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Promoting African intra-regional trade through value chains
Abstract
The emergency and growing importance of Global Value Chains (GVCs) has added a new dimension
to international trade. GVCs have given rise to markets for intermediate products and thus increase
in the exports of values added products and services provision globally and regionally. The
importance of GVCs in transforming trade has also come at a time when there has been an
invigoration of African regional integration. Yet much of the GVC literature pays much attention to
shifting patterns of global production and global trade, with little attention given to the role of
regional value chains in promote regional integration, particularly in the African region. This paper
investigates and analyses the participation of African countries in regional value chains in goods and
services and explore the potential contribution of such value chains in promoting and accelerating
intra-African regional trade and enhance African cooperation towards economic growth and poverty
reduction.
Promoting African intra-regional trade through value chains
Introduction
Historically intra-African trade has remained low relative to trade between Africa and the developed
world. One of the key reasons for the low intra-African trade is that most African countries have a
very concentrated export base with most of them trading in the same products largely raw material,
and thus unable to take advantage of African markets for goods and services. Yet today regional
integration seems to be driven more by the private sector than governments. This is particularly so
due the emergency and growing importance of Global Value Chains (GVCs), which have added a new
dimension to international trade. GVCs have given rise to markets for intermediate products and
thus increase in the exports of values added products and services provision globally and regionally.
The importance of GVCs in transforming trade has come at a time when there has been an
invigoration of African regional integration. Yet much of the GVC literature pays attention to shifting
patterns of global production and global trade, with little attention given to the role of regional
value chains in promote regional integration, particularly in the African region.
The fact that international trade is increasingly conducted along global value chains (GVCs) has
added a new dimension to the economic relationship between African states, and between Africa
and the rest of the world. GVCs have given rise to increased opportunities for African countries
through competitive outsourcing based on perceived comparative and competitive advantages.
Traditionally the distribution of gains from value chains has been skewed in favour of developed,
capital exporting countries at the upper end of the value chain. The emergence of larger, capital
exporting African countries has fundamentally reoriented terms of trade at the regional level
presenting new opportunities for African economies that have historically been on the margins of
global trade in value added, to take advantage of new opportunities presented by Africa value
chains.
This paper investigates and analyses the participation of African countries in regional value chains in
goods and services and explore the potential contribution of such value chains in promoting intraAfrican regional trade and enhance African cooperation towards economic growth and poverty
reduction.
African regional integration and intra-African trade
At their Summit in January 2012, African Heads of State and Government adopted Decisions and a
Declaration as part of an Action Plan and a Framework Document outlining a Road Map for the
establishment of a Continental Free Trade Area (CFTA) by 2017 (Mkwezalamba, 2012). This is indeed
an ambitious target date especially in view of the pace of regional integration in various Regional
Economic Communities (RECs). The date might seem unrealistic especially given the African Union
(AU) view that African trade has failed to ‘serve as a catalyst for sustainable economic growth and
poverty alleviation’ (Africa Union, 2012). But in reality, the potential for trade as an instrument for
rapid growth and sustainable development has not been tapped in most African countries. Hence
the need to accelerate regional integration in Africa as a prelude to a CFTA, in an effort to utilise
intra-Africa trade for the economic development of the continent and eliminate poverty through
trade. As such recent developments on the continent have witnessed endeavours to accelerate
activities aimed at fostering regional integration in line the African Union’s concerns to build an
African Economic Community (AEC). The continent has ‘collectively articulated its position towards
making effective development a reality’, taking charge of ‘its own development agenda’
(Mkwezalamba, 2011). These activities have been accompanied by resurgence in the debate on
African regional integration both at the theoretical level and policy making level. Indeed, Draper et
al (2012) argue, the remarkable growth experienced in sub-Saharan Africa (SSA) in the past decade
was partly due to domestic developments in the region and regional integrations efforts.
As such, the reacceleration of regional integration activities and the resurgence in the debate on
African regional integration comes at the backdrop of an improved performance by African countries
to increase intra-African trade. Figures 1 and 2 show that notwithstanding recent positive trends, it
remains the case that developing countries, compete for the same markets in the North; hence
intra-African merchandise exports remain low compared to exports to high-income economies.
However, there are indications that merchandise exports within the SSA have been increasing
between 1990 and 2009 whilst exports to high-income countries have been decreasing over the
same period.
