The funding requirements of special economic zones (SEZs) will only be sustainably met if the SEZs provide businesses with good integration into local, regional and global value chains and if they provide centralised infrastructure and services to ensure the businesses based in the SEZs are competitive.

These are some of the views financial and development funding experts raised during news organisation CNBC Africa’s 'Financing SEZs as Drivers for Economic Development in Africa' roundtable discussion last week.

Africa must industrialise and build manufacturing capabilities and expertise to be able to scale up and grow at speeds required to reduce poverty and inequality. For example, the market for minerals in Africa is only about $11-billion, but the market for refined metals is valued at about $300-billion, said development finance institution (DFI) Africa Finance Corporation (AFC) investment professional Abiola Osho.

"SEZs in Africa help in two main ways, the first is import substitution and the second is creating export-competitive value chains," he said.

The example of accessing greater value by moving up the value chain holds true in other value chains as well, such as in the agricultural value chain, with coffee and cashew products promising a $40-billion market, he added.

"This is value we are leaving on the table," he emphasised.

Further, SEZs can help to make value chains more resilient. The exporting of raw materials and importing of finished or semi-processed goods leads to significant emissions during shipping, despite Africa being in an advantageous position for shipping, with good shipping times to most parts of the world, Osho highlighted.

"Processing materials locally will therefore reduce carbon emissions from shipping, and co-locating processing within an SEZ or as part of a regional value chain will make the value chains more resilient as well as competitive," he said.

Creating an enabling environment is critical to get right, as is the financial structure of the SEZ's funding to provide a clear fiscal space for businesses to set up in, said DFI African Development Bank head of private sector investments Ezekiel Odiogo.

Government funding is and must be limited and the competitiveness of SEZs must mostly come from innovative financing solutions to unlock the potential benefits for the private sector.

"The design of an SEZ must be astute to ensure they are sustainable, able to achieve their objectives and drive growth. There are about 5 400 SEZs worldwide, and 235 in Africa. Importantly, for sustainability, SEZs must not only provide channels for export, but create linkages into regional and domestic value chains to drive inclusive growth," he said.

This will also prevent SEZs from becoming isolated enclaves, enabling them to rather provide integrated service offerings to ensure that capital flows to them. Being located in a major transport node also helps to drive a number of other activities related to the SEZ and businesses operating there, he added.

SEZs can also help to promote intra-regional trade and thereby expand the markets that businesses have access to. As value chains spread, they reduce conflicts, create much larger markets and boost regional integration, while still driving comparative and national advantages within value chains, said Odiogo.

Additionally, SEZs can build out comprehensive links and connected elements of a value chain. SEZs can provide the infrastructure, and everything from access to raw materials to logistics requirements must be addressed within an ecosystem approach, added Osho.

"Layered over this are the financial solutions required and the small and medium-sized enterprises to sell services and goods into the zone, which creates a market for ancillary services and thereby helps to create the holistic export corridor," he said.

Merely replicating successful SEZ models is not sufficient, as some of the local success factors may be missing or overlooked. Therefore, the private sector must anchor and drive the impact of SEZs, while domestic and regional linkages will lead to spillovers of innovation, and the internalising of innovations by companies within such diverse value chains, noted Odiogo.

"It is important to get the design right. Public money should only help to derisk investments, as there are many institutional investment organisations on the continent," he said.

Meanwhile, Osho emphasises that SEZs must be sustainable, not only in terms of their business viability but also in environmental-impact terms.

"The SEZ that [the AFC] funded in Gabon draws from a good mix of sustainable forestry, which at the minimum must ensure that the forestation and deforestation rates are the same, thereby ensuring that the resources that the businesses use are sustainable. We need to do more of this in SEZs," he highlighted.