In 2013, member states of the African Union agreed upon "Agenda 2063: The Africa We Want", working towards an integrated, prosperous and peaceful Africa, driven by its citizens, representing a dynamic force in the international arena. In line with this vision, developing integrated and complementary value chains for sustainable recovery and reinforcing operationalization of the AfCFTA will expand trade across the continent, which is crucial for Africa's development.

Over the years, world economies have become deeply integrated and interdependent, with global production networks and value chains (GVCs) amongst the major drivers of structural economic changes at the industrial, national, regional and global levels. Therefore, through leveraging of advancements in transport and communication technologies, multinational enterprises (MNEs) have the ability to offshore and outsource key components of their global strategies, through which they can increase their foreign direct investments (FDIs) and intra-firm international trade.

However, considering how the COVID-19 pandemic has crippled nearly every economy across the globe, there is consensus across the African continent on the need to build a strong and resilient economy to withstand future shocks. This will include developing an integrated and complementary African value chains, for successful operationalization of the African Continental Free Trade Area (AfCFTA).

A good example of mobilizing a value chain for the purposes of responding to the COVID-19 crisis is the case of pharmaceuticals in Africa, of which 90% come from imports. The African Medical Supplies Platform exemplifies continental cooperation on technology and connectivity for development of pharmaceuticals. Other examples include local development of COVID-19 tests in Ghana and Senegal, repurposing of idle factory to manufacture Personal Protective Equipment in Kenya and public-private collaboration to design and manufacture over 20 000 low-cost ventilators in South Africa.

The COVID-19 crisis gave further impetus for the development of digital trade in Africa. As early as March 2020, Africa’s businesses, with government support, were using new technologies that mitigated supply chain disruptions and facilitated trade in essential products such as pharmaceuticals. The creation of a continental e-platform procuring diagnostic tests and medical equipment from certified suppliers on the global market is an example of this. Businesses and populations also strove to adapt to the “new normal” by accelerating their adoption of technologies. In Ghana, more than a third of over 4000 firms surveyed implemented digital solutions during the pandemic. In Rwanda, mobile money payments transactions grew by 85% in 2020. On the 1st January 2021 the AeTrade Group in partnership with Ecobank, Ethiopian Airlines and DHL announced their partnership to support the Sokokuu.Africa E-Commercce Platform, a social enterprise designed to promote “Made in Africa” products and services to boost intra-African trade with an inclusive focus on SMEs, women and youth. Such interventions are coming forth inspired by the significant market opportunities which are brought about by the AfCFTA. Overall, the acceleration of Africa’s digital transformation led African policy makers to fast-track Phase III of AfCFTA negotiations to establish a continental Protocol on E-commerce to fully leverage the potential of intra-African digital trade.

The COVID-19 crisis combined with the implementation of the African Continental Free Trade Area (AfCFTA) beginning in January 2021, call for innovative policies to realize Africa’s full potential. Emerging trends in global investment and technologies cast doubt on the potential of past strategies to succeed in the new global and continental context.

For these reasons, the 2021 African Union Specialized Technical Committee (STC) on Finance, Monetary Affairs, Economic Planning and Integration will be held under the theme, “Developing Integrated and Complementary Value Chains for sustainable recovery and reinforcing operationalization of the AfCFTA.” The goal is to explore how the African continent can develop an integrated continental value chain to build a resilient economy; how digitalization of the African economy can help firms play a more active role in GVCs; develop the necessary logistics and infrastructure to facilitate international production networks and integration of value chains; and reinforce public and private financing to invest in African value chains.

Full details can be found in the Concept Note and working documents attached at the bottom of the page.

Here is an overview of the three thematic areas:

1. Global Value Chains (GVCs) Conceptual framework

Currently, global trading in goods and services account between USD$18 - 20 trillion (WTO World Trade and GDP, 2019-2020) in global gross exports, with about US$5 trillion of this amount resulting from double counting. Double counting occurs when raw materials and intermediate inputs are imported for processing into one country, whose products are again exported for further processing or final consumption in another country. These cross-border production chains comprising several countries, regions or global networks is what is referred to as global value chains (GVCs). This comprises the full range of activities performed in the areas of design, production, marketing and distribution performed by firms, to bring a product from its inception to end use and beyond.

