A Conceptual Overview to Understand Commodities, Linkages and Industrial Development in Africa

Methodology

This paper largely relies on qualitative research, couple with fieldwork, to inform the paper.

Research Objective

This paper explores the potential for backward and forward linkages in extractives sectors, which could foster greater industrialisation (opposing the notion that extractive sectors is corrosive of industrial development, the so-called ‘resource curse’)

Synopsis

  • The paper first provides an overview of literature related to the resource curse, and how thinking around this topic has changed. Extractive sector and industrial development are no-longer seen as mutually exclusive activities.
  • Due to increasingly outsourcing and fractured production processes (that manifest across regional/global value chains) there is increasingly scope for predominantly mineral exporters to increase their value addition and form part of these value chains.

Policy Recommendations

  • There is a difference between ‘hard’ and ‘soft’ commodities and the backward and forward linkages that can be formed in related value chains – processing of hard commodities (e.g. mined commodities) are typically capital intensive and forward linkages are often limited. In contrast, soft commodities (e.g. grown commodities) lend themselves more readily to forward linkages, as processing is typically labour intensive. However, backward linkages for both hard and soft commodities tend to be labour intensive, and provide opportunities for diversification.
  • There is scope for countries to develop industrial capacity by following this ‘linkage’ approach, depending on the commodities they produce
  • Strategic industrial policies could be centred on this ‘linkage’ approach to facilitate greater industrialisation. These small, targeted interventions then have the potential to mushroom into other productive activities