“access to technology” as significantly more important than did foreign investors; this most likely reflects the expectation of benefiting from technology spillover effects from multinationals.

# <u>Utilities</u>

Access to reliable, competitively‐priced utilities<sup>19</sup> was ranked as the most important investment consideration by firms in African EPZs. Where high quality, consistent utilities are available, companies can deploy modern production techniques and ensure the efficient utilization of resources; where they are absent costs rise, productivity suffers, and output is inconsistent. Overall, African countries generally fare poorly in the provision of basic utilities services. For example, according to data from the World Bank Enterprise Surveys, electricity‐related downtime costs African businesses almost 6% of sales, more than 2.5 times the average in OECD countries and the second worst‐performing region (next to South Asia); nearly 26% of all electricity in the region is reported to be reliant on generators, 40% more than in the next worst‐performing region (Latin America and Caribbean). Thus, EPZs have the potential to offer a substantially improved operating environment to investors, by providing additional infrastructure (e.g. electricity substations, reservoirs, etc.) or by ensuring dedicated or prioritized utility supplies.

The results of the survey are mixed. In most African countries surveyed, locating inside an EPZ offers much‐improved reliability of utilities relative to what would be available in the domestic economy. However, as the quality of the national utilities infrastructure in most countries is so poor, the relative improvement in the EPZ‐setting remains well below what would be required to establish a globally‐ competitive environment for investors. The results are presented below for electricity. A similar pattern of results was found for water.

For most manufacturing and services companies operating in EPZs, electricity is the most important consideration in terms of utilities – both reliability and cost are critical. The results (see Figure 9) show that all African EPZ programs offer a better investment environment with regards to electricity reliability than available to investors in the domestic market. For most, the difference is substantial. However, with the exception of Lesotho and possibly Kenya, they have not been able to provide an environment that is competitive worldwide. Indeed, for an investor looking for reliable electricity in Africa, locating in any other country’s EPZ program covered in the survey (Ghana, Nigeria, Senegal, and Tanzania) would not even put them in the top half of locations in Africa (see Table 6). Moreover, the relative improvements in Lesotho and Kenya – whose national environments for electricity reliability are significantly better than in the other African countries – were also the largest (along with Ghana) in the sample. However, the non‐African countries in the sample far outperform most of the African countries. As a comparison, although electricity reliability in Bangladesh is as poor as in the average African country, it has managed to establish a much‐improved environment within the EPZs that is competitive with countries like Vietnam and Honduras.

> 19 The focus of the survey was on electricity and water utilities. Although questions were asked about telecommunications (phone and internet) availability and set‐up, the survey did not address questions on the reliability of telecommunications.

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