Within the context of globalization, activities that require value chain analysis are often carried out in inter-firm and intra-firm networks on a global scale, by focusing on the sequence of tangible and intangible value-added activities from conception of production to end use. Through GVC analysis, a holistic view is presented of how global industries govern their global-scale affiliates and supplier networks, as well as managing the business decisions which affects the trajectory of economic and social dynamics. In this regard, the GVC methodology explores four basic dimensions (Gereffi and Fernandez-Stark, 2011) which are as follows:

1. Input-output Structure

This involves the input-output process of developing a product or service from its initial conception into a final product. For this process, a set of interconnected value chains are employed to add value as input passes through each stage. The specific segments for this chain may vary from industry to industry, however the main segments include research and design, input (raw materials), production, distribution, marketing and sales and in some cases recycling after use.

 

1. Geographic Scope

Due to the concept of competitive advantage, value chains today are globally dispersed where different activities are performed in different parts of the world, based on the participating country’s leveraging assets. Usually, developing countries tend to offer raw materials (input) and low labor cost, while developed countries that are technologically inclined have a competitive advantage in the areas of new product design, research and development. As a result, the location/ site of some value chains are determined after geographical analysis is conducted to identify the lead firms of each segment of the value chain within a country, as well as data on industry exports and the segments where they are concentrated.

1. Governance Structure

This process involves analyzing how the value chains are controlled and coordinated, when certain actors on the chain have more power than others. According to (Gereffi 1997), “governance structure” in this context refers to the authority and power relationships that determine how financial, material and human resources are allocated and flow within the chains. Usually, global commodity framework governance is described in terms of “buyer-driven” or “producer-driven” chains (Gereffi, 1994). This often requires suppliers to meet certain standards and protocols despite the fact that they are limited or the production capacity is scant. On the other hand, “producer-driven” chains are more vertically integrated along segments of the value chain, with the focus being leveraging technology and scaling advantages of integrated suppliers in the production of goods and services. Therefore, understanding GVC governance and how supply chains are controlled, helps determine a firm’s entry and development within the global industries.

1. Institutional Context

This is the last GVC dimension which looks at how the local, national and international conditions and policies shape globalization for each stage of the value chain (Gereffi, 1995). As the insertion of GVCs depend heavily on local conditions (economic, social and institutional dynamics) to be fully operational, it is necessary that all required economic inputs (raw material, labor); infrastructure and financial resources are provided. This will require performing a local dynamic analysis by examining all actors involved, thereby opening the doors to carry out a more systematic comparative analysis to identify the impact of different features of the institutional context on relevant economic and social outcomes.

1. Overview of Regional and Global Value Chains in Africa

Africa is relatively integrated in GVCs, largely forward integration. Recent estimates show that by 2015, around 42% of Africa’s gross exports either embodied foreign imports or went into further processing in destination countries, up from 40% in 2000 and higher than developing Asia’s (39%) and Latin America and Caribbean (34%). Forward participation accounts for 69% of Africa’s participation in 2015, largely through the exporting of natural resources and agricultural commodities. However, this seems to be changing as Africa’s backward integration has been growing faster than its forward integration, accounting for 80% of growth in GVC participation between 1995 and 2011. Several African countries such as Egypt, Morocco and South Africa have developed certain manufacturing industries that are highly competitive and integrated in GVC. The overall increase in participation has been almost entirely with partners outside the region, rather than with geographically close partners.

Regional value chains in Africa are more diversified with services and manufacturing sectors playing an important role. Manufacturing shows the highest level of global and regional value chain participation, agriculture the lowest. Vehicle manufacturing leads in terms of foreign value added embedded in exports, reflecting the structure of Africa’s automotive operations as assembly hubs in the production networks of the large international car companies. Among services, regional African value chains in finance shows a much higher share of value added from other African countries in a country’s exports than any other sector, attesting to the strength of regional banking groups.