Figure 1: Merchandise exports to developing economies within selected regions (% of total merchandise exports)
14
12
10
8
6
4
2
0
Sub-Saharan Africa intr-regional (all income levels)
Source: World BankData
Figure 2: Merchandise exports to high-income economies by selected regions (% total merchandise exports)
90
80
70
60
50
40
30
20
10
0
Sub-Saharan Africa (all income levels)
Source: World BankData
This improved performance in intra-African trade should also be examined on the backdrop of
improved economic performance on the continent. The region has experienced increased growths
in GDP per capita from 2002 to 2012. Despite an interruption of growth between 2008 an 2009,
Sub-Saharan Africa has experienced unprecedented increases in the levels of levels of GDP per
capita income as shown in Figure 3. This is owing to strong economic growth as shown in figure 4,
which demonstrates exceptional levels of growth that are higher that the world average during the
same period.
Figure 3: GDP per capita (US$ Current)
Sub-Saharan Africa GDP Per capita
1600
1400
1200
1000
800
600
Sub-Saharan Africa GDP Per
capita
400
200
0
Source: Source: World BankData
Figure 4: GDP growth constant (annual %)
7
6
5
4
3
Sub-Saharan Africa
2
World
1
-1
-2
-3
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
0
Source: Source: World BankData
Trade has increasingly played an important role in the strong economic performance during this
period (Lopes 2013). The strong growth coupled with and rise in per capita incomes has seen a
growing middle class (Malloch-Brown 2013), which means growing incomes and improved income
distribution that provides a ready market for some of the good produced within Africa, some of
which compete from imported products. Thus, regional markets provide some potential for
exporting value added goods (UNCTAD, 2009). Whilst this increase in intra-African trade does not
inform on the value added component of total exports, there are reasons to believe that trade in
value added goods contributed to the increase in overall output.1 This is supported by the increases
in value added as a percentage of gross domestic products for African countries as argued below.
Given the change in the nature of trade and the flow of trade with GVCs increasing in breadth and in
depth and the export in intermediate goods on the rise, Africa’s challenge is therefore to move away
from an economic growth path based on consumption and commodity exports onto a growth path
that is based on industrialisation. Such a move should be accompanied by debates on
industrialisation and investment policy, particularly focusing on investment for sustainable
development the (South Centre, 2012. This is particularly important in trying to balance between
the protection of investor interests and the retaining of regulatory policy space in the public interest,
putting growth and sustainable development at the core of new generation investment policies
(Ibid.).
Global Value Chains and African diversification of export base
The growing importance of GVCs has added new dimension to international trade, creating new
markets for intermediate products and thus increase in the exports of values added products.
Draper and Lawrence (2013:12) emphasise on the importance of GVCs in today’s world
economy and argue that they have to be taken on board by ‘any country’ embarking on
export driven economic growth and development. The duo also argue that ignoring the
importance of GVCs ‘will doom African countries to failed strategies.’ Yet the participation
of African countries in GVCs is not guaranteed and not easy to achieve as most GVCs are
provided by multinational corporations (MNCs), which have the corporate power to shape
the distribution of profits and risk (Gereffi & Joonkoo, 2012). It has also been argued in many
studies that the distribution of gains is skewed in favour of countries in the upper end of GVCs,
which provide much of the services in the GVCs. For instance on looking at the distribution of
value in the Apple iPhone and iPhone, Kraemer et al show that China besides playing a role
in supply chains and being the country of assembling gets a small share of the profits and its
benefits come in the form of wages paid for assembling the final product (see Figure 5).
This, they note is because Apple keeps most of its product designs, marketing, product
management and other function in the United States (Kraemer et al., 2011). This implies
that Chines companies are not involved in high value added production but are in the supply
chain by virtues of assembling the final products.
1
There is the problem of data necessary for the measuring of the benefits and importance of trade in value
added to African economies
Figure 5: Distribution of value for iPhone, 2010
Sales
Apple Profits
None-Apple U.S. profits
1.80% 3.50%
E.U. Profits
Taiwan Profits
Japan Profits
21.90%
S. Korean Profits
5.30%
58.50%
Unidentified Profits
Cost of Inputs: material
4.70%
0.50%
0.50%
1.10%
Cost of Inputs: China Labobour
2.40%
Cost of inputs: Non China
labour
Source: Kraemer et al (2011)
The Chinese example shows us the need to address a number of policy challenges. For
instance there can be changing patterns of production and specialisation in different
countries with some countries specialising in certain manufacturing products and tasks
which allow them to join in the value chains without adding significant value. In essence this
means joining supply chains without being concerned about the extent of value addition.
