This thesis examines two cases of Export Processing Zone (EPZ) programmes in subSaharan
Africa (SSA), specifically in Kenya and Lesotho. Using data from the respective
countries’ EPZ programme authorities, central banks, relevant studies, and country reports, I
show that although the programmes have facilitated employment generation and foreign
exchange earnings from textile and apparel exports, such exports rely highly on preferential
trade agreements such as the African Growth and Opportunity Act (AGOA). The reliance on
preferential market access, and the uncertainty regarding the continuation of such preferences
are important sources of vulnerability. This causes fluctuations in investments and also helps
explain the low level of backward linkages. This is especially evident in Lesotho. Moreover,
such production within the zones is mainly of low productivity and low added value. The vast
number of zone programmes that have materialised in the last decades has contributed to
reducing the possible net benefit of EPZs, and the increase in competition has made it difficult
to attract investors. Zone programmes in Kenya and Lesotho are seen as relatively successful
compared to other SSA zone programmes, yet investment and employment levels within the
zones are low compared to many programmes in other regions. Several factors hamper larger
investments, such as high labour unit costs, high electricity prices, inefficient bureaucracy,
corruption, as well as labour unions and political opposition. EPZ programmes may help
make it easier to do business in the host countries, and improve investors’ perception of the
countries’ attitudes towards foreign direct investment (FDI). However, SSA zone programmes
should to a greater extent target industries and services in which they have good prospects of
developing a competitive advantage, regardless of trade preferences, which provide good
opportunities for human capital and technology transfers, and which generate demand
linkages. SSA countries with large endowments of natural resources may be better able to
capitalize upon their comparative advantage by focusing on industries that take advantage of
the countries’ natural resources, rather than on the labour-intensive industries that have
traditionally located in EPZs. Due to high competition and demand for good quality
infrastructure, EPZ programmes are generally better suited in more developed SSA countries
than as a tool to facilitate development in the poorest countries.