Relations between Japan and Africa were invigorated at the Tokyo International Conference on African Development (TICAD) in 1993, when Japan made commitments to increase the share and volume of its aid to Africa. Since then, TICAD has supported a wide range of activities to enhance peace, good governance, sustainable development, and human security in Africa. During TICAD IV in 2008, the Yokohama Declaration was adopted, which focused largely on boosting economic growth through trade and investment.⁽²⁾

Nevertheless, Japanese relations with Africa seem to be on the rocks recently. In addition to the deep economic recession being experienced by Japan, many commentators have voiced their concerns about the country’s ability to honour its commitment after the disastrous earthquake and subsequent tsunami hit Japan in March 2011. In some Asian countries - namely, Japan’s traditional aid recipients - this concern has spread with regards to infrastructure projects funded by Japan.⁽³⁾ In light of this context, it is important to review and analyse the recent pattern of trade and investment between Japan and Africa, especially in the aftermath of the recent catastrophe.

Japanese foreign policy towards Africa and TICAD approaches

The Japanese Government proposed TICAD at the UN General Assembly in 1991, in line with Japan’s diplomatic endeavour to play a more active role in the international affairs of the post-Cold War era as an economic power. In the late 1980s, many major donors withdrew from African countries because of aid fatigue, followed by the poor performance of Africa’s economies, focussing instead on the newly independent eastern European countries.⁽⁴⁾ Meanwhile, Japan accumulated its own experience in providing development know-how in Asia and this confidence led Japan to set priorities for TICAD.⁽⁵⁾ Since the first conference in 1993, four TICAD conferences have been held, and Japan has played a crucial role in bringing together significant international representatives like the World Bank (WB), the United Nations Development Programme (UNDP) and civil society actors.

Over time, TICAD has transformed itself. In particular, TICAD IV was designed to encourage the Japanese private sector’s participation in Africa through trade and investment; in other words, Japan prioritised boosting economic growth based on the private sector’s involvement.⁽⁶⁾ This prioritisation highlights a significant shift from the traditional approach towards Africa - that is, a one-way flow from donor countries to recipient countries - to reciprocal cooperation emphasising the concept of Africa’s ‘ownership and partnership’ with the international community.⁽⁷⁾ This process is expected to enable Africans themselves to achieve economic and social development within the TICAD framework.

Many commentators argue that Japan uses TICAD as a political tool, particularly in the light of Japan’s constant bidding for a permanent seat on the UN Security Council. Achieving this goal requires the support of African countries, which represent more or less 25% of the votes. In addition, severe competition from China and other emerging donors has led Japan to commit to TICAD in Africa. Both Japan and China have used ‘conference and summit diplomacy’ to fortify their relationships with Africa.⁽⁸⁾

Nevertheless, it should not be overlooked that Japan has consistently committed itself to such efforts, whereas other developed countries lag behind in keeping their promises to increase efforts on the African continent.⁽⁹⁾ Indeed, Japan has met its pledges through TICAD - for example, at TICAD IV in 2003, Japan committed itself to doubling its total official development assistance (ODA) to Africa, with a target of US$ 1.8 billion by 2012. In 2008, US$ 1.75 billion had already been disbursed⁽¹⁰⁾ - a controversial issue in Japan, especially immediately after its natural disaster. In fact, the Japanese Government came under pressure to reduce the ODA budget in order to secure sufficient funds for post-earthquake reconstruction. However, during the Third TICAD Ministerial Follow-up Meeting held in Dakar, Senegal, on 1-2 May 2011, Japan confirmed that it had continued to steadily implement its promises.⁽¹¹⁾

TICAD’s limited success

In addition to ODA, the other important pillar for development within TICAD is the involvement of the private sector in trade and investment. Foreign direct investment (FDI) is considered to bring about positive effects on economic growth of host countries; for example, local firms can improve managerial skills and technological capacities, which can improve productivity. Furthermore, FDI is expected to create jobs.⁽¹²⁾ Indeed, Ernst & Young forecasts that new FDI projects in Africa will create 350,000 jobs a year by 2015.⁽¹³⁾ In this context, FDI from Japan has been expected to play a pivotal role in achieving these outcomes mentioned above.

