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Regional Integration and High Potential Value Chains in West Africa

Inclusive Economic TransformationDecember 2016 |

Judith Fessehaie

Issue Paper

l Inclusive Economic Transformation

Regional Integration and High Potential Value Chains in West Africa

Issue Paper

December 2016

Judith FessehaieCentre for Competition, Regulation and Economic Development (CCRED)University of Johannesburg

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Published by International Centre for Trade and Sustainable Development (ICTSD)International Environment House 27 Chemin de Balexert, 1219 Geneva, Switzerland

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Publisher and Chief Executive: Ricardo Meléndez-OrtizManaging Director: Deborah VorhiesProgramme Officers: Nicholas Frank, Kiranne Guddoy, and Simon Pelletier

Acknowledgements

This paper was produced under ICTSD’s Programme on Inclusive Economic Transformation as part of a project focused on global value chains which is aimed at empowering LDCs and low income countries to effectively utilise value chains to achieve sustainable and inclusive economic transformation.

ICTSD is grateful for the generous support from its core and thematic donors including the UK Department for International Development (DFID); the Swedish International Development Cooperation Agency (SIDA); the Ministry of Foreign Affairs of Denmark (Danida); the Netherlands Directorate-General of Development Cooperation (DGIS); the Ministry for Foreign Affairs of Finland; the Ministry of Foreign Affairs of Norway; and the Australian Department of Foreign Affairs and Trade.

ICTSD welcomes feedback on this publication. This can be sent to Kiranne Guddoy ([email protected]) or Fabrice Lehmann, ICTSD Executive Editor ([email protected]).

Citation: Fessehaie, Judith. 2016. Regional Integration and High Potential Value Chains in West Africa. Geneva: International Centre for Trade and Sustainable Development (ICTSD).

Copyright © ICTSD, 2016. Readers are encouraged to quote this material for educational and non-profit purposes, provided the source is acknowledged. This work is licensed under the Creative Commons Attribution-NonCommercial 4.0 International License. To view a copy of this license, visit: https://creativecommons.org/licenses/by-nc/4.0/ or send a letter to: Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.

The views expressed in this publication are those of the author and do not necessarily reflect the views of ICTSD or the funding institutions.

ISSN 1995-6932

iiiInclusive Economic Transformation

TABLE OF CONTENTS

LIST OF TABLES, FIGURES AND BOXES ivLIST OF ABBREVIATIONS vEXECUTIVE SUMMARY vi1. INTRODUCTION 12. SCALE AND STRUCTURE OF TRADE IN WEST AFRICA 3

2.1 Trade Analysis Methodology 3

2.2 Hard and Energy Commodities, Including Precious Metals 4

2.3 Soft Commodities 6

2.4 Value Added Production 9

2.5 Services Exports 17

3. IDENTIFICATION OF VALUE CHAINS 203.1 Prioritisation Criteria 20

3.2 Assessment of High-Potential Value Chains 22

4. SECTORAL ANALYSIS OF SELECTED VALUE CHAINS 244.1 Agro-food GVCs 24

4.2 ICT Services 36

4.3 Extractive Industries: Linkages and Development Opportunities 37

5. CONCLUSIONS 40REFERENCES 43

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LIST OF TABLES, FIGURES AND BOXESTable 1: West African energy and hard commodities exports (by type, value, and country)

Table 2: West African gold exports (by value and country)

Table 3: West African soft commodities exports: food commodities (by type, value, and country)

Table 4: West African soft commodities exports: industrial commodities (by type, value, and country)

Table 5: West African value added agro-food exports (by type, value, and country)

Table 6: West African additional value added agro-food exports (by type, value, and country)

Table 7: West African manufactured products (by type, value, and country)

Table 8: Global services exports in 2005 and 2015 with Compound Annual Growth Rate (US$ million) (by sub-sectors and regions)

Table 9: West African services exportsin 2013 with Compound Annual Growth Rates from 2005 (US$ million) , by type and country

Table 10: SDGs categories considered for identifying value chains with high potential for West Africa (with indicators)

Table 11: Analysis of GVCs with high potential for West Africa (using five key criteria)

Table 12: Top seven global chocolate manufacturers, by net sales value (2015)

Table 13: West African cashew nut producers, ranked by importance to their domestic economies (2010)

Table 14: Major global cashew nut markets (% of kernel imports), by value (2004) and CAGR (to 2013)

Table 15: West African urbanisation (2015) and food and beverage consumption (2010), by country

Table 16: Potential further research questions for priority VCs for West Africa

Figure 1: Top 10 regional agro-food exports in West Africa (% total agro-food exports) (2013)

Figure 2: Export markets for selected agro-food products (2013)

Figure 3: Global cocoa/chocolate value chain

Figure 4: Top ten global fastest growing consumer markets (2007–12) and top consumer markets (2012)

Box 1: Apparel and textiles global value chains

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LIST OF ABBREVIATIONSB2B business to business

B2C business to consumers

BPO business process outsourcing

CAGR compound annual growth rate

COCOBOD Ghana Cocoa Board

EU European Union

FDI foreign direct investment

GDP gross domestic product

GVC global value chain

HS Harmonized Commodity Description and Coding System

ICCO International Cocoa Organization

ICT information and communications technology

IDH Initiatief Duurzame Handel, or Sustainable Trade Initiative

IT information technology

LBC Licensed Buying Company

LDC least developed country

LIC low income country

MCS monitoring control and surveillance

MNC multinational corporation

NGO non-governmental organisation

OTT over-the-top

R&D research and development

SDG Sustainable Development Goal

SME small- and medium-sized enterprise

TNC transnational corporation

UNCTAD United National Conference on Trade and Development

VC value chain

WCO World Customs Organization

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EXECUTIVE SUMMARYThe global dispersion and fragmentation of production processes has important implications for the industrialisation strategies of developing countries. The specific characteristics of different global value chains (GVCs) will shape the opportunities for firms in developing countries to participate in international trade and to upgrade into more remunerative and sustainable economic activities.

This study aims to provide an understanding of West Africa’s potential for participation in GVCs. West Africa’s trade profile is characterised by high levels of export concentration in unprocessed commodities. Upgrading strategies require identifying value chains in which West Africa has existing capabilities and that also offer (i) dynamic markets, (ii) potential to support Sustainable Development Goals (SDGs) and the most vulnerable countries in the region, and (iii) concrete upgrading opportunities in the short to medium term. Taking this approach, our research identifies the value chains with the highest potential as fish products, processed foods, and information and communications technology (ICT) services. These value chains can all create significant employment opportunities at different skill levels and some of them may have strong backward and forward linkages to either the agriculture and fishery sectors or modern regional retail chains.

In addition, the paper makes five recommendations which should inform policymaking and industrial strategies for the region.

1) Quality should be an important component of West Africa’s upgrading strategy

Upgrading in primary commodities can take many forms. Process upgrading aimed at quality improvements and certification can support West Africa’s efforts to accrue more rents in GVCs. This is true for cashew nuts, cocoa beans, and cotton lint. In cotton, West Africa already enjoys a good reputation, but more could be done to penetrate the fast-growing market for certified organic cotton. In the cashew nuts and cocoa beans value chains, some countries have secured a quality-related price premium. Policies aimed at improving quality such quality control boards and agricultural extension programmes can play an important role in countries currently producing at the lower end of the quality scale.

2) Functional upgrading requires well-designed and effectively implemented policies across various spheres of government

Moving up GVCs will require West African governments to effectively design and implement policies that cut across a number of sectors: (i) agricultural development to secure quality, cheap, and reliable supplies to downstream industries; (ii) industrial development to attract investment and build technological capabilities; (iii) infrastructure to provide firms with adequate facilities and utilities; (iv) education to develop the skills required for more sophisticated activities; (v) labour laws to ensure firms comply with occupational health and safety standards and offer decent work conditions. Upgrading strategies will also require adequate human and financial resources and political leadership to ensure their effective implementation.

3) Upgrading requires good understanding of lead firms and their governance strategies

For each priority GVC, this paper identifies very different forms of governance in their lead firms which all have differential impacts on upgrading opportunities. For example, cocoa grinders are relocating intermediate manufacturing in producing countries while supermarket retail chains are not promoting locating cashew nuts or fish processing in producing countries. Lead firms may need incentives to relocate processing activities in producing countries, hence governments can either use a “carrot and stick” approach themselves to secure the support of lead firms to their upgrading

viiInclusive Economic Transformation

strategy. In some sectors, different lead firms within the same GVC have different strategies with regard to supplier upgrading. Governments could consider diversifying end markets/buyers to find lead firms whose governance is supportive of national upgrading strategies.

4) Regional value chains offer important upgrading opportunities

Intra-regional trade is characterised by lower export values than global exports, but higher value added. Whilst regional markets may not provide the scale offered by global markets, entry barriers are lower, and smaller regional producers can experiment and build capabilities in product design, manufacturing, brand management, and organising distribution networks.

5) The positive impact of GVCs on SDGs should be maximised through policymaking

Participation and upgrading in GVCs by itself can support some progress towards the SDGs. However, if significant impacts on poverty reduction, gender equity, and environmental sustainability, to name a few, are to be achieved, governments need to shape the dynamics within specific GVCs. This can be done through, among others, enforcing labour and environmental regulations; improving specific parts of the education system; and improving women’s access to sectors such as services, skills, finance, and markets. Governments should also play a key role in bringing together stakeholders from lead firms to government agencies, from trade unions to non-governmental organisations (NGOs), in order to create partnerships to address key constraints to economic and social upgrading.

1Inclusive Economic Transformation

1. INTRODUCTIONThe global dispersion and fragmentation of production processes which characterise most industries has important implications for the industrialisation strategies of developing countries. Through global value chains (GVCs), firms organise their activities across the globe in order to maximise efficiency and profits. GVCs encompass the full range of activities that are required to bring a product or service from conception through the different phases of production (involving a combination of physical transformation and the input of various producer services) and delivery to consumers, and also final disposal after use (Kaplinsky and Morris 2001). Lead firms in GVCs, usually multinational corporations (MNCs), take key decisions on where segments of the value chains will be located, and which firms will participate in these. This power and prerogative, known as value chain “governance,” extends to setting market and non-market parameters that participating firms will have to comply with, and potential sanctions imposed or assistance provided where firms fail to do so.

The opportunities for developing countries to participate and upgrade in GVCs are shaped by market dynamics (e.g. price, consumer preferences), the specific features of the industry (for example whether the value chain is composed of several tradeable intermediate products or not), as well as the governance strategies by lead firms. The latter can take different forms: in producer-driven value chains, manufacturers control the organisation of the value chain, backwards, with large networks of components suppliers, and forward, into distribution and retail. These value chains are found in capital- and technology-intensive industries, such as automobiles and computers. Buyer-driven value chains, typical of labour-intensive consumer goods industries, are dominated by retailers and trading companies, which coordinate vast, decentralised production and trade networks, largely based in low-

cost developing countries. Other GVCs do not neatly fall into either of these two categories, and present particular and different types of governance. In general, however, lead firms tend to focus on immaterial activities that accrue the highest rents and are characterised by high entry barriers such as research and development (R&D), product development, and marketing.

For policymakers it is important to take these issues into account when designing upgrading strategies. Strategies need to be informed by knowledge over which lead firms set the rules, how they govern the GVC, and how can they can be involved in implementing the strategy. Moreover, strategies need to set clear goals in terms of which type of upgrading is being pursued: improvements in the production process, for example through reorganisation of the production systems or through new technologies (process upgrading); moving into higher, more sophisticated product lines (product upgrading); moving into higher skill content functions (functional upgrading), and/or moving into new production activities (inter-sectoral or chain upgrading) (Humphrey and Schmitz 2002). Moreover, issues around social upgrading linked to workers’ remuneration and working conditions are becoming increasingly important to ensure the sustainability of an industry.

This study aims to provide an understanding of West Africa’s potential for participation in GVCs. Specifically, it aims to:

1) Provide an understanding of the extent of regional trade of goods and services in the West African region;

2) Set out the various export sectors operative in various West African countries, paying particular attention to least developed and low income countries;

3) Identify currently dominant value chains in the region, and analyse their value added content and potential for upgrading;

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4) Identify a few suitable GVCs for further case studies, with particular attention paid to food-/agri-business, information and communications technology (ICT), and apparel/textiles sectors, and to the attainment of sustainable development goals; and

5) Provide any policy insights with regard to furthering local value capture.

The paper is organised as follows: Section 2 discusses the scale and structure of current exports from West Africa; Section 3 sets out the criteria adopted for identifying high-potential GVCs and presents the results of the assessment; Section 4 discusses initial findings and some insights into seven high-potential GVCs; Section 5 concludes with policy recommendations.