Considerable literature on GVCs show that developing countries are confined to the lower-end of
the value chains (Zhuawu 2013, Kean 2013). This lack of value added to raw materials exports has
limited Africa’s economic growth (Douglas, 2013). Likewise, Africa has not participated extensively in
GVCs, specialising mainly in exporting commodities (Draper and Lawrence 2013). For instance
UNCTAD estimates Africa has a GVC participation rate of 54% and a growth rate of GVC participation
of 4.8% (UNCTAD 2013). Moreover, because manufacturing requires a diverse range of inputs,
including intermediate products, African countries have been unable to meet the rules of origin as
required by the importing countries (Ibid.). On the other hand local manufacture has not been able
to integrate into existing MNC value chains as most countries have not been able to attract
manufacturing GVC foreign direct investment (FDI) with much FDI going into the extractive industry.
However, despite the commodity boom experienced by Africa’s mineral sector, it has not
been translated into greater returns on investment on the continent (Lopes, 2013). This has
in a way contributed to the heavy concentration in commodity exports, inability to move up the
value chain and retardation in diversification. Yet diversifying trade could help in the
industrialisation of Africa (Douglas, 2013). As a consequence, African countries have had a limited
ability to participate and tap into the ‘modern export sector’ (Kean 2013). Yet there is potential for
unlocking this confinement to the lower-end of GVCs by taking advantage of regional value chains.
Africa has already shown potential in value added production which mirrors the potential to create
regional chains and participate in such chains. Figure 6 shows the value added as a percentage of
gross domestic product for Sub-Saharan Africa (SSA).
Figure 6: Sub-Saharan Africa (all income levels), Industry, services and agriculture, value added, (% of GDP)-1970-2011
70
60
50
40
30
20
10
0
197019721974197619781980198219841986198819901992199419961998200020022004200620082010
Industry
Services
Agriculture
Source: World BankData
On average value added processing over the period has been 32% industry, 50% services and 18%
agriculture. In this context, domestic value represents the gross value created within a particular
country, minus the foreign value added component, i.e. the part of exports that contribute to GDP
(UNCTAD, 2013). Notwithstanding some interpretive caveats, the ratio of foreign value added to
domestic value added, is perhaps the most digestible indicator of the propensity of a country to
engage in GVCs (Elms and Low, 2013). Hence, an increase in foreign value added demonstrates a
higher propensity for African countries to diversify into value added processing as well as to
participate in value chains in Africa. Nevertheless the trend towards the increasing agglomeration of
value within Africa presents substantial opportunity for SSA to diversify in value added processing
and trade in value added good as well as participate in value chains both in Africa and global.
According to UNCTAD (2013) value added trade plays an important role in economic growth. It is in
this context that we can understand increased intra-Africa trade in value added can accelerate
regional integration.
But this requires building capacities to add value to the goods produced in Africa (ECA/AU, 2013). As
Lopes (2013:1) argues, regional value chains, ‘if properly exploited’ can help in building the capacity
needed for Africa to compete as countries move up the GVC and promoting intra-regional trade in
intermediates inputs and complete products.
Moreover as argued by Draper and Lawrence
(2013:16), measures that would enhance the participation of Africa in GVCs ‘would remove
barriers to regional trade’. African regional value chains provide new opportunities and risks for
developing countries but also reinforce the rationale for keeping markets open and highlight the
costs of having thick borders. As such, the diversification of manufactured goods through value
added processing will increase trading among African countries which can then support
industrialisation. Figure 7 shows diversification indices of merchandise exports for SSA, annual,
1995-2012. Despite the poor diversification performance, the index show potential for the
diversification of the export as shown by the fall in the index between 2008 and 2011, which indicates
that the structure of exports for SSA is diversifying as the index moves closer to zero. Such
diversification is a good sign in terms of expanding intra-regional trade as countries would be able to
trade on a number of different value-added products.
