Industry Employment Shares

Figure 5.9 Correlation between GVC Participation and Changes in Industry Employment Shares

Transport equipment

Electrical and machinery

Metal products

Chemical and non-metal products

Wood and paper

Textiles and apparel

Food and beverages

0 0.1 0.2 0.3

Source: World Bank calculations using data from the United Nations Conference on Trade and Development’s Eora database and the United Nations Industrial Development Organization’s Industrial Statistics Database at the 2-digit level of ISIC (INDSTAT2). Note: The data are for Côte d’Ivoire, Cameroon, Ethiopia, Ghana, Kenya, Malawi, Senegal, and South Africa. Global value chain participation rate = foreign value-added shares in exports + indirect value-added shares in exports. For the leather industry, the GVC participation rate cannot be computed because of data unavailability. Correlation is significant except for food and beverages, textiles and apparel, chemical and non-metal products, and metal products. GVC = global value chain.

The manufacturing employment share remains relatively small in the region although it is increasing, and it is fair to say that many countries in the region are yet to have trends of successful industrialization. Nevertheless, industrialization will still be a key engine of growth in Sub-Saharan Africa, creating decent jobs, boosting productivity growth, and making a significant contribution to inclusive growth. The potential is huge, and there are reasons to be optimistic about the region’s industrial future. Sub-Saharan African manufacturing shares of employment and value added, although lower than the region’s comparators, are more stable than the shares in other regions and are increasing steadily, albeit from a low base (Naude 2019).

Integration into GVCs is providing new windows of opportunity to grow jobs and increase productivity in the manufacturing sector. Countries in the region have benefited from insertion into GVCs to grow jobs. Not only has the region expanded jobs in manufacturing through GVCs, but the contributions of GVC participation to job growth in the other key sectors—agriculture and

services—are even higher. And, although the use of labor-saving technologies has depressed GVC job growth, the region still has viable options for increasing jobs through integration into GVCs to offset this decline.

The available viable policy options are to aim to enter and expand activities in high-growth end markets as well as to improve countries’ competitiveness in capturing much of the value added in final consumption. In this strategy, fastgrowing end markets such as the European Union are as important as domestic demand. Achieving entry into these end markets will require exerting effort toward gaining market access through favorable trade agreements (preferential tariffs, less restrictive nontariff trade barriers, and simplified rules of origin) as well as trade facilitation and logistics.

Sustaining and increasing the jobs and productivity gains from manufacturing GVCs in the region will also require the implementation of policies that would attract lead firms and global suppliers in the value chain. Strengthening cooperation between public and private global and local actors will be needed to remove impediments and allow countries in the region to leverage international supply chain links or dynamics, to improve their role in global and regional chains (cf. Gereffi 2014). Such efforts would include adopting better trade and investment promotion policies, such as competitive exchange rate regimes, favorable and attractive but strategic foreign direct investment policies that target priority industries and sectors, an improved business environment (such as property rights protection), labor market regulation, and good transport infrastructure.

Inadequate supply of high-quality or affordable foreign inputs is a constraining factor in productivity and job growth. Policies and bottlenecks that inhibit access to these crucial foreign intermediates should be removed or strategically reformed to allow domestic firms to access these inputs. While sourcing intermediate inputs from abroad, a complete national export success strategy for countries in the region will require additional policies that focus on efforts to create regional integration agreements that would promote the sourcing of a sizable share of production inputs from countries in the region, which would strengthen Sub-Saharan African countries’ export positions in the global economy.

Industrial upgrading in Sub-Saharan Africa has occurred mostly in relatively labor-intensive and less knowledge-intensive manufacturing industries. These industries also absorb the greater share of the labor force in the sector, and they are predominantly low skilled and unskilled. Although the region needs to upgrade into higher-value-added manufacturing GVCs, it is equally essential to specialize in the short term in more low-skilled activities in GVCs. Important benefits accrue from specializing in less sophisticated assembly activities and performing them on a large scale. While pursuing this strategy, countries in the region should actively and effectively invest in activities that would later