2. SCALE AND STRUCTURE OF TRADE IN WEST AFRICA

2.1 Trade Analysis Methodology

In order to identify high-potential value chains, research for this study mapped current production and export capabilities across West Africa. Given the paucity of industrial output data, the mapping exercise has drawn on trade data, accessible for most West African countries from the UN Comtrade database. Drawing on trade data has a number of advantages: first, it allows for a significant level of disaggregation. While the overall analysis was undertaken at the 4-digit level of the Harmonized Commodity Description and Coding System (HS) code, it was possible to deepen the analysis further where required.1 Secondly, positive export trends reflect the underlying competitiveness of domestic producers, and some degree of participation in global value chains. Given that export subsidies are uncommon in African countries, exporting firms have to be competitive vis-à-vis producers in other countries. Whilst West African exporting firms are often relegated to the lower value added segment of GVCs, their participation implies that they have some resource endowment that could potentially be leveraged for various upgrading strategies. This is an important criterion for prioritising value chains where upgrading can take place in the medium term. Finally, trade data is widely available for most countries, and indeed it was possible to cover 14 countries across the region.2

The analysis of trade data had to be selective. We focused on the top 30 export products (HS 4-digit level) for each country, using the latest available data (details are given below). For the largest economies such as Nigeria, the analysis was expanded to the top 40 export products.

Some products were, however, excluded from our analysis: first, we excluded re-exports, which mainly consisted of machinery, equipment and boats, and—given their high unit value—often figured among the top exports. We also excluded scrap metals and various types of waste, such as cocoa waste. Commodities with little value addition potential and not common across the region were also not included, namely rice and salt. Finally, very low export values in the ‘not elsewhere specified’ categories were also not included.

Once this analysis was completed, we identified the products exported by a cross section of countries. Hence whilst individual countries may be significant exporters of specific goods, if these are not found in other countries’ export baskets, they were excluded when identifying the top regional exports. This exercise identified three main categories of exports: (i) hard and energy commodities, including precious metals; (ii) soft commodities; and (iii) value added products. The latter are further sub-divided into agro-food products and other manufactured products. Each product category is characterised by different production organisation, value added content, end markets, lead firms, value chain governance, and upgrading opportunities. There are important variations in these respects not only between the three product categories, but within each of them; these are elucidated in Section 4.

In this section, we also discuss trade in services. Services data is notoriously difficult to collect (UNCTAD 2015b). The immaterial nature of services, especially the ones that do not require embodiment in goods, transport, or face-to-face interaction, makes it difficult to measure them and

1 HS is the standard coding structure used in international trade, listing products at the 2-, 4-, and 6- digit level. The 2-digit level is the most aggregate level; the 6-digit level is most detailed one. The HS was developed and is maintained by the World Customs Organization (WCO), an independent intergovernmental organization. Our analysis relied on direct export data, as this was available for most countries and is more reliable than industrial production data.

2 Countries in the region for which UN Comtrade data was available: Benin, Burkina Faso, Cabo Verde, Côte d’Ivoire, Gambia, Ghana, Guinea, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone, Togo. Countries where no data was available: Guinea-Bissau, Liberia, Saint Helena, São Tomé and Príncipe.

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track them once they cross the border. Moreover, for some service sub-sectors, stakeholders are still developing shared frameworks for collecting data. This is the case with ICT and ICT-enabled services. Moreover, many countries in the region do not yet collect and share such data. Hence, any analysis of services exports needs to be read with caution, and used only to identify key general trends.

2.2 Hard and Energy Commodities, Including Precious Metals

West Africa is a major producer of hard and energy commodities. Table 1 shows the main producing countries of a number of these commodities. Oil and gas production are concentrated in Nigeria (US$75 billion and US$12 billion worth of exports in 2014 respectively). Significantly lower oil production takes place in Ghana, Côte d’Ivoire, and other countries. In terms of hard commodities, mineral commodities are spread

across most countries in the region. There are large exports of iron (Mauritania), aluminium (Guinea), uranium (Niger), tin (Sierra Leone), copper (Mauritania), and manganese (Ghana). Smaller values of hard commodities exports can be found throughout the region. Most ferrous and non-ferrous metal commodities are exported in unprocessed form (ores and concentrates). Only in Nigeria, Ghana, and Burkina Faso we find exports in refined form (copper, aluminium, zinc, lead, and tin), mostly directed to global markets. Indeed, as discussed in sub-section 2.4.2, these countries also have export capabilities for fabricated metal products.

Export data shows also some export capabilities in industrial minerals (cement, gypsum, lime). With the exceptions of Senegal (US$190 million) and Togo (US$50 million), such exports tend to be relatively small in value. Cement and lime trade is intra-regional, whilst calcium is exported to global markets.

Commodity type Country (year) US$ millionEnergy commoditiesH3-2709 Petroleum oils and oils obtained from bituminous minerals, crude.

Nigeria (2014) 5,033.4

Ghana (2014) 3,015.4

Côte d’Ivoire (2014) 652.1

H3-2710 Petroleum oils and oils obtained from bituminous minerals, other than crude etc.

Nigeria (2014) 6,257.1

Côte d’Ivoire (2014) 1,738.8

Senegal (2014) 446.2

Burkina Faso (2014) 275.3

Niger (2014) 271.8

Ghana (2014) 101.6

Benin (2014) 100.2

Cabo Verde (2015) 79.4

Mauritania (2014) 59.3

H3-2713 Petroleum coke, petroleum bitumen and other residues of petroleum oils.


H3-2711 Petroleum gases and other gaseous hydrocarbons.

Nigeria (2014) 12,178.8

Hard commoditiesH3-2601 Iron ores and concentrates, including roasted iron pyrites.


Mali (2012) 13.9

Table 1: West African energy and hard commodities exports (by type, value, and country)


Commodity type Country (year) US$ millionSierra Leone (2014) 0.1

H4-2602 Manganese ores and concentrates.

Ghana (2014) 134.6

H3-2603 Copper ores and concentrates.


H3-7403 Refined copper and copper alloys, unwrought.

Nigeria (2014) 49.7

H4-2606 Aluminium ores and concentrates.

Guinea (2015) 576.3

Ghana (2014) 36.6

H4-7601 Unwrought aluminium.

Nigeria (2014) 98.1

Ghana (2014) 53.7

H3-2607 Lead ores and concentrates.


H3-7801 Unwrought lead.

Nigeria (2014) 71.2

H3-2608 Zinc ores and concentrates.

Sierra Leone (2014) 0.6

H3-7901 Unwrought zinc.


H3-2609 Tin ores and concentrates.


H3-8001 Unwrought tin.

Nigeria (2014) 32.9

H3-2612 Uranium or thorium ores and concentrates.

Niger (2014) 478.2

H3-2615 Niobium, tantalum, vanadium or zirconium ores and concentrates.


H3-2511 Natural barium sulphate (barytes).


H3-2520 Gypsum; anhydrite; plasters


H4-2522 Quicklime, slaked and hydraulic lime

Ghana (2014) 26.5

H4-2510 Natural calcium phosphates, natural aluminium calcium phosphates and phosphatic chalk.

Togo (2015) 100.2

Senegal (2014) 36.3

Table 1: Continued

Gold production is significant in Ghana, Mali, and Burkina Faso, with US$5.4 billion, US$1.7 billion, and US$1.5 billion worth of exports respectively (Table 2). Smaller production

is found in Côte d’Ivoire, Guinea, Senegal, and Mauritania (between US$320 million and US$700 million worth of exports).

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Hard and oil commodities as shown in Table 1 are supplied to global markets, and are largely controlled by MNCs from the North and from emerging economies (China, India, Brazil). These lead firms, which control large flows of foreign direct investment (FDI) and trade in basic commodities, take major decisions in terms of financing, location and nature of investment projects (exploration activities, greenfield or brownfield development projects), commodity mix, and global supply chains and logistics operations.

Given the structure of these value chains and the nature of resource extraction, these MNCs also control the largest share of oil, gas, and mineral rents. The role of the state is crucial in determining to what extent the resource-rich country will share in these rents, and whether

the rents are allocated to public investment that supports the country’s industrialisation agenda. The extractive industry accrued significant rents during the commodity price boom in the 2000s, and recovered quickly from the 2008 global economic downturn.3 However, the recent decline in market prices, especially for oil, is leading to some restructuring, including suspension of projected greenfield and brownfield projects.

2.3 Soft Commodities

Soft commodities represent a large share of the export baskets of most West African countries. These commodities can be broadly categorised into food (Table 3) and non-food commodities (Table 4). West Africa’s top agro-food products are cocoa, oil seeds, edible fruit and nuts, and fish (Figure 1).

Country (year) US$ million Country US$ millionGhana (2014) 5,364.6 Senegal (2014) 345.6

Mali (2012) 1,709.3 Mauritania (2014) 322.2

Burkina Faso (2014) 1,462.9 Togo (2015) 26.5

Côte d’Ivoire (2014) 702.9 Benin (2014) 21.6

Guinea (2015) 631.5

Table 2: West African gold exports (by value and country)

3 Since the commodity price boom in the first half of 2000s, lead firms have become increasingly concentrated, through large scale mergers and acquisitions of smaller companies. As a result, the industry has seen new entrants mainly in the exploration segment of the GVC, with many junior companies willing to invest in this high risk, relatively low capital-intensive business.

Figure 1: Top 10 regional agro-food exports in West Africa (% total agro-food exports) (2013)

Source: Comtrade database, retrieved in July 2016 from http://comtrade.un.org/

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Cocoa Oil

seeds

Edible fruit

and nuts

Fish and

crustaceans

Animal/

vegetable

fats and

oils

Tobacco Cereals Dairy

produce

Coffee/

tea/

spices


2.3.1 Food commodities

In terms of food commodities, the largest export commodity from West Africa is cocoa beans. Côte d’Ivoire is the largest exporter (US$3 billion), followed by Ghana (US$1.4 billion), and Nigeria (US$0.6 billion), as shown in Table 3. Production levels are much lower in other countries, but very important to the domestic economies of Guinea and Sierra Leone.

Almost US$1.5 billion worth of cashew nuts are exported from West Africa every year. The largest exporters are Côte d’Ivoire (US$0.8 billion), Ghana (US$0.4 billion), followed by Nigeria, Benin, Burkina Faso, Guinea, and Gambia. Guinea-Bissau, not included in Table 3, exports around US$0.2 billion worth of cashew nuts. Exports from Ghana are larger than national production, which indicates cross-border trade from neighbouring countries like Cote d’Ivoire, Burkina Faso, Togo, and Mali (CashewInfo.com and African Cashew Alliance 2014).4

Coffee exports are significant only for Côte d’Ivoire (US$115.6 million); although low in value terms at US$18.9 million, they are also relatively important in Guinea’s export basket. Oil seeds exports are significant for Nigeria (US$0.5 billion, sesame seeds), Burkina Faso (US$200 million, sesame seeds), and Ghana (US$60 million, other seeds).

Cocoa beans, cashew nuts, coffee, and seeds are exported to global markets, largely in unprocessed form. As discussed in the next sub-sections, there is evidence of some recent upgrading in the cocoa and oil seeds GVCs.

Other important food commodities include live animals (Mali, Burkina Faso), hides and skins (Mali, Nigeria), and sugar (Niger, Benin, and Togo).5 Noticeably, Nigeria is the only country with significant exports of leather (US$0.5 billion).

4 Processed nuts exports include shelled almond nuts from Ghana (US$16 million) and Benin (US$22 million), and shelled ground nuts from Gambia (US$0.5 million).

5 There are also small exports of maize corn (Burkina), manioc (Ghana), and millet (Guinea).

Commodity Country (year) US$ millionCocoaH3-1801 Cocoa beans, whole or broken, raw or roasted. Côte d’Ivoire (2014) 3,045.1

Ghana (2014) 1,380.5

Nigeria (2014) 627.0

Guinea (2015) 18.9

Togo (2015) 5.6


NutsH3-0801 Cashew nuts, fresh or dried. Côte d’Ivoire (2014) 826.5

Ghana (2014) 417.8

Nigeria (2014) 92.4

Benin (2014) 65.1


Guinea (2015) 20.6

Gambia (2014) 4.9

H3-080212 Almond nuts, in shell. Benin (2014) 22.5

H3-0802 Other nuts. Guinea (2015) 2.4

Table 3: West African soft commodities exports: food commodities (by type, value, and country)

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Commodity Country (year) US$ millionCoffeeH3-0901 Coffee, whether or not roasted or decaffeinated.


Guinea (2015) 11.5

Togo (2015) 3.8


SeedsH3-1207 Other oil seeds and oleaginous fruits Nigeria (2014) 556.5


Ghana (2014) 58.7

Togo (2015) 6.2

Mali (2012) 6.8

Togo (2015) 6.2

Live animals / hidesH3-0102 Live bovine animals. Mali (2012) 84.2


H3-0104 Live sheep and goats. Mali (2012) 27.9

Niger (2014) 3.8

H3-4103 Other raw hides and skins. Mauritania (2014) 0.3

H3-4105 Tanned or crust skins of sheep/lambs. Mali (2012) 10.7

H3-4106 Tanned or crust hides and skins of other animals.

Nigeria (2014) 32.3

Mali (2012) 8.1

SugarH4-1701 Cane or beet sugar, in solid form. Niger (2014) 10.3

Benin (2014) 8.8

Togo (2015) 5.9

Gambia (2014) 1.0

Table 3: Continued

2.3.2 Non-food commodities

Among industrial soft commodities, cotton is West Africa’s largest export product (Table 4). West Africa’s largest exporters of carded and non-carded cotton are Burkina Faso (US$0.5 billion), Mali (US$390 million), Côte d’Ivoire (US$320 million), Benin (US$290 million), and Nigeria (US$180 million). Togo’s exports are small but relatively important in the country’s export basket.

