Source Kiel Institute for the World Economy.
Is the problem that there is no market for more value-added African produce? The answer is somewhere between ‘How can we know?’ and a resounding no. And this is because we have not made much of an effort, especially in today’s world where you do not even need to produce finished products to increase our participation in the global value chain.
Value addition has moved beyond producing finished goods to intermediate production
Writing for tralac, John Stuart, an economist and policy analyst points out that, “the bulk of global trade today (about 70%) is not even in finished products, but in intermediate products: items that are used in the further manufacture of products or the repair of existing products.” In other words, most of what is traded globally is not finished products, but components that are needed to finish a product or maintain it. Per data from the World Bank’s World Integrated Trade Solution, sub-Saharan Africa imported more than $14 billion of these intermediate products in 2020, up from just over $11 billion in 2015. The spare part trade is a big portion of the China-Africa trade as my Nigerian Igbo brothers will, no doubt, attest.
All of Africa’s competitiveness is in primary production. This leaves a lot of space which informal attempts at value-addition struggle to fill partly because of a lack in standardisation. It is the reason why small-scale manufacturers in Aba, Nigeria, will slap on a “Made in Taiwan” label on electronics or a “Made in Italy” on shoes. One way to look at it is to criticise the apparent dishonest display. The other way to look at it is to see the unspoken appeal to what is considered the standard. I remember speaking to some guys in Enugu, Nigeria, whose company (funded by All-On) built quality solar inverters but their wholesale partners chose to add “Made in Taiwan” labels to the inverter packs, because customers wouldn’t consider “Made in Nigeria” good enough, even though it was better in many cases and had better and trained local support and readily available spare.
Made in Taiwan, Made in Japan and recently, Made in China were all considered a sign of poor quality, but now even the best iPhones are proudly Made in China.
A lot of the time the barrier to accessing global markets comes down to efficiency, not even quality. What is the use of investing in a farm that produces quality fresh produce if I can’t get it to customers in Singapore on time and in a dependable manner?
The foundations of Taiwan’s export economy was laid in the relatively smooth Taiwan-US shipping when they were known for producing only umbrellas. That efficiency is key to how Taiwan now runs the world’s IT infrastructure backbone today through its chipmaking giant, TSMC.
Simple and boldly executed strokes of the pen have a part to play certainly. But so does the collective thinking of what it means to be an African entrepreneur. Sure, investment in Africa because there is so much opportunity to make gazillions on the continent. But what about “Invest in Africa because we are using our primary production to deepen our participation in global value chains?”
We’d love to hear from you
Psst! Down here!
Thanks for reading The Next Wave. Subscribe here for free to get fresh perspectives on the progress of digital innovation in Africa every Sunday.
Please share today’s edition with your network on WhatsApp, Telegram and other platforms, and feel free to send a reply to let us know if you enjoyed this essay
Subscribe to our TC Daily newsletter to receive all the technology and business stories you need each weekday at 7 AM (WAT).
Follow TechCabal on Twitter, Instagram, Facebook, and LinkedIn to stay engaged in our real-time conversations on tech and innovation in Africa.
Senior Reporter, Business and Insights