Japan – Africa: Retying the knot

From 31st August to 2nd September, African Business will be hosting the Africa-Japan Business Investment Forum, an exclusive two-day strategic event that brings together Africa’s top business leaders and a delegation of Japanese investors seeking new partners and opportunities across the continent. Last year, Neil Ford took a look at the expanding links between Japan and the continent.

Japan is often ignored in the debate over foreign investment in Africa. Given its position as the third-biggest economy in the world, the country has certainly not played as big a role as might be expected, yet globalisation has forced Tokyo to re-evaluate the relevance of African economies and to look beyond the attraction of raw materials. 

A fine balancing act 

Japan’s relations with the African continent were very limited until after the wave of independence in the 1960s and even today just 1% of Japan’s trade is with Africa. Economic ties are therefor still limited, but the last Tokyo International Conference on African Development (TICAD V) has highlighted a new Japanese interest in Africa.

At the same time, the state overseas development arm, the Japan International Cooperation Agency (JICA), is becoming more involved in major infrastructural projects, in Eastern Africa in particular.

Between 1973 and 2013, Japan gave $18bn in aid to Africa, split roughly equally between North and sub-Saharan Africa, but it is now following the increasingly common pattern of focusing more money on a smaller number of countries. Kenya is by far the biggest aid recipient but another eight countries have been targeted: Tanzania, Uganda, Mozambique, Zambia, Botswana, Mauritius, Cameroon and Cape Verde.

Between 1973 and 2013, Japan gave $18bn in aid to Africa, split roughly equally between North and sub-Saharan Africa, but it is now following the increasingly common pattern of focusing more money on a smaller number of countries

Like China, much of Japan’s investment in Africa revolves around infrastructural projects. In May, JICA, the government of Mozambique and Mozambique’s state-owned transport utility Portos e Caminhos de Ferro de Moçambique signed final agreements on the massive expansion of the Port of Nacala in Mozambique’s Nampula Province.

JICA is to provide a $32m grant and $200m loan to fund the redevelopment of the port. Nacala is reputed to be the deepest natural harbour on the entire east coast of Africa but has been underused since the outbreak of the Mozambican civil war.

Now, however, the port has been thrust centre stage thanks to emergence of Mozambique’s new coal industry in Tete Province in the northwest of the country. Nacala is one of three ports scheduled to handle coal exports that could exceed 100m tonnes a year by 2025 and its deepwater harbour should allow access for the giant vessels that are beginning to dominate international coal transport.

At the same time, Nacala has been earmarked as the main container and general cargo port for the northern half of Mozambique, as Maputo seeks to spread the benefits of coal and gas exports across the region.

Japanese firm Penta-Ocean Construction Company has been awarded the contract to develop the port, including the upgrade of the north pier and the construction of a new rail terminal, which began in March. In common with many other governments, Japanese aid and development loans are often used to fund projects that are being undertaken by Japanese companies.

JICA will finance the construction of the new container terminal and purchase of cargo handling equipment. Indeed, JICA and Tokyo are providing a total of $670m to Mozambique over five years, much of it to the north of the country.