The largest economies in the region are also the largest exporters of sawn wood and rubber: Ghana, Côte d’Ivoire, and Nigeria exported US$321 million, US$110 million, and US$67 million in sawn wood; and US$41 million, US$603 million, and US$94 million in rubber, respectively. Although low in value terms, rubber exports are relatively important in Guinea’s export basket.



Commodity Country (year) US$ millionCottonH3-5201 Cotton, not carded or combed. Burkina Faso (2014) 494.9


Benin (2014) 287.9

Nigeria (2014) 181.6

Togo (2015) 59.4

Senegal (2014) 22.3

Mali (2012) 13.2

Guinea (2015) 3.7

H3-5203 Cotton, carded or combed. Mali (2012) 372.2

WoodH3-4401 Fuel wood, in logs etc. Gambia (2014) 7.5

H3-4407 Wood sawn or chipped lengthwise. Ghana (2014) 231.2


Nigeria (2014) 67.3

Benin (2014) 8.3

Guinea (2015) 2.1

RubberH3-4001 Natural rubber, balata, etc. Côte d’Ivoire (2014) 602.7

Nigeria (2014) 94.1

Ghana (2014) 41.3

Guinea (2015) 26.0

Table 4: West African soft commodities exports: industrial commodities (by type, value, and country)

2.4 Value Added Production

2.4.1 Agro-food products

The soft commodities discussed in the previous section undergo minimum levels of processing, usually required for effective transport (sawn wood) or preservation of basic qualities (nuts drying). This sub-section discusses agro-food export products subject to higher degrees of processing which reflect more sophisticated technological capabilities.

Given that cocoa beans rank as West Africa’s largest export product, the composition of cocoa-related exports is indicative of the region’s potential to upgrading into the cocoa/chocolate GVC (Table 5) but to date only Côte d’Ivoire (2014) is a significant exporter of value added cocoa products: US$770 million worth of cocoa paste, US$460 million in cocoa butter, and less than US$70 million each in cocoa powder

and chocolate. This is indicative of significant upgrading in the intermediate stages of the GVC, but should still be seen in the context of over US$3 billion worth of unprocessed cocoa exports. The other two major cocoa producers, Ghana and Nigeria, lag far behind in terms of value added exports. Cocoa intermediate products from West Africa are overwhelmingly exported to the European Union (EU) (86 percent in 2013; see Figure 2).

West Africa’s fishery industry exports more than US$1.1 billion in fish products. The largest exporters are Mauritania (US$550 million, mostly frozen fish and seafood), Senegal (US$360 million, fresh and frozen fish, seafood), Nigeria (US$93 million, seafood), and Cabo Verde (US$75 million, frozen and prepared/preserved fish). The main export destinations in 2013 were the EU (50 percent), Asia (24 percent), and intra-regional African trade (20 percent) (Figure 2).

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In terms of value added, 59 percent of fish products are exported as chilled and frozen fish. This processing often happens on the fishing vessels, from where the fish is directly exported to its end destination. An additional 31 percent of fish exports are crustaceans and molluscs exported in fresh/frozen form. Whilst the per unit value of these fish products tends to be high, there may be little processing happening inland. Only 4 percent of regional fish exports are exported in processed form: dried, in brine, preserved, filleted. It should be taken into account that chilling/freezing can be a relatively technology- and scale-intensive operation, and can confer more value to the final product than other forms of processing (drying, preserving). More research is required

to understand (i) the extent to which national economies are involved in the chilling/freezing of fish; (ii) whether there are opportunities to expand processed fish, in particular filleted fish; and (iii) which service sectors and activities need to be developed to support this industry (e.g. logistics, quality certification, marketing).

The region also exports approximately US$0.5 billion worth of edible oils a year, mainly palm oil from Côte d’Ivoire (US$210 million), palm kernel oil and palm oil from Ghana (US$150 million), and smaller volumes from Senegal, Togo, Niger, and Burkina Faso. The main export market in in 2013 was regional (53 percent), followed by the EU (39 percent) (Figure 2).

Commodity Country (year) US$ millionCocoa productsH3-1803 Cocoa paste, whether or not defatted. Côte d’Ivoire (2014) 764.5

Nigeria (2014) 34.7

H3-1804 Cocoa butter, fat and oil. Côte d’Ivoire (2014) 461.8

Nigeria (2014) 146.0

Ghana (2014) 65.7

H3-1805 Cocoa powder. Côte d’Ivoire (2014) 63.0

H3-1806 Chocolate. Côte d’Ivoire (2014) 68.3

FishH3-0302 Fish, fresh or chilled. Senegal (2014) 68.4

Guinea (2015) 5.7

Gambia (2014) 0.7

H4-0303 Fish, frozen, excluding fish fillets. Mauritania (2014) 288.3

Senegal (2014) 212.7


Guinea (2015) 4.5


Gambia (2014) 0.9

H3-0304 Fish fillets, fresh, chilled or frozen. Sierra Leone (2014) 0.1

H3-0305 Fish, dried, salted, or in brine. Mauritania (2014) 7.3


H3-0306 Crustaceans. Nigeria (2014) 93.6

Senegal (2014) 30.6


H3-0307 Molluscs. Mauritania (2014) 227.1

Senegal (2014) 51.3


Table 5: West African value added agro-food exports (by type, value, and country)


Commodity Country (year) US$ millionH3-1604 Prepared/preserved fish. Cabo Verde (2015) 27.1


Gambia (2014) 0.2

H3-1605 Crustaceans, molluscs etc, prepared or preserved.


H3-1504 Fats and oils of fish or marine mammals. Mauritania (2014) 17.9

Edible oils - whether or not refined, but not chemically modified.H3-1508 Ground-nut oil. Senegal (2014) 42.1

H3-1511 Palm oil. Côte d’Ivoire (2014) 209.4

Ghana (2014) 47.7

Togo (2015) 27.2

Niger (2014) 9.7

H3-1512 Cotton-seed oil. Benin (2014) 5.6


H4-1513 Palm kernel/babassu oil. Ghana (2014) 117.4

H3-1515 Other fixed vegetable fats and oils. Burkina Faso (2014) 12.5

Gambia (2014) 0.7

Table 5: Continued


Table 6 covers other agro-food exports, with lower export values than those listed in Table 5, but significant value addition.6 Dairy exports have been significant only for Togo (US$24 million of concentrated milk) and Benin (US$9 million of butter). Other processed foods and beverages, with smaller export volumes, originate from smaller economies: Niger, Mali, Togo, Gambia and Cabo Verde export products such as pasta, water, beer and processed tomatoes. These

products are exported mostly to the region, which absorbs 72 percent of dairy products and 83 percent of processed foods and beverages (2013 data, Figure 2). Fruit and vegetables exports conversely are more significant, and mainly originate from Côte d’Ivoire, Senegal, Mali and Burkina Faso. Fruit and vegetable exports target the EU market (79 percent), while the region only accounts for 15 percent (2013 data, Figure 2).

6 Other exports which are significant at the country though not regional level include: extracts, essences and concentrates of coffee in Côte d’Ivoire (US$79.5 million); cut flowers and spices in Nigeria (US$33 million and 31 million respectively); oil seeds meals, starch-based food preparations/malt extracts, and margarine in Ghana (US$24 million, 15 million, and 16 million respectively); animal and vegetable fats and oils in Niger (US$10 million); and sugar confectionery in Togo (US$5.4 million).

12

Note: ROW=Rest of the world.


Fruits and vegetables Prepared food / beverages

Africa

Europe

North America

Middle East

ROW

79%

15%

3% 2% 1%

Africa

Asia

Europe

Middle East

ROW

83%

2%

0% 9%

6%

Figure 2: Export markets for selected agro-food products from West Africa (2013)

Cocoa value added products Fish products

Africa

Asia

Europe

Latin America

and Caribbean

North America

ROW

86%

1%

2%

2%

2%

7% Africa

Asia

Europe

Latin America

and Caribbean

Middle East

North America

50% 24%

1%1%

20%4%

Edible oils Dairy

Africa

Asia

Europe

ROW

53%

39%

4%

4%

Africa

Asia

Europe

Middle East

ROW

2%

72%

6%8%

12%



Commodity Country (year) US$ millionDairyH3-0401 Milk and cream. Gambia (2014) 0.4

H3-0402 Milk and cream, concentrated or containing added sugar or other sweetening matter.

Togo (2015) 23.7

Mali (2012) 3.7

Gambia (2014) 1.3

H3-0405 Butter and other fats/oils derived from milk. Benin (2014) 9.0

Fruit and vegetablesH3-0803 Bananas, including plantains, fresh or dried. Côte d’Ivoire (2014) 139.8

H3-0804 Dates, figs, pineapples, avocados, guavas, mangoes, fresh or dried.


Mali (2012) 13.2


H3-0807 Melons and papaws, fresh. Mauritania (2014) 0.6

Senegal (2014) 18.1

H3-0702 Tomatoes, fresh or chilled. Senegal (2014) 17.0

H3-0703 Onions, garlic, alliaceous vegetables, fresh or chilled.

Niger (2014) 13.4

H3-0708 Leguminous vegetables, shelled or unshelled, fresh or chilled.

Senegal (2014) 15.7

H3-0709 Other vegetables, fresh or chilled. Senegal (2014) 15.1

H3-0713 Dried leguminous vegetables, shelled. Niger (2014) 3.4

Processed foods & beveragesH3-2002 Tomatoes prepared or preserved. Gambia (2014) 0.4

H3-1902 Pasta, whether or not cooked or stuffed. Nigeria (2014) 42.4


Niger (2014) 7.6

Mali (2012) 2.8

Gambia (2014) 0.6

H3-2104 Soups; homogenised food preparations. Senegal (2014) 118.0


H3-2202 Waters, sweetened. Mali (2012) 4.0

Togo (2015) 16.7

H4-2203 Beer made from malt. Togo (2015) 6.0

H4-2208 Spirits, liqueurs. Ghana (2014) 35.6


Table 6: West African additional value added agro-food exports (by type, value, and country)

2.4.2 Other manufacturing

Manufactured exports from West Africa are concentrated in few product lines (Table 7). Access to competitively priced cement and fertilizers is important for infrastructure

and agricultural development. Cement is an important export product for Senegal (US$186 million). There are smaller exporters in whose export baskets cement ranks high: Togo (US$49 million, ranked 8th largest export product), Benin (US$38.5 million, ranked 3rd),

14

Commodity Country (year) US$ millionFertilizersH4-3102 Mineral or chemical fertilisers, nitrogenous. Ghana (2014) 27.2

Mali (2012) 25.1

H3-3104 Mineral or chemical fertilisers, potassic. Mali (2012) 16.0

H3-3105 Mineral or chemical fertilisers containing nitrogen, phosphorus and/or potassium.

Mali (2012) 119.0

Senegal (2014) 26.5

Togo (2015) 6.4

CementH3-2523 Portland cement, aluminous cement, slag cement.

Senegal (2014) 185.7

Togo (2015) 49.3

Benin (2014) 38.5



Metal fabricationH3-7210 Flat-rolled products of iron or non-alloy steel. Togo (2015) 11.7


H3-7217 Wire of iron or non-alloy steel. Burkina Faso (2014) 4.4

Mali (2012) 2.4

H3-7213 Bars and rods, hot-rolled, in irregularly wound coils, of iron or non-alloy steel.

Benin (2014) 13.0


H3-7214 Other bars and rods of iron or non-alloy steel, not further worked than forged, hot-rolled, hot-drawn or hot-extruded.

Senegal (2014) 20.5

Benin (2014) 15.1


Table 7: West African manufactured products (by type, value, and country)

and Côte d’Ivoire (US$28 million, ranked 41st). Fertilizers exports are significant for Mali, with a total of US$160 million in exports (the 3rd most important export product); Ghana and Senegal are smaller exporters (US$26–27 million each), but the industry is relatively important in their export baskets. The regional market accounts for all cement exports and 80 percent of fertilizers exports.

Cement tends to be manufactured locally, due to its low-value/high-volume features, and industries tend to be domestic market-oriented. Hence export data does not capture the size of individual countries’ domestic industries. Across the continent there are state-owned or state-controlled

cement producing firms. Nigeria’s Dangote is now a key player in the continent, with operations across 14 African countries (see dangote.com). The sector has also received significant FDI, as a consequence of the high economic growth rates across the continent, and of higher investment in infrastructural and housing projects. In this respect, the experience of Southern Africa highlights that the cement industry has been particularly prone to adopt anti-competitive practices across the region which have raised prices in each domestic market (Roberts et al. 2014). Hence competition aspects become critical to ensure this value chain supports broader developmental objectives, i.e. lowering the cost of infrastructure development.


Commodity Country (year) US$ millionH3-7215 Other bars and rods of iron or non-alloy steel. Senegal (2014) 18.5

H3-7304 Tubes, pipes and hollow profiles, seamless, of iron (other than cast iron) or steel.

Benin (2014) 4.1

H4-7306 Other tubes, pipes and hollow profiles of iron or steel.

Ghana (2014) 17.5

Togo (2015) 5.0

H3-7310 Tanks, casks, drums, etc of iron or steel. Nigeria (2014) 68.7

H3-7326 Other articles of iron or steel. Benin (2014) 6.2

H3-7505 Nickel bars, rods, profiles and wire. Nigeria (2014) 34.6

H3-8007 Other articles of tin. Nigeria (2014) 39.7

H3-8544 Insulated wire, cable and other insulated electric conductors.

