Firms playing catchup in Africa

Kyodo News

Faced with the aging and shrinking domestic population, Japanese companies and the government are joining hands to explore new business opportunities targeting low-income earners, not only in neighboring Asian countries but also in Africa.

Having gotten off to a late start in this field, they are trying to catch up with their European and U.S. peers, but they face difficulties in securing enough Japanese staff with the necessary language skills.

The “bottom of the pyramid” — some 4 billion people who earn less than $3,000 a year — make up about 70 percent of the world population. While their purchasing power per capita is low, collectively the market is worth about $5 trillion and rivals Japan’s nominal gross domestic product.

Japanese corporations are starting to reach out to the African market, where they have until now had relatively little exposure, in hopes of benefiting from economic growth in countries seen as the next tier of emerging markets. Some companies also consider their business in this area a form of social contribution that can help promote their brand image.

For example, major food maker Ajinomoto Co. launched a nutritional improvement project in Ghana in 2009 in cooperation with the University of Ghana and a U.S. nonprofit organization. They are trying to develop and promote nutritional supplements to add to traditional weaning food used in the West African country.

Ghana faces rampant malnutrition among young children, with mortality rates as high as 76 per 1,000 children under 5 years old — 19 times that of Japan. Fermented maize porridge, the traditional meal for weaning infants in Ghana, is seen as a major factor stunting children’s development due to its lack of protein and micronutrients.

With full-scale production and marketing of the new product expected to begin in 2012, Ajinomoto plans to eventually expand its sales to Nigeria and other neighboring African nations.

Yozo Nakao, associate general manager of Ajinomoto’s Corporate Social Responsibility Department, said this kind of business initiative not only benefits the company but can contribute to reducing child mortality, one of the United Nations’ 2015 Millennium Development Goals.

“Profits may be small, but business (which contributes to society) will help make our brand more widely known,” Nakao said.

Overall, however, Japanese firms still lag behind their European and U.S. counterparts in this area. This prompted the Ministry of Trade, Economy and Industry to launch in October a public-private partnership called the Bottom of the Pyramid Business Promotion Platform to support enterprises seeking to enter the field.

Ajinomoto’s Nakao said, “This is very reassuring, especially when trying to start a business in regions like Africa where infrastructure is fragile and information is scarce.”

But one of the biggest hurdles that companies must first overcome may be on their own turf: the lack of qualified staff. In recent years, fewer young Japanese have been willing to study abroad or be posted overseas.

“The inward-looking mindset among the younger generation these days is a cause of concern as this kind of job needs people with vibrant personalities who are creative,” said Kimihiko Inaba, principal investigative researcher at the Japan External Trade Organization and an expert on the BOP business.