SA has lost its special allure, say Japanese
Katsumi Hirano, executive vice president of the Japan External Trade Organisation (Jetro), says SA’s image of a "rainbow nation" has faded as the corruption and conflict that pervades governance in many other parts of Africa entrenches itself in SA.
"SA is a special country — but gradually has become an ordinary country," says the former executive director of Jetro in Johannesburg, who is on his way to open Jetro’s newest office in Africa — in Maputo, Mozambique.
This means SA will have to compete heavily for Japanese investment with countries such as Vietnam, Cambodia and Thailand as well as Ethiopia, which "provides special treatment for investors".
"The attractiveness of SA’s economy is the private sector’s knowledge, skill and experience in Africa," he says.
Kenya, Nigeria and SA are ranked as Jetro’s top three investment destinations.
Jetro, under Japan’s ministry of economy, trade and industry, promotes trade and investment. It is changing its focus on mining and manufacturing-related activities in Africa to include participation in energy generation through coal, gas, renewables and nuclear projects. It is also entering sectors such as healthcare.
Hirano, who has a doctorate in global studies from Doshisha University in Kyoto, was a visiting researcher at Wits University in 1993-95.
He says the Japanese foray into Africa is still relatively new.
"Toyota is the biggest Japanese investor in Africa."
But investment risks abound, ranging from armed conflict to currency crises in commodity exporters such as Nigeria, Angola, Zambia and Mozambique. There was also poorly developed banking and telecommunications infrastructure, policy instability, inadequate tax and legal systems, poor skills and electricity blackouts.
Hiroyuki Nemoto, executive director of Jetro’s Africa region, says the number of Japanese companies in SA has risen significantly to 140 in the last count in 2015. Among them, household names include Toyota, Fuji, Mitsui, Mitsubishi and Panasonic. More recently, companies such as JVC Kenwood, Nippon Oil & Energy, Konica Minolta, Isuzu Motor, Nomura International and a range of insurance groups have established offices in SA.
"But competition among countries is huge," Nemoto says.
Hirano says South African companies are "dominant business leaders" in Africa and collaboration between these entities and Japanese groups is important. In 2010, Nippon Telegraph and Telephone Corporation, one of the world’s biggest telecommunications providers, bought up 100% of Dimension Data for £2.1bn.
Since then, another major Japanese information and communications technology company and food and pharmaceutical producers have taken stakes or ownership positions in South African groups. The hostile takeover in 2011 by Japan’s Kansai Paint of Freeworld Coatings, the maker of the Plascon paint brand, was recognised as deal of the year on Wall Street for deals valued from $100m to $500m.
Most recently, JSE-listed Distribution and Warehousing Network says more than 70% of shareholders say they favour the sale of its remaining 49% interest in Grohe Dawn Watertech — the maker of Cobra taps and Vaal products — to Japan’s Lixil building and materials group.
Jetro’s official move into Mozambique comes as the prices of minerals commodities, including oil and gas, seem to be recovering. Hirano says a main focus of investment is on coking coal, used to make high-quality steel, and natural gas.
"Mozambique is one of the few places Japan can get [coking coal] in the world," he says. The country competes with China and the US among the biggest producers of steel.
The Japanese government committed through the Tokyo International Conference of African Development to spend $30bn in 2016-19 in support of African infrastructure, education and healthcare.
This comes shortly after Chinese President Xi Jinping said China would invest $60bn in African capital projects, including for industrialisation, agriculture, infrastructure, financial services, poverty reduction, public welfare and environmental development.