Senegal (2014) 17.2

PlasticsH3-3902 Polymers of propylene or of other olefins, in primary forms.

Nigeria (2014) 26.9

H4-3917 Tubes, pipes and hoses, and fittings of plastics. Nigeria (2014) 26.3

Ghana (2014) 13.7

Togo (2015) 4.4

H4-3920 Other plates, sheets, film, foil and strip, of plastics.

Togo (2015) 9.9

H3-3923 Articles for the conveyance or packing of goods, of plastics.


Togo (2015) 66.1

Nigeria (2014) 48.9

Ghana (2014) 27.0


Guinea (2015) 6.4


H4-3924 Tableware, kitchenware, other household of plastics.

Ghana (2014) 26.4

Togo (2015) 6.5

Guinea (2015) 4.7


Textiles, Garments and FootwearH3-5208 Woven fabrics of cotton. Côte d’Ivoire (2014) 34.3

Niger (2014) 15.0

Benin (2014) 13.0


H4-6203 Men's or boys' suits, ensembles, jackets, blazers, trousers, etc.


H4-6107 Men's or boys' underpants, briefs, nightshirts, pyjamas, bathrobes, etc.


H4-6109 T-shirts, singlets and other vests. Cabo Verde (2015) 1.3

H3-6402 Other footwear with outer soles and uppers of rubber or plastics.


Table 7: Continued

16

Metal and plastic product exports are characterised by relatively low export values, approximately US$300 million each a year, but spread across the region and with varying degrees of technological content. Exports of metal fabricated and engineering products span Nigeria, Senegal, Benin, Ghana, Togo, and Mali. They include flat-rolled products, wires, bars, rods, tubes, pipes, and tanks, mostly of made of iron and steel. Regional exports of plastic products from seven countries in the region mostly consist of packing material, but also tableware and fittings,. Whilst Nigeria, Ghana, and Côte d’Ivoire are large exporters, there are exports from smaller economies too. In Togo, Burkina Faso, Guinea, and Sierra Leone, plastic products are indeed the top non-traditional exports.7 Both metal and plastics products are exported to Africa, which received 94 percent of metal fabrication exports and 83 percent of plastics exports in 2013. The EU and Asia account for the remaining shares.

Notwithstanding West Africa’s large cotton endowment, exports of textiles, garments, and footwear are low. The largest exports are woven

cotton fabrics, around US$70 million worth of exports from Côte d’Ivoire, Niger, Benin, and Burkina Faso. Exports of footwear with rubber and plastics soles are relatively high, mainly originating from Côte d’Ivoire (US$73 million) and Nigeria (US$54 million). More than 90 percent of exports of textiles, garments, and footwear are regional. Cabo Verde exports small amounts of men’s garments and footwear parts to Portugal.

Similarly to cotton, West Africa’s forestry resources endowment is not matched by export capabilities of value added wooden products. Approximately US$370 million worth of exports in wood and paper products originate from West Africa. More than half of these consist of veneering sheets from Ghana and Côte d’Ivoire, which have relatively low value added content. Unlike the rest of the region, Côte d’Ivoire has a pulp and paper industry which shows export capabilities, with over US$100 million of paper and packaging material exports. While sawn wood from West Africa is exported to global markets (US, EU, China among others), the other forestry-related products are exported to the region (72 percent in 2013) and the EU (16 percent).

7 Defined as the largest export product after agricultural, mineral, and energy commodities and re-exports.

Commodity Country (year) US$ millionNigeria (2014) 54.1

H4-6406 Parts of footwear. Cabo Verde (2015) 3.8

Wood products and paperH3-4408 Sheets for veneering for plywood. Ghana (2014) 153.7


H3-4412 Plywood, veneered panels. Ghana (2014) 37.2


H4-4421 Other articles of wood. Ghana (2014) 24.8

H3-4819 Cartons, boxes, cases, bags and other packing containers, of paper, paperboard, etc.


H3-4821 Paper or paperboard labels of all kinds. Côte d’Ivoire (2014) 43.1

CosmeticsH3-3304 Beauty or make-up preparations. Ghana (2014) 238.5


Togo (2015) 43.3

Senegal (2014) 36.2

Table 7: Continued



West Africa’s cosmetics industry has seen remarkable levels of dynamism, with US$460 million a year worth of exports from Ghana, Côte d’Ivoire, Togo, and Senegal. In Ghana and Togo, the cosmetics industry was the fifth largest source of exports. Cosmetics exports are directed mainly to Africa. Finally, West Africa also exports approximately US$300 million in tobacco cigarettes, mostly from Nigeria (US$138 million), Senegal (US$100 million), and Côte d’Ivoire (US$56 million).

2.5 Services Exports

Between 2005 and 2015, world services exports have grown by 6.2 percent Compound Annual Growth Rate (CAGR), totalling US$4.8 trillion in 2015 (Table 8). As of 2014, the value of international services trade had completely recovered from the dip in 2009 (UNCTAD 2015c). The bulk of these trade flows took place between North America, the EU, and East Asia. The largest services exports by value consist of travel and transport (over US$2 trillion), and other business services (over US$1 trillion). The latter category includes business supporting services such as merchanting, legal, accounting and management consulting, advertising, market research, R&D, architectural and engineering services. The fastest growing sub-sectors have been ICT (8.6 percent CAGR), business services (7.3 percent CAGR), finance and insurance (6.9 percent and 6.8 percent CAGR respectively), and construction (6.9 percent CAGR).

Services exports from developing countries grew faster than the world average, at 9.2 percent CAGR between 2005 and 2015. However, their total exports in 2015 still amounted to less than a third of total world exports. More than half of developing countries’ services exports are accounted for by travel and transport; yet the fastest growing services sub-sectors have been ICT (13.8 percent CAGR), financial (12.8 percent CAGR), construction (11.4 percent CAGR), and insurance (10.1 percent CAGR).

Africa has underperformed in international services trade, both in terms of value and growth. In 2015, the continent exported only US$0.1 trillion worth of services, approximately 2

percent of world exports. Services exports grew below the world average over the last decade since 2005. Transport and travel account for almost 70 percent of total exports. Only three sub-sectors have grown faster than the world average: ICT (9.1 percent CAGR), other business services (7.4 percent CAGR), and transport (6.9 percent CAGR). Exports of insurance, travel, construction, and goods-related services, on the other hand, have stagnated.

Whilst services trade has not done well at continental level, West Africa’s services export performance has matched the developing countries’ average, 9.1 percent CAGR between 2005 and 2015.With the exception of construction services, West Africa’s exports have grown faster than the world average in every sub-sector, albeit still low in absolute terms (US$14.9 billion total services exports in 2015). Most sub-sectors have also outperformed developing countries’ average growth. The most dynamic sub-sectors have been financial services (16.4 percent CAGR), other business services (12.7 percent CAGR), insurance (11 percent CAGR), ICT (9.9 percent CAGR), and travel (9.8 percent CAGR).

Table 9 presents available data at national level for these most dynamic sub-sectors. The largest services exports originate from Nigeria, Ghana, Senegal, and Côte d’Ivoire. In terms of growth, however, smaller exporters have outperformed the largest ones: Burkina Faso has registered the fastest export growth (29 percent CAGR between 2005 and 2013), followed by Sierra Leone, Togo, Benin, Cabo Verde, Gambia, and Ghana (10–14 percent CAGR). Senegal has shown an average growth at 7.2 percent, whilst Nigeria, Guinea, and Côte d’Ivoire’s services exports have stagnated.

At country level, there are significant variations in terms of the sub-sectors driving this growth. ICT service exports have registered high to very high growth rates in Sierra Leone, Burkina Faso, Benin, Guinea, Mali, and Senegal. Only in the latter two, however, export levels are significant, with US$170 million a year in Mali and US$300 million in Senegal. Other business service exports have grown significantly in

18

World Developing economiesSectors 2005 2015 CAGR (%) 2005 2015 CAGR (%)

Services TOTAL 2,655,860 4,826,030 6.2 620,820 1,497,880 9.2

Goods-related services

85,930 152,360 5.9 25,720 45,330 5.8

Transport 581,240 876,120 4.2 159,490 300,640 6.5

Travel 688,010 1,230,420 6.0 215,130 551,850 9.9

Construction 45,800 89,140 6.9 13,940 41,180 11.4

Insurance and pension services

64,660 123,380 6.7 9,430 24,750 10.1

Financial services 214,370 416,250 6.9 18,090 60,510 12.8

ICT 206,670 472,590 8.6 34,780 126,190 13.8

Other business services

514,280 1,038,380 7.3 114,880 286,840 9.6

Government goods and services not indicated elsewhere

57,170 72,020 2.3 15,970 23,370 3.9

Africa West AfricaSectors 2005 2015 CAGR (%) 2005 2015 CAGR (%)

Services TOTAL 61,530 102,030 5.2 6,210 14,900 9.1

Goods-related services

1,220 1,500 2.1 110 200 6.2

Transport 15,370 30,010 6.9 2,120 4,660 8.2

Travel 29,040 40,800 3.5 1,920 4,880 9.8

Construction 1,080 1,560 3.7 120 180 4.1

Insurance and pension services

1,160 1,150 –0.1 60 170 11.0

Financial services 1,150 2,100 6.2 90 410 16.4

ICT 2,170 5,170 9.1 330 850 9.9

Other business services

5,820 11,880 7.4 530 1,750 12.7

Government goods and services not indicated elsewhere

3,800 5,430 3.6 890 1,200 3.0

Table 8: Global services exports in 2005 and 2015 with Compound Annual Growth Rate (US$ million) (by sub-sectors and regions)

Source: UNCTADstat, retrieved in July 2016 from http://unctadstat.unctad.org/

Sierra Leone, Nigeria, Guinea, Ghana, and Cabo Verde, reaching significant values in Ghana (US$770 million a year) and Nigeria (US$200 million). With few exceptions, ICT and business services have grown across the entire region. Conversely, financial, insurance, and transport services exports have either grown

very fast (for example Burkina Faso, Gambia, and Nigeria) or stagnated/declined (Senegal, Côte d’Ivoire, Mali). Travel services exports have performed more evenly across the region: growth rates were between 8 percent and 33 percent, with only four countries performing less well (Ghana, Mali, Niger, Sierra Leone).


Services Total

Transport Travel Insurance Financial ICTOther

business services

Ghana

2013 (US$ million) 2,454.0 696.4 853.3 36.3 N/A N/A 767.4

CAGR (%) 10.5 21.6 0.3 20.7 N/A N/A 30.2

Nigeria

2013 (US$ million) 2,396.2 1,099.3 538.0 4.1 22.0 51.7 201.4

CAGR (%) 3.7 −2.4 33.1 27.9 9.1 12.4 47.4

Senegal

2013 (US$ million) 1,329.1 145.0 438.7 9.7 10.1 296.0 199.9

CAGR (%) 7.2 1.7 7.7 2.9 5.0 13.8 8.0

Côte d'Ivoire

2013 (US$ million) 935.0 138.7 181.0 1.3 27.2 91.7 188.0

CAGR (%) 0.0 −3.8 10.2 −33.3 −8.2 0.1 −2.1

Cabo Verde

2013 (US$ million) 651.3 135.2 421.7 5.4 2.4 27.6 22.7

CAGR (%) 11.3 3.1 16.8 6.4 17.6 4.9 30.5

Benin

2013 (US$ million) 514.4 142.0 189.2 0.8 9.4 76.6 56.2

CAGR (%) 13.0 20.1 7.8 −4.4 15.8 39.3 6.7

Burkina Faso

2013 (US$ million) 496.6 60.9 153.0 4.9 87.2 73.5 11.0

CAGR (%) 29.1 61.5 16.6 118.4 29.5 92.8 9.3

Togo

2013 (US$ million) 486.0 232.1 125.4 2.3 10.5 21.2 42.3

CAGR (%) 13.5 14.3 25.5 13.4 43.9 7.2 4.4

Mali

2013 (US$ million) 428.6 1.4 178.5 6.0 2.9 173.6 8.7

CAGR (%) 5.7 −33.4 2.3 8.1 −4.5 18.6 −7.3

Sierra Leone

2013 (US$ million) 221.2 49.9 65.8 0.2 0.7 94.8 3.1

CAGR (%) 13.9 20.0 0.3 −15.3 −8.6 146.7 52.9

Gambia (%)

2013 (US$ million) 205.3 69.6 111.8 5.2 N/A 17.9 N/A

CAGR (%) 12.1 20.2 8.5 38.9 N/A 11.2 N/A

Niger

2013 (US$ million) 147.5 6.0 57.8 1.9 3.1 63.9 8.8

CAGR (%) 6.7 −4.4 3.7 16.3 31.9 13.9 1.9

Guinea

2013 (US$ million) 103.5 9.8 N/A 5.4 N/A. 63.6 8.1

CAGR (%) 2.8 −2.6 N/A 20.9 N/A 77.0 54.4

Table 9: West African services exportsin 2013 with Compound Annual Growth Rates from 2005 (US$ million) , by type and country

Source: UNCTADstat, retrieved in July 2016 from http://unctadstat.unctad.org/

20

3.1 Prioritisation Criteria

The trade analysis presented in Section 2 identified several potential value chains that could be prioritised in West Africa. These are concentrated in hard and energy commodities, precious metals, soft commodities (food and industrial), value added products (food and non-food related), and services sectors. In order to prioritise high-potential value chains, this section adopts five main criteria.

