From Digital Transformation to Circular Growth: The Role of Economic Complexity and Eco-Innovation in Africa’s Sustainable Future

The global economy continues to face short-term challenges such as resource depletion and pollution, which has made the transition to a circular economy system imperative. To explore the capacity of the CE for African economies, this study analyses the role of eco-innovation, economic sophistication, and digitalization in influencing the CE using data from 2000 to 2024 on a panel of African economies. The study uses the Dumitrescu-Hurlin causality test, as well as POLS, DKSE, and MMQR techniques, to investigate the effects of the three explanatory variables on EC. The findings show that digitalization, economic complexity, and eco-innovation are key drivers of CE growth in Africa, with as the primary determinant, whereas economic complexity and eco-innovation exert moderate influences. However, the consequences differ depending on CE performance levels: economic complexity is important in relatively developed economies, whereas eco-innovation is more important in less CE-developed countries. The study finds a unidirectional causal relationship between economic complexity and CE, but also finds reciprocal causal relationships between digitalization, CE, and eco-innovation. These results highlight the importance of region- and country-specific approaches to boost CE initiatives, thereby supporting Africa's sustainable development strategy as well as long-term environmental and economic objectives.