Figure 7: Diversification index (Exports)*
0.615
0.61
0.605
0.6
0.595
0.59
0.585
0.58
0.575
0.57
0.565
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Sub-Saharan Africa
Source: UNCTADStats
* ‘The diversification index signals whether the structure of exports or imports by product of a given country or group of
countries differ from the structure of product of the world. This index that ranges from 0 to 1 reveals the extent of the
differences between the structure of trade of the country or country group and the world average. The index value closer
to 1 indicates a bigger difference from the world average’ (UNCTADStats)
The fragmentation of production means that trade is now characterised by trade in tasks. It is
therefore important for African countries to focus on trade in tasks within the region and promote
intra-African investment and trade. African countries want to develop and diversify their exports,
both in terms of products and markets as well as capture the development contribution offered by
GVCs, which can have a direct impact on value added, jobs and income. GVCs can also offer an
important avenue for African countries to build their productive capacity, including through
technology dissemination and skills building – opening up opportunities for industrial upgrading. As
such, African countries have to identify potential regional chains in which they can effectively
participate, as well as better positioning within the chains. This can lead to the diversification of
these countries exports base. However, the challenge is to align the value added processing with
regional demands.
One way of overcoming the challenges is through learning from previous African experiences. There
are a number of successful examples of integration into regional MNC value chains as in the case of
Lesotho (box 1).
Box 1
Lesotho: Apparel industry
The apparel industry in Lesotho is integrated in the apparel GVCs through FDI and has developed into the
largest Sub-Saharan Africa apparel exporter to the US under the Growth and Opportunity Act (AGOA). But in
recent years the industry has started exporting within the region, particularly to South Africa, taking advantage
of duty free market access to South Africa as provided under the Southern African Customs Union (SACU) and
low production costs including labour cost in Lesotho. This has been possible because of South African
producers retailer-governed value chains. The chains have had an impact on the productive capacities and
private sector development in Lesotho with benefits to the economy in general.
•
Between 2006 and 2011 exports of apparel to South Africa increased (in terms of rand) from R17
million to R445 million and employment increased by 5.5% between 2008 and 2009 for South African firms.
•
To date the apparel sector contributes 18% of gross domestic product (GDP), about 70% of total
manufacturing, 60% exports, 50% of formally employed work force, and 80% of Lesotho’s manufacturing
workforce. The industry remains important for employment creation and poverty reduction in a country with
half of the population living below the poverty line.*
•
There has been export market diversification with most producers supplying the South African Market
not have previously exporting to the United States.
•
The South African manufacturers have given some plants in Lesotho more decisions-making powers.
As such they have relocated some of their broader production related function to Lesotho. Moreover South
African firms do not act globally and do not have substitute companies elsewhere, taking advantage of low
costs production environment in Lesotho.
•
South African firms identify the lack of finance, transport, logistics and customs related costs and
deficiencies in the support sector as challenges. However, South African firms besides taking the development
of local skills seriously, also import a number of skills because of local condition
Source: Staritz & Morris (2013)
There has been considerable investment within Africa particularly from South Africa. Aykut and
Goldstein (2006) estimate that more than half of South Africa’s FDI outflows have been to other
African countries. The continent is also building development corridors through public-private sector
partnerships. It is essential that SSA countries identify those value added export sectors that bring
considerable benefits to these countries as participation in regional value chains no matter how
small it maybe can bring some of the desired results or may bring marginal benefits as in the case
of Lesotho.
Boosting intra African trade through value chains
Notwithstanding recent positive trade and growth trends, it remains the case that African countries
continue to compete for the same markets in the developed countries. However, as argued above,
there are indications that merchandise exports within Africa, particularly for SSA have been
increasing whilst exports to high-income countries have are on the decline. Indeed Lopes (2013)
observes that trade within regional economic communities is growing faster than African exports to
the rest of Africa and to the rest of the world. For example the Economic Community of West
African States (ECOWAS) is reported to be the fastest growing region on the continent (Allafrica,
2013). But there is still need to do more if a CFTA is to be realised by 2017.
According to Draper and Lawrence (2013:15), countries that are developing GVCs ‘are
negotiating deeper regional trade agreements to meet their needs, by passing the WTO in
the process.’ This is not surprising as the fragmentation of production of a single final
product has brought in a new dynamic to international trade. Instead of exporting more
and thus producing more, firms and countries can export less and gain more (Banga, 2013).
Moreover there is the recognition that trade preferences can stimulate diversification into higher
value added export activities. African regional integration initiatives provide regional preferences
which, if used properly, could stimulate the diversification of African economies into higher value
added production on the continent and contribute too accelerating regional integration. Moreover
improving participation in GVCs will also remove barriers to regional integration. As such, regional
value chains if properly exploited can help Africa develop the capacity to compete as the continent
moves up global value chains whilst at the same time promoting cross border opportunities that
allow individual countries to contribute various inputs to the production of intermediate and final
products within Africa.