1) Existing capabilities across the region

The value chains should be relevant to several West African countries, and the trade data analysis should have identified that they are significant in value or growth terms.

2) Significant upgrading opportunities

The value chains should present opportunities for value addition, and for different forms of upgrading. Upgrading is understood to take place in multiple dimensions: product and process upgrading, and functional upgrading into more sophisticated value chains segments.8

3) Dynamic markets

The success of many late industrialisers to date has rested on their strategy to position themselves in fast-growing GVCs (e.g. clothing, electronics). Participation in dynamic markets opens opportunities for new entry and for capturing higher rents, which in turn support upgrading processes. Market dynamism is looked at both at regional and global level.

4) Importance in LDCs’ and LICs’ export baskets

The selection will focus on value chains that are likely to impact positively on Least Developed Countries (LDCs) and Low Income Countries (LICs), since only five countries in the region are not in these categories, namely

Cabo Verde, Côte d’Ivoire, Ghana, Nigeria, and São Tomé and Príncipe.

5) Likelihood of supporting SDGs

The value chains should have the potential to support the achievement of the Sustainable Development Goals (SDGs), subject to appropriate policies being put in place. Some value chains may already be contributing to SDGs, but such impacts may be enhanced through interventions by governments, lead firms, regional and international bodies, non-governmental organisations (NGOs) and others. Where value chains do not currently contribute, similar interventions may also be required to shift the impact of the value chain altogether, towards greater sustainability.

The nexus between GVCs and SDGs is complex (Kaplinksy 2016). The lack of macro-level databases and the inadequacy of micro-level databases on SDGs in GVCs constrain how well we can assess this relationship in quantitative terms. Whilst collecting and analysing primary data allows us to shed light on individual case studies, this does not allow for cross-country comparison. This is because there are variations between GVCs (coffee and cocoa GVCs are markedly different) and within GVCs (the apparel industry in Ethiopia will have very different characteristics from the one in Italy). Finally, not all SDGs are affected equally by a GVC, and not all GVCs have the same impact on all SDGs (Kaplinksy 2016).

Particular attention is paid by this study to the gender dynamics of GVCs: in which GVCs do women participate most, what are their roles, occupations and incomes? Historically, women have provided a low-cost (but often high-quality) workforce for labour-intensive, export-oriented GVCs (Bamber and Staritz 2016). This has enhanced their participation in the labour market, but often at socially determined lower wages and at discriminatory

3. IDENTIFICATION OF VALUE CHAINS

8 Chain upgrading, that is moving into more sophisticated GVCs, is not considered in this scoping study.


conditions compared to men. Overall, women’s unequal access to resources (land, credit, skills and education, services) hampers their ability to benefit from value chain upgrading and increased export opportunities (Bamber and Staritz 2016).

Table 10 presents the SDGs taken into considerations in identifying high-potential value chains. The grouping of SDGs is based on but adapted from Kaplinsky (2016): poverty and education, equality, sustainability, and inclusive growth and industrialisation.

Source: based on Kaplinsky (2016)

Theme SDG Indicators

Poverty and education

Goal 1: End poverty in all its forms everywhere

Type of employment generated (seasonal, formal/informal, self-employed/waged)

Net incomes

Goal 4: Inclusive and quality education

Skill intensity of the GVC

Training opportunities

Equality

Goal 5: Achieve gender equality and empower all women and girls

Incomes for to women and youth

Meeting the needs of women and young people as consumers

Goal 10: Reduce inequality within and among countries

Income distribution within companies/firms and between GVC participants and non-participants, between countries

Indirect impact of GVC firms on third countries and competing countries

Sustainability

Goal 2: Food security and sustainable agriculture; Goal 6: Access to water and sanitation; Goal 7: Affordable, reliable, sustainable and modern energy; Goal 12: Sustainable consumption and production patterns; Goal 13: Climate change

Use of natural resources

Waste disposal

Energy intensity of the GVC, including logistics and international transport

Inclusive growth and industrialization

Goal 8: Inclusive and sustainable economic growth, decent work; Goal 9: Resilient infrastructure, sustainable industrialization and innovation

Employment, value added, exports growth

Displaced and excluded firms/workers

Health and safety conditions, social standards, trade unions

Upgrading processes and inclusive innovation (targeting the poor)

Goal 17: Revitalize the global partnership for sustainable development

Value chain alignment

Table 10: SDGs categories considered for identifying value chains with high potential for West Africa (with indicators)

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3.2 Assessment of High-Potential Value Chains

On the basis of the five criteria outlined in the previous section, the following high-potential

value chains have been identified as warranting further analysis: agro-food, namely cocoa, cashew nuts, fish, processed foods; apparel/textiles; ICT services; and upstream linkages to extractive industries (Table 11).9

9 The apparel/textiles GVC scored low on two criteria: existing capabilities, which are limited mostly to cotton lint exports, and dynamic market, because cotton prices are depressed. Moreover, upgrading in this GVC may prove particularly difficult given stiff competition from large scale suppliers. It has, however, been included in the discussion because cotton production is very important for the regional economy.

Table 11: Analysis of GVCs with high potential for West Africa (using five key criteria)

Existing capabilities

Upgrading opportunities

Dynamic markets

Impact on LDCs/LICs

Impact on SDGs

Cocoa More than US$5 billion exports

Cocoa bean quality upgrading

Intermediate products

Growing global demand, especially fast-growing for speciality chocolates

Guinea, Sierra Leone, Togo

Potentially very significant

Cashew nuts

More than US$1.5 billion exports

Kernel quality upgrading

Shelled and packed nuts

Sustained growth in global demand

Benin, Burkina Faso, Gambia, Guinea, Guinea-Bissau, Senegal


Fish Approx. US$1.1 billion exports

Certification

Value added products (fillets, frozen, etc.)

Growing global demand

Mauritania, Senegal, but ocean and inland fishery is important across the region


Processed foods

At least US$0.8 billion. More if one includes other products (e.g. bakery)

Quality, brands, access to supermarkets

Increased regional exports

Growing regional demand

Benin, Burkina Faso, , Gambia, Mali, Niger, Senegal, Togo


Apparel/textiles

More than US$1.7 billion exports of cotton. Very limited other apparel/textiles

Cotton lint quality

Fabrics/apparel

Stagnant global demand for textiles, except for quality cotton

Benin, Burkina Faso, Mali, Togo


ICT services

One of the fastest growing sectors in the region (9.9% CAGR in 2005–2015). Linked to business services (12.7% CAGR)

Software development capabilities

Business process outsourcing (BPO) exports

Fastest growing service sector globally, especially for developing countries

High growth of ICT services in Benin, Burkina Faso, Guinea, Mali, Senegal Sierra Leone,

Potentially significant


Table 11: Continued

Existing capabilities

Upgrading opportunities

Dynamic markets

Impact on LDCs/LICs

Impact on SDGs

Upstream linkages to extractive industries

Approx. US$300 million exports of metal fabricated products. More developed supplier capabilities in Ghana, Nigeria.

Product and process upgrading to supply extractive companies

Expanding into regional markets

Large installed mining capacity

Significant opportunities in spares supplies

Mining operations across most LDCs/LICs

Exports of metal fabricated/engineering products from Benin, Burkina Faso, Mali, Senegal, Togo.

Potentially significant

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This section discusses the initial findings and some insights into the seven high-potential GVCs identified in the previous section. The individual GVC discussions are by no means exhaustive and only aim to present some preliminary issues for further in-depth studies.

4.1 Agro-food GVCs

4.1.1 Cocoa

In West Africa, cocoa production is dominated by smallholder farmers. World prices for cocoa have been declining since the late 1980s, due to entry of new large-scale Asian suppliers. Increased supply has been associated with declining quality of cocoa beans due to the dismantling of government marketing boards and pressures by grinders to reduce costs. Prices have somewhat recovered since the 2000s. World production of cocoa beans is estimated to have decreased by 3.7 percent to 3.9 million tonnes in 2012/2013, compared to the previous season. The combined production for Côte d’Ivoire and Ghana dropped over the past years but still represents almost 60 percent of total world cocoa output (ICCO 2013).

The GVC for cocoa starts with primary processing of cocoa beans, i.e. fermenting and drying, which is critical to determine the overall quality of the intermediate products (Figure 3). These stages are followed by cleaning, roasting, and nibs extraction. At this stage, the intermediate processing stage starts, involving grinding the nibs into a paste known as cocoa liquor or paste. This can be supplied to confectionaries or, more commonly, further processed into cocoa

butter and cocoa powder. The former is used by confectionery producers, the latter by drinks or confectionery producers (biscuits, candies, chocolates). Cocoa intermediate products such as cocoa paste, butter, powder and cake are easily storable and tradable, two characteristics which have made it possible to relocate processing facilities in producing countries (Talbot 2002).

The governance of the cocoa GVC has been characterised as “bi-polar” because power is exercised at two different stages of the value chain: grinding and chocolate manufacturing (Fold 2002). Grinding is controlled by MNCs based in consuming markets, especially the Netherlands. There has been a process of increasing concentration, with four companies, Archer Daniels Midland (US), Cargill (US), Barry Callebaut (Switzerland), and Blommer (US), dominating the market. In the past, international traders played a critical role in the cocoa GVC (Kaplinsky 2004). Changes in marketing and transportation such as the shift to futures markets and the introduction of new technologies in bulk transport, storage, and communication, have caused many traders to either collapse or make the transition to grinding. Grinders now organise purchasing, grading, quality control, and international transport, through subsidiaries located in the major producing countries. More importantly for producing countries, they are increasingly integrating upstream in producing countries, setting up processing operations to supply world buyers with intermediate products. Hence grinders have strategic control of coca beans supply, processing, and logistics (Fold 2002).

4. SECTORAL ANALYSIS OF SELECTED VALUE CHAINS


Figure 3: Global cocoa/chocolate value chain

Source: African Union and UNECA (2013)

The chocolate market is being increasingly differentiated between low-cost, bulk chocolate markets (mainly developing countries), standard quality markets, and speciality markets (organic, Fair Trade) (Fold 2002). Distribution is increasingly organised through supermarkets retail chains. As a response to increasingly fragmented consumer tastes and sophisticated retail channels, chocolate manufacturers have reorganised their position in the GVC. Chocolate manufacturing is controlled by a small number of MNCs: Mars (US), Mondelēz International (US), Nestlé (Switzerland), Ferrero (Italy),

Meiji (Japan), Hershey (US), and Lindt & Sprüngli (Switzerland) (Table 12). They have increasingly outsourced manufacturing of intermediate products (cocoa liquor, cocoa butter), and in some cases chocolate itself, to specialised grinders in order to focus on design and marketing operations. Through innovative product development, aggressive marketing and brands, they control the most remunerative segment of the GVC. The GVC has also seen increasing linkages between grinders, chocolate manufacturers, and retailers.

seeds, inputs, extension

growing, fermentation, and drying

roasting

grinding

cocoa liquor

cocoa butter cocoa powder

chocolate manufacturing confectionary and drinks

branding and marketing

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Company Net sales 2015 (US$ millions)Mars Inc (USA) 18,400

Mondelēz International (USA) 16,691

Nestlé SA (Switzerland) 11,041

Ferrero Group (Luxembourg / Italy) 9,757

Meiji Co Ltd (Japan) 8,461*

Hershey Co (USA) 7,422

Chocoladenfabriken Lindt & Sprüngli AG (Switzerland) 4,171

Table 12: Top seven global chocolate manufacturers, by net sales value (2015)

Source: ICCO, retrieved in July 2016 from http://www.icco.org/about-cocoa/chocolate-industry.html - based on Candy Industry, January 2016* This includes production of non-confectionery items

Whilst the US is the world’s largest chocolate bar consuming market (valued at US$2 billion per year), the top consumer markets in terms

of per capita consumption are in Europe (Figure 4), and developing countries are the fastest growing markets.

Figure 4: Top ten global fastest growing consumer markets (2007–12) and top consumer markets (2012)

Source: KPMG International (2014)

Ten fastest growingchocolate markets 2007-12

Ten top chocolate consumingcountries in 2012 (kg/person)

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Smallholders accrue a small share of the rents generated in the GVC. Following the withdrawal of government marketing boards and international efforts to control prices, they have been relegated to supplying cocoa beans at world prices in a context where inferior quality beans contribute to depress prices further (Barrientos and Asenso-Okyere 2009). The contribution of developing countries to value added in the global value chain halved between the early 1970s and the late 1990s (World Bank 2008).

Among cocoa producing countries, Ghana is an exception because of the role of the state in improving the terms of its participation in the GVC. By retaining the Ghana Cocoa Board (COCOBOD), which has a monopoly on marketing of cocoa, the country has managed to maintain production of high-quality cocoa beans, negotiate a price premium, reduce price volatility, and comply with the traceability requirements for Fairtrade and organic certified chocolate (Barrientos and Asenso-Okyere 2009). COCOBOD has released some of its powers to the private sector further down the value chain, through a network of Licensed Buying Companies (LBCs) as agents to buy and transport goods at the local level to its facilities. COCOBOD fetches higher prices for producers, and ensures compliance with higher environmental and social standards.

