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Why the Japanese are keen on SA

May 20 2018 06:06
Rapule Tabane
President Cyril Ramaphosa is greeted by Japan's Pr

President Cyril Ramaphosa is greeted by Japan's Prime Minister Shinzo Abe at Abe's official residence in Tokyo on August 24, 2015. (Photo: File, Toshifumi Kitamura, AFP)

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Executives from three hundred of Japan’s top companies landed in South Africa two weeks ago in an effort to explore investment opportunities here and, ultimately, in the rest of the continent.

Their arrival was opportune for South African President Cyril Ramaphosa, who is on a mission to raise $100 billion in new investment over the next five years.

While Ramaphosa is on this journey, the Japanese have also been working to endear themselves to the continent, which is a rearguard battle, given how aggressively China has invested during the past few years.

Ramaphosa, who previously visited Japan when he was deputy president, was the ideal president to lead the partnership with the Asian country as his predecessor Jacob Zuma was almost exclusively focused on the emergent economic bloc of Brics, composed of Brazil, Russia, India, China and South Africa.

Japan is among the top 10 investors in South Africa with 280 of its companies – such as Toyota, Isuzu and NGK – in operation here.

Addressing the Japan-Africa Public-Private Economic Forum in Sandton, Johannesburg, early in May, Ramaphosa looked up at Japanese business delegates and told them: “As I stand here, I can already see some of you contributing to the 100 billion dollars we need. I can see you, sir, here and you, sir, there. And I thank you for contributing in advance.”

He assured them that South Africa had independent institutions such as the judiciary, a free press and other chapter 9 institutions that anchored its democracy.

Most Japanese companies say they regard South Africa as the pathway to the rest of Africa, meaning they often locate their head offices in the country before moving on to invest in the rest of the continent.

However, in recent years Japan has started working more closely with countries in the east of Africa, including Rwanda, Ethiopia and Kenya, which have been receptive to their message.

Japan has therefore developed the vehicle called Tokyo International Conference on African Development to govern the partnerships between itself and the continent.

During a visit to Japan, officials briefed journalists that their interest in Africa was that the continent had a population of around 1.1 billion, which was 15% of the global population.

The high economic growth rate of 4.2% and its riches in natural resources and promising markets are also big factors.

Japan promises to provide nation-building support in the area of development, as well as politics and governance in a way that respects the ownership of African countries.

The Japanese External Trade Organisation has conducted a survey of Japanese companies in Africa, assessing the conditions they operate in and also informing other companies that have an interest in investing in the future.

South Africa has the highest number of Japanese companies, with 128 being approached for this survey.

The country with the second highest number was Egypt with 47 companies and Kenya with 38.

A majority of companies replied that they were looking into expanding business over the next 1 to 2 years. The top reasons for expanding were increasing sales and high growth potential.

African investment advantages

Market size and growth potential were marked at 65.3% as the biggest advantages in the local investment environment.

Nigeria (90%) and Egypt (86.1%) were especially high, along with Kenya at 75.8%.

Ghana was marked at 100% for social and political stability and Morocco followed at 90.5%. South Africa was at 65.5%.

In considering the investment risk of African countries, Japanese concerns included:

  • In Nigeria, the lack of foreign currency exchange, the possibility of policies being changed every four years under a new president, kidnapping/terrorism risk, high security costs, bribe demands from administrative officials, increased production costs due to backup generators for power outages and serious traffic congestion.
  • In Ethiopia, the political and security risks linked to a warring multi-ethnic state, an inadequate taxation and legal system, government communication restrictions, and a lack of foreign currency exchange.
  • In Mozambique, the extreme shortage of talent, serious armed conflict between the ruling and opposition parties, and the difficulty in obtaining government procurement permission.
  • In South Africa, the frequent labour strikes, increasing costs for expat staff, anxiety about system changes – such as the Mining Charter – sudden regulation changes, shortage of specialised personnel and frequent changes of the automobile certification system.

In order of importance, Kenya, Nigeria and South Africa were ranked as the most attractive future investment destinations.

Kenya is seen as East Africa’s best market, market size and stable growth, and potential infrastructure development projects, including power generation businesses such as geothermal power.

Nigeria is a major power in West Africa and has potential as a future consumer market, high market potential as the oil price recovers, the expansion of infrastructure business opportunities and large potential growth capacity in the agricultural sector.

South Africa is Africa’s only country with a well-established social capital, development potential in the manufacturing sector, expansion of infrastructure development, including electric power, and mineral resources. South Africa was also lauded for “maintaining a high standard of living”.


4. Ethiopia

5. Ivory Coast

6. Tanzania

7. Mozambique

8. Ghana

9. Angola and

10. Egypt

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japan  |  sa economy  |  foreign direct investment


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