In Depth takes a close look at one sector critical for development in Africa. Every year the African Development Bank, the OECD Development Centre and the United Nations Development Programme choose a new sector to study, taking into account the strategic challenges and opportunities Africa will have in the future. This year’s Outlook has a special theme: Global Value Chains and Africa’s Industrialisation.
Global value chains (GVCs) are driven by firms that optimise their sourcing strategies through the separation of production stages. GVC integration could accelerate structural transformation in Africa if combined with upgrading. Trade in value added serves to measure global value chains. Africa so far captures a small but growing share of them. Productivity gains from value chains have been easier to achieve than employment growth.
Integrating into global value chains and upgrading within them depends on country-specific and value chain-specific factors. Taking this into account, this chapter examines value chains in agriculture, manufacturing and services in Africa. Lead firms play an important role in increasing domestic capacity to participate in global value chains, while regional and emerging markets may be more accessible for African producers and create opportunities for more value added.
Global value chains magnify the need for a good business environment, for openness to trade and investments, and for skilled workers and capable firms and entrepreneurs. Policies for global value chains must maximise economy-wide opportunities while creating the optimal environment for the sectors with the greatest potential.