In this respect, Nigeria and Côte d’Ivoire have been relegated to the undifferentiated segment of this commodity market. This aspect is of strategic importance because, for a range of reasons, West African smallholders have fewer incentives to farm cocoa beans, threatening the sustainability of supply for MNCs. As a response to this, and to consumer concerns, MNCs have been involved in initiatives such as the International Cocoa Initiative and the Initiatief Duurzame Handel (IDH), or Sustainable Trade Initiative, to increase the sustainability and the profitability of farming cocoa beans. For the region, there are two critical upgrading opportunities in this regard: upgrading the quality of cocoa beans

in countries other than Ghana, and moving into standard-intensive markets.

In terms of functional upgrading, Ghana and Côte d’Ivoire have had some success in increasing the share of cocoa beans processed locally, through a combination of public initiatives and investment by lead grinders. Côte d’Ivoire, for example, exported more than US$1.3 billion in value added products compared to US$3 billion in cocoa beans exports. Nevertheless, the highest value added products, cocoa butter, powder, and chocolate, were less than US$600 million in value. Moreover, other countries in Asia and Latin America have been more successful in moving up the GVC (e.g. Indonesia, Malaysia, Brazil). It is important to note that across West Africa’s major cocoa producers, the exports of final products (chocolate, drinks) have targeted the domestic and regional markets (African Union and UNECA 2013). This calls for a two-fold strategy to achieve functional upgrading, (i) to attract more investment for intermediate processing oriented to supply grinders in the North and (ii) to meet the demand for final products from within the region.

The most direct contribution of the cocoa GVC to the SDGs is poverty reduction, through substantial backward linkages to smallholder farming. In Ghana alone approximately 700,000 farmers are involved in cocoa production. Process upgrading into higher quality and certified cocoa production would enable West Africa to secure higher and more stable prices for smallholders. Participation in international sustainability initiatives would improve environmental management, support social upgrading (decent work), and reduce inequality between producing and consuming countries, which constitute three other SDGs (see Table 10). These international initiatives are also aligned to the SDG related to partnerships between governments, NGOs, and lead firms. Finally, functional upgrading into higher value added cocoa products would contribute to building industrial capabilities and, again, to a more equitable distribution of rents along the GVC.

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4.1.2 Cashew nuts

West Africa is a relatively new cashew nut producing region, with significant production expansion since the 2000s. West Africa’s share of raw cashew nut output grew from 6 percent in the 1960s, to 26 percent in the in 2013 (CashewInfo.com and African Cashew Alliance 2014). Cashew

nuts are grown on marginal land, with little inputs from smallholders, hence constitute an attractive option for farmers. Table 13 shows the number of West African smallholders involved in production in 2010, totalling over 1.5 million farmers. In Guinea Bissau, Benin, and to a lesser extent Burkina Faso and Senegal, the crop is very important to the national economy.

Over 90 percent of West African cashew nuts are exported in in-shell form (Fitzpatrick 2011).10 The GVC for in-shell cashew nut is trader-driven, with major international traders based in Singapore and Hong Kong setting key market parameters and managing complex networks of international transporters, logistics companies, and domestic traders in individual African countries. In-shell cashew nuts are exported to two main destinations with large processing capabilities: Vietnam, which is also the world’s largest kernel exporter which supplies 85 countries including the US; and India, increasingly focused on value added kernels (roasted and salted) and on the growing domestic market, as well as now the world’s second largest exporter, (CashewInfo.com and African Cashew Alliance, 2014).

The key market parameters for in-shell cashew consist of quality, supply reliability, and logistics

(Fitzpatrick 2011). Quality considerations are critical, for example broken and split kernels receive a much lower price than whole ones (CashewInfo.com and African Cashew Alliance 2014). Whilst Côte d’Ivoire is the region’s major producer, the best yields and kernel quality are found in smaller countries: Benin, Burkina-Faso, Gambia, and Guinea-Bissau. Better quality receives a price premium in the key importing markets; indeed Nigeria, Côte d’Ivoire and Ghana have received lower prices than Benin, Gambia, and Senegal in 2013. The key constraints affecting West Africa’s competitiveness include poor post-harvest handling practices (poor drying and picking techniques, and storage), and high logistics costs (port charges and facilities, domestic transport costs). Quality upgrading is a critical upgrading strategy for many producing countries (Gibbon 2001).

Producing country Number of growersImportance to the economy

(1: very important, 10: not important)

Guinea-Bissau 1,000,000 1

Benin 120,000–180,000 3

Côte d’Ivoire 300,000 5

Burkina Faso 25,000 5

Senegal 50,000–60,000 8

Ghana 35,000 10

Gambia 10,000 10

Table 13: West African cashew nut producers, ranked by importance to their domestic economies (2010)

Source: Fitzpatrick (2011)

10 East Africa has been relatively more successful in moving up the GVC, by reviving an old established processing industry (Fitzpatrick, 2011). Up to 20–30% of its production in 2010 was in shelled form.


Most consumption of cashew nuts consists of snack foods, driven by growing demand for healthy and comfort food. Moving up the GVC involves processing the nuts (shelling, peeling, grading, roasting), packaging, and marketing. Higher rents are accrued by salting, flavouring, packaging and/or mixing with other nuts, cereals or chocolate (Cramer 1999). Processing is generally labour intensive and relies on skilled, low-cost, usually female labour, although recent developments point to an increasing mechanisation and automation of the processing industry. European buyers set high food safety, labelling, and packaging standards. This is the result of both private standards imposed by supermarkets, as well as government legislation such as the EU traceability requirements, or the new US Food Safety Management Act which imposes importer

accountability and third party certification of exporting firms (Fitzpatrick 2011; CashewInfo.com and African Cashew Alliance 2014).

Demand has grown since the 2000s in Western countries, Asia, and the Middle East (CashewInfo.com and African Cashew Alliance 2014). Whilst the US is still the world’s largest importer, there are other end markets and the fastest growing markets are Japan and some EU countries (Table 14). Due to a weak supply response, prices have risen year on year and have been resilient to the 2008 financial crisis; indeed, the average export price increased from 2.01 US$ per lb in 2004 to 3.30 US$ per lb in 2013, a CAGR of 6 percent. However, the sector is characterised by significant price volatility, due to seasonality factors and traders’ role in managing risks and capturing rents.

Country 2004 2013 CAGRUS 48 29 −4.0

Saudi Arabia 12 9 −6.0

Netherlands 6 16 9.6

France 5 2 −8.6

Japan 4 6 6.2

Spain 2 3 8.8

UK 2 5 0.4

UAE 2 3 2.7

Germany 1 2 5.0

Others 16 25 4.2

Average kernel export price (US$ per lb free on board)

2.01 3.30 6.0

Table 14: Major global cashew nut markets (% of kernel imports), by value (2004) and CAGR (to 2013)

Source: CashewInfo.com and African Cashew Alliance (2014)

Retailers and traders accrue most value in this GVC, to the disadvantage of processors and especially producers (CashewInfo.com and African Cashew Alliance 2014). Unlike other GVCs, the cashew nut GVC has not been characterised by vertical integration by lead firms, nor by trade protection for value added nuts in the consumer markets and there has been no significant change over the last 20 years (Cramer 1999). Relationships across the value chain tend to be organised at arms’ length.

For West Africa to pursue functional upgrading into processed and finished products, the challenge is two-fold: meeting increasingly stringent buyers’ requirements and developing cost competitiveness, with regional processors able to compete against firms in Viet Nam and India, which have better financing, scale economies, logistical costs, and government support. Most West African countries are endowed with high kernel quality and low labour costs, but these advantages are currently

30

offset by the poor post-harvest practices and high logistic costs mentioned earlier, plus high energy costs and lower labour productivity (Fitzpatrick 2011). There are important trade-offs in the choice of processing technologies—labour- vs. capital-intensive—which relate to recovery rates, skills requirements, timeframes to achieve higher productivity, and workers’ health, all of which need to be taken into consideration in any upgrading strategy (Cramer 1999).

If West Africa were to pursue process upgrading (higher quality kernels), this would impact directly on poverty reduction through higher prices received by smallholders. Functional upgrading would contribute to creating job opportunities for women, although initiatives by governments, trade unions, lead buyers, and NGOs are required to ensure these opportunities are part of a genuine social upgrading process. Functional upgrading would also contribute to the SDGs related to industrialisation and reducing inequality between consuming and producing countries, as well as environmental sustainability. Transport of in-shell cashew from West Africa to Asia, and of processed nuts to consuming markets, generates hundreds of thousands of tonnes of carbon emissions (Fitzpatrick 2011; CashewInfo.com and African Cashew Alliance 2014). It is expected that processing industries will relocate closer to producing countries over the next decade; this, together with greener technologies in energy and waste disposal, are inevitable steps to ensure the sustainability of the industry.

4.1.3 Fish

The value of global trade in fish products eclipses trade values of other food commodities such as meat and tropical beverages (Wilkinson 2006). Japan, the US, and the EU absorb the bulk of global exports, but developing countries are also becoming net importers. For example, West Africa exports high-value fish and imports low-value, frozen fish. Since the 1990s, although aquaculture has become more

prominent, global fish production has been in decline. While aquaculture is projected to become a very large share of fishery production in the near future, MNCs involved in food processing currently overwhelmingly rely on marine fisheries. Given the sustainability crisis in this industry, Unilever, the world leader in final frozen food products (Findus, Birds Eye, and Igloo), accounting for some 25 percent of the frozen fish market in Europe and the US, co-founded the most important initiative in sustainable fishery, the Marine Stewardship Council. Multiple actors including firms involved in fishing, processing, and retailing, as well as consumers, governments, and international organisations, contribute to shape different drivers of the fish value chain, such as quality, food safety, and sustainability (Wilkinson 2006). Their strategies and interventions are shaping the trajectory of the GVC, sometimes in contradictory ways. Apart from sustainability issues, there are public and private standards based on EU traceability requirements, and quality-driven procurement strategies from leading supermarket retail chains. The latter are increasingly shifting to direct contracting with trawler ships, cutting out intermediaries, in order to ensure standard compliance.

West Africa is endowed with very rich fishery resources, thanks to 6,000 km of coastline, a maritime Exclusive Economic Zone of 2,000 km2, and an upwelling along the coast of Senegal and Mauritania and the Gulf of Guinea ; the industry provides full-time employment to an estimated 3 million people, mostly artisanal fishers (Ndiaye 2013).

In West Africa, the fishing industry is a major contributor to gross domestic product (GDP), especially in Ghana, Mauritania, and Sierra Leone (De Graaf and Garibaldi 2014).11 Most exports for the global market originate from Mauritania and Senegal, and consist of fresh and frozen fish and seafood. However, there are smaller exporters across the region, as well as significant production for the domestic market. Compared to other African regions, post-harvest

11 Mali, Niger, and Burkina Faso have smaller fishery industries, reliant on the Senegal and Niger rivers.


value added is significant. Processing makes up between 10–20 percent of fishery contribution to GDP in Senegal and São Tomé and Príncipe, between 30–50 percent in Benin, Burkina Faso, and Côte d’Ivoire, and 70 percent in Gambia and Cabo Verde (FAO 2006). The processing industry is labour intensive and employs many women, 40 percent of employees in artisanal fishery and 70 percent in industrial fishery. Moreover, fish plays an important role in the region’s diet, especially for poorer communities.

There is significant potential for intra-regional trade in fish products (Atta-Mills et al. 2004; Ndiaye 2013). This requires addressing four constraints: (i) hygiene and quality standards for processed products; (ii) improving infrastructure and equipment for the handling, transport, storage and preservation of fresh, frozen, or processed fish products; (iii) market information; and (iv) improving the business environment (Ndiaye 2013).

A critical and urgent form of upgrading in ocean fishery is required in terms of production processes, ensuring the sustainability of the industry. Overfishing, overcapacity, habitat degradation, and inequitable access agreements with the EU have contributed to the decline in catches throughout West Africa (Atta-Mills et al. 2004). Moreover, it has been estimated that climate change could lead to a 21 percent drop in annual landed value, a 50 percent decline in fisheries-related jobs and a total annual loss of US$311 million in the whole economy of West Africa (Lam et al. 2012). This calls for efficient Monitoring Control and Surveillance (MCS) strategies to tackle illegal and unmonitored fishing, and a decisive shift to environmentally sustainable fishery practices (Belhabib et al. 2015). Only through the stakeholder partnerships envisaged in SDG 17 can the region succeed in these areas. Process and functional upgrading required to expand

regional production and trade would support SDGs related to poverty reduction, as the poor are involved both as producers and consumers of fish products, as well as to gender equality, through job creation in processing industries.

4.1.4 Processed foods

Processed foods industries have developed across West Africa, with varying degrees of capacity, competitiveness, and sophistication. Trade in processed foods tends to be small in values. Regional trade is key because it opens up important opportunities for smaller food processors that currently lack the capabilities to export to global markets. The regional market offers lower barriers to entry, with lower technical and sanitary and phytosanitary standards, more established distribution and marketing networks, similar consumer preferences, and easier routes to markets (wholesalers, independent retailers with no private standards).

The regional market for processed foods is growing as a result of at least three intertwined factors: high urbanisation rates, increased consumption of processed foods by urban consumers, and the spread of supermarkets. Table 15 shows that 2015 urbanisation rates in West Africa have been above 3 percent (except for Cabo Verde). Looking at household consumption of food and beverages, across each country, average urban consumption levels are significantly higher than the national average. The difference is particularly significant in Burkina Faso, Guinea, Mali, Niger, Togo and Senegal, where urban consumption is up to a third above the national average. In all countries, the gap rises when we look at the urban middle class. In Nigeria, Togo and Benin, consumption by the urban middle class amounts to three to five times the national average.

