African manufacturers need to strengthen infrastructure, finance, others to capture greater value in the global economy

Despite its rich endowment of natural resources and industrial potential, Africa’s integration into Global Value Chains (GVCs) has been shallow and skewed towards low value-addition. Africa’s involvement in GVCs remains constrained by structural limitations, particularly low value addition and persistent reliance on raw material exports. PAMA proffered that strengthening infrastructure, improving access to finance, investing in skills development, and deepening regional integration are key steps toward enhancing Africa’s manufacturing performance and enabling the continent to capture greater value in the global economy, writes Editor Gentechnews, Tony Nwakaegho.

Africa has a rich endowment of natural resources and industrial potential, but its integration into Global Value Chains (GVCs) has been shallow and skewed towards low value-addition and also remains constrained by structural limitations, particularly low value addition and persistent reliance on raw material exports.

According to PAMA May News Bulletin, a striking illustration is the Democratic Republic of Congo, which supplies nearly half of the world’s cobalt used in batteries, yet cannot process it into higher value products before export.

“It has become a usual trend that Africa exports primary commodities like cocoa, cobalt, crude oil, and gold, while importing higher-priced finished goods such as chocolate, batteries, refined petroleum and jewelry. This dependence on raw commodity exports has curtailed Africa’s progress in climbing the global manufacturing value chain.

“Since the 1990s, GVCs have reshaped international trade, now accounting for nearly 70% of all global trade. Africa’s participation in this structure remains disproportionately low, especially manufacturing related output, where it accounts for less than 3% of global GVC activity,” it stated.

It noted that countries that embrace GVCs grow faster, for instance China’s share in the global value chain has been substantial and this is aptly reflected in its level of manufacturing value addition, which jumped from about 7% in 2000 to nearly 30% in 2022.

It highlighted that Japan plays a high-value, upstream role in GVCs—supplying advanced components, materials, and machinery for manufacturing sectors across Asia and beyond, adding that Japan’s success factors include a solid manufacturing base, technology, regional network and specialized technical skills.

Africa’s participation in Global Value Chains is said to be strikingly marginal, even though GVCs have driven over half of world trade in the past decade.

According to the World Bank’s 2023 GVC Development Report, Sub-Saharan Africa’s participation in GVCs is less than 3%.

It explained that more disconcerting is the nature of this participation, dominated by upstream low-value market activities such as raw material extraction and primary commodity exports as Africa exports more intermediate goods as a share of their manufactured exports than it imports for its industrial manufacturing activities.

Data from the Industrial Analytics Platform, as cited by UNIDO, suggests that in 2000, intermediate goods constituted 53.6% of Africa’s manufacturing imports, but by 2021, this share had declined to 46.7%, marking a 6.9 percentage point drop.

UNIDO noted that this decline suggests a reduction in Africa’s backwards integration into global value chains (GVCs), noting that it means that Africa is importing fewer inputs used in the production of finished goods.

“While this statement at first gives the impression that Africa over the period relies more on domestic supply sources, the quantity of locally available inputs or intermediate goods is limited to cater for overall industrial needs on the continent. Hence, it is a case of shrinking manufacturing activities.

“This is evident in the case of pure forward GVCs participation for the continent. For example, Africa’s share of intermediate goods in manufacturing exports rose dramatically from 41.5% in 2000 to 71.9% in 2021, representing a 30.4 percentage point increase.

“The sharp rise indicates a stronger forward integration into GVCs, with the continent, rather than deepening finished products exports, increasingly exporting semi-processed or component goods that feed into global manufacturing processes elsewhere.

“While this reflects growing engagement in international trade in general, it also underscores Africa’s continuing role as a supplier of upstream inputs rather than a hub for downstream, high-value added production.

“Africa acts primarily as a supplier of raw materials or semi-processed inputs. Africa is more of a contributor to other regions’ value chains development than a beneficiary of full manufacturing cycles,” the statement emphasized.

However, based on the African Export-Import Bank 2023 report, over 80% of Africa’s exports to the EU and China in 2022 were unprocessed commodities (African Export-Import Bank, 2023). UNECA (2024) also noted that only 17% of goods exported within Africa are manufactured, versus 68% in intra-EU trade.

“The implication is clear: Africa is locked in the low-value segments of GVCs, forfeiting significant opportunities for value addition, employment creation, and industrial upgrading,” it revealed.

PAMA News Bulletin proffered that strengthening of infrastructure, improving access to finance, investing in skills development, and deepening regional integration as key steps toward enhancing Africa’s manufacturing performance and enabling the continent to capture greater value in the global economy.