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vcbannerOver the past decades world trade has been increasingly characterised by the fracturing of manufacturing and production processes, with different goods and services provided in different geographical locations, ultimately forming part of a single commodity. This global phenomenon, referred to as global value chains, has spawned significant research. This website acts as a repository for policy-orientated studies specific to value chains in the SADC region.


  • Institution AECOM International Development / USAID Southern Africa
  • Year Published 2012
  • Sectors Agriculture
  • Commodities Maize
  • Country (ies) SADC
agroculture

Synopsis
The main findings are:

  • Promoting the development of the maize value chain in the region will need more consistent and coherent policy approaches across the region.
  • It is important to understand the dynamics within the maize industry in order for a proper analysis of the value chains to be made.
  • There are various advantages and disadvantages of growing maize in the region.
  • There are also a number of strengths, weaknesses, opportunities and threats of maize production in SADC.
  • The main function of the maize value chain start with input supply, moving onto production, harvesting, post-harvest handling, storage, marketing, processing and consumption.
  • The horizontal or vertical relationships between different actors within the value chain and the governance structures that manage the relationships are critical to developing efficient channels to get products grown and marketed.
  • There are different actors for each function and they differ greatly across the countries especially when comparing SA and the rest of SADC.
  • Private trade and investment develops more slowly and more tentatively in countries where governments policy is unpredictable
agroculture

Synopsis:
Key findings

  • South Africa has est. 500 abattoirs, slaughtering 2.3 million cattle, 2.4 million pigs and 5.5 million sheep annually
  • 60% of South African cattle is produced by approx. 50,000 commercial (mostly white) farmers. 40% is produced by 240,000 emerging and 3 million communal farmers.
  • Supply chains vertically integrated, most abattoirs owned by feedlots (some also linked to farmers and SMMEs). Some sell directly to consumers or wholesalers (rather than auction)
  • South Africa’s beef consumption is not self-sufficient, is a net importer of beef (7 million kilograms imported and 4.4 million kilograms exported). Per capita consumption: ~15.70 kg, number of consumers: ~48.6 million.
  • In 2013 Africa commanded the highest amount of South Africa’s beef exports (primarily Mozambique at 46%), followed by Europe
  • In 2013, South Africa imported the most beef from Australia at 64%
  • Beef imports dropped 36% from 2012-2013, making the industry more self-sufficient. Likely due to Foot in Mouth Disease outbreak and the Global Economic Downturn
  • South Africa applies a 40% MFN tariff to its major importers
  • South Africa’s beef export destination countries generally apply preferential tariffs between 10-20%
  • Highest growing demand for South African beef is in Kuwait (annual growth 294%) and UAE (annual growth 194%)
  • Institution South African Department of Agriculture, Forestry and Fisheries
  • Year Published 2014
  • Sectors Agriculture, Agro-processing
  • Commodities Soybean
  • Country (ies) South Africa
agroculture
agroprocess

Synopsis:

  • Soybean production in South Africa has more than tripled over the period of observation (2003 – 2013). During this period, production outstripped domestic consumption, allowing for export opportunities
  • Soybean production geared towards oil and oilcake, animal feed and human consumption – crushed soybean (oil/oilcake) have seen an increase in demand, while processing for feed and human consumption has been fairly consistent
textile

Synopsis:

This paper provides a brief overview of the clothing industry, discussing the clothing global value chains and its main actors, the regulatory environment of global clothing trade and global trade patterns. It identifies different types of clothing firms and value chain channels and their implications on upgrading, skill development and sustainability, and assesses main challenges.

