In seeking to be part of global value chains (GVCs), it is important to know and understand the core incompetencies and compentencies of business or government, respectively, in order to “prioritise and specialise” the vertical value chain, Open University Professor Raphael Kaplinsky said at Thursday’s Economies of Regions Learning Network meeting in Pretoria.

Kaplinsky described a value chain as a chain of activities that a firm operating in a specific industry performed in order to deliver a valuable product or service for the market. It is every step a business goes through, from raw materials to the eventual end-user and, moreover, could play a role in poverty alleviation.

He mentioned that the problem with much of policy and much of the thinking in the world today was that too little focus was placed on the issue of supply and capabilities. “What are the capabilities we require, what are the human resources we require? Unless you understand how it is that these products get inserted into markets, you don’t really make sense of the challenge of inserting gainfully in the global economy.”

Thinking in terms of the GVC goes beyond production capability, he said; it thinks about the links between the final markets, the production and innovation requirements for that, and it helps one understand how to position oneself in this chain all the way from conception to after-use.

He noted that Africa had grown more rapidly since 1990, particularly in the 2000s, than during any other period in history, noting, however, that the number of people living below the poverty line since then and up to 2008 had increased by an extra 135-million people.

“Unless you understand the dynamics of value chains, you don’t understand how it is that producers insert themselves gainfully in markets in such a way that they provide sustainable incomes,” Kaplinsky elaborated.

“You might want to build core capabilities and deepen your value-add over time, but if you’re inserting into global value chains in an existing industry, from the policy perspective, it may be more important to know what your core incompetencies are, rather than your core competencies, asking yourself not ‘what am I going to do’, but also ‘what am I going to give up?’” he explained.

He noted, however, that this was very difficult to determine owing to the politics of giving up some compentencies.

He said it was vital that decision-makers move from a mentality that everything could be produced in-house. “That is often as big a jump as the idea of what we can do and want to do well, and where we want to go,” he said.

He noted that “thinning out” and “letting go” may be one of the key steps in value chains, where the more diffused these vertical specialisation value chains became, the more important it would be to develop a mentality of letting go.