Africa’s structural transformation debate is often framed around a familiar question: should African countries deepen their economic ties with the Global North or strengthen their rapidly expanding relationships with the Global South?
This framing is increasingly inadequate. It reduces trade strategy to a geopolitical choice between competing blocs and overlooks a more fundamental development question: which trade relationships provide the technologies, machinery and intermediate inputs that African economies can effectively absorb, adapt and deploy?
This question lies at the center of our recent article, Ndubuisi, Owusu and Kassa (2026), published in The World Economy. Drawing on evidence from 52 African countries between 2000 and 2022, the study examines how imported capital inputs and intermediate inputs from different regions influence structural change.
The findings point to a simple but powerful conclusion: the developmental impact of imported capital and intermediate input depends on where those imports come from, and how well they fit domestic production capabilities.
Trade is not automatically transformative
Structural change refers to the movement of labor and economic activity from relatively low-productivity sectors into more productive activities, specially manufacturing and modern services. Historically, this process has been central to sustained productivity growth, employment creation and economic development.
Trade can support structural change by giving firms access to machinery, equipment, components and production inputs that may not be available domestically. Imported capital inputs can raise productivity, expand production capacity and introduce new technologies. Imported intermediate inputs can improve product quality, reduce production costs and help firms enter more sophisticated industries.
However, imports do not generate these outcomes automatically. A machine may embody advanced technological knowledge, but its productive value depends on whether firms possess the engineers, technicians, infrastructure, finance, organizational capabilities and complementary inputs required to use it. Where these conditions are absent, sophisticated technologies may remain underutilized, operate below capacity or fail to generate wider learning effects.
The relevant issue is therefore not simply access to technology. It is the relationship between the complexity of imported technologies and the capabilities of the economy receiving them.
Why South–South trade matters
Our results show that capital and intermediate inputs imported from the Global South consistently support structural change in African economies.
A likely explanation is technological and productive alignment. Machinery and intermediate inputs produced in countries such as China, India, Türkiye and other emerging economies may be more closely suited to conditions prevailing in many African countries. They may require lower levels of technical sophistication, operate more effectively under infrastructure constraints, be easier to maintain and repair, and correspond more closely to the scale and organization of African firms. These technologies may also be more affordable and accessible to small and medium-sized enterprises, which constitute a large share of productive activity across the continent.
The findings become even more revealing when the Global South is treated not as a single, homogeneous group.
Imported capitals from more industrialized Global South economies generate stronger structural transformation effects. These countries can supply machinery that is technologically more advanced than what is locally available in many African economies, while remaining relatively compatible with their productive structures.
For intermediate inputs, the pattern flips. Intermediate inputs from less-industrialized Global South economies produce effects more than twice as large as those from industrialized Global South economies. This advantage appears to come from low cost, accessibility and alignment with labor-intensive production systems. In early transformation, affordability can matter as much as technological depth.
The capability–technology mismatch
The importance of South–South trade does not mean that imports from the Global North are irrelevant. Northern economies remain important sources of advanced technologies, high-quality machinery, specialized components and knowledge-intensive inputs.
Our findings show that intermediate inputs imported from the Global North can promote structural change. However, the effects of sophisticated capital inputs from Northern economies depend more strongly on domestic absorptive capacity.
This reveals what may be described as a capability–technology mismatch. The most advanced technology is not necessarily the most developmentally appropriate technology. A machine may embody world-leading knowledge, but its productive value will remain limited where firms lack the capabilities to use it effectively. Unfortunately, many African firms operate under this very condition.
This argument should not be misunderstood as a case for permanent technological inferiority. It is an argument for sequencing. Findings in our study also reveal that stronger absorptive capacity dampens the transformative benefits of imported capital from the Global South. In this sense, technologies that are well suited to low- or middle-capability production systems can become inadequate as countries seek to move into more complex, knowledge-intensive and higher-value activities.
Rethinking African trade policy
The policy implication is not that African countries should choose between the Global South and the Global North. Such a binary choice would be economically limiting and strategically misguided. Instead, our findings suggest that Africa’s trade policy should be capability-sensitive, technology-specific, and dynamically sequenced.
Africa does not simply need more trade. It needs trade that supports structural transformation. Attaining this feat requires strategic trade and industrial policies that continuously match imported technologies with domestic capabilities while deliberately investing in the skills, institutions, infrastructure and firms required to absorb progressively more sophisticated knowledge. Among others, this means trade agreements should be evaluated according to their contribution to domestic transformation rather than export growth alone. Policymakers should specifically ask whether trade relationships increase local production capacity, stimulate learning, generate linkages, support employment and enable firms to enter more complex activities.
At a broader level, it means improving technical and vocational education, strengthening engineering and managerial skills, expanding reliable energy and transport infrastructure, supporting domestic suppliers, financing industrial investment and developing effective technology institutions.
Taken together, the critical question is no longer whether Africa should trade more with the North or with the South. It is how African countries can strategically combine both relationships to move from technological access to productive use, from productive use to adaptation, and from adaptation to innovation.
That is the pathway through which trade can become a genuine engine of structural transformation.
South–South trade can enable an entry point into structural transformation, providing accessible technologies and productive inputs that correspond to existing conditions. However, it cannot be treated as the endpoint. North–South trade can support technological deepening and access to frontier knowledge. But neither will generate sustained transformation without domestic investment in firms, workers, institutions and infrastructure. Domestic capability accumulation must therefore connect the two.
