Promoting MSME Development and Entrepreneurship in and around Special Economic Zones in Africa

Special Economic Zones (SEZs) are an ever-popular policy tool for the promotion of investment, employment generation, and the stimulation of innovation. Current estimates suggest that there are around 240 SEZs in Africa alone, with the total number worldwide passing 5,000. While traditionally, SEZ policies have focused on the attraction of foreign large-scale industrial investors, there has been an increasing interest on how to leverage SEZ policies to support local firms, in particular micro, small and medium-sized enterprises (MSMES) and foster local entrepreneurship. The importance of MSMEs and entrepreneurship for economic and social outcomes has been extensively documented. In most economies, MSMEs represent the vast majority of firms, in particular in the developing world. They contribute to the lion share of formal and informal employment and typically grow faster than large established companies. The entry of new firms has been shown to promote productivity and value added. However, MSMEs also encounter particular challenges. Among other, they face higher hurdles to access finance, struggle more with bureaucratic processes, and often have lower managerial and technological capabilities. These difficulties make it even more challenging for them to realize market opportunities and their growth potential.