AFRICAN PRODUCTIVE CAPACITY INITIATIVE (APCI)

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AFRICAN PRODUCTIVE CAPACITY INITIATIVE (APCI)

• A Review
• SADC Expert Group Meeting
• Johannesburg, South Africa
• 5-8 December 2006
• Chibo Onyeji, Ph.D.
• UNIDO Consultant on the APCI

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Origins of the APCI

• MDGs (2000)
• 1. Eradicate extreme hunger and poverty
• 3. Promote gender equality and empower women
• 7. Ensure environmental sustainability
• 8. Develop global partnership for development
• NEPAD common vision for robust economic growth
• CAMI-16 sub-regional meetings 2002-2003
• African Union adopted the APCI in 2004 as the
  sustainable industrial development component of
  NEPAD

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Approach of the APCI

• Build an African common vision of Productive
  Capacity
• based on the value chain approach
• Highlight sectoral priorities as part of specific
  segments of the value chain
• based on comparative advantage
• Harmonize industrial policies/strategies at
  national/regional levels
• based on cooperation/ collaboration
• Facilitate implementation of the African Peer
  Review Mechanism on industrial performance/compete
  ncies
• based on benchmarking
• Suggest sub regional programmes for productive
  capacity upgrading
• backed by a financial facility (APCF)

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WHAT IS PRODUCTIVE CAPACITY?

• The ability to
• Produce goods that meet the quality requirements
  of present markets
• Upgrade in order to meet the requirements of
  future markets
• This ability is determined by
• Productive resources, entrepreneurial skills,
  production linkages, etc.

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Characteristics of the APCI

• Collaborative (envisions ppp at different levels
  continental, sub-regional, sectoral, individual)
• Comprehensive (develops a common African vision,
  harmonizes industrial strategies and policies)
• Based on the value chain concept.

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Drivers of productive capacityPresent level /
Upgrading potential

• Skill level of workers
• Infrastructure physical, soft
• Intermediate inputs availability
• Available technology
• Patterns of joint action
• Benchmarking practice

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Influence on the Drivers

• Enhancing technological diffusion and innovation
• Harnessing information and communication
  technologies
• Optimizing industrial energy systems
• Improving human capital formation
• Improving environmental protection
• Building capacity for market access and
  development
• Reducing poverty and achieving the MDGs.

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The Value Chain

• A value chain is the sequence of production, or
  value adding activities leading to and supporting
  end users of a particular product.
• The production process is simply a process of
  adding value, where value added is the sum of
  wages, profits and natural resource rents. Thus
  for each good sold a value chain could be
  constructed as a decomposition of its price into
  the value added in each stage of production.
• But creating value is not confined to production
  alone because there is a combination of other
  activities that are integral to bringing products
  to the market.
• Value chains have a geographical dimension.

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Types of Value Chain Gereffi is credited with
identifying two basic types of value chain

• buyer-driven
• Large retailers, marketers, branded manufacturers
  play central roles in setting up decentralized
  production networks (e.g., Garments, footwear,
  etc.)
• producer-drive
• Large, usually transnational manufacturers play
  central roles in coordinating production
  networks(capital- and technology-intensive
  industries e.g., automobiles, aircraft,
  computers, etc.)

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Analytical Uses of the Value Chain

• Identify factors that influence competitiveness.
• Analyze the role of policy in enhancing or
  reducing chain competitiveness.
• Understand particular economic problems e.g.,
  remuneration of workers or distribution of
  profits.
• Benchmarking

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POLICY USES OF VALUE CHAIN ANALYSIS

• Enables us learn what can be done to increase the
  returns to individuals and firms
• Enables us understand the changes involved in the
  nature and mix of activities within each link in
  the chain, and in the distribution of intra-chain
  activities
• Enables us understand the possibilities and
  probabilities of upgrading productive capacities
• BENCHMARKING

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Benchmarking the Performance of Productive
Capacity The systematic use of comparisons

• Industrial capacity benchmarks
• How strong is industrial capacity?
• Industrial capability benchmarks
• How strong is industrial capability?
• Industrial complexity benchmarks
• What is the level of complexity?
• Industrial upgrading benchmarks
• What is the potential for upgrading?

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Indicators of Industrial Capacity Benchmarks
capacity is the ability to perform

• Availability/reliability/cost of electricity
• Availability/quality/cost of water
• Availability/reliability/cost of communications
• Cost of key means of transport
• Availability/quality/cost of production

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Indicators of Industrial Capability Benchmarks
capability is the ability to operate capacity

• Average education level of workers
• Workers' technical skills
• Training opportunities available
• Level of intellectual capital
• Quality of product conformity and quality
  infrastructures

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Indicators of Industrial Complexity Benchmarks

• Number of producing firms
• Types of products and their markets
• Number of local suppliers
• Number and type of distributors
• Formal support organizations
• Associations, sectoral networks, and other
  linkages

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Indicators of Industrial Upgrading Benchmarks

• Changes over time in any or all of
• capacity, capability, complexity.

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TYPES OF UPGRADING Upgrading replaces low-paid
activities with activities that command higher
returns

• Process upgrading
• Increases efficiency of internal processes
• Product upgrading
• Introduces new products faster than rivals
• Functional upgrading
• Increasing value added by changing the mix of
  activities within the chain, or moving from
  low-return to high-return activities
• Chain upgrading
• Moving from one chain to a new, more profitable
  chain

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DEVELOPING A PROGRAMME for CHAIN UPGRADING

• Knowledge of context
• Choice of chain
• Chain knowledge
• Knowledge of support systems

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SOME CAVEATS AND THE CASE FOR REGIONAL VALUE
CHAINS

• External obstacles to industrial upgrading
• barriers to greater intra-regional trade
• trade distorting policies e.g., high
  tariffs/subsidies to farmers
• non-tariff barriers e.g., complex rules of
  origin
• chain specific limitations

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TO MAKE SIGNIFICANT PROGRESS TOWARD ACHIEVING THE
MDGs BY 2015

• develop and cultivate ability to diversify
  exports, and integrate into appropriate marketing
  and global production networks (supply/conformity
  capacity)
• comprehensive regional programmes are needed to
  guide the productive capacity upgrading process
  and actualize the APCI
• as the productive sectors necessarily benefit
  from new market opportunities inherent in the
  globalization process, the long-standing
  conditions of poverty and deprivation will be
  substantially alleviated

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URGENT NEED TO MOBILIZE RESOURCES FOR
IMPLEMENTING THE APCI

• The African Productive Capacity Facility (APCF)
  is the funding mechanism envisioned for the APCI,
  dedicated to supporting regional productive
  capacity initiatives
• The APCF was to be endowed with 5 million from
  the defunct Industrial Development Decade for
  Africa Fund
• APCF consists of loans, loan guarantees, grants,
  technical assistance, fiscal measures,
  contributions in kind, etc.

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CONCLUDING REMARKS

• African countries can make significant progress
  in achieving the MDGs by diversifying exports,
  and integrating into global production networks
• Toward these ends CAMI-16, in 2003, undertook to
  redirect the economic development path of Africa
  and agreed the APCI
• In 2004 the African Union adopted the APCI as the
  sustainable industrial development component of
  NEPAD
• The APCI is based on the value chain approach
• The APCI is centered on collaboration/cooperation
  including PPP at all levels
• The APCI has a funding mechanism, the APCF
• The APCI is evolving into the policy framework
  for Africas industrialization effort

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THANK YOU!!!Chibo Onyeji, Ph.D.UNIDO
Consultant on the APCI