VNc#1926: From Value Chain Integration to Value Chain Upgrading
By Victor PM Nyasulu
In our previous article, we argued that Zambia’s indigenous Micro, Small and Medium Enterprises (i-MSMEs) must move beyond market readiness and pursue integration into productive value chains.
We observed that participation in value chains provides access to
markets, learning opportunities and pathways for growth.
Yet integration alone is not enough.
The next challenge is Value Chain Upgrading. Many indigenous enterprises successfully enter value chains but remain trapped at the lowest levels of economic participation. They supply basic goods and services, often competing primarily on price while capturing only a small fraction of
the value ultimately created.
This phenomenon is common across developing economies. A small enterprise may provide cleaning services to a mining company. Another may supply vegetables to a hotel. Yet another may transport goods for a manufacturer. While these activities generate income, they often do not create substantial wealth unless enterprises continuously upgrade their capabilities.
Value chain upgrading simply means moving into activities that create greater value and
therefore generate higher returns.
There are several ways this can occur.
- Process upgrading. This involves becoming more efficient through better technology,
improved systems and higher productivity. Enterprises that deliver superior quality at
lower cost become more competitive and profitable. - Product upgrading. Here, businesses move from supplying basic products to offering
higher-value goods and services. A carpenter who produces ordinary furniture may
eventually manufacture premium office fittings. A farmer may progress from selling raw
produce to supplying processed food products. - Functional upgrading. This occurs when enterprises assume additional roles within the
value chain. Instead of merely supplying products, they may add packaging, branding,
logistics, distribution or after-sales support.
These forms of upgrading are what transform ordinary enterprises into industry leaders.
For decades, national discussions have focused on increasing indigenous participation in the
economy.
While participation is important, true empowerment occurs when indigenous enterprises progressively occupy higher-value positions within strategic sectors.
A supplier today should aspire to become a manufacturer tomorrow. A subcontractor today
should aspire to become a prime contractor tomorrow. A local business today should aspire to
become a regional exporter tomorrow.
This requires deliberate effort both from the Zambian i-MSMEs and the government of the
republic of Zambia if the 44-year-old efforts to boost the MSME sector are to bear fruit, fruit that
lasts!
Naluta mafumu, Chiuta wamutumbikani! __________________________________________________________________
The Author can be reached on +260 955 746 997 or via email at vpmn69@gmail.com
