CHAPTER 1. The Services Sector in Africa: Emerging Trends
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Relative to other regions, Africa captures only a small share of global services trade in value added terms. There is significant potential for African countries to position themselves as services suppliers in national, regional and global value chains for goods production and in services value chains. Services are also enablers of many production and sales processes. There are important input–output linkages between manufacturing and services. With regard to South Africa, one study estimates that 25.3 per cent of the intermediate inputs into manufacturing come from services (of which the bulk comes from trade and finance) and 24.7 per cent of the intermediate inputs into services come from manufacturing (Tregenna, 2007). If imported intermediates are excluded, 31.4 per cent of all domestically produced intermediates into manufacturing are purchased from the services sector and 18.6 per cent of all domestically sourced intermediate inputs into services come from manufacturing. While African countries should aim to develop their manufacturing sectors, increasing the competitiveness of their domestic services sectors should also be a concurrent objective (UNCTAD and United Nations Industrial Development Organization, 2011). There is significant scope for African countries to position themselves as reliable and competitive services suppliers in manufacturing value chains, whether at national, regional or global levels. Global value chains can offer significant new opportunities for structural transformation in Africa. About 60 per cent of global trade consists of trade in intermediate goods and services that are incorporated at various stages in the production process of goods and services for final consumption (UNCTAD, 2013a). To date, Africa has captured only a small share of global trade in terms of value added, although its total level of global value chain integration is high compared to other regions. However, much of this concerns the forward integration of Africa’s commodity exports as inputs in foreign manufacturing, which creates little additional value added in Africa (African Development Bank et al., 2014). Upgrading over time within these value chains through process, product or functional upgrading must be a long-term policy goal for Africa in order to maximize potential economic gains from participation (UNCTAD and United Nations Industrial Development Organization, 2011, and UNCTAD, 2013a). The successful insertion of the African services sector into global production and services value chains will depend on the ability of African countries to: build global competitiveness in the services sector; understand the determinants of competitiveness and the constraints faced by the private sector engaged in the