Why Africa’s investors are choosing special economic zones over countries

For a long time, Africa’s investment landscape has been framed as a market-size problem. Over time, it appeared that the solution was simply to scale up: bigger populations, faster urbanisation, rising consumption. Yet capital inflows remained uneven. What investors discovered, repeatedly, was that Africa’s constraint was not opportunity, it was friction.

That friction showed up everywhere: overlapping regulators, volatile currencies, slow incorporation timelines, and unclear exit pathways. As a result, Africa’s most consistent investment inflows did not arrive through national reforms, but through exceptions. This is the overlooked story behind the resurgence of Special Economic Zones (SEZs).

As Africa moves into 2026, SEZs are no longer peripheral incentives for manufacturers. They are becoming core financial infrastructure; structured entry layers designed to de-risk investment before capital ever touches the domestic economy.

Intelpoint’s latest report, “How to Expand into Africa: A New Operating Playbook” captures this shift clearly. The most successful entrants today are not simply choosing countries; they are choosing jurisdictional layers that sit on top of them.

From industrial incentives to financial architecture

Three waves characterise the rise of special economic zones (SEZs) across Africa.

Africa’s first wave of SEZs was industrial by design. Zones like the Calabar Free Trade Zone in Nigeria, South Africa’s Industrial Development Zones (IDZs), or Hawassa Industrial Park (HIP) in Ethiopia were built to attract factories, create jobs, and boost exports. Their economics relied on land, logistics, and physical throughput.

But this model had limits. Manufacturing zones struggled when national infrastructure failed or global supply chains shifted. Returns were slow, capital-intensive, and highly exposed to domestic instability.

The second wave of SEZs reflects a different economic logic. Mixed-use zones such as Tatu City in Kenya marked a transition, combining industrial activity with services, housing, and commercial real estate. The goal was resilience through diversification.

Today’s third wave goes further. Digital and service-oriented SEZs focus less on land and more on rules. Their value lies in speed, predictability, and balance-sheet protection. They function as parallel systems, not to replace national economies, but to interface with global capital on clearer terms.

Why investors are choosing entry layers, not countries

The business case for modern SEZs is straightforward. They reduce three costs that matter most to capital: time, volatility, and uncertainty.

First, time. Incorporation delays, licensing backlogs, and multi-agency approvals materially affect returns. SEZs compress these timelines by centralising authority.

Second, volatility. Currency instability remains the single biggest deterrent to long-term capital in frontier markets. SEZ frameworks that allow multi-currency operations and profit repatriation reduce balance-sheet risk without requiring macro perfection.

Third, uncertainty. Fragmented regulation complicates valuation and exit planning. SEZs create legally legible environments that institutional capital understands.

It is for these reasons that Tanzania, for example, passed a law in 2025, the Investment and Special Economic Zones Act, as a compact institutional and legal framework aimed at enhancing efficiency and investor confidence.

Tumwesige Evans Lushakuzi, a senior attorney, notes that “the Tanzania Investment Centre (TIC), the Export Processing Zones Authority (EPZA), and Special Economic Zones (SEZs) have been merged to form one centralized body: the Tanzania Investment and Special Economic Zones Authority”

This is why SEZs are increasingly treated not as tax shelters, but as risk buffers.

Nigeria as a stress test for the SEZ model

Nigeria illustrates this logic better than any other market. With over 230 million people and access to the wider ECOWAS bloc, it is Africa’s largest commercial opportunity due to having the largest single consumer market, giving businesses access to a vast and youthful customer base unmatched elsewhere in Africa. It is also one of its most complex operating environments due to currency volatility (what many call the “Naira trap”) and infrastructure gaps (electricity and logistics).

The numbers support this. Nigeria accounts for roughly 52% of the total population of the 15-member ECOWAS bloc, which has about 451 million people. Nigeria also accounts for approximately 62.7% of ECOWAS’s GDP, making it the bloc’s central commercial engine. ECOWAS’ GDP has been in the $600-700 billion range since 2019, so Nigeria’s share of that would be roughly $375–$440 billion.

For years, investors faced a trade-off: access scale, or protect capital. Currency volatility and policy shifts made that choice unavoidable.

SEZs change the equation. By operating through specialised jurisdictions, firms can engage Nigeria’s demand while limiting exposure to its macro shocks. The entry layer separates opportunity from risk.

This is not unique to Nigeria, but Nigeria’s scale makes the payoff more visible.

