2024 Public Sector Perspectives

Global value chains Over the past few years, worldwide supply chains have faced significant challenges due to extraordinary trade fluctuations, economic instability, geopolitical occurrences, and natural calamities. As a result, these supply networks have experienced substantial disruptions which have prompted major participants in the production and distribution of specific goods – including manufacturers, distributors, and shippers – to reconsider strategies for enhancing the resilience of their supply chains. In the case of Africa, recent global shocks such as the Covid-19 pandemic and Russia’s invasion of Ukraine exposed the continent to record levels of uncertainty, disrupted value and reversed countries’ hard-earned progress in economic and social development 4 . Africa’s marginal role in production both internationally (1.7% of participation in global value chains in 2019 5 ) and at the regional level as well as its participation in few resource-based and light manufacturing sectors (e.g., agri-processing, textile and clothing, and food and beverage) 6 have created immense bottlenecks and have hindered the recovery in recent years. Supply chain finance value, USD billions 330 2022 2021 2020 2019 2018 2017 2016 2015 448 562 743 971 1,311 1,803 2,189 5 7 11 12 16 21 29 41 World Total Africa Source: UNCTAD, 2023 The impending resource allocation decisions to improve intra-Africa trade present a unique opportunity for the region to refresh and bolster its supply chain resilience, both at the regional, and by extension, at the global level. For instance, by streamlining supply chains and bringing sources of supply closer to the point of demand, not only can emissions be reduced but local manufacturing production can also thrive. This approach not only mitigates supply chain risks and cost complexities associated with imports but also elevates local suppliers. Moreover, it serves as a catalyst for local economic growth while simultaneously minimizing the environmental footprint associated with global logistics, aligning with sustainable and resilient trade practices in the region. By leveraging its competitive advantages, Africa can not only build resilient and sustainable value chains but also can leverage the opportunity to accelerate climate action and green investment. 4 OECD 5 OECD 6 OECD Africa boasts a wealth of comparative advantages that it can build these decisions on to position itself uniquely for a leading role in the current global landscape. One of the most significant assets is its youthful and rapidly growing population, with approximately 60% of Africans being under the age of 25. Moreover, the continent possesses extensive reserves of critical minerals, holding at least a fifth of the world’s reserves in a dozen types of metal crucial for the ongoing energy transition 7 . Lastly, electricity is the backbone of the region’s new energy systems, powered increasingly by renewable sources. Africa is home to 60% of the best solar resources globally, and renewables – including solar, wind hydropower and geothermal – are expected to contribute 80% of the new power generation capacity through 2030 8 . Leveraging these abundant natural resources responsibly is critical for the continent’s future development. For example, by utilizing its solar and wind capacity, the commercial production of green hydrogen on the continent has the potential to produce 30-60 million tons per annum (mtpa) of green hydrogen by 2050 while creating 3.7 million new jobs and boosting the continent’s GDP by as much as $60 billion to $120 billion 9 . Africa’s share of global reserves, percentage 48.1 Iron Ore (Crude Ore & Iron Content) Lithium Nickel Copper Graphite (Natural) Manganese Cobalt 47.6 21.6 5.9 5.6 1.0 0.6 Source: UNCTAD, 2023 Africa’s wealth of rawmaterials and immense renewable energy potential offers a chance to diversify and strengthen both regional and global supply chains by creating a new regional market for businesses and industries expanding their supply chain relationships. Likewise, pursuing an ambitious energy transition pathway could play a key role in advancing socio-economic development in the region. However, entering Africa for supply chain purposes demands significant investments in infrastructure, technology, and skilled labor. The inadequate state of infrastructure, including transport and warehousing facilities, in many African countries remains a major obstacle to efficient logistics and supply chains on the continent 10 . 7 UNCTAD 8 IEA 9 BII 10 UNCTAD Citi Perspectives for the Public Sector 27 26 Bolstering Intra-Africa Trade Flows Amidst the Current Global Scenario