Japan’s relations with the African continent are again in the spotlight as the eighth Tokyo International Conference on African Development (TICAD 8) in Tunisia nears. In the past, Tokyo largely exercised its influence on the continent through soft power and aid and development, while the private sector and commercial lenders have been more cautious.
Yet Tokyo is hoping to give its private sector renewed impetus to invest in Africa and lend to the continent as economic engagement by its great geopolitical rival China drops off at the same time as the twin impacts of Covid-19 and the war in Ukraine hit the global economy.
Demand for the kind of preferential lending offered by Tokyo is likely to be particularly high as rising African sovereign debt levels make securing other sources of lending more challenging.
The number of global powers seeking to play a substantial role in Africa’s political, diplomatic and economic life has steadily increased since the end of the Cold War. Until now, Japan’s role has been overshadowed by China, which has been the biggest source of bilateral project finance since the turn of the millennium, boosted by the provision of cheap loans for projects developed by Chinese contractors to keep them occupied at times of lower domestic demand.
But under the leadership of the late Shinzo Abe, prime minister from 2006-07 and 2012-20, who was assassinated in July, Japan’s attempts to woo the continent underwent a step change, including new tours of the continent and leader-to-leader meetings.
Japan puts quality over quantity in its commitments to Africa
Some have sought to portray Tokyo’s policy as an effort to counter Chinese influence on the continent but the monetary value of its loans and investment remains tiny compared to Beijing. Instead, the Japanese government has promised to put quality over quantity in its financial commitments to African countries. The current government of prime minister Fumio Kishida has pledged to sustain and diversify Abe’s level of interest in Africa.
Tokyo has always financed a range of different projects, with various sectors championed at different times. A decade ago, it was the port sector, with Japanese financing for a new container terminal at the Mozambican port of Nacala and also the second container terminal at Kenya’s main port, Mombasa. Now, renewables are being favoured as a means of promoting development, while maximising Japanese expertise.
Tokyo financed the construction of the 83 MW Unit 6 at the Olkaria geothermal site in Kenya, which was completed in April. It provided a ¥99.6bn ($746m) low interest loan to finance the new project and also the transmission lines required to connect the plant to the rest of the country, with the work undertaken by two Japanese companies, Fuji Electric Global and Marubeni Corporation. This is an area in which Japan specialises, with Japanese firms supplying more geothermal turbines than the rest of the world put together, while the Japan International Cooperation Agency (JICA) finances geothermal projects around the world.
The ¥29bn ($217m) loan for the generation side of the project carries a concessionary 0.2% interest rate repayable over 30 years, inclusive of a decade-long grace period. The Japanese government had already provided $94m to refurbish ageing units 1-3 at Olkaria in 2018. Other areas attracting substantial Japanese finance, including from JICA and the Japan Bank for International Cooperation, include agricultural and road projects, with total JICA support for Africa reaching ¥226bn ($1.69bn) in 2020.
Lack of private sector investment
Abe was keen to make Japan’s relationship with Africa more about investment and less about aid but his pledge of large-scale investment by private sector Japanese companies has yet to fully materialise. Diversifying Japan’s range of trading partners was a key plank of Abenomics, as Abe’s economic strategy was known. However, the lack of familiarity with the continent by Japanese companies has seen most continue to focus on markets closer to home.
The number of Japanese companies operating in Africa slowly increased from 520 in 2010 to 796 in 2019 but total investment appears to have fallen in recent years under the influence of Covid-19. According to the Ministry of Finance, new annual investments fell from $590m in 2019 to $310m in 2021.
In talks between Japanese foreign minister Yoshimasa Hayashi and ministers from 50 African nations in March in preparation for TICAD 8, Hayashi emphasised Japanese support for both investment in Africa by Japanese companies and the growth of the African private sector. The implementation of the African Continental Free Trade Area (AfCFTA) may have a positive impact on these figures over the next few years.
In the meantime, bilateral finance has remained a primary driver of Japanese engagement with Africa. Japanese support for Africa has been praised for helping cushion African economies from the economic impact of the Russian invasion of Ukraine. In 2021, JICA agreed to lend ¥73.6bn ($551m) to the African Development Bank (AfDB) after the latter’s financial resources came under huge strain during the pandemic.
“We have never experienced a greater challenge or pressure on our ability to sustain development in Africa,” the director-general of the UN Development Programme’s regional bureau for Africa, Ahunna Eziakonwa, said in May.
“Reinforced multilateralism and strong partnerships, including with Japanese government entities and the private sector, will be decisive in supporting African countries’ aptitude to respond to the new economic shocks caused by the war in Ukraine, at a time when they were already reeling from the impact of the Covid-19 pandemic.”
Countering Chinese influence
Tokyo is seeking to counter the diplomatic leverage that Beijing’s investment and lending in Africa gives it over such issues as Taiwanese independence and territorial claims over the South China Sea, where many Asian nations claim territory. The Yokohama Declaration, which was signed at TICAD 7 in 2019, bound all signatories to abide by the United Nations Convention on the Law of the Sea (UNCLOS), in effective opposition to China’s strategy of unilaterally seeking to secure its South China Sea claims.
It is also keen to counter the growing Chinese military presence in Africa, although not through any Japanese military deployment. Another concern is African support for or neutrality towards Moscow, as only 28 African countries voted in favour of the UN resolution condemning the Russian invasion of Ukraine (Tokyo is a firm ally of the West on the issue).
Tokyo may also be seeking support for its own bid for a permanent place on the UN Security Council. However, there is no chance that Japan will seek to compete economically with China in Africa in terms of the level of Beijing’s previous investment and lending to the continent.
TICAD offers chance for renewal
The regular TICAD events have helped promote Africa-Japanese relations. Tokyo had traditionally focused its overseas aid budget on Southeast Asia but has steadily stepped up its commitment to Africa over the past 20 years. Tokyo has sought to allay criticism of its lending to Africa by offering minimal interest rates and easy repayment terms, while ensuring that it does not lend to African governments with high sovereign debts or unstable debt profiles.
TICAD was first held in 1993 to promote relations between Japan and African countries, with NGOs and the private sector also invited to participate on an equal basis. Since then, the United Nations, the African Union and the World Bank have been among those organisations to join the Japanese government in organising subsequent conferences.
The main themes of each TICAD have varied since 1993, although promoting disease prevention and improved access to healthcare have run as common threads through the commitments made at each conference. The previous edition of TICAD was held in Yokohama in 2019 but this year’s is the second to be held in Africa rather than in Japan.
Tokyo has gradually increased its diplomatic presence in Africa and now has embassies in 35 countries on the continent. Other projects include the Africa Business Education Initiative, which was launched in 2013 to allow African government officials, corporate representatives and students to study or undertake internships in Japan. More than 1,200 people, drawn from every country in Africa, have thus far participated in the scheme.
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