Global value chains and the Bank's response

22/05/2014
Share |

A value chain, or sector, is a set of products (goods or services) and producers combining to serve a market or even the world market. "Nowadays, growth should be translated into transformation; that is, it should not be merely a growth in GDP, but a transformation of our economies to create jobs, climb the value chain and integrate international trade," says Donald Kaberuka, President of the African Development Bank (AfDB).

According to the AfDB 2013 Annual Report, global value chains (GVCs) are an important, dynamic platform Africa could use for its industrialisation and beneficial integration into the world economy. According to this concept, it is more profitable to be a link in the production chain than to control its entire process.

Nevertheless, the document, which was published on the occasion of the Bank’s Annual Meetings in Kigali (May 19-23, 2014), says countries should analyse the costs and benefits of GVCs to avoid becoming trapped in low productivity value chains or suffering environmental degradation. GVCs could also undermine regional trade agreements.

To industrialise the continent and diversify its economy, success will require an innovative, far-sighted approach which takes full advantage of Africa's enormous natural resources, of the youth of its population and of a middle class that is growing in power. At the operational level, the Bank has carried out a number of projects and activities in agriculture, transport and ICT with implications for GVCs.

The Bank’s Ten-Year Strategy for 2013-2022 stresses the importance of GVCs for Africa's integration into the global economy. Policies and strategies for the private sector, regional integration, agriculture and human development are all moving in the same direction.

Recent examples of the Bank's private sector operations with considerable potential for stimulating GVCs include its support for Nigeria's manufacturing and agro-industrial sectors, its trade financing programme to a value of US $1 billion set up in 2013, and its loans for transport and energy projects in East Africa and southern Africa. The Bank has also undertaken studies and other knowledge-based activities focused on GVCs.