The role and effectiveness of state-owned Export Processing Zones (EPZ) and Special Economic Zones (SEZ) in Tanzania is examined in this paper. Tanzania's objective is to become a middle income, semi-industrialized nation by 2025. Industrialization is expected to be an important catalyst in increasing the growth rate in the economy to above 10% per annum and in ensuring that growth is coupled with structural transformation and job creation. Tanzania, like many other developing countries, has attempted to stimulate industrialization through the creation of EPZs and SEZs. A large literature exists highlighting the benefits associated with the clustering of firms in one geographic location. The authors set out the case for the establishment of SEZs in Africa and the potential benefits associated with doing so. The main economic rationale for firms locating in close geographic proximity is that it reduces the costs of transporting: goods, inputs and outputs; people, thus facilitating better matching of workers to jobs; and ideas, facilitating technology transfers and knowledge sharing.