Japan seeks to grow Africa investments to ease reliance on China

The Star

a day ago

TOKYO: Japan is supporting its companies to grow their business in Africa and develop trade ties across a continent where it's mainly been seen as a key donor.
The second-biggest Asian economy's emergence from a three-decade period of deflation has boosted its private sector's risk appetite, Takehiko Matsuo, vice-minister for International Affairs at the Ministry of Economy, Trade and Industry told Bloomberg in Abidjan, the commercial hub of Ivory Coast.
"Now the mindset of Japanese business leaders has changed dramatically and they are now much more proactive about expanding their business globally,' Matsuo said. "Africa is one of the destinations where we expect Japanese companies' to grow their presence.
Japan is reasserting a commitment to do more business with Africa as it emerges from years during which its private sector was particularly risk-averse.
The government has yet to declare an end to the deflation that gripped the economy for decades. Still, data this month showed consumer prices have advanced at or above the Bank of Japan's two per cent inflation target for three straight years.
Japan's net external assets reached a record high in 2024 as its investors and companies continued to load up on holdings abroad, with the US and UK the prime destinations for foreign direct investment.
So far, only a trickle of that has reached Africa, with the continent receiving about 0.5 per cent of Japan's foreign direct investments.
For Africa, Japan's push to recalibrate its relationship also comes at a critical time. Mobilising private investment has become more pressing since President Donald Trump returned to the White House, slashing US aid.
But it could be a win-win. By 2050, one in every four people will likely be African, and Goldman Sachs Group Inc. research projects that, by 2075, six of the biggest economies in the world could be in the Global South, including Nigeria - a point cited by the Japanese ministry.
Key sectors of interest for Japan include critical minerals, base metals and rare earths as the government seeks to reduce its reliance on China, coincidently Africa's top trading partner.
"We are pretty much depending on Chinese companies,' Matsuo said. "I'm not saying that we cannot work with Chinese companies, but only depending on one country may be causing some vulnerability.'
Japanese trading house Mitsui & Co. emerged as the highest bidder for a stake in First Quantum Minerals Ltd.'s Zambian copper mines, Bloomberg reported in November.
Beyond mining, Japanese corporations are also looking to bring new technologies to Africa, sometimes backed by government subsidies, Matsuo said.
Fujifilm Corp. is exploring preventive medical-care services, a technology that's especially relevant in a region with low health insurance penetration, and Toyota Tsusho Corp. is looking into introducing automobile recycling systems, Matsuo said. Hitachi Construction Machinery Co Ltd. has also been working on hybrid dump trucks to help green mining operations.
Japanese investors also have an appetite for green hydrogen and ammonia that can be used to decarbonise industries, he said.
It's not only corporations seeking to work more on the continent. Japan announced an initiative this month to connect Japanese and African startups to foster innovation.
Within members of the Organisation for Economic Cooperation and Development, Japan was sub-Saharan Africa's third-biggest providers of overseas development assistance in 2022, with US$1.68 billion in gross disbursements, according to government data.
Unlike the US or the UK, it's not announced plans to reduce its aid so far.
"This year, we will have the biggest meeting for collaboration between Japan and African countries,' Matsuo said, referring to the ninth edition of the Tokyo International Conference on Africa Development holding in Yokohama in August.
"In that sense, we are rather making efforts to expand our cooperation.' - Bloomberg