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Potential and Evidence

Feb 25 '16 | By La Afrique Media | Views: 53 | Comments: 0

Globalisation has changed the way goods and services are produced. The country-centric view of trade no longer reflects reality. Instead production networks, even for just a single product, span many countries, often the entire globe. We call these networks global value chains (GVCs) (see Box 6.1). They are driven by firms which use the advances in communication and regulation to optimise their sourcing strategies through geographic re-organisation and the separation of production stages. Global value chains offer new opportunities for structural transformation in Africa. Countries can integrate into global value chains at a specific stage, usually assembly in manufacturing and commodity production in agriculture. Ideally this leads to opportunities to upgrade through knowledge transfers, product differentiation and the addition of adjacent stages of the value chain. Measures of trade in value added - as opposed to traditional gross measures of trade - can provide insights into integration into global value chains and the benefits this entails. Africa so far captures only a small share of global trade in value added terms, but its total level of GVC integration is high compared to other regions. However, a good part of it is forward integration of Africa's commodity exports as inputs in foreign manufacturing, which creates relatively little additional value added in Africa. In terms of gains from global value chains, export and productivity growth has been easier to achieve than employment growth. Success depends on a country's ability to respond to external demand, as well as on the nature of the value chain and the lead firm.

Figure 6.14 Integration of African regions into global value chains, 2011Figure 6.14 Integration of African regions into global value chains, 2011

Note: Backward integration is measured by the share of foreign value added embedded in a country’s exports. Forward integration is measured by the share of a country’s exported value added that is further exported by the importing country.

Source: Authors’ calculations based on UNCTAD-EORA GVC database (2014).

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