Achieving Upgrading in Agro-based Value Chains: How participation in different trade trajectories affects producers in the Kenya leather sector

Giovanni Pasquali


Globalisation has been characterised by a phenomenon of disintegration whereby increasing trade and capital mobility has been accompanied by a breaking-up of value chains across different countries. Within a logic of export-oriented development, developing nations have seen participation into GVCs as a unique opportunity to relocate productive activities inside their borders, supporting not only economic growth but also better working conditions and social standards. This notwithstanding, GVCs scholars have recently questioned the occurrence of this pattern, noticing how dependence on external buyers in developed countries locks developing countries’ suppliers into low-skilled, labour intensive activities, preventing them from developing the institutions and know how required to move into higher stages of value creation. In virtue of the its fundamental role in sustainable development and its buyer-driven and labour-intensive structure, this study focuses on agro-based manufacturing GVCs in order to understand how different trade trajectories and end-markets impact of suppliers’ economic and social upgrading. In light of the recent surge of South-South and regional trade, along with the preeminent role played by lead buyers in developing economies, this research posits three trade trajectories (i.e. South-North, South-South and local/regional) defined by different levels of (i) consumer preferences; (ii) product and process standards; and (iii) factor endowments. Drawing on this evidence, the study proposes a mixed methodology combining qualitative methods of data analysis with a set of descriptive statistics to assess different level of governance and chain integration across trade trajectories, along with their respective impact on suppliers’ capacity to upgrade products, processes and functions. The leading hypotheses derived by the literature are conflicting. On the one hand, suppliers in South-South value chains are likely to be locked into low stages of functional upgrading due to lower labour costs and a propensity towards unprocessed imports typical of Southern buyers; on the other hand, it is claimed that suppliers in South-South value chains experience increasing functional innovation due to the lower hierarchical integration of these chains compared to GVCs dominated by northern buyers. The current research tries to shed light on the dynamics underpinning this phenomenon by focusing on two of the most promising manufacturing sectors in Kenya, i.e. the leather and apparel value chains. The choice of the case study has been defined both as a consequence of its convenience in accessing data, as well as the presence of all three trade trajectories mentioned above, with an increasing role played by South-South and regional GVCs. The presentation will focus on the study preliminary results from a quantitative analysis of single transaction data on leather exports from 2006 to 2014 as well as a set of qualitative interviews with 25 tanners across Kenya and Uganda and a set of 10 other institutions and practitioners within the value chain.

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