The Japanese Government has devised various ways to attract Japanese investors to the region. In practice, this trend has been supported by the Ministry of Economy, Trade and Industry (METI), which promotes public-private partnerships, thereby supporting enterprises seeking to enter a new market. As a result, by 2010, the number of Japanese companies in South Africa had increased considerably.⁽¹⁴⁾ One of the prominent examples reflecting such support is South Africa’s Standard Bank, who signed a US$ 150 million loan agreement with the Japan Bank for International Cooperation (JBIC) in order to boost trade finance in Africa in 2009. This agreement was designed to facilitate trade finance in South Africa and other African countries.⁽¹⁵⁾ By narrowing the case to South Africa, JBIC has provided more than US$ 1.2 billion since 2007, including US$ 470 million to finance ESKOM power generation equipment and transformers, as well as power transmission installation. In 2010, the total value of bilateral trade between Africa and Japan amounted to US$ 24 billion, a 30% improvement over 2009.⁽¹⁶⁾ Since 2008, Japan has expanded its scope and amount of trade with Africa, especially Liberia and South Africa. Liberia alone accounts for 50% of all Japanese investments in the region.⁽¹⁷⁾

Despite the earthquake in Japan, the country’s imports from Africa continued to grow, signalling that its trade patterns had returned to normal.⁽¹⁸⁾ In truth, certain industries such as the automobile sector have suffered, thereby affecting South Africa as Japan is the second largest exporter of automobile component parts, which South Africa relies on.⁽¹⁹⁾ However, it does not seem that the disaster negatively influenced the total volume of trade. Ironically, the earthquake and tsunami were accompanied by nuclear reactor problems and several plants shut down in Japan, causing a shortage of electricity. In order to reconstruct its energy sector, the demand for coal increased, which further assisted trade between Japan and Africa.⁽²⁰⁾

Although the total volume of trade recovered despite the natural disaster, several issues should not be overlooked. Even within Japan, the private sector’s involvement in Africa since 2009 is perceived to be very modest due to the global recession, according to Yuko Yasunaga, Head of the Mineral Resources Division of the Japanese Ministry of Economy, Trade and Industry.⁽²¹⁾ In addition, Japanese trade and investment has been limited to only a few countries - namely, South Africa and Liberia - which is in line with the Japanese ‘key country approach’.⁽²²⁾ Unlike China’s omni-directional approach, Japan has focused on several countries that can serve as bridgeheads.

However, Japan should invest in more African countries, not just in a few. In fact, trade with South Africa and Liberia accounts for only approximately 1% of Japan’s total exports and imports. In examining statistical data from the Japan External Trade Organisation (JETRO), it is clear that little attention has been paid to Africa. Japan’s trade is still concentrated on East Asian partners and the United States. According to the 2010 JETRO Global Trade and Investment Report, Japan has also focused on trading with regional blocs, such as the Association of South East Asian Nations (ASEAN), the European Union (EU), and the North American Free Trade Agreement (NAFTA). It seems that no attention has been paid to any other African regional economic organisations.⁽²³⁾

Finally, it seems that African countries rely heavily on the mineral and raw materials sector in their trade with Japan, which indicates the potential to perpetuate Africa’s reliance on mineral exports in the future. In other words, by focusing on the resources sector, the manufacturing sector will never be able to catch up with other developing countries.⁽²⁴⁾ At the moment, what most African countries need is to transform their economies and to encourage diversification based on industrialisation, which can result in high-quality growth in Africa. Japan should deliver its promise in a way that assists African countries in building capacity for self-sustainable economic growth.

Concluding remarks

Contrary to expectations, recent natural disasters in Japan have not affected the pattern of trade and investment between Japan and Africa. Rather, due to the economic recession, the relationship has shrunk. Also, trade and investment from Japan have heavily focused on a few countries and natural resources. However, the possibility still exists that Japan’s firm commitment through TICAD can be realised in earnest.

In this regard, three ideas should be considered. Firstly, diversification is important from both sides. More countries should have the opportunity to trade with and receive investment from Japan. In addition to resources, more industry sectors should be involved in FDI.

Secondly, Japan has to take more initiative to attain the goals of TICAD. Japan has gained valuable experience from its engagement with many Asian countries, and Japan’s involvement has become the driving force of many countries’ economic development. Considering that TICAD depends on consensus-building with other stakeholders, it might be difficult for Japan to push forward its own initiative unilaterally within the framework of TICAD.⁽²⁵⁾ However, Japan does need to play a more vigorous role.

