Boosting Agriculture, Services and Value Chains is Key to Africa’s Competitiveness

June 4, 2015

African Competitiveness Report 2015


CAPE TOWN, June 4, 2015

  • Despite high economic growth, competitiveness in Africa is stagnating, with few signs that productivity is rising, thus hindering the prospect of inclusive and sustained growth.
  • Poor-quality institutions, infrastructure, health and education hold competitiveness down, although efficiency in goods and labor markets is improving.
  • Supporting Africa’s structural transformation will require a comprehensive policy mix that prioritizes transport and ICT infrastructure, education, trade and further regulatory reform.

African economies’ prospects for long-term, sustainable growth are under threat from weakness in the core conditions necessary for competitive and productive economies, despite outwardly healthy-looking growth rates in many parts of the region, according to the African Competitiveness Report, which is published today.

The biennial report, themed Transforming Africa’s Economies, combines detailed data from the World Economic Forum’s Global Competitiveness Index (GCI) with studies on three key areas of economic activity; agricultural productivity, services sector growth and global and regional value chains. The data points to low and stagnating productivity across all sectors: agriculture, manufacturing and services, partly as a result of ongoing weakness in the basic drivers of competitiveness, such as institutions, infrastructure, health and education. This shortfall masks a better performance in other areas of the economy; specifically, better functioning of labour and goods markets.

In view of Africa’s young and growing population, labour-intensive sectors must play a larger role in the continent’s transformation: the growth in services – both in terms of GDP and employment – cannot propel Africa’s growth alone, and even here development remains uneven, with too many people employed in low productivity services.

“Due to the rapid growth of Africa's working-age population, investments in highly productive labor-intensive sectors will be crucial to create more globally competitive economies. These investments will also promote the regional agenda for inclusive growth and generate much-needed employment opportunities for women and youth,” said Barak Hoffman, World Bank Group Governance Specialist and co-author of the report.

Key findings from the report’s analysis include:

  • Improving agricultural productivity: Agriculture provides an important source of income for the majority of African citizens, but productivity remains too low and based on small-scale subsistence production. Improvements such as better leveraging of technology (both information and communications technologies, as well as development of high-yield crops and better irrigation), more clearly defined land property rights and promotion of rights and opportunities for women, who represent a significant share of the agricultural workforce on the continent, are all needed to address this. Moreover, enabling greater market access for small-scale farmers would help ensure inclusiveness, while the development of regional value chains would serve as a useful stepping stone, enabling them to improve production and marketing processes, and ultimately to meet the quality standards of world markets.
  • Leveraging services: Services exports are typically viewed as an area of comparative advantage for more advanced economies, but a deeper examination of trade statistics suggests that they are much more significant for Africa than previously thought, especially as inputs into exports from other sectors. Further development of low-cost, high-quality services will help countries participate in local, regional and global value chains. It will also encourage policy-makers to promote services development as part of a wider growth agenda. 
  • Tapping global value chains (GVCs): Greater participation in global and regional value chains can accelerate African economic transformation through the gains associated with enhanced productivity and the development of new activities. However, gains from GVC participation are not automatic and require a broad set of policies, with a particular focus on trade facilitation, investment, transport infrastructure and access to finance. Many of these policy areas have economy-wide benefits beyond GVC integration.

“Business cannot continue as usual in Africa’s agriculture sector. It is imperative that productivity be significantly boosted through tailored agriculture research, harnessing ICT and strengthening linkages between small-scale farmers and commercial producers while better integrating them into regional and global value chains,” said Steve Kayizzi-Mugerwa, Ag. Vice President at the African Development Bank.

“The service sector is rapidly becoming much more prominent on the development agenda across Africa and for the World Bank. In many countries across the region, services are the most rapidly growing sector, creating new jobs and economic activities, and providing critical inputs to boost production in other sectors. Yet productivity of the service sector remains low. To be more competitive, governments must lower trade barriers as well as enact complementary regulatory reforms. These reforms are also necessary for Africa to deepen its integration into global value chains,” said Anabel González, World Bank Group Senior Director for Trade and Competitiveness.

“To consolidate the progress achieved and make new gains that will allow sub-Saharan Africa to fulfil its full potential, we need to promote further investment in infrastructure, adopt swifter trade procedures, increase regional integration and build more effective institutions. Faster structural transformation is also needed to boost productivity, enhance job creation and improve social cohesion,” said Angel Gurría, Secretary-General at the Organisation for Economic Co-operation and Development (OECD) in Paris.

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