Agriculture value chains also play a key role for economic and social upgrading in Africa. The sector employs more than 50% of the African population, agricultural value chain is critical to generate more job opportunities, promote development and reduce poverty within the region (African Agriculture Status Report, 2018). Over the years, business communities involved in the agribusiness sector in Africa have seen a resurgence of interest in promoting and enhancing value chains, as an approach to add value, reduce cost, diversify rural economies and increase income for rural households (Webber & Labaste, 2010). With an increase in demand for high value agro-products, plus an increase in sourcing of agro-products from Africa by international traders, domestic and regional markets in Africa saw an impressive growth for the African agricultural sector.^[1]

Therefore, the goal is to ensure that renewed engagements will lead to an increase in financial resources and technical assistance, devoted to supporting market-driven and competitive value chains throughout the African region. In this regards, several African countries are trying to revive national and regional level industrialization efforts, through value chain development. Though most of their efforts are smallholder based and labor intensive, mostly centered on agriculture and raw material extraction, several countries have achieved success in joining GVCs in the apparel, food, automotive and sometimes business services.

1. Opportunities for Value Chain Integration in Africa

Global Value Chains have steadily become a dominant feature of world trade and investment, comprising of countries from developing, emerging and developed economies. As the process of producing goods and services from raw materials to finished products has become increasingly fragmented, with production taking place where the needed skills and materials are available, both small and large companies have to participate in GVCs, by engaging one of the many types of chain activities, in order to reduce cost and increase quality.^[2] However, geographical location, factor endowment and the type of product manufactured will determine whether a country’s value chain will be regional or global in nature. Nonetheless, there are immense opportunities to be harnessed by African countries, should the continent prioritize regional value chain development as a strategy to facilitate operationalization of the AfCFTA.

Through GVCs, developing countries have the opportunity to provide specific skills and high-quality products at least cost to GVCs, without having to create an entire industry in order to be competitive at the world market. Further to this, exposure to international markets opens the door for learning-by-doing to take place, where technology transfer and spillover effects allows for best practice management and learning of business methods between countries to materialize. Africa’s accelerated digital transformation is an opportunity in that context for all types of policies - from knowledge transfer, broad-based education and skills policies, financing value chains penetration, to products promotions and economies of scale (AUC/OECD, 2021).

Additionally, regional value chains can build on the comparative and competitive advantage of different countries to benefit from economies of scale. This can be achieved through the provision of regional infrastructure and support services which connect domestic private sectors providers to regional and global chains. These investments are critical to improve competitiveness of national economies, and enhance the flows of goods and services trade on the continent.

1. GVC impact on employment, living conditions and economic growth

The emergence of global value chains has offered Africa new opportunities to integrate into the global economy. However, major challenges remain: the Africa’s Development Dynamics report show that Africa’s trade with the global economy has not led to the expected level of growth sustainability, poverty reduction and social equality (AUC/OECD, 2018). The outcomes associated with participating in GVCs are couched in terms of economic and social “upgrading”. Economic upgrading is associated with productivity gains, and income growth (more than standard trade). According to WDR (2020), in its cross-country studies, a 10 percent increase in the level of GVCs participation was estimated to increase average productivity by close to 1.6 percent and per capita GDP by 11–14 percent – or much more than the 2 percent income gain from increasing trade in products produced through comparable advantage and hyper-specialization.

Alongside productivity and income gains, GVCs can support social upgrading by delivering more (better) jobs and wages. Gains in domestic value added in exports are necessary but limited in Africa due to several important factors, such as gender imbalances, skills deficits, prevalent informal employment and unequal power relationships within value chains (AfDB/OECD/UNDP, 2014). Nonetheless, there are notable examples of successes in economic and social upgrading. Between 2000 and 2014, for example, the labour force of Ethiopian firms that were importers and exporters – a proxy of GVC participation – grew by 39 percent relative to when they were non-traders^[3]. This increase in labour force further delivers better living conditions. Empirical evidence suggests that within three years of joining a manufacturing GVC, a country is more than 20 percent richer on a per capita basis, improving workers’ livelihoods and those of their families (WDR, 2020).