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Urban population growth 2015 (%)

Consumption of food and beverages 2010

(US$) Urban averageUrban

middle classBenin 3.6 201.63 232.92 1,011.52

Burkina Faso 5.7 117.62 158.43 383.06

Cabo Verde 2.3 1,186.33 1,450.86 2,432.98

Côte d'Ivoire 3.7 403.82 482.29 1,089.39

Gambia 4.2 278.93 343.42 971.63

Ghana 3.5 360.67 439.68 995.73

Guinea 4.0 313.67 425.83 1,126.24

Liberia 3.2 253.15 286.06 690.96

Mali 4.9 195.11 266.16 625.36

Mauritania 3.5 430.36 493.11 1,081.93

Niger 5.4 176.75 245.85 599.33

Nigeria 4.4 267.55 312.2 1,154.82

São Tomé and Príncipe 3.0 2,090.62 2,280.02 2,912.17

Senegal 3.8 299.58 382.99 884.68

Sierra Leone 3.1 402.9 455.31 965.3

Togo 3.9 206.72 286.23 1264.83

Table 15: West African urbanisation (2015) and food and beverage consumption (2010), by country

Source: World Bank Data, retrieved in July 2016 from http://databank.worldbank.org/data/home.aspx; Global Consumption Database, retrieved in July 2016 from http://datatopics.worldbank.org/consumption/detail

Urban consumption of food and beverages tends to involve processed and more sophisticated products than basic commodities. The experience of other developing regions and parts of Africa shows that supermarket retail chains play an increasingly leading role in meeting and shaping this demand. The supermarket revolution first started in Southern and Eastern Africa during the 1990s (Weatherspoon and Reardon 2003). South Africa has Africa’s most developed domestic retail chains, which have invested across the border into the Southern Africa region. In Kenya, some very competitive retail chains are expanding into the Eastern African Community countries. In both regions, these developments have importantly opened opportunities for local suppliers, but also raised entry barriers for smaller suppliers who have struggled to meet the high market requirements and private standards imposed by buyers. Supermarkets create buyer-driven value chains where they impose standards and organise their

supply chain and logistics in ways that improve efficiency, cut costs, and improve food safety (Dolan and Humphrey 2000).

In West Africa, supermarket chains are growing rapidly, albeit from low levels, with shopping malls being built across the region that rely on large supermarkets as anchor tenants (ACET 2013). In Dakar in Senegal, 25 percent of consumption is already controlled by supermarkets. Larger economies like Nigeria and Ghana have domestic supermarket chains. FDI flows are increasing, with US$1.3 billion invested in the retail sector across West Africa in 2010–2012. South African Shoprite and Swiss Spar have already invested in Ghana and Nigeria. Supermarkets will create larger domestic markets and introduce modern supply chain logistics and higher quality standards than traditional retailers. They will also potentially consolidate regional markets, by developing cross-border distribution, transport,


and logistics networks. However, this will also change how food processing firms in the region bring their products to market.

Urbanisation, rising urban consumption, and the rise of supermarkets create important market opportunities for West African food processors. However, this will require specific interventions from government in partnership with supermarket chains to upgrade local supplier capabilities.

The experience of Southern Africa provides at least two important insights: first, supermarkets operating in smaller economies tend to source from within their home countries, reducing the risk and costs of dealing with a weak local supply chain. Secondly, as local sourcing increases, it tends to focus on low-value bulk food commodities, whilst processed foods, both in-house brands and foreign brands, tend to be more difficult to localise.

Building a regional market for processed foods requires multiple initiatives such as assisting farmers to meet higher quality, cost, and reliability standards; developing cold supply chains and facilitating cross-border trade; assisting food processors in meeting technical standards and developing more sophisticated marketing skills; and incentivising large retailers to develop local supplier development programmes. These upgrading strategies would support SDGs related to inclusive poverty reduction and industrialisation, especially if smallholders and small- and medium-sized enterprises (SMEs) are targeted; gender equity, if female entrepreneurs are encouraged to participate in the supply chain; sustainability, when standards include environmental issues; and food security, if food prices decrease as a result of more competitive suppliers and retailers. Partnerships between lead buyers, governments, NGOs, and suppliers are key to achieving these outcomes.

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West Africa is one of the world top producing regions of cotton lint. Production expanded substantially in the past two decades, and producers have maintained a reputation as reliable suppliers of medium- to high-quality, hand-picked cotton to international traders and spinning companies (Larsen 2008). This is due to some of the traditional marketing boards being retained across the region. A combination of concentrated local monopolies, government intervention through marketing boards, regulations, quality controls, and provision of agricultural inputs to farmers have ensured that most countries have successfully preserved their reputations for quality, especially compared to other producing countries where deregulated and fragmented markets have led to deteriorating quality, like Tanzania. Cotton prices have stagnated, under downward pressure because of competition from synthetic fibres, cotton supply increasing faster than demand, and government subsidies in the US.

Quality upgrading and local processing are two avenues to upgrading in the cotton GVC (Gibbon 2001). Cotton lint trade is dominated by international traders, which play an important role in bridging differences in quality, timing, origins, and volume, in a global market characterised by large numbers of producers and importers (Gibbon 2001). Lint quality has become more important than in the past due to the increased automation of spinning processes which require known lint qualities and product characteristics (Larsen 2008). Some international traders have integrated upstream by investing in ginneries, domestic trading, and provision of inputs to farmers (Frederick and Staritz 2012). This has been critical to ensuring constant supplies of specific national origins and volumes to clients. Secondly, the increasing differentiation in the end market for textiles is supporting demand for high-quality cotton textiles. As a consequence, the process of quality assessment has deepened, and relies more on specialised instrumentation and customised orders. Thus, industry standards are being added to existing national standards. At the farmer level, the main incentive problem is that quality reputation is still based on national origin, not on individual batches, hence farmers do not have incentives to improve quality because they will receive a price set at national level. Addressing this disincentive requires collective action and public–private sector coordination.

The global textile industry is dominated by spinners and concentrated in a few countries, such as India and Turkey (Larsen 2008). The capital, scale, and skill intensity of textile production makes entry by lower income countries difficult. Very few countries or areas are both major producers and exporters of textiles and apparel: these are China, the EU, India, and Turkey (Frederick and Staritz 2012).

The garments industry has played an important role in the trajectory of many early industrialisers. Unlike textiles, apparel production is labour intensive, requires low skills and capital investment, and relies heavily on female labour. The apparel GVC has been one of the first manufacturing sectors to be characterised by the global dispersion of manufacturing operations. This buyer-driven GVC has been governed by different categories of buyers: mass merchants, brand marketers, brand manufacturers, and more recently specialised retailers in the US and EU (Bair and Gereffi 2001; Gereffi 1994, 1999). Each category of buyers has specific outsourcing strategies which impact differently on supplier capabilities and upgrading in developing countries.

With the phase-out of the Multi-Fibre Agreement in the second half of the 1990s, competition from Asian producers in the global clothing market has increased substantially. The global

Box 1. Apparel and textiles global value chains


apparel industry went through a process of restructuring (Frederick and Staritz 2012). The biggest winners in this process have been China and other low-cost producers in Asia (India, Bangladesh, and Vietnam). Regional suppliers, such as North Africa for the EU, have lost market share.

Cost competitiveness, in particular labour costs, and preferential market access remain important factors for suppliers to succeed in the apparel GVC (Frederick and Staritz 2012). However, increasing emphasis has been placed on firm-level upgrading. Buyers in the US and EU have reorganised their supply chains towards fewer, more capable suppliers, increasing focus on lean retailing and just-in-time supply, and demanding compliance with labour (apparel) and environmental (textile) standards (Frederick and Staritz 2012; Palpacuer et al. 2005). Supplier upgrading has taken various forms, including acquiring capabilities related to inputs sourcing, financing, product development, stock holding, and inventory management (Frederick and Staritz 2012). The most dynamic suppliers have become full package providers and have increased their contractual power in the GVC (Appelbaum 2008).

The overall impact of buyers’ demanding procurement strategies on suppliers is that entry and upgrading are both more difficult now than they used to be (Palpacuer et al. 2005). New entrants have to compete with large full package suppliers in a market characterised by stagnant demand in the North and declining unit prices due to stiffer supplier competition on the one hand and buyer power on the other hand.

West Africa has underperformed in the textiles and apparent GVC: export values are low, and apparel production is limited to Cut-Make-Trim operations. However, Ethiopia’s textile and apparel industry shows that there is room for African countries to catalyse investment in this industry and penetrate Northern markets (Staritz et al. 2016). Although the industry is at an early stage of development and any final conclusive assessment would be premature, Ethiopia’s industry has grown in terms of FDI, and of exports to the EU and the US. There is evidence of upgrading processes, in terms of end market diversification, process and product upgrading, and localisation of skills. The country’s experience highlights the critical role of selective industrial policies to promote new industries and upgrading processes. Such policies pursued by the Ethiopian government include pro-active and targeted FDI promotion, export promotion, subsidised infrastructure and transport, industrial parks, tariff protection in the domestic market, and setting up institutions to support firm productivity. This should be contrasted with the passive approach of Lesotho, where the lack of industrial policies to support upgrading of the local apparel industry supplying South African retailers is locking the country into the low value added segment of the value chain and is threatening the future of the industry (Morris et al. 2016).

Process and functional upgrading in the global cotton/textile/apparel GVC are challenging tasks and require very well designed, coherent, and well implemented industrial policies from governments. Process upgrading in cotton production requires less resources because West Africa already has a reputation for good quality cotton. Upgrading requires maintaining quality standards and pursuing certification. Textiles and apparel production are more ambitious goals, but would be important to support West Africa’s industrialisation objectives, and the apparel industry can play a critical role in poverty reduction, employment generation for women, and building industrial capabilities.

Box 1. Continued

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4.2 ICT Services

ICT services have been the fastest growing sub-sector in world services trade, even more so in developing countries. ICT as a sector includes various elements: infrastructure, ICT services and goods, access by households and businesses, and international trade in services and goods. In the early stages, ICT systems supported trade in basic call centre services, simple software coding, and generation of digital content (UNCTAD 2015b). India’s experience in seizing export opportunities with business process outsourcing (BPO) is well documented. However, nowadays ICT systems have become “core platforms on which innovation and work takes place, quality is ensured, and products are built and delivered” (UNCTAD 2015b, 2).

ICT is now critical both as a source of direct exports of telecommunications services, information technology (IT) system design, software development, and related tasks, and as an enabler of other services trade (UNCTAD 2015b). Direct ICT services include IT consulting and support services; computer programming activities; data processing, hosting, and related activities; IT infrastructure and network management services; and maintenance and repair services of computers and peripheral equipment. ICT-enabled services include the application of ICT to sales and marketing services, education, and e-government. Finally, there is a hybrid category of services which is partially ICT services and partially ICT-enabled: communications services (news provider), web portals, software development, over-the-top (OTT) communications services (such as voice and text over the Internet protocol, e.g. Skype and WhatsApp, and application service provisioning, e.g Twitter and Facebook).

The development of the ICT industry poses a number of regulatory challenges for developing countries. West African countries have fared relatively well compared to the rest of the continent, with the highest number of countries that have adopted legislation on consumer protection and privacy and data protection (UNCTAD 2015a). The region, however, still lags

behind Southern and Northern Africa in terms of e-transaction laws and cybercrime laws.

ICT can support private sector development in different ways (UNCTAD 2011). First, quality ICT infrastructure can support both SMEs and large corporations; in particular, mobile broadband is key in enabling them to supply internet-based services to the poor. The penetration of mobile phones in Africa is more than four times the penetration of the internet (WB and ADB 2015).

Secondly, ICT can support firm productivity and promote access to market (UNCTAD 2011). Business to Business (B2B) and Business to Consumers (B2C) e-commerce has been growing very fast, but has been concentrated geographically in the North and in China (UNCTAD 2015a). In sub-Saharan Africa, various e-commerce solutions have been adapted to develop commerce over feature phones: there are thousands of e-commerce start-ups although only few have reached scale.

Thirdly, the production of ICT goods and the services sector per se generate employment and enterprise development (UNCTAD 2011). Finally, e-government is helping to deliver public goods that support private sector development, such as agricultural extension services, business development training, help to small-scale producers to meet certification standards, and so forth.

Seizing the trade opportunities that the ICT industry brings requires West African countries to develop domestic technological capabilities related to software development, in particular, the capabilities to adopt and adapt foreign technologies, and possibly also to innovate. Domestic enterprises are better placed to develop software solutions for the local ICT industry and local ICT-enabled services (UNCTAD 2012). The close interaction between domestic producers and users generates learning opportunities and operational efficiency, which in turn support market expansion and diversification.

The software development industry has a number of important features: low capital-


12 This figure includes both ICT services and ICT-enabled services.

13 These included the introduction of a new telecommunication code in 1996, the privatisation of the incumbent telecommunications provider (Sonatel) in 1997, amending the Labour Code to support the labour requirements of call centres, and the introduction of investment incentives for ICT firms (Doumbouya et al. 2015).

related barriers to entry; high-value, high-growth domestic and global markets, including a growing demand for software applications also in the poorer economies; and applications for private and public sectors which are key to enhancing productivity and customer/citizen access to services (UNCTAD 2012).

