Global value chains will become shorter as regions seek to become resilient
Africa dependency for supply of crucial needs like food must be changed through diversification of sources and investing in its own regional specialization for production of goods and services.
The future of Africa should be where the EAC produces this, while ECOWAS produces that and SADC produces… and so on and so forth, the regions must specialize and safety measures put in place to secure production and trade routes to protect against disruptions.
Global value chains have increased inter-connectivity and reliance on each other at a global scale, a reality that is been reversed by trade wars, actual wars pandemic threats and resulting friend shoring.
While the world is still very interconnected and value chains of the goods and services we consume web in and out of multiple countries, trade wars like United States and China, and actual wars like Russia and Ukraine are now deglobalizing the world village.
While there are tremendous benefits in the global interconnectivity, the taking of sides and disruptions by wars places ever strenuous circumstances on dependent countries, and that is everyone.
Experts now say, the real task is harnessing the benefits of interconnection while at the same time, mitigate the risks of dependency. None knows this fact better than Africa.
Many might not have known but Africa is fed by Ukraine, most of its cereals come from Ukraine and the war with Russia disrupted that flow of food. So, there you see the ice thin condition of global interconnectivity and the fragility of dependency.
- Africa dependency on concentrated food sources makes it vulnerable
- Global value chains are now becoming shorter as countries seek to mitigate risks
- Africa regional groups should specialize production and then inter-trade
Factors that affect the flows of good like global integration, interdependency and financial risks are not locked in the hands of governments alone, not anymore, the role of multinational corporations has become not just important but central.
It should also be noted that when we speak of flows of trade, we are not just talking about goods but people, capital and data; the services industry is now the common place of global trade, not goods.
Growth in global flows is now being driven by intangibles, services, and talent, attests an MGI research which points out that the trade of goods that fueled global economic growth ‘stabilized around 2008 after 30 years of rapid expansion.’
Now, it is the flow of services, human resource and intellectual property that is at the lead of global exchange. Services, the exchange of knowledge-intensive services, ranges from student exchange programs to professional services and government services all the way to industry leaders like IT services, and telecommunications; in fact, data exchange alone grew nearly 50 percent annually over the past decade.
While the COVID-19 pandemic upset the exchange of goods, and yes, to a big extent also affected flow of services but in other cases it actually accelerated it.
Between 2020 and 2021, the overall, flow of intangibles and capital increased, and in some books, resilience of this trade actually stifled the devastating effect of the pandemic.
During the pandemic, flow of data was immense reaching all-time highs, ranging from virtual conferences to the thousands of worker working remotely.
However, what about food and other consumption goods, people still needed to eat even if they worked from home? This is where Africa needs to draw lines to dependency and diversify its food sources and improve its agriculture technology.
Take the Asian markets for instance, when supply chains were disrupted by the pandemic to bridge the gap of Western supply chains in 2020, domestic production was able to step in.
During that period there was a paradox shift in demand because while services were at an all time trade high, the locked borders caused a panic and demand of goods grew tremendously.
Consumers switched their spending away from services back to goods during the long periods of lock downs and social distancing. This year, in 2022, trade in goods continued to grow despite several new disruptions.
Consider this MGI analysis that suggests “… products whose origins are concentrated in only a relatively few geographies are found in every sector and region and at every stage of the production process.”
These so called ‘concentrated products’ those products that only up to three countries or ‘global concentration hotspots’ account for almost all the global supply, these form a very important share of global trade.
Such products and their related trade routes all along their value chains create significant dependency around the world. Here is the case and point for Africa dependency, especially of food; wheat for example.
Africa has never needed agriculture technology like it does now. Did you know, Egypt and most of the rest of Africa especially East Africa, imports more than 75 percent of its wheat from Ukraine and Russia?
On one hand, Africa must increase its own production to meet its food needs but on the other, it must diversify this production. With growing inter trade and ever stronger regional blocs, instead of competing to produce all products and then compete for markets, Africa should divide its regional products for the production of certain products.
Granted this puts the query of disrupting and dependency back on the table but it will be a far less easier case to deal with the EAC not supplying wheat to Egypt that to resolve a war in Europe to meet the same need.
Globally speaking, experts are urging a similar point; diversification of sources of origins. Economists contend that although it may involve substantial up-front investment, it will have long term beneficial effect.
While inter-regional trade and global value chains remained the defining characteristic of the early 2000s thanks to trade liberalization and technological improvement, however, with the global economic shake down of 2008, trade flow patterns were disrupted.
As countries and entire regions react to the global pandemic by seeking to strengthen their resilience, they will, on one hand, cut dependence on sourcing or at least diversify their sources and on the other hand, improve their own responsiveness to demand.
That is where agriculture technology comes in, because what is bound to happen is shorter supply chains will emerge and Africa food security will be undermined.
The continent, while prioritizing transport infrastructure will do well by investing in human resource development and agriculture technology to diversify Africa food sources and Africa food security. The future is in automation, so if a country has the needed human resource it can invest in developing value chains tended by a more technical labour working its agriculture technology.
To build Africa food security, the huge population of Africa youth can offer great competition to the rest of the world if it is educated to meet the global technical needs as ever more intangibles hubs form.
Services value chains for intermediate services will create employment as other nations out source for more affordable wages and easier employment terms.
The current policy of ‘self employment for youth in agriculture’ is not long term, not in the cause to secure Africa food security. Youth cannot afford the needed mechanization to farm commercially and sustainably. Youth in farming will remain mostly substantial, earning enough to sustain a firmly but not to reinvest in mechanization.
However, better education regimes and not necessarily university education for all but rather hands on vocational training in agriculture technologies, machinery, digital systems, software writing and coding, will create a workforce that can both be out sourced in the service industry and self employ in high tech agro ventures.
It is a digital future that we have born our children into, the old days of the hand hoe are gone; stop asking youth to hand plough, enable them to finance automated seeding and irrigating systems.