Africa is a dynamic and growing market, one that has steadily drawn the interest of Japanese companies across all major business fields in recent years. As we approach the sixth Tokyo International Conference on African Development (TICAD VI) to be held on Aug. 27 and 28 in Nairobi, I would like to use this opportunity to explain how we expect African and Japanese business to grow hand-in-hand, and where my organization, JETRO, fits in.
The Japan External Trade Organization promotes business, specifically two-way trade and investment between Japan and the rest of the world. We have 74 offices abroad, as well as 46 within Japan, including a research institute. Our offices in Africa are located in South Africa, Kenya, Nigeria, Cote d’Ivoire, Ethiopia, Egypt and Morocco.
JETRO Addis Ababa is the seventh office on the continent and it was inaugurated in a splendid ceremony on July 20 in the presence of the Prime Minister of Ethiopia H.E. Hailemariam Desalegn, and Minister of Foreign Affairs of Ethiopia H.E. Tedros Adhanom. Messages were also delivered from Prime Minister H.E. Shinzo Abe and the Minister of Economy, Trade and Industry the Hon. Motoo Hayashi.
The number of Japanese companies in Africa has steadily increased over the years. As of October, it was 687. However, given that across the globe there is a total of 71,000 Japanese companies operating internationally, that figure represents less than one percent. To give some perspective, the number in Asia is about 50,000.
Given its potential for becoming the world’s next great growth market, we at JETRO believe that Japanese companies must become more involved in Africa and are fully committing efforts toward seeing this happen.
The topic of “public-private partnerships” has drawn much attention since TICAD IV and the further involvement of the private sector was called for at TICAD V. This trend has only strengthened in the lead-up to TICAD VI. It is JETRO’s role to bridge companies from Japan with those overseas. And this year our goal is for TICAD VI, the first TICAD conference to be held in Africa, to be the new beginning of business between Africa and Japan.
We believe that establishing multiple relationships is necessary, from conventional fields such as resources, automobiles and infrastructure to new fields such as consumer products that enhance the quality of life, food, medical care and services.
It must also be recognized that when we refer to Africa, we are referring to a region of more than 50 countries and an area that is bountiful in diversity. While JETRO currently has its offices in those countries with the highest concentration of Japanese companies, we are now expanding our activities in a manner tailored to the specific circumstances of each African country and region.
Of course there are obstacles to be overcome. Every year, JETRO conducts a survey for Japanese companies on the operational environment in Africa. The results indicate foreign exchange fluctuation is the most serious issue. This is particularly highlighted in resource-rich countries. Tax burdens and cumbersome procedures in money transfers or customs clearance are also commonly brought up. Outside of the administrative side, inadequate basic infrastructure, wage hikes and a shortage of human resources for middle management are cited as issues to be addressed.
Another pressing matter is risk management. It is known that Africa is a high-cost and high-return market, but most of the Japanese companies are simply not accustomed to managing the types of risk found in the region.
In order to support the African business of Japanese companies and to overcome these barriers, we at JETRO rely on a strategy consisting of five pillars.
First, we facilitate investment from Japanese companies based on the concept of “African ownership,” or the self-reliance of the continent. At TICAD VI, “African ownership” is a key concept. As JETRO also attaches great importance to it when promoting Japanese investment, we are going to provide African investment promotion organizations (IPOs) support so that they may proactively pursue these activities on their own.
Second, we create opportunities for business matching between Japanese and African companies, one of our most fundamental roles. Toward this end, we are holding a “Japan Fair” and an “Africa-Japan Business Conference” in tandem with TICAD VI. We plan to make these regular events in the future.
Third, we promote collaboration with third countries to reduce risks. Companies from the Middle East or Europe such as France, have abundant experience in Africa, and entering into partnerships with them is an effective way to give their Japanese counterparts a boost in entering the market. JETRO has worked together with Business France to form a framework to support activities in Africa cooperatively conducted by companies from both countries, something we intend to fully utilize.
Fourth, we promote business in infrastructure by taking advantage of Japan’s rich experience in the field. In the past, Japan also struggled to overcome the problems related to rapid urbanization and pollution that Africa now faces, allowing us to accumulate effective solutions and technologies that can still be applied today.
And fifth, we are strengthening our framework for providing information on business in Africa to Japanese companies. While we live in an era where information can, by and large, be obtained effortlessly via the internet, when it comes to business in Africa, relevant information has to be gathered in person, on the ground. Nothing less can facilitate real business results. In consideration of this, JETRO has set up both “Japan Desks” within African IPOs, and “Africa Desks” within our offices in Japan, Europe and the Middle East. Through these windows, we are ensuring that Japanese companies both within Japan and overseas have access to the knowledge JETRO works to accumulate in Africa person-to-person.
The Japan Fair and the Japan-Africa Business Conference at TICAD VI, are the first steps we are taking toward forming the new relationship between Japan and Africa. The Japan Fair will be a venue to share information on Japanese products and technologies, as well as their contribution to Africa, all under one roof. The Japan-Africa Business Conference will introduce Japanese companies’ activities in Africa in the style of a forum. This year, the Japan Fair will feature exhibits by about 100 Japanese firms and will be the largest showing we have had in Africa by far.
Japanese companies are steadily shifting their gaze toward Africa. We at JETRO are honored to stand at the vanguard and lead the way to the exciting new partnerships to come.
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