African countries must level up on their ability to measure services trade and use services to grow their economies and value chains.
Africa is ready to take advantage of its rapidly growing services sector but needs to step up its analytics game to play a more active role in global and regional value chains.
This was the consensus among African countries participating in a joint UNCTAD-United Nations Economic Commission for Africa (UNECA) project on services trade.
The project is helping train African experts to do just that: measure the contribution of services to regional value chains and explore the role of domestic and foreign firms.
In partnership with Ethiopia, The Gambia, Kenya, Mali, Nigeria and Togo, UNCTAD-UNECA delivered a three-day ‘train-the-trainers’ seminar, in Addis Ababa, Ethiopia, from 29 to 31 January.
The focus was on how to unlock potential in three services sectors – transport, financial services and tourism – in those countries, and help African countries acquire the necessary skillset to measure and monitor services trade value chains.
“Services offer African countries an important opportunity to diversify production away from traditional sectors and engage in activities with higher value added,” says Paul Akiwumi, UNCTAD’s division head for Africa, least developed countries and special programmes.
“Some services – transport, financial, and information and communication services – are key contributors to trade and improve the ease of doing business across borders.”
Continental trade dreams
Services trade can also support the aspirations of the African Continental Free Trade Area (AfCFTA) agreed by African leaders in March 2018.
The AfCFTA seeks to establish a single market for goods and notably services. To date, 16 countries have ratified the agreement.
But turning the AfCFTA vision into a reality has proved challenging, especially when it comes to services trade, says Stephen Karingi, UNECA regional integration and trade division director.
“One of the main stumbling blocks to the implementation of trade services-related policies is the lack of understanding and quantification of services trade, and more generally, the role services play in regional and global value chains,” Mr. Karingi says.
Raising the profile of services in Africa may offer promising opportunities for export diversification, services-led transformation and services trade-led growth.
Africa stands to gain from sharpening its ability to measure and analyze services value chains.
That is why policymakers are committing to levelling up their services analysis skills to design services policies aimed at increasing integration into regional and global value chains.
UNCTAD economist Claudia Roethlisberger told attendees that services have become essential for countries’ ability to participate in global and regional value chains.
“The continental market brings immense opportunities for shaping Africa’s services trade, creating and supporting services regional value chains and regional integration,” Ms. Roethlisberger said.
In practical terms, unlocking this potential requires services trade to be better understood and supported in policy-making processes.
UNCTAD and UNECA’s seminar series helps deliver this through user-friendly tools and capacity-building initiatives like the seminar of African trade analysts and policy makers.
Getting to work
Workshop participants dug deep into the details of the data and methodologies on how to construct reliable indicators on services trade and trade in value added.
Country delegations and experts discussed quantitative and qualitative tools to measure the contribution of services to value chains.
Ms. Ya Awa Nyassi from The Gambia highlighted the possibility of engaging industry associations to select firms to survey and interview and confidentiality was essential for useful inputs.
Mr. Kossi Abiguime from Togo also emphasized the need to adapt the survey to country contexts.
Participants are already seeing the value of measuring services trade. Ethiopian and Kenyan delegates found transport sub-sectors where they expect the project to generate value.
They now want to assess how transport services support horticulture and manufacture exports and the how transport of the freight industry facilitates regional value chains.
Mr. Sidy Keita and Mr. Sidy Boly from Mali discussed how surveys can be adjusted to measure the tourism sector.
The project is filling important and practical knowledge gaps for the continent. “We are addressing the lack of understanding and quantification of services trade in Africa,” Mr. Karingi said.
Given that many services sectors employ many women, services trade can also have significant gender impacts and offer new opportunities for women in Africa, ensuring no-one is left behind, added Mr. Akiwumi.
“To reap real benefits from today’s international trade, countries must integrate into value chains and build their services sectors to participate in segments with higher value added.”
“This will increase their ability for income generation, boost their development outcomes and contribute to realizing the targets of the Sustainable Development Goals,” he said.
The project is funded by the United Nations Development Account.
African Services: The numbers
In 2016, about 55% of Africa’s GDP was generated by services.
The share of services in Africa’s trade reached 22% in 2016, following a steep increase and catching up process to the global average of 24%.
In 2017, Africa accounted for only 3% of the world’s total services imports and 2% of the world’s total exports of services.
Removal of tariff barriers will increase intra-African trade by 50%.
The improvement of trade facilitation will more than double the intra-African trade.