Hi LinkedIn Family!
Welcome to the 23rd edition of How to Trade with Africa. Thank you for your support!
Today, we’re diving into the dynamic and often misunderstood world of African value chains. If you’ve been exploring ways to expand your business operations or tap into the continent’s growing opportunities, understanding value chains is non-negotiable. Africa’s economic potential is immense, but the true magic lies in the interconnectedness of industries, products, and services—what we call value chains.
So, whether you’re a business in Africa looking to integrate with global markets or a company based abroad seeking mutually beneficial partnerships, this newsletter will provide you with actionable insights. We’ll explore five key African value chains, highlight their benefits, and show you exactly how to become part of this vibrant ecosystem. Let’s dig in!
What Are Value Chains, and Why Do They Matter in Africa?
Before we jump into specifics, let’s define what a value chain is. A value chain represents the full lifecycle of a product or service, from initial production (such as farming, mining, or manufacturing) to processing, distribution, and final sale to the end consumer. Each step in this chain adds value to the product or service, whether through refinement, packaging, transportation, or marketing.
Africa’s potential lies in the fact that its value chains are rich with opportunities at every stage. From agriculture and mining to technology and creative industries, Africa is bursting with untapped and underutilized resources. However, the key challenge for many businesses—both local and international—has been understanding how to join, contribute to, and benefit from these value chains.
Five Key African Value Chains You Should Know
To inspire you and spark ideas for your business, let’s explore five of the most promising African value chains that present lucrative opportunities for global and African businesses alike.
1. Agricultural Value Chains: Feeding the World
Africa is home to 60% of the world’s uncultivated arable land, and agriculture remains a critical driver of the continent’s economy, employing nearly 65% of its labor force. However, most agricultural produce is exported as raw commodities, which means that African farmers and businesses miss out on the higher profits that come from processing and adding value to these products.
For example, take cocoa. Africa produces about 70% of the world’s cocoa beans, yet the continent processes less than 5% of the global chocolate market’s final products. Similarly, cashew nuts grown in West Africa are often sent to Asia for processing, losing out on significant revenue opportunities.
Opportunities for Businesses:
- Invest in local processing facilities to produce finished goods like chocolate, juice, or packaged nuts.
- Develop supply chain partnerships with African farmers to ensure fair pricing, quality control, and sustainable practices.
- Collaborate on agricultural technology to improve yield and efficiency in farming.
What’s Required to Join:
- A clear understanding of the agricultural product you want to work with.
- Partnerships with local farming cooperatives, governments, or private sector players.
- Access to financing for processing plants or technology.
2. Textile and Fashion Value Chains: Redefining African Identity
The textile and fashion industry in Africa is on the rise, with African designers gaining global recognition for their vibrant designs and sustainable approaches. Countries like Ethiopia, Ghana, and South Africa are increasingly becoming hubs for textile manufacturing and fashion innovation. However, the lack of robust local production facilities has meant that many African designers still rely on imported fabrics, which increases costs and limits the scalability of their businesses.
For example, the kente cloth from Ghana or shweshwe fabric from Lesotho and South Africa represents unique cultural heritages that can become global trends if efficiently scaled. In addition, there is a growing demand for ethically made and sustainable fashion, which African artisans and designers are perfectly positioned to meet.
Opportunities for Businesses:
- Partner with African textile manufacturers to develop eco-friendly and culturally inspired designs.
- Set up factories for large-scale production or work with local cooperatives for artisanal, handmade goods.
- Leverage African fashion trends to penetrate global markets and promote cultural exchange.
What’s Required to Join:
- An understanding of the African fashion market and its global appeal.
- Investment in training local artisans or upgrading production facilities.
- Collaborations with established African fashion brands to bridge the gap between local and international markets.
3. Technology Value Chains: Driving the Digital Revolution
Africa is undergoing a digital transformation, driven by the rapid spread of mobile phones and internet connectivity. The continent is now home to more than 650 million mobile subscribers, creating opportunities for innovation in mobile payments, e-commerce, and tech-based solutions for everyday challenges.
