Mauritania: Intra-Africa Trade in Value Added

Introduction

The Mauritanian economy suffers a substantial lack of diversification, low productivity, and over-reliance on primary sectors. According to the world bank Mauritania: Country Economic Memorandum (2020), in 2017, mining and fishing products accounted for 98.1 percent of the country’s exports. The insufficiency of the economic diversification and the slow transformation of the economy have central implications when it comes to the vulnerability to external shocks such as exchange rate and commodity prices fluctuation. An example is the 2014 fall in the price of the commodity shock that led the 5.5 percent GDP growth in the period 2011-2014 to drop to 2.5 percent in the period 2015-2018. Moreover, the insufficient diversification of the economy results in the dependency on low value-added domestic activities, which in turn, is associated with limited job creation, low productivity, and sluggish growth.

Despite efforts to regain macro-economic stability and to progress toward effective transformation and diversification of manufacturing, and service industries, the economy remains heavily reliant on extractive sectors. In 2019, measures and policies were considered to pave the way toward a more sustainable and stable growth through the boosting of less resource-dependent activities as well as the diversification of the economy. While signs of progress were felt, yet, the economy remains insufficiently diversified

One of the key economic transformation outcomes consists in the development of effective participation in the global value chain (GVC) with specialization in higher value-added tasks along the supply chain. The GVC can facilitate access to the global markets while enabling developing countries to focus on a set of tasks within the industry. It also enables leveraging the activities where they have comparative advantages as well as skills and technology upgrades. The literature conveys that participation in the GVCs yields more job creation, higher productivity and technological transformation, skills upgrading, and faster growth ((Dine, 2019)), ((Dine & Chalil, 2021)).

Mauritanian economy and GVCs’ participation: A comparison with Maghreb Countries

Figure 1 depicts the participation of Mauritania’s economy in the global value chain. The participation in the GVC remained low and flat during the period 1990-2003 averaging 115 million USD a year. However, the GVC participation commenced increasing before it drops as a result of the 2008 economic crisis. Afterward, the GVC participation recovered and increased in 2010. In 2015, the GVC participation declined, which appears to be a result of the fall in the commodity price in 2014-2015, before it rises to 1.03 billion USD.

While the Mauritanian economy seems to have achieved important progress in participation in the GVC, the economy remains the least integrated when compared to the Maghreb countriesGVC data are lacking for Libya - figure 2. This can be seen when deconstructing the GVC participation in foreign value-added (FVA) and indirect value-added (DVX) - figures 3 and 4. The Mauritania integration in the GVC through the FVA and DVX is the lowest among the Maghreb countries, which is essentially a result of the insufficient diversification of the economy, low productivity, and over-reliance on extractive sectors.

The Mauritanian participation in the GVC by the channel of foreign value-added and at the sector level in 2015 is presented in figure 5. The agriculture sector is the least integrated into the GVC via the foreign value-added as a share of export (backward linkages). Although Mauritania possesses a comparative advantage in agriculture, which can play a key role in the diversification of the economy, the sector faces several barriers preventing its development such as human capital, access to finance, infrastructure, developed markets, adequate and quality spending, good governance, and access to land (Block, 2014; Fuglie and Rada, 2013; Mandemaker et al., 2011). We observe from figure 5 that several sectors have relatively high backward linkages exceeding 40 percent, with the recycling industry, private households, and transport equipment sectors.

Sectors, then, are classified according to their technological advancement use in production. That is, we split the data into primary sectors, low-tech and high-tech, which is shown in Figure 6. Figure 6 shows that the Mauritanian participation in GVC through the backward linkages is principally driven by low-technology sectors.

On the other hand, the primary sectors, which rely mostly on the exploitation of natural resources such as agriculture, fishery, fostering, etc., are the least integrated into the GVC despite their considerable potential to play a main role in the economic growth as well as the diversification of the economy. High-tech manufacturing and services are less integrated into the GVC. This suggests the importance of tailoring adequate policies to seize the opportunity to promote the value-added in high-tech industries and invest in high-skilled workers and tasks to leverage the potential of integrating the GVC and support economic growth through the introduction of improved technologies efficiently managed through upgraded skills and capabilities.

Mauritania and African Trade in Value Added

Table 1 reports the value-added originating in Mauritania and exported by African countries. The exported value-added increased rapidly by 491% during the period 1990-2019 reaching 10.1 million US in 2019. As can be seen in figure 7, this evolution is mainly driven by the growth in the Mauritanian’s value-added exported by Nigeria, South Africa, Togo, Tunisia, Algeria, and Cameron. The value-added exported by Nigeria increased to reach its highest in 2010 before it descents to half of its value in 2019.

The value-added exported by South Africa comes second and has grown over the same period by 1233%, by 1048% for Togo, 1768% for Tunisia, 402% for Algeria, and finally 547% for CameronThe increasing tendency is observed for almost all the remaining countries. Despite the rapid increase in the value-added originating in Mauritania and embedded in African countries’ exports, the volume of traded value added remains low and efforts need to be set forth to boost the gains associated with regional trade integration.

On the other hand, information on the foreign value-added originating in African countries used in Mauritania’s export for the years 1990, 2000, 2010, and 2019, is reported in table 2. The value-added created in African countries and exported by Mauritania has rapidly evolved to reach 33.47 million USD in 2019 with an overall growth rate of 790% over the period from 1990 to 2019. Figure 8 shows that this evolution in the African foreign value-added embedded in Mauritania’s export is essentially propelled by the countries of Senegal, Morocco, Cote D’Ivoire, Swaziland, and South Africa with a total foreign value of millions of USD of 11.73, 7.45, 7, 5.25 and 4 respectively. The value-added originating in Senegal and embedded in the export of Mauritania has rapidly increased starting from 2010 whereas the Moroccan, Swaziland, and South Africa’s value-added embedded in Mauritania's export grew till 2010 before it declines in 2019. Access to foreign intermediates is central to seizing the opportunities associated with the regional GVC integration, mainly through technology transfer and knowledge spillover. Firms with more GVC participation are found to be more competitive and more productive. Therefore, it is fundamental to increase the volume of the foreign value added in the Mauritanian export to fully benefit from the African supply chain nexus and its repercussion on growth.

This article sheds some light on the Mauritania GVC integration within the African region. The analysis suggests that Mauritania must focus on and promote its comparative advantages to strengthen its participation in regional value chains and leverage the gains associated with such integration. The Mauritania economy remains insufficiently diversified and industrialized and is heavily dependent on extractive sectors while specializing in low skills tasks yielding export of primary products with low value-added limiting the firms’ integration to upstream positions. Moreover, the economy relies on the domestic market as a source of intermediates inputs - mainly in manufacturing - although this would enable the organization of the manufacturing production, the lack of access to intermediaries from abroad limits the knowledge transfer and thus the upgrading process of the technology and labor.

Finally, the Mauritanian economy must put forward efforts to upgrade its participation in the regional African GVC by leveraging its potential and building upon its comparative advantages, specializing in further down the value chain tasks, the diversification of the economy, and boosting productivity. This requires adopting efficient policies to boost gains associated with the regional trade agreements such as the African Continental Trade Agreement and the introduction of improved technology while focusing on skills and capabilities upgrading and capital accumulation along with the participation in the international supply chain GVC.

References

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