podcast the best way to do it is just go to iTunes type in China and Africa and we’ll come right up there in the in the search results that’s the easiest way to find us and we would be so grateful if you could leave us just kind of a comment or a rating because it makes it easier for other people to discover our show and to find the program so we’ll be back again very soon with another edition of the China in Africa podcast thank you so much for listening you