Finally, the most important condition that can lead to success is a new mindset for African leaders. Africa is now regarded as an attractive investment and trade destination, but FDI does not flow into a country that has not been equipped with favourable conditions for the private sector. As TICAD originally articulated, it is important for Africa to take ownership of the situation. It is time to set the right direction for development and carve out a meaningful path for capital inflows. Following this, African countries can then expect genuine ‘partnerships’ through the TICAD mechanism and Japanese involvement that will bring about tangible outcomes.

NOTES:

(1) Contact Yejoo Kim through Consultancy Africa Intelligence’s Asia Dimension Unit ( asia.dimension@consultancyafrica.com This e-mail address is being protected from spambots. You need JavaScript enabled to view it ).
(2) ‘Towards a vibrant Africa: A continent of hope and opportunity’, TICAD website, http://www.ticad.net.
(3) B Fernandez and C Ordinario, ‘Impact of Japan’s woes assessed’, Business Mirror, 14 March 2011, http://www.abs-cbnnews.com.
(4) T Ochiai, ‘Beyond TICAD Diplomacy: Japan’s African Policy and African Initiatives in Conflict Response’, African Study Monographs, 22(1), pp. 37-52, 2001.
(5) Elizabeth Donnelly, ‘Japan–African engagement and TICAD IV: Can Japan lead the way on African development?’, Chatham House, July 2008, http://www.chathamhouse.org.
(6) Ibid.
(7) N Gouede, ‘Trade and Investment between Japan and Africa in the context of follow-up to the TICAD IV’, Paper presented at the African Economic Conference organised by the African Development Bank, November 2008, http://www.afdb.org.
(8) F Aremu, ‘A Comparative Study of Japan and China’s African Diplomacy in Contemporary Historical Context’, Ritsumeikan Center for Asia Pacific Studies, pp. 1-22, 2008.
(9) ‘From TICAD to the G8 Summit: An Analysis of Japan's Commitment to Africa’, ONE website, 2009, http://www.one.org.
(10) ‘Development Assistance Committee Peer Review of Japan’, OECD, 2010, http://www.oecd.org.
(11) ‘The Third TICAD Ministerial Follow-up Meeting’, Ministry of Foreign Affairs of Japan, 2011, http://www.mofa.go.jp.
(12) ‘Africa Competitiveness Report’, World Economic Forum, 2011, http://www3.weforum.org.
(13) ’Looking forward: Africa’s Prospects’, Africa Attractiveness Survey, Ernst & Young, 2011, http://www.ey.com.
(14) ‘Firms playing catch up in Africa’, The Japan Times, 2 February 2011, http://search.japantimes.co.jp.
(15) ‘Stanbank, Japan boost for Africa trade’, South Africa Information website, 6 October 2009, http://www.southafrica.info.
(16) ‘US$ 24 billion Japanese trade, aid inflows to drop after earthquake’, Standard Bank media release, 24 March 2011, http://www.standardbank.com.
(17) ‘June Statistics’, JETRO, 2011, http://www.jetro.go.jp .
(18) Ibid.
(19) ‘Japanese disaster weighs on SA car sector’, Finance24, 9 May 2011, http://m.news24.com.
(20) ‘June Statistics’, JETRO, 2011, http://www.jetro.go.jp.
(21) ‘FDI destinations in Africa’, Africa Economic Outlook, 22 July 2011, http://www.africaneconomicoutlook.org.
(22) F Aremu, F, ‘A Comparative Study of Japan and China’s African Diplomacy in Contemporary Historical Context’, Ritsumeikan Center for Asia Pacific Studies, pp. 1-22, 2008.
(23) ‘Global Trade and Investment Report 2010’, JETRO, 2011, http://www.jetro.go.jp.
(24) Yan Hairong and Barry Sautman, ‘Trade, investment, power and the China-in-Africa discourse’, Japan Focus, 4 January 2010, http://www.japanfocus.org.
(25) F Aremu, F, ‘A Comparative Study of Japan and China’s African Diplomacy in Contemporary Historical Context’, Ritsumeikan Center for Asia Pacific Studies, pp. 1-22, 2008.

Written by Yejoo Kim ⁽¹⁾