Japanese business community and Africa

Japanese business community and Africa
Photo Credit To Reuters

Japan’s Prime Minister Shinzo Abe joins African leaders for a group photograph during a break session
for the Sixth Tokyo International Conference on African Development in Kenya’s capital Nairobi.

Holding TICAD-VI in Africa from the August 27th to 28th will certainly bring more visibility on Africa’s business opportunities through Japanese media coverage of the event. It will also demonstrate the growing role that the private sector plays in promoting socioeconomic development.

Here in Japan, the Japanese business community is certainly looking for business opportunities in Africa. Several Japanese companies are wishing to expand their product distribution network in Africa, given the emergence of a new class of consumers. Many leading firms want to offer technologies and industrial equipment to help African companies to modernize their industrial and commercial activities, not to mention plans from Japanese companies to locate its own manufacturing activities in Africa.

According to the African Development Bank, there are already more than 440 Japanese companies present on the African continent. The majority are large Japanese firms operating in the automotive sector, power generation, machine tools, robotics, and communication systems. Others have set up sales and distribution networks for electronic products, precision material, cultural goods and various consumer products.

Access to new markets

The current political environment in Japan is quite proactive to promote access to new markets including Africa. This is a priority for the Shinzo Abe’s government who was signatory to the Transpacific Partnership agreement. The implementation of this agreement remains uncertain since it depends in part on the outcome of the elections in the United States. Both US presidential candidates, Hillary Clinton and Donald Trump have expressed reservations about this agreement.

In this perspective, the Abe government announced recently an increase in its investment fund from 110 to 200 billion USD by 2020 to support quality infrastructure projects like roads, power plants, and ports. The African continent is one of the targets of the Abe government, particularly with respect to the energy sector and geothermal. From the private sector standpoint, many Japanese companies are taking a greater interest in what opportunities Africa has to offer.

New business opportunities are never without risks. That said, several conditions would facilitate Japanese investment in Africa. Here are a few:

  1. To ensure political stability and a safe business environment.
  2. To reduce some excessive regulations on investment and restrictive conditions imposed on business activities in some African countries.
  3. To ensure legal protection on intellectual property rights and investment.
  4. To alleviate the interregional tariff barriers on the free movement of goods and people in order to facilitate the development of interregional distribution network.

Besides the Japanese multinationals present in Africa, perceptions and risk factors analysis are critical for many medium-sized Japanese companies still hesitant to expand their activities abroad. Many of them, with their business activities predominantly in Japan, are in excellent financial position. Faced with lower growth prospects, they look increasingly towards the Southeast Asia and Africa to expand their activities. In this context, African countries represented in Japan must increase their efforts to connect with these midsize Japanese companies looking for new markets.

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