Value Chains & Economic Transformation

Taking a Value Chain Approach to Economic Development

Economic development has traditionally focused on increasing production, supporting individual businesses and investing in infrastructure. While these interventions remain important, they often fail to create lasting transformation because economic value is not created by individual actors in isolation. It emerges from the connections between producers, processors, markets, finance, technology, infrastructure and institutions.

A value chain approach shifts the focus from individual activities to the system that enables value creation. It asks different questions: Where is value created? Where is it lost? Which capabilities are missing? How can markets, businesses and institutions work together to build competitive industries that capture more value locally?

Why a Value Chain Approach?

Traditional economic development often focuses on individual interventions: supporting entrepreneurs, increasing production, building infrastructure or improving access to finance. These interventions can create meaningful improvements, but they often fail to transform the wider economic system because businesses do not operate in isolation.

A value chain approach looks beyond individual actors and examines how producers, processors, markets, infrastructure, finance, technology and institutions connect. It asks where value is created, where it is lost, which capabilities are missing and how the entire system can become more productive and competitive.

By shifting the focus from supporting activities to designing systems, a value chain approach helps identify opportunities that individual programmes often miss: new industries to build, missing capabilities to develop, and the connections required to create sustainable economic value.

Core Ideas

Five concepts that challenge conventional thinking about economic development and explain how a value-chain approach is different.

1. Production Does Not Equal Productivity
The idea: More output does not automatically create more economic value.
…

Economic development often starts with increasing production: more farmers producing more crops, more factories manufacturing more goods, more businesses entering markets.

But productivity is about much more than output. It is about how effectively a system converts resources into greater value — through coordination, capabilities, technology, quality, market access and the ability to move into higher-value activities.

A sector can therefore grow without becoming more productive.

2. Value Chains Are More Than Supply Chains
The idea: Economic transformation is not only about moving products efficiently; it is about creating and capturing more value.
…

Supply chains focus on the movement of goods. Value chains look at where value is created, where it is lost, and which capabilities determine competitiveness.

This changes the question from: “How do we produce more?”

to: “How do we build the capabilities that allow an industry to capture more value?”

3. Economic Transformation Requires Ecosystems, Not Isolated Stakeholders
The idea: Businesses do not succeed in isolation.
…

A producer, manufacturer or entrepreneur depends on a wider system: suppliers, skills, finance, infrastructure, technology, standards, logistics, institutions and markets.

Many development interventions focus on individual actors, but transformation happens through stronger connections between stakeholders.

4. Demand Creates Value
The idea: Successful industries are built backwards from markets, not forwards from production.
…

Many interventions begin with what exists — farmers, factories, resources or entrepreneurs — and then search for opportunities.

A value-chain approach starts with demand:

Who is the customer?
What value do they need?
Which capabilities are required to deliver it?
Which actors need to connect?

This shifts development from “producing more” to “building what creates value.”

5. Value Creation Requires Capabilities, Not Just Capacity
The idea: Growth depends not only on doing more, but on building the capabilities that allow industries to compete.
…

Many development efforts focus on increasing capacity: more production, more businesses, more infrastructure or more access to finance.

But capacity alone does not create competitiveness.

Industries transform when they develop the capabilities needed to create higher value: technology, skills, quality systems, innovation, operational excellence, market intelligence and the ability to adapt.

Economic transformation is therefore not only about expanding what exists, but about building what is missing.

Kenya’s Economic Future: Choosing Ownership Over Dependency

Manufacturing • Value Creation

Kenya’s economic transformation depends not only on attracting investment and creating jobs, but on building local ownership, productive capabilities and value chains that allow more wealth to remain within the economy.

Africa at the Crossroads: Feeding Ourselves Before It’s Too Late

Food Economy • Productivity

Africa’s food security challenge is not caused by a lack of agricultural potential, but by fragmented systems that limit productivity, investment and the ability to build resilient domestic food markets.

Rethinking Africa’s Place in Global Value Chains: Why Value Addition Alone Won’t Cut It

Value Chains • Value Creation

Moving up global value chains requires more than adding processing steps; it requires redesigning the systems, capabilities and ownership structures that determine who captures value.

Africa’s Path to Human-centred Industrialisation in the AI Era

Innovation • Manufacturing

Africa’s industrial future does not need to follow the same path as previous industrial revolutions; it has the opportunity to design new systems that combine technology, sustainability and local capabilities from the beginning.

Unlocking True Productivity: Why Funding Must Evolve Beyond Activities

Development Organisations • Productivity

Many development efforts fund visible activities and outputs, but lasting economic transformation requires investment in the underlying systems, capabilities and coordination mechanisms that create productivity.