1. Value Chains reinforcing AfCFTA operationalization

Beyond its ground breaking size, the AfCFTA signals a paradigm shift and a commitment to deeper integration of the continent by negotiating goods and services concurrently and mitigating the issues of multiple overlapping trade agreements on the continent. It is thus hailed as an economic game-changer for Africa’s development owing to its potential to boost intra-African trade and enhance value chains within the continent. It is estimated that implementing the AfCFTA will increase the volume of intra-African trade by 81% by 2035, and increase the volume of total African exports by 29% (World Bank, 2020). It is also envisioned that the AfCFTA agreement will yield economic gains for the African continent, including $16.1 billion welfare gains, a GDP growth of 1 to3%, employment growth of 1.2%, and a 50% decline in Africa’s trade deficit (WEF, 2021). Simulations by the IMF also show that AfCFTA may significantly increase Africa’s ranking on the Global Competitiveness Index^[4].

Strengthening RVCs can help exploit complementarities between different economic activities within Africa. Trade can deepen regional production systems and the linkages between complementary factors, which include: differentiated labour costs and productive capabilities, disparities in natural resource endowments, geographic issues such as maritime access, as well as existing geopolitical issues and trade agreements. However, the average level of regional sourcing currently remains under 15% in Africa (AUC/OECD, 2019). Besides, the overall increase in GVC participation has been driven mostly by partnerships with actors outside of the region.

1. Challenges for value chain integration in Africa

Despite these significant opportunities, Africa is still confronted with numerous challenges which could hamper the benefits of value chain development within the region.

One of the fundamental challenges facing Africa’s value chain is how to achieve structural transformation on the continent and raise domestic value addition in Africa’s exports. A large share of exports of the region comprises basic commodities with very little value addition. For instance, of all the challenges facing Africa’s agribusiness sector, the failure to add value to crops before they are exported has proved the most intractable. West Africa is the world’s largest producer of cocoa, with Côte d’Ivoire, Ghana, Cameroon and Nigeria producing over 70% of global output but around 75% of the crop is exported as raw beans to Europe and Asia, with only a quarter staying in the region for processing into cocoa butter, powder and (a little) chocolate. This leaves the lion’s share of value addition to be captured by the confectioners and retailers at the end of the value chain.

Poor infrastructure also hinders the flows of production and trade, as well as the competitiveness of African producers, both soft and hard infrastructure are pertinent. There are challenges of inadequate storage facilities for perishables; inadequate fulfilment systems including branding and packaging services, poor communications systems; and deficient maintenance of road, rail and port networks. There is also an underinvestment in quality infrastructure in Africa.

Furthermore, access to finance is a critical constraint for African producers and processors, especially SMEs. The 44 million micro, small and medium-sized enterprises in Africa needed USD 404 billion of finance in 2017, creating a financing gap of approximately USD 331 billion, or 16% of the continent’s GDP (AUC/OECD, 2021). Uncertainty in the production process and value addition, the lack of collateral among SMEs and underdeveloped financial market makes it difficult for banks to finance value addition, all the more so in the context of the economic crisis brought about by the COVID-19 pandemic.

The lack of capacity and skills, particularly for SMEs, has been a limiting factor in Africa’s participation in GVCs. Human capital development has a positive effect on the performance of SMEs and their integration into the global supply chain (ITC, 2018). Investment in formal and on-the-job training is necessary for the growth and development of SMEs.

The Conference will look specifically at the following three (3) sub-themes namely: (i) Developing an integrated and complementary continental value chains; (ii) Digitalize African Value Chains; and (iii) Reinforce Public and Private Investment in African value chains.

1. Developing integrated and complementary continental value chains

African integration was the basis for the establishment of the African Union and since then, the mandate of the AU has been shown in various integration programmes at continental level. There is now a renewed impetus to generate growth and prosperity via integration beyond national boundaries, in order to stimulate and increase continental and global trade. In the past decades, enterprises across the continent were independent from one another – with one country bearing the burden of taking one particular raw material and transform it from the first stage of production to the end. Today the story has changed, businesses are integrating their production processes, and firms across the continent now have a shared interest in specializing in specific tasks, and learning from each other.

African countries are now seeking to forge ties with each other via cooperative planning, implementation, and efficient management of the flow of goods, services, and information across the continent, to increase value and optimize the efficiency in value chain trade. For some countries, such links already exist, for many others, they still lie in the future. For example, the SADC identifies agro-processing; mineral beneficiation and downstream processing and industry, and service-driven value chains as the key value chains to realise the SADC Industrialization Strategy and Roadmap 2015-63 (AUC/OECD, 2019).