There is greater need for Africa to focus on value added processing of its raw materials and supply
the regional demand for intermediate inputs. Given that not all exports contain domestic produced
value added the share of value added trade accrued to the country can be different from its share of
global exports (UNCTAD 2013). There are factors that influence the share of domestic value added
in production for export which SSA countries face and need redress. This can be done through a
number of policy measures such as the development of clusters, the development of the necessary
skills to enhance the manufacturing sector to be able to have the capacity to supply the region.
Sector industries can be created around sources of raw materials through utilising natural resources
revenue (Allafrica, 2013). On the other hand, there is potential for agribusiness which offers great
prospects for value chain creation. For example the Ethiopian leather industry hold potential for
regional value chains to include neighbouring countries if properly developed (AfDB 2013). On the
other hand, Project Nature in East Africa has strengthened value chains in Kenya and Uganda for
improved smallholder production of mangoes and passion fruit, with the mango puree produced by
Sunny (Kenya) and Allfruit EPZ (Uganda) being sold in Kenya, Uganda, DRC, Zimbabwe, and South
Africa (New Agriculturalist, 2013).
In recognizing that the commodities boom minerals sector has not translated into greater returns
on investment, the exploitation of natural resource and new discoveries of oil and gas in many
countries should be in such a way that some form of processing takes place in the country
concerned. Botswana gives us an important example of value added processing of raw materials.
For a long time, Botswana exported rough diamonds, but today it is able to cut, polish and sell the
stones itself. As a result, Botswana is now able to supply the local market, the regional market and
the international market from Botswana. This has led to diamond related companies setting up
factories in Botswana which will lead to approximately US$6 billion worth of diamond trade as a new
diamond park has been built to accommodate spin-off business (Young 2013). The venture is also
attracting other companies that are not related to diamonds because of the impending business.
This is helping in the diversification of the economy which was once dependent on the export of
rough diamonds. There has also been increased business between Botswana and its neighbours
South Africa and Namibia. Moreover there is a possibility of increased diamond trade within the
regional as diamond producing countries such as Namibia, Zimbabwe, Angola and the Democratic
Republic of Congo might decide to have their diamonds cut and polished within the Southern Africa
Development Community (SADC) country. Such developments have the potential of creating
downstream value added processing activities in these countries. In instances in which there are
new discoveries, there should be agreements with investors to allow local value added processing.
For example Uganda has negotiated to have some form of value added local processing for its oil.
Such moves ensure that these countries move along the supply chain to higher levels of value added
and thus capture some value in the chain.
For the past decade, Africa has been on an unprecedented growth path which has contributed to
reduction in poverty. This growth path has raised per capita incomes and contributed to the
emergence of the middle class on the continent as shown as argued above. Africa can take
advantage of its growing middle class, which according to Stumo (2013) without which public
policies tend to be skewed to the top of the distributions. As such the growing middle class means
growing incomes and improved income distribution that provides a ready market for some of the
good produced within Africa, some of which compete from imported products.
Africa can also take advantage of informal cross-border trade (ICBT) by bringing ICBT within the
formal trading system as well as extending the benefits of regional integration to small traders.2
Such developments will contribute to the movement of value added products within Africa as ICBT is
dominated by agriculture and manufactured products. For instance in the case of COMESA, given
the small number of manufactured products traded by ICBT, traders have expressed interests in
having the common list of simplified trade regime extended to industrial products from outside the
region (Njiwa2013). This shows the existence of an inadequately supplied market for some
industrial goods within the COMESA region, which can be addressed through diversification.
The new economic of interdependence ensure that human agents operate within one system which
calls a shift in the production mindset. Africa needs a new lens through which potential investors
can be evaluated so as to avoid the risks of stranded assets.3 There is also the need to ensure that
the motivation behind the investment is clear. The need for more locally owned enterprises must be
exploited to try and enable responsibility, risk and reward to be more closely associated with the
true partnership. There is also need for increased intra-African investment particularly to take
advantage of GDP growth, an increase in the number of African with more disposable income and
more discretional income due to increased urbanisation and a growing middle class. Thus there is a
growing consumer market in Africa especially given that half the population of Africa is under the
age of 25, forming a new market that demand quality products and would shun second quality goods
which usually flood Africa (Sprackett, 2012). Not only should Africa be concerned by value chains
but also value cycles, which allow the renewal of resources, rather than their exploitation to
exhaustion. However, much of this depends on Africa reducing the high costs of doing business on
the continent. As argued by (Pence, 2012) that competition, difficulties in finding right deals and
closing transactions continue to pose as challenges for investors. More so there it is important for
Africa to ‘share technologies and collaborate’ in an attempt to ‘build strong regional industries that
bolster inter-African trade’ (Ichikowitz,2012).
