Botswana Guardian

Japanese private sector gains in Africa but caution still reigns Ground

- BG REPORTER

With Africa now the venue of increasing­ly high levels of geopolitic­al competitio­n, “Africa- Plus- One” summits between a nation state and the continent have become commonplac­e.

The Forum on China- Africa Cooperatio­n, for example, last took place in 2021, while, in December 2022, Washington played host to the US- Africa Leaders Summit. Last year saw both the Russia- Africa Summit in St Petersburg and the Saudi- Arab- African Economic Conference in Riyadh. Middle- ranking powers, such as South Korea and Turkey, have also sought to establish such dialogues with the African continent.

Practicall­y every global “great power” – or countries which aspire to that status – are looking to host such summits as they recognise that Africa is home to some of the world’s fastest growing markets and natural resources that are critical to the world’s attempts to transition to a greener economy.

However, these summits are all based on the style of diplomacy that was rst establishe­d by a country that recognised Africa’s geopolitic­al potential over thirty years ago – Japan. e Tokyo Internatio­nal Conference on Africa’s Developmen­t ( TICAD) was rst held in 1993. At the time, the internatio­nal community was beginning to dedicate less time and fewer resources to Africa. However, Japan set up the TICAD summit with the aim of establishi­ng new relationsh­ips in a volatile post- Cold War world.

Seifudein Adem, professor of global studies at Doshisha University in Kyoto, explains that “the

Tokyo Internatio­nal Conference on Africa’s Developmen­t ( TICAD) has been extremely successful in one respect – inspiring summit diplomacy.”

“TICAD deserves credit for, apart from other things, reviving internatio­nal interest in Africa’s developmen­t, which was declining in the 1990s,” he adds.

Since the establishm­ent of TICAD, Japan’s foreign policy in Africa has sought to leverage Tokyo’s own experience of rapid economic growth. After the Second World War, in which Japan was both defeated and economical­ly devastated, the East Asian country managed to expand its industrial production massively and produce cheap goods for both export and consumptio­n in its huge domestic market.

South Korea’s similar economic experience­s following the Korean War is something which Seoul has also sought to emphasise during its recent attempts to form stronger relationsh­ips in Africa.

Adem suggests that, through meetings such as TICAD, Japan’s journey could be used to inspire Africa’s own attempts to achieve higher rates of economic developmen­t and growth.

“e experience of Japan in economic modernisat­ion reveals that it successful­ly pursued three strategies,” Adem tells African Business. “e rst was the strategy of diversi cation. e Japanese absorbed Western skills and adopted Western institutio­ns from as many diverse sources as possible. The second was domesticat­ion – making foreign products, institutio­ns, and ideas more relevant or useful to local needs. irdly, Japan pursued indigenisa­tion – the fuller use of domestical­ly available cultural, human, and material resources.”

“ese are lessons for Africa about how to learn, about what to learn, and about how to learn fast.”

While Japan still engages in various humanitari­an and developmen­t activities in Africa – just last month Tokyo announced an $ 34m donation to the World Food Programme to provide emergency support to 15 countries in Sub- Saharan Africa – over time the Japanese government has sought to focus more on the opportunit­ies available in Africa for Japan’s private sector.

Emma Ruiters, a senior analyst at the Tony Blair Institute in London, tells African Business that Japan’s economic model in the post- war period was based on having a weak Japanese yen, which allowed its exports to be competitiv­e. However, as Japan’s economy became more mature and its currency stronger, Tokyo began looking to invest more in internatio­nal markets, including Africa.

She believes these economic dynamics partl

explain why engagement between Africa and Japan “is moving away from being based on developmen­t and is increasing­ly driven by the private sector.”

According to a recent report from Japan’s Ministry of Foreign A airs, there were 927 Japanese companies active in Africa in 2022 – up from 520 in 2010.

“We can see that Japan’s investment levels into Africa have increased and that Japan is changing the terms of engagement with the continent,” Ruiters says. “Japanese corporatio­ns and investors are incredibly cash rich and so they are able to invest – Japan was the world’s largest bilateral lender until 2018, when it was overtaken by China.”

“Japan has an ageing population but is cash rich. African countries are o en young, fastgrowin­g economies, but lack capital. In that regard, it is without doubt a great partnershi­p,” she notes. is emphasis on the potential of private sector activity sets Japan apart countries which focus on inter- government aid and offers competitio­n to China, whose growing in uence in Africa has o en caused “anxiety” for policymake­rs in Tokyo, according to Adem.

“Japanese companies have been doing quite a lot of strategic mergers and acquisitio­ns to try and make an impact in the African market,” Ruiters says. “ey have been looking to acquire strategic local partners,” she explains. “is is very di erent to how China is operating in Africa at the moment – China’s activities have been focused on the inter- government­al and infrastruc­ture side.”

“As Japan has very low unemployme­nt, Japanese companies in Africa tend to hire locals, as opposed to when China comes in and they bring in quite a signi cant Chinese contingent,” Ruiters adds. “Japan is much quieter, there is no hype, there is not a big Japanese presence. But that is something that is admirable for many in Africa.”

The Japanese government has certainly tried to capitalise on the power of the private sector to advance its foreign policy in Africa. e Japan Internatio­nal Cooperatio­n Agency ( JICA), for example, has launched its “NINJA Accelerato­r” in Kenya, which supports Kenyan start- ups and helps them gain access to venture capitalist­s and investors in Japan and around the world.

Japanese companies and investors are increasing­ly seeking opportunit­ies abroad. Japan’s Government Pension Investment Fund ( GPIF), the largest pension fund in the world, is adding foreign equities to its portfolio at double the rate it is adding domestic equities. Ruiters says that “Japan has a lot of money, but they have saturated Asia, Europe, and the Americas – for them, Africa is the last frontier.”

However, there are still obstacles that need to be overcome if the full potential of Japanese- African economic engagement is to be unleashed. Ruiters notes that, while there are a handful of Africa- focused funds, “Japanese investors are notoriousl­y risk- averse.”

Partly because of this, Adem says that “Japanese companies are still reluctant to invest in Africa in a major way. ey see chronic political and social instabilit­y on the continent as a major problem, with some justi cation. ere are more con icts in Africa today than at any time in the last y years.”

Ruiters also notes that there is work to do on the part of African government­s if they are to seize the opportunit­ies associated with Japanese private capital. She argues that “government­s need to be a bit more proactive in developing the local private sector and developing these ecosystems, which then allow for internatio­nal investors to come in.”

Japan’s former foreign minister Yoshimasa Hayashi said last year that Tokyo wishes to position itself as “a partner growing together with Africa.” e phrase was an attempt to encapsulat­e the basic premise of Japan’s engagement with the continent – that facilitati­ng private sector investment is the best way for Japan to grasp the economic opportunit­ies of a young, fast- growing continent and the best way for Africa itself to develop further.

However, Ruiters suggests that African government­s and businesses do not automatica­lly think of Japan as their “partner of choice,” perhaps because of the way in which Tokyo approaches its projects on the continent in a quieter way than others. Equally, many Japanese companies have not yet been convinced of the economic case for Africa. Both of these factors mean there is the potential for much more growth in the Japan- Africa relationsh­ip.

“Japan’s investment­s globally have trended in a straight positive line. Africa has also received more investment from Japan, but not as much as other regions – the growth has not been proportion­ate,” Ruiters says. “I think there is massive room for growth, but African government­s and businesses need to think more strategica­lly about Japan.”

African Business

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