Maximizing the Benefits of Trade for Africa

African countries are increasingly integrating into global supply chains (GSC). Yet the linkages between African and foreign firms and the impact of GSC activities on the development prospects of African states is not well understood. This policy brief analyzes GSC trade between the U.S. and China, on the one hand, and Southern African Customs Union (SACU) member states on the other. It shows that, contrary to the conventional wisdom that SACU states export raw materials with few value-added products, SACU states are actually positioned further up in the supply chain hierarchy. They import intermediate inputs from China and export a substantial volume of intermediate goods to the U.S. rather than to China. Moreover, GSC trade is diversifying the countries’ exports and increasing their industrial capacity, positioning African countries to attract companies moving out of China, whether because of high production costs, supply chain disruptions, U.S. tariffs, or geopolitical tension between the U.S. and China. But SACU states will need to adopt smart policies to upgrade existing supply chains and position themselves to build or attract new GSCs to their region.