Deepening Regional Integration: A Value Chain Perspective

The signing of the CFTA by 44 African states symbolises an important milestone in the African integration process since the founding of the Organisation of African Unity in 1964 – now the African Union. The CFTA constitutes one of various regional arrangements intended to increase intra-Africa trade and drive industrialisation. While this indicates commitment among African leaders to deepen regional integration, lack of strong and productive regional value chain (RVC) linkages; with increased participation of all member states stalls the process of industrialisation and structural transformation. Development of regional value chains is crucial for building industrial capabilities, which shape countries’ growth paths. Lack of industrial capabilities in African economies limits the opportunities for producing diversified and sophisticated products that can improve terms of trade and sustain growth. Intra-regional trade data continues to show that economies on the continent are not integrated. From 2005 to 2016, Africa’s share of world exports only grew from 1.8% to 2.2%. Primary commodities including minerals and agricultural products continue to dominate Africa’s export basket. This poses a key challenge for most African countries regarding how they can develop their economies beyond, or on the basis of linkages to the mineral wealth of the continent.