Economic transformation remains a key task in the national economic strategy of African countries. In September 2024, the World Bank Group released a study on this topic. The study analyzes the role of South-South and North-South trade in Africa’s economic transformation, focusing on imports of intermediate and capital goods. 

The MIM:AGENCY team emphasized the main points in the format of a brief overview. 

Introduction

As is well known, imports from the Global South contribute to structural change, and from the Global North to productivity convergence. Identifying the factors that influence structural change and productivity convergence is critical to developing effective policies and implementing economic transformation in Africa.

Economic transformations

The impact of South-South and North-South capital and intermediate goods imports on structural change and productivity in Africa is generally not well understood. This paper analyzes data from 44 African countries for 2000-2022, focusing on structural change, productivity convergence, and the role of imported capital and intermediate goods.

Imports of capital goods, such as machinery and equipment, give African countries access to advanced technologies that would be unattainable in isolation. Imports of intermediate goods provide access to cheaper, better quality, and more diverse inputs. Taken together, this reduces production costs and, as a result, not only increases efficiency but also facilitates changes in the sectoral structure. Thus, countries can change their specialization, and lower costs stimulate the development of new and expanding enterprises.

The Global South receives capital and intermediate goods from the Global North, which helps to reduce the technological gap between the regions. Imports from the North provide access to quality inputs and advanced technologies that support the development of high-productivity sectors. This promotes structural change and accelerates catch-up development, bringing the region closer to global productivity levels.

Conclusions

According to the study, imported capital and intermediate goods are key drivers of economic transformation in Africa. Imports from the Global South facilitate structural change, while goods from the Global North help bring productivity closer to global standards. These two forms of imports serve different functions, underscoring the need for policies that provide African countries with access to markets in both regions. This approach challenges the idea that regional integration alone is the key to economic change on the continent.

Thus, economic transformation remains a priority for African countries, and structural change and productivity convergence are key components of this process. The results of the study show that imported capital and intermediate goods are important for economic transformation. At the same time, imports from the Global South contribute to structural change, while imports from the Global North have a greater impact on productivity convergence. This emphasizes the importance of both regional and global trade in achieving comprehensive economic transformation in Africa.

The political implications are also worth noting. First, African countries should focus on developing capabilities to maximize the benefits of advanced technologies and quality resources from the Global North. This requires investments in education, infrastructure, and institutions to help better absorb new technologies. Second, policies should support trade among countries in the Global South by strengthening regional integration and reducing trade barriers, allowing access to cost-effective technologies that are better suited to local conditions. Finally, a balanced trade policy that combines trade with the North and South can help achieve both structural change and productivity growth, contributing to sustainable economic transformation.

Source:

Kassa, Woubet; Ndubuisi, Gideon Onyewuchi; Owusu, Solomon. Economic Transformation in Africa: The Role of North-South and South-South Trade (English). Policy Research working paper; PROSPERITY Washington, D.C.: World Bank Group. URL: http://documents.worldbank.org/curated/en/099355309042437621/IDU1931dcb9316873148021872c153d8b9fed9ef