Japanese investments are becoming increasingly popular as the island nation looks to explore the continent’s untapped resources.
While Japanese African relations trace back to the 1960’s, it is only now that the economic powerhouse appears to have started taking a keen interest on what the continent has to offer when it comes to investment opportunities.
Japanese investors are increasingly showing great interest in setting up companies and financing other businesses around the continent. The result has been win-win situations for both.
Japan’s investments are becoming increasingly popular in part because of the country’s balanced trade across the continent. In 2017 the country exported $7.5 billion worth of goods to Africa and imported $8.3 billion.
South Africa Top Destination for Japanese Investors
While China has sought to spread its investments around the continent, Japanese investors appear to be maintaining a keen interest in some markets, more than others. According to data compiled by Asoko Insight the Japanese Ministry of Foreign Affairs and the Japan External Trade Organization, South Africa remains a top investment destination for Japanese investors.
According to data compiled by JETRO and analysed by Asoko Insight, there were about 738 Japanese companies registered in the Content as of the end of last year. Almost half of the companies, at 354, had their investments distributed across South Africa.
Most of the Japanese companies in Africa operate either as wholly owned subsidiaries or in partnership with local companies. Some of the companies are also believed to have formed alliances with foreign firms particularly from Asia and Europe.
Away from South Africa, Japanese company’s presence is also being felt in North Africa which happens to be the next top investment destination.
In North Africa, there were about 138 Japanese companies representing 7.3%. East Africa comes third with about 120 Japanese companies followed by West Africa with 114 companies.
Areas of Investments
When it comes to investment areas, Manufacturing remains a top investment area with the JETRO Survey indicating about 315 companies involved in such operations. A quarter of the companies employ more than 51 staff with the others employing 50 or less.
Energy and mining are the two most popular investment areas for Japanese companies in the continent. The companies are in pursuit of fresh raw materials in the form of mineral resources that would keep their country’s industries up and running.
Increased investments in Africa are part of a bigger plan of gaining access to markets for finished products back at home.
The conversation about Africa is shifting from one of “deficits” and “gaps” to one about opportunities, prospects, ventures and creativity. That’s not news to companies that have paid close attention to the continent and invested there. The fast growing youth population, the urbanization expected to drive over 50% of Africans to cities by 2050, and Africa’s formalizing economy are all well known. These trends and other developments have driven a half century or more of growth in Africa, and will continue to do so.
The island nation plays host to some of the biggest companies in the world. Faced with competition in developed markets, Japanese’s companies have had to look for new markers elsewhere, with Africa emerging as an exciting prospect in this case.
Other factors include the vast continent portfolio of untapped natural resources. Pursuit of natural resources in Africa does not come as a surprise given that the country is not the most endowed on this front