Impact of South-South FDI and trade on the export upgrading of African economies

Abstract

We explore the impact of FDI and imports on the upgrading of African exports. We find that South South flows impact differently from North South ones on the ability of recipients to absorb the positive spillovers. Results support the view that South South integration has a strong potential for accelerating structural transformation in the continent. South South FDI foster diversification in key low-tech industries such as agro-industry and textiles, and raise the average quality of manufacturing exports, while importing from the South increases the ability to expand the variety of manufactured exports and to introduce more advanced goods in less-diversified economies.