Benefits can also be realised in the services sector as the advancement in information and
communication technology has had pronounced effect on the sourcing of services from abroad. For
instance services in the knowledge sector such as data entry and research and consultancy can be
2
The Common Market for Eastern and Southern Africa (COMESA) has already started simplifying trade
regimes to along ICBT to work within the formal trading system (Njiwa2013).
3
Assets whose value could be dramatically influenced by major externalities.
carried out over the internet and tele- and video conferencing (OECD, 2007a and 2007b). It is also
important to note that GVCs also bring about an extensive use of services with 46% of inputs to
exports coming from service-sector activities (UNCTAD, 2013). This is because manufacturing for
exports make use of services in their production. According to UNCTAD, more than 60% of global
FDI stock is in services activities, 26% in manufacturing and 7% in the primary sector (Ibid.). This has
also brought with it the issues of exporting jobs abroad which might be seen in negative terms in the
outsourcing country. However, it is expected that in the long run the effect on employment would
be in terms of the type of jobs available rather than the number (UNCTAD, 2013). Moreover the
number for jobs lost to offshore production may be large in absolute terms, but relatively small
compared with overall job creation and loss in the labour market (Ibid.). On the other hand OECD
(2012) argues that while there is concern for job loss, the jobs created in the export industry are a
result of foreign inputs. For example the creation of employment in Lesotho in the apparel export
sector between 1999 and 2004 was due to the importation of inputs into the apparel industry.
Thus because of the fragmentation of production and the changing character of trade, it is important
for African countries focus on trade in tasks within the region and promote intra-African. African
countries have to identify potential regional chains in which they can effectively participate, as well
as better positioning within the chains. This can be done by countries developing productive
capacities and their export sector. Not only does this enable them to participate in the value chains
at higher levels but also lower costs and become competitive allowing them to enter emerging
markets. It is also anticipated that this will improve the long term growth of productivity. This will
also help create jobs in other sectors of the economy which support the export sector. UNCTAD
(2013) identifies four distinct GVC paths that can be followed by developing countries, ‘engaging in
GVCs, ‘upgrading’ along GVCs, ‘leapfrogging’ in GVCs and ‘competing’ in GVCs (UNCTAD 2013). It
would be ideal for a country to try and have a combination of these approaches; however, these
paths bring with them a number of challenges in terms of policy implications which need to be dealt
with. Maybe the most reasonable approach would be build productive capacity for the export
sector, private sector development and diversification in the export sector to allow effective
participation in GVCs. This is important because it will not only allow participation in GVCs but
create positive results for the economy through generating more value added through producing
intermediates for export. Rugwabiza (2011) points out at the importance of ‘galvanising’ private
sectors in poorer countries along value chains and broadening the suppliers networks through
investing in capacity and competitiveness of producers, traders and institutions.
Conclusion and recommendations
The expansion of intra-regional and intra-Africa trade flows along value chains creates opportunities
for African firms to participate in regional value chains and prepare them for insertion into GVCs.
Most African countries are well placed to benefit from the growth of intra-regional and intra-African
trade largely because of geographical proximity and the relatively high growth rates being
experienced on the continent vis-à-vis the developed world. However, there are a number of
challenges that need addressing if African countries are to benefit from the value chain potential and
accelerate regional integration. A number of policy interventions can be considered to encourage
diversification in value added processing, strengthen the competitiveness of African firms vis-à-vis
imports from outside Africa particularly given the low flows of FDI in the manufacturing sector and
participation of African firms in GVCs. These include:



Investment in skills development, technical and vocational training to meet the demands for
skilled manpower critical for transforming raw materials into value added products.
Prioritising commodity based industrialisation with emphasis on capturing higher levels of
domestic value addition which can be exported through undertaking strategic planning for
identified sectors which fit into the boarder national development priorities of respective
countries and regional market opportunities. To this end, governments have to come with
the right mix of industrial and trade policies in the context of regional integration but also
geared at supporting local manufacturing.
Governments have to devise policy measures that enable access to capital, technology and
manpower. Policies that attract African in the diaspora might be a good starting point and
so would be the removal of visa requirements between African states.
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