In the spirit of promoting value chain integration in Africa, some alliances have been formed between African countries. The largest producers of cocoa beans – Côte d’Ivoire and Ghana which together produce 65% of the world’s cocoa, are creating “an OPEC for cocoa” to harmonise their sales policies and have greater impact in their trade.^[1] The expansion of cocoa grinding capacities of both economies have shifted their integration from supplying cocoa beans alone, to processing into cocoa paste, intermediate products and final products such as chocolate. What’s more, both partners have plans to build storehouses in which harvests can be stockpiled. Furthermore, Rwanda and Burundi – the bigger players on the leather market are building alliances which have generated a total leather exports of more than US$ 9 million, leading to a relative increase in growth of transformed leather exports (UNCTAD, 2015).

Integration and complementarity in value chain trade is necessary for creating an environment, where African enterprises can benefit from the efficiency gained from a much finer international division of labour within the continent. It exploits the fact that countries have different comparative advantages, not only in different sectors, but also in different stages of production, hence, specialization is promoted through breaking up tasks in production. Currently, the average level of regional sourcing currently remains under 15% in Africa. By comparison, intra-regional sourcing in Southeast Asia accounts for more than 80% of exports in industries such as motor vehicles, textiles and apparels, and computer, electronic and optical products (AUC/OECD, 2019).

Further to this, integration creates a conducive environment for the emergence of local enterprises that are specialized in certain areas. More so, by opening up access to higher-value markets, value chain integration and complementarity of value chains, gives Africa an opportunity to achieve cost efficiency in production, quality productivity, greater sophistication in production, skills development, diversification of exports, import substitution, and facilitation of economic growth and recovery. For example, Senegalese firms are 8% more likely to upgrade to more sophisticated products when they export to regional market than when exporting to OECD markets (AUC/OECD, 2019). At the same time, these connections via value chains serves as a conduit for the transfer of knowledge, skills and technology within the continent.

Additionally, African countries have the potential to complement each other in value chain production. For instance, though not fully integrated, Africa’s automotive powerhouses, South Africa and Morocco with other emerging markets such as Egypt, Ghana, Nigeria and Algeria, have the potential to form alliances and complement each other to achieve greater productivity through value chains. To attain this, a supportive policy environment with emphasis on continental integration is important – African Association of Automotive Manufacturers (AAAM) is developing the Pan-African Auto Pact (PAAP), which aims to connect potential automotive powerhouses to trade easily and efficiently. According to Africa Automotive Forum (2020), when these automotive powerhouses complement each other in the value chain, PAAP can potentially create a market of 5 million new vehicles each year.^[2]

Moving forward, what needs to be done to reap the benefits of integration and complementarity of value chains in Africa? And what role should government policy play in facilitating integration? The discussion under this sub-theme may focus on the following policy-oriented questions:

• How can policymakers facilitate regional sourcing of intermediate goods? What are critical trade-related bottlenecks that policymakers should focus on?
• What are good procurement practices for African SMEs, and how can smart procurement policies enable African SMEs participation in higher value chains (while attracting technology transfer coming through FDI and the necessary imports of complex products)?
• How can policymakers address the trade finance gap, especially for MSMEs?
• How have African governments supported logistics industry (e.g. transportation companies, aviation, etc.) sector during the COVID-19 crisis? What are the implications for facilitating a competitive logistics sector for intra-African trade?
• How can African countries make value chains more environmentally sustainable and resilient?
• How can African countries facilitation financial and digital inclusion – especially of women and youth owned enterprises?
• How can African countries harness fintech solutions for payments as well as smart logistics and other crucial areas? How can Research and Development be enhanced in order to create an enabling environment for SMEs?

2. Digitalize African Value Chains

As globalization and segmentation of production systems keeps growing over the years, countries around the world have reformed the way they trade with the rest of the world (Grossman & Rossi-Hansberg, 2008; Zhu & FU, 2013). Through GVC upgrades, developing countries have the capacity to gradually advance technology for faster industrial growth (Baldwin, 2012) and to expand exports for maximized profits (Criscuolo & Timmis, 2017). However, the COVID-19 pandemic (specifically, global lockdowns) has caused enormous disruptions and permanent changes to the global production networks, compelling business leaders to rethink and change the way they organize business (UNCTAD, 2020).