Take Kenya’s M-Pesa mobile payment system, which revolutionized financial transactions and became a global case study for mobile banking. Similarly, Nigeria’s burgeoning fintech scene has given rise to startups like Flutterwave and Paystack, which have attracted significant international investment.
Opportunities for Businesses:
- Develop mobile apps or digital platforms tailored to African consumers’ needs (e.g., e-learning, telemedicine, or agritech).
- Invest in African tech startups or establish local partnerships to expand your tech footprint.
- Tap into Africa’s young and growing talent pool by outsourcing tech development or building innovation hubs.
What’s Required to Join:
- A solid understanding of the African tech landscape, including regulatory environments and consumer behavior.
- Capital for R&D and marketing to adapt your technology to local contexts.
- Strong networks with African tech hubs, governments, or academic institutions.
4. Mining and Mineral Value Chains: Unearthing Wealth
Africa is richly endowed with natural resources, ranging from precious minerals like gold and diamonds to critical industrial inputs like cobalt and lithium. However, much of the continent’s wealth in this sector is exported in raw form, leaving African economies with minimal profits while overseas markets capitalize on refining and manufacturing.
For example, cobalt, a key component in batteries for electric vehicles, is mined heavily in the Democratic Republic of Congo but processed mainly in China. Similarly, lithium, which is vital for renewable energy storage, is abundant in countries like Zimbabwe and Namibia.
Opportunities for Businesses:
- Set up local mineral processing facilities to increase value addition before export.
- Develop partnerships with African governments to create mining policies that benefit all stakeholders.
- Support sustainable and ethical mining practices to align with global ESG (Environmental, Social, and Governance) standards.
What’s Required to Join:
- Access to capital for large-scale operations or joint ventures.
- Knowledge of mining regulations and geopolitical considerations in specific African countries.
- Technology for efficient and sustainable mining and processing.
5. Creative Industries Value Chains: Telling Africa’s Story
From Nollywood films in Nigeria to Afrobeats music sweeping global charts, Africa’s creative industries are booming. The continent’s cultural assets—its music, films, art, and literature—are becoming powerful exports that shape perceptions and create economic opportunities. Yet, the industry lacks sufficient infrastructure to fully capitalize on its global appeal.
For example, Nigeria’s film industry produces thousands of movies annually, but limited distribution channels mean many of these films don’t reach a global audience. Similarly, African artists and musicians often struggle to secure royalties or retain ownership of their work due to weak intellectual property protections.
Opportunities for Businesses:
- Develop platforms (e.g., streaming services, galleries, or publishing houses) that promote African creative works.
- Collaborate with African artists to co-create content for global audiences.
- Invest in training programs to nurture local talent and build infrastructure for the creative economy.
What’s Required to Join:
- An appreciation for Africa’s diverse cultures and creative output.
- Partnerships with local content creators, distributors, and policymakers.
- Strategies for navigating copyright laws and intellectual property challenges.
How to Join an African Value Chain: Five Practical Steps
- Conduct Market Research: Study the value chain that interests you, identify its key players, and understand where your business can add value.
- Build Local Partnerships: Whether you’re sourcing raw materials or co-developing products, strong partnerships with local businesses, governments, and communities are critical.
- Invest in Capacity Building: Strengthen local skills and infrastructure to ensure sustainability and long-term growth for both your business and the value chain.
- Adopt Ethical Practices: Sustainable and socially responsible practices are crucial to gaining trust and ensuring compliance with international standards.
- Leverage Trade Agreements: Take advantage of initiatives like the African Continental Free Trade Area (AfCFTA) to reduce trade barriers and access broader markets.
Conclusion: The Time to Act Is Now
Africa’s value chains represent incredible opportunities for businesses willing to take the leap. Whether it’s processing cocoa into premium chocolate, scaling up tech innovations, or bringing African art to the world stage, there’s something for everyone. The continent’s growing population, expanding middle class, and increasing connectivity make it a market you simply cannot ignore.
So, roll up your sleeves, do your homework, and take the first step toward becoming an integral part of Africa’s value chain revolution. It’s not just about trade—it’s about building lasting, mutually beneficial relationships that drive prosperity for all.