Japan expands its trade and investment in Africa: Japan is seeking to diversify the range of its trade partners in Africa and encouraging SMEs and startups to invest in the continent, as Neil Ford reports.

Author:Ford, Neil
Position:Special Report: Japan: Africa
 
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On the back of the Tokyo International Conference on African Development (TICAD), Japanese cumulative FDI in Africa increased from $3.9bn in 2007 to $10bn in 2016. The big challenge will be diversifying the range of the country's trade partners in Africa beyond the handful of countries that currently dominate Japanese trade relations with the continent South Africa, Morocco, Kenya, Egypt, Ghana and Nigeria.

In 2017, Japan exported goods worth $7.5bn to Africa, including $2.5bn to South Africa, and imported $8.3bn, of which 57% came from South Africa, including iron ore and platinum.

The two biggest sectors for Japanese investment in Africa are mining and hydrocarbons, particularly in Mozambique, where Mitsui & Co has invested billions of yen in coal and gas projects.

Such investment is backed by the Japan Oil, Gas and Metals National Corporation (JOGMEC), which works to ensure "a stable supply of natural resources to Japan".

Although commodity investments have become more uncertain since the commodity price downturn of 2014-17, they are still likely to lead the way on Japanese investment in Africa for the foreseeable future.

The most important Japanese exports to Africa over the past decade have been motor vehicles. Toyota and Nissan dominate the roads from Cairo to Cape Town. Japanese electronic goods, particularly TVs are also hugely popular in the continent. There is also a thriving business in quality second-hand cars, particularly in the countries of Anglophone Africa, which like Japan use right-hand drive vehicles.

In addition, Japan has been the biggest Asian project finance sponsor in Africa over the past five years. M&A activity by Japanese firms in Africa has generally been fairly limited, although Nippon Telegraph and Telephone bought South Africa's Dimension Data for $3.2bn in 2014.

Tokyo is encouraging the expansion of Japanese SMEs and startups in Africa (see below), but the number of big Japanese firms investing in Africa is also increasing, from NTT in the IT sector to Kansai Paint in the paint and coatings sector.

Toyota Tsusho Corporation has one of the most comprehensive networks on the continent, with a sales network covering 53 African countries and a variety of sectors in addition to the automotive industry.

Japanese firms still tend to be reluctant to invest in a region where they have little experience.

As Katsumi Hirano, executive vice president of the Japan External Trade Organisation (JETRO), told the African Law...

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