Economic diversification and complexity are vital for sustainable growth. Countries producing complex products — those requiring advanced skills, knowledge, and technology for manufacturing — tend to be more resilient and experience faster growth. Diversification into such products drives structural transformation, enhances productivity, and reduces vulnerability to external shocks. This is important for developing countries, particularly those reliant on exports of primary commodities, which are highly vulnerable to price volatility.

In Southern Africa, this need for diversification aligns with a pivotal moment in the transition to renewable energy, which is accelerating the global demand for Critical Energy Transition Minerals (CETMs). These minerals are essential inputs in the fabrication of renewable energy technologies, such as solar panels, EV batteries, grid batteries, and wind turbines. As key producers of CETMs, Zambia (copper and cobalt), Madagascar (graphite) and Namibia (copper, cobalt and uranium) are well positioned to benefit from the energy transition, with the potential to drive the inclusive and sustainable development of their economies.

However, to realize the development potential of their CETM endowments while avoiding the risk of deepening their commodity dependence, these countries would benefit from an evaluation of their comparative and competitive advantages and their capacity and institutional readiness for value addition in CETM value chains and diversification into other products and industries. In this context, this project assists beneficiary countries in identifying accessible, high-value products and industries for value addition and diversification. 

The project applies economic complexity and product space methodologies, using commercial transaction data to identify products with high diversification potential, including those related to CETM value chains. Unlike traditional methods based on trade data, commercial transaction data more accurately reflects what is produced and consumed domestically, offering a more precise starting point for prioritizing value addition and diversification opportunities.
 

Objectives

The project aims to support Zambia, Namibia and Madagascar in understanding their strategic positioning in selected CETM value chains and identifying new products and sectors along these and other value chains that can drive economic diversification.
 

Methodology

This project will use economic complexity— that is, assessing the productive capabilities (i.e. knowledge and skills, infrastructure, regulations, etc.) an area already has,—and the product space—a methodology that shows how different products are connected, to identify opportunities with more advanced and diverse production accounting for existing productive capabilities.  

1. Stakeholder mapping in CETM value chains, in collaboration with the relevant government and civil society counterparts.
    
2. Conduct economic complexity analysis to identify opportunities for local value addition and diversification:
   • Economic Complexity: This analysis helps us understand the diversity and sophistication of the country’s production. The goal is to identify which products are more complex, to then identify the policies and productive capacities necessary for the country to produce them.
   • Product Space: Using UNCTAD's trade dataset, covering 49,000 products, disaggregated by price range, a product space analysis for each country will reveal products most closely aligned with the country's endowments and current capabilities, as well as highlighting "nearby" products and industries for development. From this list, stakeholders will prioritize products with above-average economic complexity and export potential that align with national priorities. This analysis requires anonymised national data that proxies for production, such as e-invoicing data tracking commercial transactions.
      
3. Targeted policy instruments: Based on the prioritized selection of products for diversification, the project will facilitate an analysis of policy instruments and institutional and regulatory frameworks necessary for fostering strategic value addition and diversification. 
    
4. Convene multi-stakeholder workshops and consultations, which will validate the mapping exercise and findings from the economic complexity analyses, with the participation of relevant ministries, other local authorities, businesses and civil society representatives.
    
5. Dissemination of recommendations at the national and regional level, through United Nations country team offices and at intergovernmental meetings, including UNCTAD.
    

Deliverables

The key deliverable will be a final report, which will include:

• Diagnostic of the productive structure: Assessment of production using national data.
• Economic complexity and product space analysis: Identification of potential new products and sectors for diversification.
• Workshops and consultations: Workshops with local stakeholders to validate findings and prioritize sectors.
• Strategic recommendations: Covering investment attraction, innovation, and industrial policy to support diversification.
   

Partners

The project will require partnerships with relevant ministries, chambers of commerce, industrial institutes, universities and vocational training centres. These partnerships will be key to engaging sector-specific experts to support the validation of priority products and sectors.

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