Digitalization can fundamentally change the design and efficiency of local value chains (AUC/OECD, 2021). E-commerce platforms allow producers to reach a wider market, and increase efficiency by cutting down trade intermediaries. New ways of generating, storing and sharing information on products and processes such as Distributed ledger technologies (blockchains) offer significant improvement to the traceability of supply chains. Other digital solutions can support smallholder producers in rural areas to ensure quality and generate digitized quality information to satisfy requirements in export markets. New digital-enabled business models facilitate access to financial services and production tools for workers and firms in remote areas. Digital-based pay-as-you-go (PAYGO) models allow users to pay for lumpy goods in small increments for investment in off-grid solar panel, irrigation pump (SunCulture in Kenya), and cold chains (ColdHubs in Nigeria).

To assess the impact of the pandemic on GVCs, Guan et al (2020) employed the use of a disaster impact model to analyze global trade. In his findings, losses for the value chain industry was as a result of the imposition of lockdown measures by countries, with a large contribution of these losses being dependent on the duration of these lockdowns, as supposed to its strictness. Nonetheless, it is worthy to note that the impact of the pandemic on GVC was dependent on the degree of GVC fragmentation, as well as the degree of digitalization of the different sectors for each country. In this regard, it is clear that investment and incorporation of digitalization and technology into GVCs will go a long way to enhance the resilience of value chains and offer solutions to challenges when it comes to value chain analysis. Therefore, through the digitalization of value chains in Africa, new drivers of growth for post-pandemic economic recovery can be fostered for successful operationalization of the AfCFTA, and to achieve Agenda 2063 and the 2030 Sustainable Development Goals (SDGs).

However, doing so will greatly depend on how easy it is to digitize value chains, manufacturing operations and business functions in Africa, to enhance productivity and reap maximum benefits, through an increase in resource mobilization. For instance, business services and manufacturing can be easily digitalized, whereas the provision of services which are “contact-intensified” cannot. The other aspect is the ability and capacity of a country to digitize its value chains and business activities, where applicable. Therefore, for low income countries dominated by the informal sector, including contact-intensive services like small retailers, restaurants, agriculture, micro-businesses and resource extraction, digitalization of the value chains can help increase the participation of small and medium enterprises. Through the introduction of optimal design of high-tech plants on the assembly line, bottlenecks in the production process can be eliminated to achieve greater efficacy and productivity. Additionally, considering demand for online financial services have increased tremendously due to the pandemic, policy to support E-trade and E-commence needs to put in place to encourage and enhance the ease of doing business, including smooth operationalization of the AfCFTA.

Realizing the digital transformation of African value chains also depends on the capability of local actors. Dynamic small and medium-sized enterprises need support to adopt the most appropriate digital tools for innovation and trade. For example, internet access has expanded thanks to the growing prevalence of mobile phones; yet its remains unequal across genders, income groups and other groupings. Having a website is positively associated with a 5.5% increase in the share of direct exports in firms’ sales. Only 31% of firms in Africa’s formal sector have a website, compared to 39% in Asia and 48% in Latin America and the Caribbean (AUC/OECD, 2021).

The discussion under this sub-theme may focus on these policy-oriented questions:

• How can policymakers leverage the AfCFTA process to strengthen digital trade in Africa and facilitate a digital single market?
• What are the key issues in ensuring the safe and free flow of data across African value chains and countries?
• How can African countries exercise pooled sovereignty to ensure that at least 80 percent of Africa’s data is stored in the cloud in Africa?
• How can Africa leapfrog using renewable energy innovations to bridge the digital divide? How can such solutions be made available at a large scale in order to have significant impact? Can the African Union play a role similar to that of the COVID-19 procurement project?

3. Reinforce Public and Private Finance for Investment in African value chains

Africa’s governments are facing the COVID-19 pandemic with lower financial resources per capita than during the 2008 global financial crisis. The amount of financing per capita decreased during the 2010-18 period for both domestic revenues and external financial flows, by 18% and 5% respectively (AUC/OECD, 2021). Tax-to-GDP ratios had already been stagnating at 16.5% since 2015 in 30 African countries, despite important tax reforms. Improving public finance, including strengthening domestic resource mobilization through widening tax bases, enhance the fight against Illicit Financial Flows (IFFs), proper debt management, will enable resources for public investment into African value chains (AUC, 2019).