Synopsis:
The findings of the study are:

  • SACU firms are highly likely to experience major or severe customs and trade regulations compared to most other regions, making it more likely that firms trade on an intra- rather than an extra-regional basis.
  • The experience of firm’s manager is critical determinant on whether firms trade intra- or extra-regional.
  • Firms exporting on extra-regional basis are more likely to be foreign-owned.
  • A change in firm ownership and a new type of relationship with lead firms may be necessary in order to access some types of GVCs. All exporters in South Africa have a share of foreign ownership.
  • Domestic firms may have more opportunities to launch their own manufactured and branded products within their home market or in neighbouring markets with similar levels of development.
textile
agroculture

Synopsis:

SSA finds it challenging to integrate into the regional and global trading system. Geography and history are determinants of trade costs, but not the full story. Policy must play a role, both in terms of pure trade policy and also the set of measures surrounding infrastructure development and utilization – particularly air and maritime transport. Trade in agriculture costs higher than in manufacturing – considering that most SSA rely on agriculture trade this compounds the problem. Tropical products, horticulture goods, cut flowers have achieved considerable success in export markets by making use of good air and maritime linkages.

Key findings include that the UK and USA are important for SSA countries as sources of final demand in both agriculture and textiles, although the nature of the relevant value chains is quite different with a much longer chain developing in textiles, possibly due to the provisions of AGOA.

Weak global connectivity of SSA countries (air and maritime connectivity) results in weak global networks of trade.

  • Institution Food and Agriculture Organisation of the United Nations (FAO)
  • Year Published 2015
  • Sectors Agriculture
  • Commodities Maize
  • Country (ies) Tanzania
agroculture

Synopsis:

  • Maize is the staple food for the majority of Tanzanians. Most maize is produced by small-scale farmers and is usually grown under low input, rain-fed conditions. It is both a subsistence and a cash crop. The maize value chain is fragmented and poorly coordinated. There are many layers and inefficient connections between producers and consumers. Trust, reliable information systems and the benefits of economies of scale are not well established. The result is considerable uncertainty, which discourages investment by both resource-poor, risk-averse small-scale farmers and commercial investors.
  • It is expected that domestic and regional demand will significantly grow in the coming years, with additional demand for yellow maize for stock feed.
  • Once the right incentives and a positive business environment are in place there is a huge opportunity to develop the maize sub-sector using available technology.
  • Current constraints include uncertain land tenure, little access to affordable finance, poor rural infrastructure, periodic bans on cereal exports, corruption, local taxes on farm production, limited availability of improved seed, weak business skills and inadequate institutional and technical capacity. Many constraints are now being tackled on a sector-wide level.
  • Institution United Nations University World Institute for Development Economics Research
  • Year Published 2015
  • Sectors Manufacturing
  • Commodities Supermarkets (consumer goods)
  • Country (ies) Botswana, South Africa, Zambia, Zimbabwe
manufacturing

Synopsis:

  • Spread of supermarkets in Africa in early 2000s mainly caused by FDI from larger, richer African countries. Other factors: increasing urbanization, the entry of women into the workforce, increased per capita income, rise of the middle class, lower costs due to economies of scale, transport economies, improved modern infrastructure
  • Shoprite, Pick n’ Pay, Spar, Woolworths and Fruit & Veg City all have expanded from South Africa to develop stores in the region
  • Spread of SA supermarkets facilitated by increased sale of dry, processed foods which allow easier realisation of economies of scale. Also from centralised procurement. More supermarkets in the region allows increased exports of food from SA to the region.
  • Trend now changing from South African supermarket chains spreading in the region to other SADC country chains spreading throughout Southern Africa. Most notable e.g.: Botswana’s Choppies now spreading from Botswana to SA, Zimbabwe and Zambia, plans to continue expansion in Africa.
  • Barriers to entry for the establishment of supermarkets throughout Southern Africa: perishable goods require large investments in logistics, distribution, and inventory maintenance and advertising, also local content policies in most countries
  • Zambia is beginning to export soaps, detergents, candles and cereals to DRC due to increased industrialisation in Zambia and increased presence of supermarkets in DRC

Synopsis:

