Head of UNDP Africa at the African Economic Forum

Oct 6, 2014

Talking points, Abdoulaye Mar Dieye - XIV International Economic Forum on Africa: “By Africa, for Africa?” Industrialisation and Integration for Inclusive Growth
Monday, October 6, 2014, OECD Conference Centre, Paris

Integration in global and regional value chains provides enhanced opportunities for small producers, suppliers, processors and agents along the value chain (transport, marketing) to reach larger markets and improve the quality and value of their products. Africa remains a marginal player in world trade, accounting for only 2.8% of world exports and 2.5% of world imports in the decade from 2000 to 2010. African countries account for only a small share of global agricultural exports, and most commodities are exported in their unprocessed form (UNCTAD data quoted in AEO 2014).

The channels for poverty reduction include inclusive, sustainable and broad-based growth that creates jobs for growing populations through economically diversified and export-oriented economies as well as enhanced agricultural transformation and reduced food insecurity (AEO 2014).   Africa’s record of structural transformation has been poor but the story is changing for the better.   While productivity growth has been slower than in other regions of the world, there is evidence from the recent African Economic Outlook Report (2013) that since 2000 labour has started moving from less to more productive activities. A sample of 19  countries reveals that labour productivity grew by 2.18% after 2000 and the contribution of structural change across sectors was 0.87 percentage points or roughly 40% of the total. In contrast to the earlier period from 1990-99, structural change now accounted for nearly half of Africa’s overall productivity growth.

The drivers behind positive structural change have been the quality of governance, human capital accumulation, competitive exchange rates and the share of the labour force in agriculture.   The higher the quality of governance as measured by the Mo Ibrahim Foundation (2012), the more positive the structural transformation. Human capital accumulation as measured by changes in primary school completion is also positively correlated with structural transformation.  In addition, the more competitive the exchange rate (measured by a comparison of price levels across countries), the more rapid the drop in the share of agriculture in employment. At the same time more competitive exchange rates are positively correlated with the share of employment in manufacturing. Finally, countries with a higher share of the labour force in agriculture are experiencing greater growth-enhancing structural change (AEO, 2013).

Regional economic integration policies are key to enhancing Africa’s competitiveness and sustainable human development (UNDP Report on Regional Integration and Human Development, 2011): This includes policies that govern liberalization of trade, investments in regional infrastructure, harmonization of regulations and standards, common approaches to macroeconomic policy, management of shared natural resources, and greater labour mobility.

Importance of regional economic integration (UNDP, 2011): (i) It addresses the disadvantage of being landlocked and the fragmentation that limits market size and denies economies of scale to many countries; (ii) Promotes resilience through pooling capacities to respond to vulnerabilities; (iii) Promotes human development through tariff reduction, customs unions investments in infrastructure, technological upgrading and policy harmonization which enhances competitiveness, productivity and employment, especially for young people; (iv) Greater labour mobility which safeguards the rights of migrant workers could contribute to incomes and  empowerment; (v) Sustainable management of cross-border natural resources for human development.

Policies that promote job creation through local, regional and global value chain development can rebuild livelihoods and social cohesion (AEO 2014). This applies in particular to countries recovering from recent or long-standing conflicts. New jobs can provide economic opportunities for women, youth and other marginalised groups. Examples from Africa and Asia show that a proactive approach to private sector development using a value chains approach effectively reduces poverty, builds community resilience and helps resolve local-level conflicts. The development of agricultural value chains in Northern Uganda and Rwanda have contributed to economic growth and conflict mitigation. In Northern Uganda, cotton production and sales expanded despite local insecurity. In Rwanda, exports from coffee processing increased.

These experiences demonstrate the significant potential for value chain development, especially in agriculture, to promote poverty reduction and community resilience.
UNDP experience in promoting regional integration focuses on promoting Inclusive businesses that include low-income people in the value chain for mutual benefit -- on the demand side as customers and on the supply side as employees, producers and entrepreneurs.  Our Inclusive Market Development (IMD) approach works to develop private sector markets by strengthening the whole market system – enterprises, business relationships, market structures or the business environment.   The focus is on target value chains and collaboration between policy makers, lead firm, MSMEs and smallholders.

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