Invest in pharmaceuticals, baby food, cotton clothing and automotives, in line with African goals to improve food security, health and tech skills, to kickstart trading under the €2.5 trillion market of the African Continental Free Trade Area (AfCFTA).

That’s the key message of a new report, Made by Africa: Creating Value through Integration, released today during the African Union Summit on Industrialization and Economic Diversification in Niamey, Niger. The International Trade Centre (ITC) produced the report, in close collaboration with the African Union Commission and the European Commission.

The report identifies 94 value chains with high potential for sustainable development, with each value chain linking to at least five African countries from different regions. These four sectors emerge as especially promising, including for small businesses, which make up 90% of companies and more than half of jobs worldwide: pharmaceuticals, baby food, cotton clothing and automotives.

• Pharmaceuticals is a critical sector, in particular emerging from the pandemic, to improve health and reduce imports.
• Baby food draws on the agricultural sector, contributing to sustainable food security and nutrition, at a time of global supply chain disruptions.
• Cotton clothing offers opportunities for millions of people in Africa’s least developed countries to find jobs through value chain integration.
• Automotives has high potential for intraregional trade growth, with links to other value chains, such as leather and electrical machinery, as well as foreign multinationals looking to invest.

Companies, business support organizations and industry experts in Africa confirmed – through thousands of interviews and consultations – that these sectors are feasible for intra-regional growth – and that transformation is already happening in those sectors.

For example, 77% of surveyed companies along the four value chains are already greening their production processes, from reducing energy and water use to recycling waste, investing in recyclable or biodegradable packaging and developing circular business models, for example, by producing high-quality clothing from fabric waste and second-hand clothing.

Investing in Africa, by Africa

ITC data show current intra-African export growth potential to be US$22 billion.

While the opportunities are great, so is the need for action. Africa’s footprint in the international market is still small, accounting for just 2.3% of global exports, with an export basket heavy on primary commodities and natural resources. About 14% of the continent’s exports are destined for other African countries, and much of this trade is in transformed products. What may come as a surprise is that intra-African trade is more diversified and technologically advanced than Africa’s trade with the rest of the world.

Strengthening regional trade boosts resilience to crises and sustainable industrialization – ultimately contributing to job creation and better livelihoods on the continent.

In short, investing in diversification and stronger regional value chains, under the umbrella of the continental trade agreement, is key to unlocking Africa’s full economic and development potential.