  • Lesotho, the Seychelles, Swaziland, Tanzania and Zimbabwe are in the global top 30 in terms of GVC participation
  • SA producers selling goods to African supermarkets that pay lower prices than European ones can often make up for these costs due to less stringent standards in Africa
  • Contains individual country reports detailing their progress in GVC integration
mining
construction

Synopsis:

  • Examines the dynamics which determine whether local or regional construction companies are utilised in building rail infrastructure which is being developed to exploit coal discoveries in Tete, Mozambique
  • Lead firms in mineral exploitation (such as Vale in Mozambique) tend to procure from large MNC construction suppliers with pre-established relationships. This limits local capacity building
  • Local Mozambican construction firms struggle with financing, meeting health and safety standards, supply chain coordination (cost/shortages of inputs)
  • RVCs are being developed through the strong presence of South African construction companies (are competitive on price and quality with Chinese and other international firms)

Synopsis:

Once concentrated among a few large economies, global flows of goods, services, and capital now reach an ever-larger number of countries worldwide. Global trade in goods and in services both increased 10 times between 1980 and 2011, while foreign direct investment (FDI) flows increased almost 30-fold. A value chain is global when some of these stages are carried out in more than one country, most notably when discrete tasks within a production process are fragmented and dispersed across a number of countries.
SACU-region global value chains are both a new reality and significant opportunity for expanding non-commodity exports to support growth, diversification, and job creation in the region. The task-based nature of GVCs creates opportunities for developing countries to establish very quickly a position in global trade within a sector in which they may have had no previous experience. For South Africa, GVCs are seen as a route to higher manufacturing exports and greater value addition. For other SACU countries, GVCs are seen as a route to diversification and global integration, and to leverage the possibility of greater investment from South Africa itself.

Synopsis:

  • The implied logic of GVCs are that firms build local and regional value chains before moving into GVCs – local and regional markets often offer less competition and firms understand these markets better.
  • However, for some countries (especially LDCs) domestic capacity might be so limited that it won’t be possible to establish a local productive base, instead such countries would have to rely on FDI for necessary (financial/technical) capacity
  • There are two types of regional value chains:
    • VCs focused on regional production for regional consumption
    • Regional VCs aimed at global markets
  • Initial analysis of intra-regional trade intensity suggests that Commonwealth countries trade more in additive types of VCs (e.g. natural resource based, agro-processing, etc.)
  • Intra-regional trade in the Commonwealth is dominated by mineral fuels, machinery and manufactured goods. Certain barriers such as restrictions in financing, registration processes and discretionary enforcement of regulation can affect trade in GVCs
  • Firms with a 10% share of foreign ownership are more likely to export
  • Customs and trade regulations appears less problematic for intra-Commonwealth exporters
    • Small Island Developing States are more likely to export to other Commonwealth countries
  • Market size is a strong determinant of the volume of GVC trade.
  • Countries with large markets tend to source a relatively low share of foreign inputs for their production of exports. This is because the larger the domestic market, the larger the pool of domestic intermediates to source from.
  • Institution Centre for Competition Regulation and Economic Development
  • Year Published 2015
  • Sectors Mining, Transport, Construction
  • Commodities Coal
  • Country (ies) Mozambique, South Africa
mining
transport
construction

Synopsis:

  • Africa generally lacks adequate large-scale infrastructure due to limited investment during the 1980s/1990s. Extractive industries often attract large-scale infrastructure – key consideration is what the benefits of this is to local economic development (i.e. do MNCs use infrastructure to extract minerals and repatriate profits or are backward linkages formed that benefit local development)
  • This study investigates the case study to explore the institutional dynamics of lead firms, the government and Mozambique and development partners involved in infrastructure development to establish how these dynamics influenced local economic development

Synopsis:

  • Regional integration can either lead to trade promotion or trade diversion
  • Southern Africa accounts for 40% of Africa’s GVC participation
  • Most foreign value add in African exports is from outside the continent, but South Africa provides over 10% of intermediate goods in Botswana, Namibia, Swaziland, Zambia and Zimbabwe.
  • Examples of VCs in Southern Africa:
    • In automotives, South Africa exports products which are then exported back to SA (RVCs)
    • Textile products are exported to SA by SACU members (RVCs) and then exported internationally by SA (GVCs)
    • Dairy products, cocoa, soap, and plastic are exported to SA from SACU countries (RVCs)
mining

Synopsis:

The research findings in this report focus on (i) the impact of privatisation on upstream linkages development, (ii) firm ownership and value chain governance and (iii) local supply firms’ trajectory.

