“Africa, a shining continent full of dynamic growth, is no longer a recipient of ‘aid’,” former Japanese prime minister Shinzo Abe said in a 2014 speech from Addis Ababa. So why, you might wonder, is Japan now preparing for the 8th Tokyo International Conference on African Development (TICAD) conference, to be held in Tunisia in August 2022?
TICAD started in 1993 – and was billed back then as a conference to bring development partners and African leaders together, as well as Japan. Hence, it was organised and continues to be organised in collaboration with the African Union Commission (AUC), the World Bank and the United Nations Development Programme (UNDP).
This marks it out from successors such as China’s FOCAC, which hardly involve other bilateral or multilateral partners. Nevertheless, given Japan’s co-hosting, TICAD’s now triennial meetings have also functioned as a means to coordinate Japan’s development relationship with the African region, and vice versa.
What can be expected at TICAD8?
The last TICAD, held in 2019 in Yokohama, had a strong focus by Japan on private sector investment in Africa, building on the Japanese achievement of having invested more than $20bn between 2016 and 2019 on the continent. Hence, by 2019, there were 796 Japanese companies in operation in Africa compared to 520 in 2010.
According to a survey on the Business Conditions of Japanese Companies in Africa, conducted by the Japan External Trade Organisation (JETRO) in 2020, a third of these companies were in the manufacturing sector, with the highest number located in Southern Africa, followed by North Africa.
Thus, at TICAD7, the former prime minister said: “The Japanese government will do everything possible to support Japanese companies expanding into Africa”, and there was a wide expectation that Japanese companies would continue to expand investment in the continent, given its market size and growth potential.
But with Covid-19, that expectation has been dampened. Japanese companies continue to perceive the African market as high risk, with 65% of the companies citing development and implementation of regulation or legislation as a risk of investing in Africa. Next was financial affairs (46.7%), followed by poor infrastructure (44%), hiring and work force problems (39.4%) and trade regulations (33.5%).
Moreover, although this is the first TICAD since the African Continental Free Trade Area (AfCFTA) kicked off, it also comes at a time of great geopolitical uncertainty – with the Russia-Ukraine war, continued tensions between the US and China, and concerns about spillover effects on African countries – from the food crisis to potential energy and debt crises.
The Japanese government has therefore begun to play down the summit, suggesting TICAD8 will be centred on three very broad pillars: economy, society, and peace and stability, and fewer participants are expected to join in person in Tunisia due to Covid-19.
Four goals for Africa
So should African leaders and businesses bother attending? What can they get out of such a summit, at such a difficult time?
Our view is that four helpful outcomes could be possible through the summit, although Africans will have to push for these to occur.
1. Investment higher up the value chain
First, the Japanese private sector does have significant potential in Africa, but investors need to switch from seeing the continent as a market for sales – for example of second-hand cars, but instead a location for value addition and manufacturing – beyond assembly. The Japanese government can help with this.
For instance, Japan has almost no trade-related agreements with African countries, beyond standard duty quota-free schemes for least developed countries, often underutilised due to non-tarriff barriers. It does not have a Preferential Trade Agreement (PTA) with any African country.
Only four African countries – Egypt, Morocco, South Africa and Zambia, have double taxation agreements (DTAs) with Japan.
On company and asset protection, Japan has agreements with five African countries – Egypt and Kenya among them.
African governments can therefore urge the Japanese government to encourage its businesses to invest higher up the value chain in Africa, which will itself act as a risk-management measure – avoiding problems such as the impact on raw material prices Japanese companies such as Sumitomo in Madagascar have experienced, while taking advantage of, for instance, Japan’s own consumer markets for African branded goods – from fashion to chocolate and coffee.
In turn, African governments could commit to engaging at a regional or sub-regional level to agree some of these mechanisms with Japan – for example a continent-wide PTA, which can assure Japanese businesses of higher returns on investment.
In this way, TICAD8 could begin to address the disconnect between the Japanese government and the Japanese private sector, while also bringing Japanese investment in line with AU frameworks such as the African Mining Vision.
2. Infrastructure development
Second, Japan is a member of the G7-led B3W initiative, expected to focus on infrastructure – but little has been said about how Japan can add value in this area. What sort of infrastructure development can Japan offer, for instance, that China or other G7 members cannot?
Japan’s experience with designing and building efficient urban infrastructures for dense populations is highly relevant to an urbanising African continent. As of 2022 for instance, Lagos has a population of 15.4m in a 1,171 sq km area while the greater Tokyo area has 37.2m people in 2,194 sq km. But the Lagos area population is estimated to rise to 32.6m by 2050, so now is the time to benefit from Japanese expertise and investment in city planning. Yet, so far, what has been seen in Africa from Japan is advice and transfer of the cheapest methods – bus rapid transit systems, not high-speed underground or overground systems.
Buses, of course, have their place, but African business people deserve modernised systems as much as Japanese business people do. African leaders can encourage Japan to do better and even specialise in supporting this kind of urban infrastructure, truly fit for “built forward better” African cities.
3. Local partnering
Third, African governments are under pressure to avoid new debt – meaning public private partnerships (PPPs) are now all the rage in development. However, there is mixed experience in Africa with PPPs. Optimal social pricing is particularly difficult to get right – risk-averse foreign companies often choose to impose high prices, but these deter use. Japanese companies however have invested in some PPPs, especially in the energy sector, and have the potential to do more and better, especially if they partner with African companies. A push for the Japanese government to provide incentives for Japanese businesses to partner locally on all African projects could be another key outcome to seek.
4. Support for Africa in international forums
Last but not least, although only 10% of Japan’s ODA aid budget goes to Africa, Japan has – rightly in our view – continued to offer concessional finance, especially through multilateral and regional development banks.
Japan has some weight on these boards, and can advocate for some degree of structural reform in the banks that would be helpful to African countries – for example an overhaul of debt sustainability frameworks (Japan can talk to the meaning of this), or an overhaul of how the banks value different forms of collateral such as natural resource payments (this would draw on loans Japan itself offered countries such as China), or how the banks value regional infrastructure projects – such as those under the AU’s Programme for Infrastructure Development for Africa (PIDA).
Encouraging Japan to listen more carefully to African countries’ needs and back them in multilateral and plurilateral forums could be another outcome to seek from TICAD8.
Yes, Tunisia’s TICAD8 is unlikely to act as a pledging conference for Japanese aid towards African countries. But there is still reason to engage – if Japanese leaders are truly open to working in a new, respectful and mature way, hand in hand with African counterparts.