Global Value Chains and Digital Infrastructure Development in Africa: Panel Data-Based Evidence and Implications for the AfCFTA and for Regional Value Chains

This study examines the influence of digital infrastructure development on participation in global value chains (GVCs) across 28 African countries from 2000 to 2018 and explores the implications for the African Continental Free Trade Area (AfCFTA) and African regional value chains. The study highlights how digital infrastructure facilitates not only connectivity but also the creation, diffusion, and application of knowledge across borders, and situates Africa’s digital transformation within the broader context of the global knowledge-based economy. The findings, based on a dynamic panel data model, indicate that a one-unit rise in the digital infrastructure development index (DIDI) corresponds to a 2.4 to 3% boost in overall GVC participation, a 2.7 to 3.6% increase in upstream participation, and a 2.3 to 2.7% rise in downstream participation. The analysis also uncovers bidirectional causality between digital infrastructure development and both overall GVC participation and downstream GVC participation, as well as unidirectional causality from upstream GVC participation to digital infrastructure development, as established through a panel causality test. The results highlight the need for further coordination between digital infrastructure development and GVC policies in Africa. They also highlight the critical role of digital systems in facilitating knowledge flows, spreading innovation, and supporting learning-by-linking processes within value chains. Furthermore, the results indicate that digital infrastructure development and its impact on participation in GVCs influence the success of the AfCFTA and the development of regional value chains. The AfCFTA also presents opportunities for digital infrastructure to open up market access and improve participation in GVCs.