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Global Value Chains and Africa's Industrialisation

Feb 25 '16 | By La Afrique Media | Views: 68 | Comments: 0

This thematic edition of the African Economic Outlook 2014 (AEO) looks at how Africa can make the most of global value chains to implement its industrialisation agenda, while at the same time avoiding getting stuck at the lowest end of value chains. The choice of this theme largely stems from the findings of the last three AEO thematic chapters: Africa's emerging partners (2011), promoting youth employment (2012), and structural transformation and natural resources (2013). Each of them points to a specific challenge:

The competitiveness challenge. The phenomenon of shifting wealth - the centre of the global economy moving East and South - has played a key role in Africa's recent growth episode: Brazil, China, India, Turkey and many other countries have emerged as significant investors in the continent and as dynamic markets for African export products. Yet their rise has also led to much stiffer competition in the global market.

The employment challenge. Every year 13 million young Africans join the labour market. Africa's total labour force is projected to reach 1billion by 2040 making it the largest in the world, surpassing both China and India. Education and skill levels are improving, but the majority of Africa's workforce remains low-skilled. In many countries informal work continues to account for more than half of total employment. The challenge is particularly acute for young people, who often are poor despite being employed or because they remain outside the labour market altogether. In several countries, wage employment - the best job category - accounts for less than 15% of youth in the labour market. To turn the youth bulge into an opportunity, African countries must create 100million jobs every ten years, including for young people with few skills.

The structural transformation challenge. Structural transformation entails the rise of new, more productive activities and the movement of human and financial resources from less productive activities to these newer ones, raising overall productivity. The growth of Africa's economies over the last decade has been impressive and has been driven by more than just natural resources, which accounted for one third of Africa's growth. Structural transformation has taken place: Africa's labour productivity increased by close to 3% during the 2000s, with almost half this attributable to workers moving to new activities with higher productivity. However, this transformation has not been enough to make a sufficient dent in employment or poverty. Africa thus needs to accelerate its structural transformation towards a type of growth that produces more jobs.

In order to put in place the policies that will stimulate the development of competitive firms in job-creating activities, policymakers need i) to be aware of what the new rules of the game in international trade mean for African economies, ii) to assess those economies' strengths and weaknesses in that context and iii) to consider the policy options best suited to their country's endowments and their own national strategy. This AEO2014 thematic volume, complete with individual case studies for all 54 African economies, aims to help them in that endeavour.

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