Regional integration and services in African value chains: Retrospect and prospect

Abstract

AbstractThis article takes a first step towards understanding the quantitative evidence on the role of services in African value chains. The available data are largely based on assumptions and modelled estimates, but can nonetheless provide some useful information at an aggregate level. In general, services play an important role in the African regional economy, including through their embodiment in the exports of other sectors through input–output relationships. However, services value chains in the region are mostly composed of domestic value added, and to a lesser extent inputs sourced from global suppliers. There is very little intra‐regional sourcing of services inputs. Simulations using a new quantitative trade model show that intra‐regional sourcing could be increased through a derived demand effect following goods market liberalisation. In the stylized cases examined, increased use of regional services inputs is not at the expense of globally competitive suppliers. As such, it will be important to give a more prominent role to services in discussions of regional integration going forward.