Senegal provides an illustrative example of success in ICT services exports (Doumbouya et al. 2015). These were worth US$520 million in 2013 and represented approximately 47 percent of Senegal’s cross-border services trade.12 The IT and BPO services sector have emerged only recently as a result of policy reforms, new investment in ICT infrastructure, an incubation centre, and availability of advanced skills.13 In 2011, an estimated 96 ICT companies in Senegal were involved in sales, rental, and repair of equipment; creative activities; integration of information systems; software development; and computer consulting. A small number of BPO firms were contributing significantly to exports of call centre services, back-office operations, telemarketing, surveys and polls services. The ICT industry has been successful in attracting FDI, but there are also significant levels of domestic capabilities. Important successes include, for example, GAINDE 2000, a public-private partnership between the Senegalese Customs Administration and private ICT firms to develop the Single Window system for border clearance formalities. The system won several awards and is now deployed in Kenya, Togo, and Burkina Faso (www.gainde2000.com). Senegalese companies have also branched out to mobile money transfer and agricultural market information systems.

Expenditures on ICT within Africa could exceed US$150 billion by 2016 (WB and ADB 2015). Opportunities for Africa in the ICT industry are increasing: linkages with manufacturing are deepening; there is greater fragmentation and differentiation within the software industry;

business process offshoring is growing; and firms and individuals can leverage open source software, which has lowered barriers to entry (WB and ADB 2015).

West Africa’s upgrading in the ICT GVC can play a critical role in poverty reduction and inclusive innovation, two important SDGs. For example, mobile money systems have fostered inclusive financial systems for the poor as well as micro and small enterprises. Good governance enables better use of public resources for poverty reduction. In Nigeria, ICT solutions have been applied to decrease fraud and increase accountability in HR management within government, saving an estimated US$120 million solely in the pilot phase (WB and ADB 2015).

Moreover, ICT services can be tailored to support women entrepreneurs’ access to finance, skills and training, and services (UNCTAD 2011). BPO centres are important for female job creation, as women tend to constitute approximately 70 percent of employment in this area (Holman et al. 2007). ICT applications can also be used in industries and government services to improve environmental management and occupational safety.

4.3 Extractive Industries: Linkages and Development Opportunities

West Africa’s significant endowment of mineral, oil, and to a lesser extent gas resources has been an underlying factor in positive economic growth since the early 2000s. Whilst there is general consensus on the need to diversify African economies, governments should also leverage their resource endowment to promote industrialisation up- and downstream of their extractive industries. One strategy is obviously to maximise fiscal rents and invest them in infrastructure, education, enterprise development, and so forth. This, however, may not suffice to promote linkages, as shown by the

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experience of Botswana, which has historically managed to accrue significant revenues from the diamond sector and invest it effectively. Yet structural transformation processes have proven elusive, and the government is now adopting more selective and interventionist policies to support a diamond beneficiation industry and the shift towards a knowledge economy (Fessehaie et al. 2016). Downstream and upstream linkage development strategies therefore remain very important in achieving Africa’s objective to maximise and broaden the impact of the commodity sector (Morris et al. 2012).

In terms of downstream linkages, there are opportunities for industrial minerals where low-value/high-volume features confer important localisation advantages for the beneficiating industry. This has been an underlying factor in the success of the cement industry in some African countries. However, beneficiation of mineral commodities has historically been more difficult for Africa. These industries are scale and energy intensive, and usually require either public investment or large-scale FDI, which have often not been forthcoming. Moreover, they often operate on thin profit margins, which makes it difficult to compete with more established, and often subsidised, operations in the North and more recently China. Yet, in specific value chains such as steel, beneficiation would support further downstream manufacturing of finished goods. This is critical to foster broader industrial capabilities, and generate employment. The opportunities for downstream linkage development require an evidence-based, carefully designed strategy to select minerals where West Africa can be competitive in the medium term and which would support significant manufacturing activities further downstream.

Upstream linkage development strategies have seen different level of success in Africa (Morris et al. 2012). In most countries local suppliers are involved in the mining and oil supply chains as importing agents or providers of low value added services (cleaning, security, gardening). Overall, African countries have struggled

to develop high value added manufacturing and services linked to the hard and energy commodity sectors. Two countries in West Africa, however, Nigeria and Ghana, have been relatively successful (Adewuyi and Oyejide 2012; Block and Owuso 2012). The success of linkage development strategies impinges both on exogenous factors, over which governments have little leverage (the type of commodity, economies of scale involved in specific activities), and factors that are policy-influenced or -determined: skills, technological capabilities, corporate policies, and effective design and implementation of local content and beneficiation strategies (Morris et al. 2012).

Whilst the dynamics of the mineral and oil GVCs militate against the localisation of beneficiation industries in Africa, these same dynamics are more conducive to upstream linkage development. The extractive industry is increasingly outsourcing and nearsourcing, offering important opportunities for inputs suppliers (Morris et al. 2012). As mining and oil lead firms re-focus their activities towards their core competence, they progressively outsource activities to suppliers. These are expected to upgrade from providing individual products or services to providing full package solutions for an entire supply link. If economically efficient, buyers prioritise suppliers located in the proximity of the extractive operations, to ensure short lead time, efficient information flows, and responsiveness to the specific requirements of the operations.

In West Africa, the market for inputs into mining, oil, and gas is substantial. Imports and re-exports of capital equipment are significant, indicating large demand and cross-border trade. Whilst there is a need to be mindful of different characteristics of inputs industries required for oil/gas, ferrous and non-ferrous minerals, precious minerals, and non-metallic minerals, the region does seem to offer the economies of scale and scope for specific manufacturing activities. The export profile of the region has highlighted the existence of metal fabrication capabilities in a cross-section of countries. It would be


very important to understand the extent to which these are linked or can be linked to the supply chain of the extractive industry. In particular, the after-market segment of the value chain (spares, repair, and maintenance) is worth millions of dollars, and is more stable because less vulnerable to commodity prices variability. When manufacturing capabilities are sufficiently established, the opportunities for diversification into other sectors should also be explored (inputs into agriculture and infrastructure for example).

Upgrading in the mining and oil supply chains would enable West Africa to support SDGs related to industrialisation, upgrading, innovation, employment, and decent work. Supply firms of engineering products and services tend to be skills intensive and create quality jobs. They often invest more in innovation and can migrate to providing inputs into agriculture or infrastructure. Finally, supplier development programmes create the partnerships envisaged by the SDGs, and can specifically support women entrepreneurs and SMEs.

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West Africa’s trade profile is characterised by high levels of export concentration in unprocessed commodities. The richness and diversity of natural resource endowments across the region is significant, as evidenced by a variety of hard, energy, and soft commodities exports. Although still too low in relative terms, there are also export capabilities for value added products. The regional market is supporting the growth of value added industries across agro-food, manufacturing, and services sectors.

This study adopted five criteria to identify high-potential GVCs, namely:

1) Existing capabilities across the region;

2) Significant upgrading opportunities;

3) Growing markets;

4) Importance in LDCs’ and LICs’ export baskets;

5) Likelihood of supporting SDGs.

On this basis, six GVCs were identified as high potential: cocoa bean to chocolate; cashew nuts; fish; processed foods; ICT services; and upstream linkages to extractive industries.

If further narrowing down is required, we suggest that the top priorities should be:

1) Fish products;

2) Processed foods;

3) ICT services.

Available evidence shows that these value chains are already dynamic and firms are upgrading into higher value added value chain segments, especially to serve regional markets. They can create significant employment opportunities, at different skill levels, and have strong backward linkages to the agriculture and fishery sectors, and potentially forward linkages into increasingly modern retail chains.

For each of these value chains, the following research questions need to be addressed:

5. CONCLUSIONS

Value Chains

Research questions

Fish products

What is the relationship between inland and in-vessels processing activities?

What is the potential to increase filleted fish exports to the EU and Asia?

What is the role of multinational corporations (MNCs) in controlling the processing stages of the value chain? Could they support a regional upgrading strategy?

What are the obstacles to increasing fish processing for the regional market?

Processed food

Who are the lead food manufacturers in the region?

What are the key constraints in primary production affecting food processors further down the value chain?

Are there TNCs and African multinationals involved in supplier development that could be involved in a regional initiative for this VC?

Are governments designing strategies to commit the emerging supermarket retail sector to supporting supplier development initiatives?

ICT

What is required to upgrade and expand the ICT sector in countries like Senegal and Ghana?

What are the priority interventions to create regional markets for existing and potential ICT providers?

What is the potential for partnerships with foreign ICT companies?

What are the opportunities for countries that still do not have dynamic ICT firms?

Table 16: Potential further research questions for priority VCs for West Africa


Whilst each GVC is characterised by its own dynamics and upgrading opportunities, this study highlights the following cross-cutting issues:

1) Quality should be an important component of West Africa’s upgrading strategy

Upgrading in primary commodities can take many forms. Process upgrading aimed at quality improvements and certification can support West Africa’s efforts to accrue more rents in GVCs. This is true for cashew nuts, cocoa beans, and cotton lint. In cotton, West Africa already enjoys a good reputation but more could be done to penetrate the fast-growing market for certified organic cotton. In the cashew nuts and cocoa beans value chains, we find important intra-regional quality differences. Some countries have secured a quality-related price premium. In some cases, this has been the result of good environmental conditions, in others of effective policy interventions. Therefore, policies can also play an important role in countries currently producing at the lower end of the quality scale.

2) Functional upgrading requires well-designed and effectively implemented policies across various spheres of government

Moving up GVCs will require West African governments to effectively design and implement policies which cut across a number of sectors: agricultural development to secure quality, cheap, and reliable supplies to downstream industries; industrial development to attract investment and build technological capabilities; infrastructure to provide firms with adequate facilities and utilities; education to develop the skills required for more sophisticated activities; labour laws to ensure firms comply with occupational health and safety standards and decent work conditions. Upgrading strategies will also require adequate human and financial resources and political leadership to ensure their effective implementation.

3) Upgrading requires good understanding of lead firms and their governance strategies

In each priority GVC, we have found very different forms of governance which impact differently

on upgrading opportunities. For example, cocoa grinders are relocating intermediate manufacturing in producing countries, and mining and oil companies are outsourcing and nearsourcing. In these cases, policy makers can leverage these dynamics to support their upgrading strategies. Conversely, supermarket retail chains are not promoting cashew nuts or fish processing in producing countries; similarly, international traders do not invest upstream in cotton spinning. Hence governments can either use a ‘carrot and stick’ approach to secure the support of lead firms to their upgrading strategy or find alternative players who could take on this role.

4) Regional value chains offer important upgrading opportunities

Intra-regional trade is characterised by lower export values than are global exports, but by higher value added. This study shows that processed foods, plastic, and metal fabricated products, and the higher value added segment of soft commodities (fabrics, chocolate, roasted peanuts), are exported to regional markets. The highest value added segment of Senegal ICT services is also exported to the region, whilst lower value added call centre services are mostly destined for Europe. Whilst regional markets may not provide the scale offered by global markets, entry barriers are lower, and smaller regional producers can experiment and build capabilities in product design, manufacturing, brand management, and organising distribution networks.

5) Maximise the positive impact of GVCs on SDGs through policymaking

Participation and upgrading in GVCs can support some progress towards the SDGs. However, if significant impact on poverty reduction, gender equity, and environmental sustainability, to name a few, is to be achieved, governments need to shape the dynamics taking place within specific GVCs. This can be done through, among others, enforcing labour and environmental regulations; improving specific areas of the education system; and improving access to services, skills, finance,

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and markets for women. Within the ICT sector, initiatives could be adopted to support new tech entrepreneurs involved in inclusive innovation efforts that could revolutionise the way in which government delivers services and the poor participate in the economy. Governments should also play a key role in bringing stakeholders together, from lead firms to government agencies, trade unions to NGOs, in order to create partnerships that address key

constraints on economic and social upgrading. A number of international initiatives, as discussed with regard to the Marine Stewardship Council and the International Cocoa Initiative, aim to support the sustainability of the cocoa and fishery industries. However, their effectiveness in producing countries can only be secured or maximised if governments are pro-active in putting in place complementary measures and mobilising stakeholders.


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www.ictsd.org

Other recent publications from ICTSD’s Programme on Inclusive Economic Transformation include:

• Inclusive and Sustainable Growth: The SDG Value Chain Nexus. By Raphael Kaplinsky, 2016.

• The Gender Dimensions of Global Value Chains. By Cornelia Staritz and Penny Bamber, 2016.

• Trade Policies and Sustainable Development in the Context of Global Value Chains. By ICTSD, 2016.

• The Gender Dimensions of Services. By Julia Lipowiecka and Tabitha Kiriti Nganga, 2016.

• African Integration: Facing Up to Emerging Challenges. By ICTSD, 2016.

About ICTSDThe International Centre for Trade and Sustainable Development (ICTSD) is an independent think-and-do-tank, engaged in the provision of information, research and analysis, and policy and multistakeholder dialogue, as a not-for-profit organisation based in Geneva, Switzerland. Established in 1996, ICTSD’s mission is to ensure that trade and investment policy and frameworks advance sustainable development in the global economy.

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