Explore Further

Additional perspectives that reveal how value chains shape economic opportunities, competitiveness and value creation.

Making Data Work: From Visibility to Productivity

Digital Transformation • Technology

Data can improve decision-making, but only when it is combined with context, interpretation and systems thinking rather than treated as a substitute for understanding.

The Other Half of the Aid Story: Shaping Development on Our Terms

Development Organisations • Innovation

Sustainable development requires moving beyond short-term projects towards approaches that strengthen local ownership, market systems and the capacity to create lasting value.

Rethinking Credit Systems for MSME Inclusion

Financial Services • Financing

MSMEs are often excluded from finance not because they lack potential, but because credit systems are designed around traditional measures of risk rather than the realities of emerging businesses.

Value Chains Explored by Sector

How a value-chain perspective changes the way we see opportunities across different industries.

Turning the Tide of Africa’s Blue Wealth

Blue Economy • Value Creation

Africa’s blue economy opportunity depends not only on protecting and increasing aquatic resources, but on building the processing, technology and market systems required to turn natural wealth into sustainable economic value.

Reimagining Kenya’s Sugar Industry: Lessons, Opportunities, and a Path to Sustainable Growth

Agriculture • Value Creation

Kenya’s sugar industry illustrates how increasing production alone cannot create competitiveness; sustainable transformation requires redesigning the entire value chain from farmers to processors, markets and by-products.

Optimizing Farming Outputs for Improved Incomes

Agriculture • Value Creation

Agricultural development has focused heavily on increasing yields, but significant economic opportunity remains in transforming by-products and waste streams into new sources of income and industry.

Software gave Kenya its first breakthrough. Hardware will keep it in the game.

Innovation • Technology

Kenya’s digital success created global recognition, but building lasting industries requires moving beyond software applications towards the hardware, manufacturing capabilities and value chains behind innovation.

Reimagining Kenyan Tourism: It Starts With Becoming a Tourist Yourself

Tourism • Value Creation

Kenya’s tourism industry has traditionally been designed around international visitors, but unlocking its full potential requires developing local demand, broader experiences and stronger value chains.

Preserve the Crop, Create the Market: Rethinking Agricultural Value in Africa

Agriculture • Value Creation

Africa’s agricultural challenge is not simply increasing production, but redesigning food systems to preserve value, create markets and enable farmers to capture more from what they already grow.

Rethinking Sports as a Platform for Youth-Led Value Chains

Sports Economy • Value Chains

Kenya has world-class sporting talent, but building a sustainable sports economy requires developing the businesses, infrastructure and ecosystems that surround athletes and events.

Kenya’s Health Crisis Isn’t a Lack of Hospitals – It’s a Broken System

Digital Transformation • Healthcare

Healthcare transformation requires more than expanding physical infrastructure; it requires connected systems that use data, technology and coordination to improve decisions, access and outcomes.

Why rural electrification risks failing—unless we change what it’s designed to deliver.

Energy & Mobility • Productivity

Rural electrification often focuses on expanding access, but economic transformation requires designing the surrounding systems that turn electricity into productive activity, businesses and incomes.

Why Kenya’s Leather Industry Lags—and How Rethinking Value Chains Could Transform It

Fashion & Textiles • Value Creation

Kenya’s leather industry demonstrates the difference between supply chains and value chains: while raw materials move efficiently, much of the opportunity for processing, design, branding and value capture remains elsewhere.

The Transformative Potential of the Lunch Economy in Kenya

Entrepreneurs & SMEs • Food Economy

Kenya’s informal food economy feeds millions every day, but its potential extends far beyond daily consumption: with better systems, infrastructure and coordination, it could become a driver of value creation, jobs and local industry.

Rethinking Kenya’s Blue Economy: From Catch to Value Creation.

Blue Economy • Value Creation

Kenya’s Blue Economy has focused heavily on increasing output, but sustainable economic transformation depends on building the systems and value chains that turn natural resources into higher-value industries.

Kenya’s Looming Opportunity: From Fiber Supplier to Sustainable Fashion Leader

Fashion & Textiles • Value Chains

Kenya’s textile opportunity lies not in producing more fibre alone, but in building the capabilities, partnerships and value-chain connections required to transform raw materials into a competitive sustainable fashion industry.

Kenya’s Mango Paradox: Growing the Fruit but Importing the Juice

Agriculture • Value Creation

Kenya’s mango challenge is not a lack of production, but the absence of the processing, coordination and market systems needed to transform agricultural output into higher-value products.