According to (UNCTAD, 2020) highlights that annually over US$80 billion is lost through IFFs^[3]. Conversely, this amount surpasses the resource received through Foreign Direct Investment (FDI), which was anticipated to drop by 20% to 40% in 2020 from US$32 billion in 2019 and US$ 43.5 billion foreign aid. Tax-to-GDP is still low at 16.5% based on the data compiled for 30 countries relative to OECD average of 34.3% and the Latin American and Caribbean (LAC) 23.1%.^[4]

Strengthening tax systems and administration has become imperative to increase resources for the continent. A lot of resources continue to leave the through tax avoidance and aversion, trade misinvoicing and activities of digital Multinational Enterprise (MNEs) operating in jurisdictions where there are not present. The Report of the African Union’s High Level Panel on IFFs estimates that Africa loses US$50 billion to tax evasion annually, while the United Nations Economic Commission for Africa (UNECA) estimates an even higher figure of US$100 billion is lost^[5]. These resources will go a long way in assisting business including MSMEs to develop and provide an opportunity to invest in emerging markets.

Crowding in private finance can help address the gap for financing public investments into Africa’s productive system. Private finance also plays an integral role, over the years the continent has made strides in developing capital markets, however, they remain limited in terms of participation of SMEs. Blended finance has been a stepping stone to create and help sustain private markets with strong impact development. It also supports SMEs that have traditionally been poorly served by the banking industry in Sub-Saharan Africa – During the period of 2014 to 2016, projects representing a value of US$3.78 billion have been financed through blended finance^[6].

To effectively integrate and reap the benefits of value chains, the continent must leverage both public and private finance. Credit constrained firms, and presumably financially underdeveloped nations suffer from low value-added stages of the supply chain and unable to pursue more profitable opportunities. Strengthening public finance is an essential prerequisite for moving into higher value-added and more profitable activities.

The discussion under this sub-theme may focus on these policy-oriented questions:

• How can African countries mobilise public resources for productive investment in the current global and domestic context?
• How can African countries better attract investment in regional production networks whilst avoiding a “race to the bottom”? How can governments ensure quality employment for women and youth in GVC-related activities?
• How can the AfCFTA protocol on investment address some of the policy gaps?
• How can the AfCFTA Protocol on E-Commerce address some of the issues raised in this paper?
• How will the private sector be involved in the policymaking process? Can the newly established African Business Council play a meaningful role in advocacy to enrich the policy making processes at the continental level?

What role can the Diaspora remittances and investments play in catalysing competitive value chains?

The main objective of the STC is develop concrete policy actions and measures required for developing Integrated and Complementary Value Chains for sustainable recovery and reinforcing operationalization of the AfCFTA for consideration and approval by the African Union Summit.

The Expected Outcomes are;

1. Ministers that are well appraised of progress with implementation of recommendations of the previous STC meeting;
2. Clear and robust policies of strengthening Africa’s business, including SMEs, to facilitate their integration in value chains; and
3. Policy recommendations to harness value chains for the effective operationalization of the AfCFTA

Participants to the Conference will be from the Ministries of Finance, Economic Planning, and Integration and Central Banks of AU Member States. Other participants will include experts and senior officials from the African Union Organs and Specialized Institutions and Agencies, Regional Economic Communities, African Capacity Building Foundation, African Development Bank, OECD Development Centre, United Nations Economic Commission for Africa, UN Agencies, International Monetary Fund, World Bank, other international and Regionals Institutions, other partners, Civil Society Organizations and Non-Governmental Organizations.

• Declaration and report of the 3rd STC on Finance, Monetary Affairs, Economic Planning and Integration
• Domestic Resource Mobilization: a Fight against Corruption and Illicit Financial Flows
• How Africa loses US$50 billion to Illicit Financial Flows
• African Union Assembly Special Declaration On Illicit Financial Flows-
• African Continental Free Trade Area
• 2019 Africa Development Dynamics Report
• African Integration Booklet
• African Integration and Development Review
• Publication of the PAN-African Financial Institutions
• 11th African Private Sector Forum Declaration 2019