• Human Capital Consulting Recruiting

Japanese firms seek to catch up with rivals, boost presence in Africa

HCCR - Human Capital Consulting Recruiting

Japanese companies are making a renewed push to tap into rising business opportunities in Africa as they lag far behind firms from China, the United States and other advanced economies in Asia and Europe in terms of investment.

Japanese investments, which were focused on automobiles, infrastructure and development of natural resources dating back to around the 1970s, have been slow in diversifying targeted sectors in the continent, analysts say.

The world’s third-largest economy only recently began to capitalize on the new opportunities brought about by the region’s adaptation to a digital economy, which have allowed companies to focus on the low-income group, they say.

“The common recognition shared by African countries is that the image of Japan being strong in the market with advanced electric appliances and other goods has waned over the years,” said Katsumi Hirano, executive vice president at Japan External Trade Organization.

“Globalization of Japanese investments has only been partial, with the focus on China and Southeast Asia. The targeted industries also need to be more diversified to include such sectors as the agriculture, healthcare and medical,” Hirano said.

He made the comments ahead of a three-day Africa-focused investment conference, known as the Tokyo International Conference on African Development, through Friday in Yokohama.

According to data by the U.N. Conference on Trade and Development, Japan was not among the world’s top 10 investors in Africa in 2017, which were led by France, the Netherlands, the United States, the United Kingdom and China, and also included Singapore and India.

Japan’s direct foreign investments in Africa have also fallen to $7.8 billion in 2017 from $12.1 billion in 2013. In 2017, France invested $64 billion, China $43 billion, Singapore $19 billion and India $13 billion.

In 2018, Japan ranked 16th in terms of total exports to Africa at $11 billion, while China topped the list at $71 billion.

With Africa touted as a “last frontier” market, global exports to the continent have increased 17.2 percent from 2008 to $554 billion in 2018. By 2048, the continent is projected to become home to 2.5 billion people, or one in four of the global population, according to U.N. data.

Obscure legislation and regulations, concerns about safety and substandard infrastructure have caused Japanese companies to shy away from doing business in the continent, but Africa has now grown to offer too much opportunity that Japanese companies cannot afford to ignore, the analysts say.

“There is an expansion of innovative business models in Africa with the spread of mobile phones and electronic money,” said Kumiko Imai, general manager at the Overseas Market Development Operation Business unit at Yamaha Motor Co. “Many young people who experienced businesses overseas have also launched startups.”

“Africa is developing at a pace faster than in Southeast Asia and Yamaha aims to make use of the region’s digitalization to expand our businesses,” Imai said.

Yamaha Motor has operated in Africa since the 1960s but its businesses mostly centered on sales of motorcycles and fishing vessels. It is among Japanese companies ambitious to launch new businesses in Africa.

In June, Yamaha Motor invested an undisclosed amount into Nigerian motorcycle ride-hailing startup Max.ng, boosting its motorcycle rental service to the African company that offers quick transport options for customers in urban areas hit by traffic congestion.

The Japanese manufacturer is also in talks with Nairobi-based aerospace company Astral Aviation over the use of unmanned helicopters in agriculture, logistics and surveillance.

Yamaha has also been in a tie-up with Uganda startup WBPF Consultants Ltd., founded by Japanese entrepreneur Jun Ito, over logistics business involving deliveries of various items using internet technology.

The company said it aims to double its sales in Africa to over 20 billion yen ($189 million) by 2030.

In the telecommunications sector, NEC Corp. last year made South African tech company Xon Holdings Proprietary Ltd. a subsidiary by additionally investing 2.5 billion yen in it, with the aim of expanding sales of the Japanese company’s security system in the continent.

“Africa has lots of potential but unfortunately we have been doing business there only little by little,” said Akihiko Kumagai, senior executive vice president of NEC. “But we want to meet the growing demand for telecommunications and cyber security systems.”

Small and medium-sized companies that account for over 99 percent of all Japanese companies also see the need to go into Africa amid the shrinking domestic market.

Kyoto-based Nissan Steel Industry Co., which makes antibacterial preservative sheets to keep fruits and vegetables fresh, explores business opportunities in Africa where storage and transportation of foods is underdeveloped.

“It is such a waste that delicious fruits and vegetables in Africa are rotten by the time they get to the market due to poor control,” said Hideyo Nishimoto, international division director at Nissan Steel Industry. “The preservative sheets have been successful in India so we want to repeat the experience in Africa.”

Lequio Power Technology Corp, an Okinawa-based medical equipment maker, says there is a strong need for Japan’s high-quality healthcare services in Africa especially in rural areas.

The company offers low-cost, portable ultrasound scanners to check the medical conditions of patients, including expecting mothers. The devices have been used in African countries such as Sudan with unstable power supplies.

“We hope to start a subscription-based service using the scanners. I think there is a need for the product among midwives in villages with no large hospitals,” said Ryotaro Nakano, corporate planning manager at Lequio.

Bagagnan Abdou Rasside, who is involved in student exchanges between Japan and Burkina Faso, said, “For now, people in Africa still have an impression that Japanese products are high quality and superior.”

“But I think as Japanese economic growth slows down, companies need to be more aggressive in making a presence in Africa, otherwise China will continue to take the lead,” he said.


Featured Article: 

Getting the right mindset to flourish in Japan

Understanding the Japanese interview process

Source: https://japantoday.com/category/business/focus-japan-firms-seek-to-catch-up-with-rivals-boost-presence-in-africa

Author: Junko Horiuchi

Image Credit: AJBIF