  • Emergence of informal traders and imports on the one hand and higher performance requirements on the other, which was worsened by no support from government culminated in stiff competition.
  • Poor access to capital and infrastructural constraints affected the cost competitiveness of supply firms.
  • Privatisation of the copper mines was a critical determinant of the extent and depth of upstream linkages to copper mining since the 1990s.
  • Competition along the supply chain became stiff, because of trade and investment liberalisation, and the provisions of the Development
  • Agreements granting tax exemptions on capital equipment imports.
  • After privatisation, Zambia’s copper industry ownership
    structure became highly diversified
  • Firm’s ownership shaped value chain governance in significant ways.
  • The small market power of these fragmented small-scale operations resulted in a particular power relation with original equipment manufacturer’s (OEMs) and other large suppliers
  • The small-scale buyers‟ value chain was characterised by low entry barriers, as buyers were willing to engage with new products and new suppliers, also from Asia.
  • Chinese mining OEMs started positioning themselves in these value chains, offering advantageous credit terms, and often displacing established OEMs which would facilitate future expansion in the large buyers‟ supply chains
  • Value chain governance was critical in shaping these trajectories.
  • Local upgrading process was supported by the supply firms’ backward integration in their respective GVCs.
  • Chinese supply chain offered market growth opportunities, through low entry barriers and good payment records
  • This thesis also found a number of issues surrounding buyer and supplier cooperation.
mining

Synopsis:

This paper highlights the importance of bridging the gap between the extractive sector and productive value chains in order to foster sustainable structural transformation. It stresses the importance of:

  • creating linkages within the extractive sector, notably through focused industrial policy to boost backward and forward linkages
  • promoting linkages outside the extractive sector, notably in the field of agriculture, currently the most important economic sector in Africa
  • identifying concrete areas where extractive industries can contribute positively to value chain production; and
  • the global context in which industries operate and the need for countries to position themselves in a strategic manner in the product space, notably in the context of global value chains, to make sure they integrate fully into the complex system of fragmented production.
extractives

Synopsis:

  • The paper first provides an overview of literature related to the resource curse, and how thinking around this topic has changed. Extractive sector and industrial development are no-longer seen as mutually exclusive activities.
  • Due to increasingly outsourcing and fractured production processes (that manifest across regional/global value chains) there is increasingly scope for predominantly mineral exporters to increase their value addition and form part of these value chains.
textile

Synopsis:

  • This paper looks at different sources of foreign direct investment within the same value chain in a country, and how different sources of FDI can influence value chains differently.
  • This paper also investigates the dynamics of aligning international labour standards while promoting competitiveness
  • The paper starts with an overview of the related GVC literature, before looking at the characteristics of the textile and clothing value chain in Lesotho. Case studies of two different sources of FDI (international and regional) are investigated.
  • Research found that regional FDI has a higher likelihood of leading to greater participation of the investor due to proximity, and ultimately an incentive to relocate more production functions. Whereas global FDI is seen to exploit specific competitive advantages for a specific objective. Taiwanese (international) FDI was largely focussed on exploiting cheap labour in Lesotho to produce for mass-markets in the US, resulting in little skill and technology transfer, and little further investment. In contrast, South African (regional) FDI looked towards shifting production of clothing to Lesotho (due to unfavourable local conditions) and had greater incentive to make continues investments (financial, technical, etc.) in their Lesotho operations.