Abstract
The World Bank promotes integration into global value chains as the path towards development. By liberalising their respective national economies, African countries are expected to benefit from economic impulses, with more and more activities beyond resource extraction being relocated to peripheral locations and generating so-called linkages there. This analytical report focuses on the upstream oil and gas sector, showing that Africa’s hydrocarbon-rich countries do not achieve economic progress merely because of being part of global value chains. The reason for this is endogenous obstacles to investment. Services – especially in engineering and logistics – are carried out by South African firms, which bring their own equipment and staff or work in South Africa. The emerging economy therefore benefits from linkages that exploration and extraction of oil and gas in developing countries generate.
Highlights
Following the latest World Development Report, Africa should pursue a liberal economic agenda in order to achieve what the authors of the report temptingly call “development in the age of global value chains.” Integration into global value chains is promoted as the path towards growth and prosperity
While the World Development Reports do not go into details regarding causal mechanisms that explain why integration into global value chains triggers economic dynamics in developing countries, publications by the Policy Research in International Services and Manufacturing (PRISM) unit at the University of Cape Town shed light on this critical issue
Being part of global value chains undoubtedly offers considerable opportunities, but this analytical report showed that various endogenous obstacles need to be addressed before African countries can fully benefit from external impulses that the leading area generates, triggering linkages at peripheral sites
Summary
Following the latest World Development Report, Africa should pursue a liberal economic agenda in order to achieve what the authors of the report temptingly call “development in the age of global value chains.” Integration into global value chains is promoted as the path towards growth and prosperity. While the World Development Reports do not go into details regarding causal mechanisms that explain why integration into global value chains triggers economic dynamics in developing countries, publications by the Policy Research in International Services and Manufacturing (PRISM) unit at the University of Cape Town shed light on this critical issue.
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