africa

Yale Center for the Study of Globalization
Figure 16.11: The “Smile Curve”: Value Addition and Production Stages
Source: Author.
The value-added leap is made possible by a technological leap. Deficiencies in infrastructure
pose a major obstacle to Africa’s development. In Africa, nearly 70 percent
of people remain without access to electricity. The World Bank 4 estimates that a 10
percent increase in infrastructure investment contributes a 1 percent increase in
GDP growth, and that a US$1 increase in public spending in infrastructure generates
a US$0.35 increase in total exports. Between 2001 and 2005, infrastructure
development contributed half the acceleration in growth in Africa. The infrastructure
is estimated at more than US$1 trillion in low and middle-income countries.
The value-added leap, and the move into an economy based more on services, will
require a technological leap and massive investments in the types of infrastructure
most relevant to this new economy, in particular information and communication
technologies (ICT). At the same time, the value-added leap partially solves the infrastructure
problem: services trade requires less infrastructure than most industrial
activities, so geographical remoteness could pose less of a problem. Skills remain
the backbone of services, though to develop them will require additional investment
in education and training.
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