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Forging new value chains for African goods

Can emerging industries preserve and protect added value within Africa?

Lionel Stanbrook
5 November 2019

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Although trade statistics are unable to reveal what originates where, and what is sold at which price, with sometimes unintended and dramatic effects on trade relations, significant commodity value chains originating in Africa have been circumnavigating the world for decades. But Africa benefits the least as their commodities and natural resources are invariably just hoisted out of the earth and immediately exported for onward processing and value enhancement.

At the margins, the less valuable raw materials remain stubbornly local. For example, in Abidjan, Cote d’Ivoire, women and girls dice with death and 4x4s between the traffic lanes on main roads in the evening rush-hour by selling bags of groundnuts, plantain chips, or coconut pieces, which they have grown or prepared at home.

On the beaches of nearby Jacqueville, Assinie, and Bassam, they walk all day on the hot sand selling bottles of pressed juices they made in the morning from hibiscus flowers, ginger, pineapple, mango, papaye or baobab, piled high in large baskets on their heads. Other women sell creams, soaps and ointments, also made locally or in neighbouring countries.

On the other hand, within the city of Abidjan, men and boys dominate the morning’s traffic-dodging, selling goods that are mostly manufactured outside the country. These include windscreen wipers, plastic toys, jump-leads and coat hangers; products they have bought in bulk at a small discount from foreign-owned wholesalers or supermarkets. This, by contrast, is invariably the last and least profitable link in an international value chain that often reaches into Europe, Asia or the Americas, and back again.

In summary, wherever and whenever Africans are involved in value chains, they are often at the wrong end, or else stuck between the links where the margins are vanishingly small.

And at the continental and macro-economic end of the scale, Africa is importing far too much of what it should be producing (over $60 billion in food products alone in 2018) - although tragically it often re-imports what it had previously exported in raw form, but only after extra value has been ladled onto it in a more developed country.

It is ironic and instructive that most African nations cannot feed themselves, when there is so much fresh food available outside the processed and manufacturing categories within the continent. Almost every week I discover a new vegetable or fruit grown in Cote d’Ivoire, but there are few with markets wanting to supply it or customers persuaded to consume it.

But sustained and inclusive economic growth can only happen if Africa succeeds in creating global-facing industries and manufacturing processes for its raw materials. The question arises, if the developed world depends on Africa for raw materials for its manufacturing, how has Africa not taken advantage of the value chains that start in their own countries? How is it that Africa, rich in resource, remains poor?

A partial answer is often given that poor countries are those that have been unable to diversify away from agriculture and minerals extraction and towards manufacturing and other activities.

What many do not also say is that the necessary diversification cannot easily happen in the wide open conditions of global free trade. The growth opportunity can be realised only if local resources can be deployed in adequate quantities to produce goods for the external market before the new market opportunities are prematurely seized by a foreign predator brandishing an African identity.

This was, after all, how other regions managed to grow their industrial base. But there have been trade predators in the weak economies of Africa not just under colonialism but equally since. For example, Chinese textiles factories in Africa in the past 30 years have destroyed thousands of mostly rural textile businesses across West Africa with their cheaply manufactured clothes.

The uncomfortable truth is that domestic African production capacity is still at an early and unformed stage. In addition, many of the commodity deals struck by African government negotiators with international companies, multinationals and their sharp-thinking lawyers have been naïve and self-harming.

If trade data could demonstrate and prove the strength of Africa’s inherent advantage as the producer and determinant, the continent would at last benefit from its own work. But all too often, sophisticated transfer pricing sucks the enterprise out of African trades, impoverishing the African farmer and producer, and forcing them into continued economic dependency.

African governments, regional organisations and development finance institutions need to act in robust defense of their precious and emerging local industries, helping them build and connect their own value chains for a rich harvest of domestic added value and producing more competitive goods for export to other countries and internationally.

 


Lionel Stanbrook has been Chief of Communications at the African Development Bank since 2016 and Senior Editorial Consultant since 2018. He was previously Communications Specialist at the World Food Programme, and Managing Partner at Clement Reputation, a communications agency based in Basel, Switzerland. He spent eight years as Head of Reputation Management at Syngenta GmbH in Basel and was previously Managing Director of PRM Consultants, a Brussels-based communications agency.

Between 1991 and 2000 he was the Deputy Director-General and Head of Communications at the UK Advertising Association, after spending 10 years working as Political Adviser in the European Parliament and the European Commission in Brussels, including 3 years as the Speechwriter and Spokesperson of the President of the European Parliament.

He trained as an advertising copywriter and journalist and studied at the University of Oxford, where he obtained an MA (Oxon) after reading Modern History and Languages.

Email: cjlcs50@gmail.com