Digital SEZs: The next iteration

Digital SEZs are not a departure from Africa’s long-standing use of special zones; they are its refinement. As growth shifts toward services, technology, and knowledge-based exports, the binding constraints are no longer land and logistics, but regulation, capital mobility, and time-to-market. Digital SEZs respond by optimising legal and financial frameworks rather than physical infrastructure.

The two dominant models in 2026 offer a study in contrast for capital allocation:

• The “Build-First” Model (Konza Technopolis, Kenya): A government-backed “Silicon Savannah.” This is a long-term play on physical infrastructure and smart-city integration. It offers high certainty but requires physical presence and follows a slower, construction-dependent timeline.
• The “Rules-First” Model (Itana, Nigeria): Itana leverages Lagos as its physical anchor but operates as a digital-first jurisdiction. For asset-light service firms, this represents a lower barrier to entry. It allows a firm to “plug into” Nigeria’s 230-million-person market with the regulatory agility of a “Delaware or Dubai-style” entity, as Luqman Edu, CEO of Itana, puts it.

The contrast highlights two competing philosophies of African entry. One prioritises infrastructure certainty over time. The other prioritises regulatory speed over physical completeness. As capital increasingly targets asset-light, service-driven businesses, the latter model is proving easier to adopt and faster to scale.

AfCFTA and the scaling effect

The African Continental Free Trade Area has accelerated this shift. AfCFTA’s promise is continental scale, but its execution depends on practical hubs that can transact across borders efficiently.

SEZs are emerging as those hubs. Institutions such as the Charter Cities Institute have argued that trade integration will not happen evenly across countries, but through nodes that already minimise friction.

A firm operating within an SEZ is better positioned to export services, attract capital, and scale regionally under AfCFTA rules. In this sense, SEZs are becoming the operating bridges between national markets.

The economics of the new entry strategy

For investors entering Africa in 2026, the goalpost has shifted decisively. The central question is no longer which country offers the biggest market, but which entry structure offers the lowest execution risk. In that context, Special Economic Zones are increasingly understood not as incentives, but as financial instruments designed to improve risk-adjusted returns.

Time is the first variable: According to the World Bank’s Doing Business 2020 report, starting a business in many Sub-Saharan African economies still took several weeks to months when incorporation, licensing, and sectoral approvals were spread across multiple agencies.

In Nigeria, for example, the report estimated an average of 7 procedures over 7 days under ideal conditions, a figure that often stretched considerably longer in practice once sector-specific permits were required. Each additional month before operations begin raises the cost of capital, particularly for service-led and venture-backed firms whose valuations depend on early revenue traction.

Foreign exchange exposure: This is a core financial constraint for investors in Africa. World Bank data shows that, after global FDI flows slid to historically low levels in 2023 (developing economies received just $435 billion, the lowest since 2005) African recipients saw a similar compression in capital, with the continent’s total FDI shrinking to around $53 billion that year.

A year later, there was a measure of recovery, but this uneven pattern underscores how currency and regulatory volatility can weaken long-term commitments. In 2024, foreign direct investment into Africa rebounded to roughly $97 billion, driven largely by large project finance and energy-linked deals. Nigeria attracted an estimated $1.1 billion of that total, translating to about 1.1% of continental inflows, a modest share for Africa’s largest market by population and a clear signal that scale alone is no longer sufficient to pull in global capital.

Regulatory predictability: Fragmented rules raise transaction costs and complicate cross-border scaling. This matters even more under the African Continental Free Trade Area, which aims to increase intra-African trade by more than 50% by 2045. AfCFTA’s success depends not just on tariff reduction, but on operational nodes that can move services, data, and capital efficiently across borders. SEZs are increasingly emerging as those nodes.

The SEZ advantage

SEZ frameworks that allow multi-currency accounts, stable FX treatment, and guaranteed profit repatriation directly address these constraints. By stabilising cash flows and clarifying exit mechanics, they reduce currency risk and improve the risk-adjusted return on investment, making African market exposure clearer to global capital, especially for institutional investors who price balance-sheet certainty into valuation models.

For investors entering Africa in 2026, the question is no longer “Which country?” but “Which operating layer?”

Africa’s next decade of capital inflows will not be defined by who chases population growth fastest, but by who structures risk most intelligently. In that equation, Special Economic Zones have quietly become the continent’s most important entry layer.