Making the Most of Africa’s Commodities:

Industrializing for Growth, Jobs and Economic Transformation

Key messages

African countries are growing but have been unable to fulfil their industrial potential.

Massive industrialisation based on commodities is an imperative that is possible and beneficial.

Evidence of value addition and linkage development exists in Africa but the experience is mixed

Success requires firms to have a good understanding of the critical factors that influence linkage development.

Effective industrial policies and development plans are critical for Africa to address constraints and industrialize

Trade agreements and intra-Africa trade and regional integration must be used to foster Africa’s industrialization.

Economic growth strengthened as political tensions eased across the continent………

However, export diversification remains weak in most African countries…………

And the commodity price boom has increased commodity-dependence in Africa

High revenue lost from not adding value - Value-added content of selected developing countries’ cocoa exports, 2011…

Value added content of selected developing countries timber export, 2011

Commodity-based industrialization and moving up the value chain has dynamic benefits

• Employment effect

• Income effect

• Price benefits and price stability

• Diversification of local technological and industrial capabilities

• Lateral migration into other sectors

• Efficiency gains of cluster development and positive spill-over effects in terms of knowledge and information

Benefits of moving up the coffee value chain - Example

What influences linkage development?

P

O

L

I

C

Y

• Structural factors – these are difficult to

influence through government

intervention

• Country Specific factors – this is where a

government has leverage

For example:

Ownership, Infrastructure,

Skills and capabilities,

Linkage strategies etc

Asian/Latin America experiences Salient features of successful linkage development:

• Ambitious policies for the resource sector

• Domestic markets to move up the value chain

• Marketing links

• Domestic firm capabilities / partnerships

• Industrial policies, export restrictions, fiscal incentives

Making the most of linkages in soft (food) and industrial commodities – Constraints

and opportunities

Survey Findings from 9 country case studies

Analytical framework

Depth and breadth of

local linkages

Technical features of the

value chain

Industry structure

Lead firms strategies CSFs

Location and infrastructure

Industrial policy

Trade restrictions,

standards, other constraints

VALUE-ADDED CONTENT OF COCOA EXPORTS, GHANA, NIGERIA AND CAMEROON 2011 ($ THOUSAND)

Cocoa in three countries - different trajectories

Coffee, Tea and Agro-processed value chains – a summary comparison…..

Factors affecting linkage development – Egypt’s textile industry

Value added content of Ethiopia’s leather/hide export

Linkage development in the mineral sector – three country comparison…….

A regional hub – linkages from South Africa’s mining sector to the rest of the economy

Variation of factors affecting linkage development by sector and country – summary conclusions of a nine country case study

Critical success factors vary by sector and value chains – a summary….

Factors driving linkage development

• Focus on country-specific factors to foster linkage development.

• Nationality of lead firms and end markets matters

• Build Firm Capabilities – management & worker

• Supplier development programmes are key

• Infrastructure – hard and soft - crucial

• Government capabilities – skill & institutions

• Attack the misalignments

• Appropriate, evidence-based, prioritized, monitored, incentivised policies

Making the most of Africa’s commodities – a nine point policy framework

• Adopt a coherent policy framework • Create institutional industrial policy mechanism • Develop local content policy • Raise lead firm procurement, sourcing and processing • Run supply-chain development programmes among major

commodity firms • Boost local skills and technologies • Negotiate regional trade agreements and foster intra-African

trade • Address infrastructure bottlenecks • Coordinate ministries to improve implementation

Thank you

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SESSION 3