210 Africa in the New Trade Environment
Econometric Assessment of Sub-Saharan African Participation in Asian GVCs On the basis of the stylized facts described in the previous section, this section conducts an empirical analysis to understand whether economic engagement with Asia has shaped the particular trade and GVC patterns observed in individual Sub-Saharan African nations. Our main sample covers 46 countries in Sub-Saharan Africa over a 16-year period from 2000 to 2015 (listed in annex 5A, table 5A.1). Several facts stand out from the analysis. First, Asia’s economic engagement in trade with Sub-Saharan Africa increased significantly over the sample period. The share of imports from Asia in the total imports of a median Sub-Saharan African country in 2005 was 18 percent, which increased to 28 percent by 2015. The share of exports to Asia was only 12 percent in 2005, which rose to 20 percent by 2015. Of a Sub-Saharan African country’s total imports, the median share imported from China in 2005 was 5 percent, which increased to 14 percent by 2015. The share of exports to China was only 2 percent in 2005, and tripled to 6 percent by 2015. Second, we use three GVC measures as the dependent variables of interest: the ratio of domestic value added (DVA) to gross domestic product (GDP), the average length of production, and the upstreamness of exports, finding the following: • Among the countries in our Sub-Saharan Africa sample, the median DVA declined slightly (from 0.37 to 0.35 between 2005 and 2015), consistent with the global trend of declining DVA (Johnson and Noguera 2012). • Over the same period, the production chain of Sub-Saharan African exports became more complex, as revealed by the increasing average length of manufacturing production chains. For the median country (in terms of export volume), the export-weighted average of the number of stages (sectors) involved before final export rose from 2.31 to 2.36 between 2005 and 2015. • Among the GVC measures, the upstreamness index—which captures the distance between the sector and final-goods consumers (at home or abroad)—increased the most. Among the countries in the sample, the median upstreamness index increased from 2.45 to 2.62. A country’s exports become “more upstream” for many reasons. One tempting explanation is that Sub-Saharan Africa’s exports, partly because of China’s economic engagement, have become more resource-intensive. Given that natural resource–intensive sectors tend to be more upstream, the observed increase in export upstreamness may be related to the increasing resource intensity of Sub-Saharan Africa’s exports. This section empirically examines this hypothesis.
