Citation: Eegunjobi, R.; Ngepah, N. Dynamic Relationships between Seafood Exports, Exchange Rate and Industrial Upgrading. Sustainability 2022, 14, 7893. https://doi.org/ 10.3390/su14137893 Academic Editor: Just Tomàs Bayle-Sempere Received: 24 May 2022 Accepted: 18 June 2022 Published: 28 June 2022 Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affil- iations. Copyright: © 2022 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/). sustainability Article Dynamic Relationships between Seafood Exports, Exchange Rate and Industrial Upgrading Ruth Eegunjobi * and Nicholas Ngepah College of Business and Economics, University of Johannesburg, Johannesburg 2006, South Africa; nngepah@uj.ac.za * Correspondence: ruth2012ee@gmail.com Abstract: Few studies have examined the relationship between seafood export performance and exchange rate fluctuations. This paper investigates the short and long-term relationship between variables and the effect of currency depreciation on investment in industrial upgrading in the Namibian seafood industry. Employing the Johansen cointegration technique and a vector error correction model (VECM) on quarterly data from 2008 to 2020, we find that investment in industrial upgrading has a higher impact on exports than exchange rate fluctuations. Therefore, investment in industrial upgrading plays a significant role in mitigating the negative impact of exchange rate volatility. Key policy implications include the need to take advantage of currency depreciation to mitigate challenges to investment in industrial upgrading by increased budgetary allocations. Keywords: seafood; exchange rate; sustainability; industrial upgrading; Namibia 1. Introduction The export performance of seafood-dependent economies, particularly in developing countries, is facing unprecedented shocks due to inadequate value addition, stringent safety standards and regulations and financial constraints to enhance competitive exports [1–3]. The continued ability to export competitive products required for improved export perfor- mance underpins the economic development of seafood-dependent economies. Moreover, exports must have long-term export sustainability [4]. Therefore, industrial upgrading is essential for export performance among the many determinants of competitive exports. Processed seafood exports are highly reliant on industrial upgrading in the form of a stepwise development from simple manufacturing skills to complicated tasks. However, most developing countries that export seafood cannot upgrade their export processing facilities [5], making market access difficult and the competitiveness of their products uncertain [6]. Due to the possibility of an increase in demand for processed seafood as a result of dietary changes, convenience, packaging and preservation methods and avail- ability [7], inadequate value addition in the form of export processing may hinder export performance [2,8]. Constraints on industrial upgrading and the rising demand for seafood products have revealed two major concerns. First, inadequate funding may impede industrial upgrading, especially in developing nations, resulting in insufficient value addition or an increase in unprocessed exports, with consequences for trade benefits [9,10]. Second, the increasing demand for unprocessed seafood may encourage reprocessing trade [11]. In this case, exporters may lose potential export earnings if they fail to add value before exporting. In an effort to address the abovementioned issues, the causal relationships between industrial upgrading, seafood export and exchange rate volatility have received growing attention in recent years. Existing research is, however, inconclusive regarding the direction of causal relationships. On the one hand, some studies describe a supply-driven relationship and argue that the cost of industrial upgrades is driven by exchange rate volatility, resulting Sustainability 2022, 14, 7893. https://doi.org/10.3390/su14137893 https://www.mdpi.com/journal/sustainability