While Japan has traditionally had a limited economic footprint in Africa, with only 0.5% of its foreign direct investment directed there in 2024, the upcoming Tokyo International Conference on African Development (TICAD) in Yokohama signals a growing intent to strengthen these ties.
Historically, factors like geographic distance, language barriers, and Japan’s risk-averse business culture have hindered greater engagement.
However, there’s a discernible shift, driven by a new generation of Japanese executives who possess a more international outlook and recognize Africa’s significant potential as a burgeoning market with a rapidly growing population.
This new perspective is particularly appealing as Japan faces a domestic market projected to shrink due to its declining population.
Evidence of this renewed interest is supported by surveys from the Japan External Trade Organization (JETRO), indicating that 57% of Japanese companies already operating in Africa plan to expand in the next two years—a figure surpassed only by Southwest Asia.
Existing connections, such as the widespread presence of Japanese-made cars and the unseen role of Japanese technology in African energy and digital networks, provide a foundation for deeper collaboration.
Experts, including Emma Ruiters from the Tony Blair Institute, emphasize the “renewed importance” Japanese investors are placing on the continent, with TICAD forums becoming increasingly prominent.
Japanese businesses are also adapting their engagement strategies. They often collaborate closely with Japanese government institutions like the Japan International Cooperation Agency (JICA), which offers a starting point for commercial investors through its development-focused programs.
Unlike some other foreign investors, Japanese companies tend to rely less on expatriate staff in Africa, a practice necessitated by their own constrained domestic labor market.
This has encouraged them to invest in and work with local African companies, a departure from past “failure cases” where reliance on Japanese personnel proved ineffective due to difficulties in building local networks.
Despite this positive momentum, challenges persist. A significant hurdle is the limited number of bilateral investment treaties (BITs) between Japan and African nations (currently only five), which concerns Japanese investors seeking international arbitration for disputes rather than relying on local courts.
While some investors mitigate this by channeling funds through subsidiaries in countries with broader BIT networks (like the UAE or Mauritius), stronger direct agreements are needed.
Furthermore, Japanese businesses often face a “major gap” in accessing reliable data about African markets, and a shortage of advisors who can help navigate cultural nuances.
However, some argue that Japanese businesses, known for their meticulous decision-making, can accelerate their investment process if provided with adequate data.
Finally, the article highlights the need for African governments to more actively promote their countries to Japanese investors, despite efforts by organizations like the African Development Bank to bridge this information gap.
The sentiment is that while the ingredients for robust partnerships are present, African nations must proactively present their opportunities.
