AFRICAN DIASPORA: Japan closing gap on China in Africa trade
Japan pledges $30 billion in public, private support for Africa over the next three years to close trade gap on China By KURT DAVIS, JR. NAIROBI, Kenya (AFKI) — China's trade in Africa in 2015 amounted to
Japan pledges $30 billion in public, private support for Africa over the next three years to close trade gap on China
By KURT DAVIS, JR.
NAIROBI, Kenya (AFKI) — China’s trade in Africa in 2015 amounted to approximately $180 billion, nearly eight times more than trade by Japan over the same period.
The Sixth Tokyo International Conference on African Development (TICAD) was hosted in Nairobi, Kenya in August. There is some strong symbolism in its presence in Kenya, as it was the first time TICAD has been held in Africa since its inception in 1993. At the conference, Japanese Prime Minister Shinzo Abe pledged $30 billion in public and private support for Africa over the next three years—including $10 billion for African infrastructure projects carried out in cooperation with the African Development Bank, and $20 billion of investment from the Japanese private sector.
And for critics of the $30 billion pledge, Prime Minister Abe also stated that, of the $32 billion pledged by Japan over a five-year period at the last TICAD meeting, Japan had already put 67 percent of that money to work in current projects in Africa. Closing out his promise, Abe added that the motive for this new pledge is “quality and enhancement.” Some attendees labeled that statement as a challenge to China—a country often criticized for the quality of work and material provided on the continent.
Chinese Foreign Ministry spokesperson Hua Chunying responded, “Regrettably, during the Sixth TICAD held last week in Kenya, Japan attempted to impose its will on African countries to gain selfish interests and drive a wedge between China and African countries.”
She elaborated by highlighting Japan’s attempt to incorporate political issues, including maritime security issues and U.N. Security Council reform, into the conference agenda. The attempted inclusion of such issues was definitely a change of course from previous years.
History shows Japan may be trailing both economically and socially in the “race to Africa” Japan directly invested $1.24 billion in Africa in 2015, down from $1.5 billion in 2014, according to the Japan External Trade Organization. Although the site does not provide a breakdown of sectors, it is clear from news and other reports that the investment covered projects in transport (roads, ports, and airports) and power plants.
By comparison, China made a single investment of $2 billion in oil-rich Equatorial Guinea in April 2015 alone.
China is running away with the numbers. Their money targets a vast amount of infrastructure projects all across the continent from Mozambique to Nigeria. Even more compelling, China has investment in various natural resources projects across the continent.
China’s head start on investing in African natural resources is a concern for Japan. The nation’s interest in Africa is clear as Japan is heavily dependent on imports of natural resources. The shutdown of Japan’s nuclear reactors boosted its dependency on oil and natural gas in the past couple of years. The country wants to deploy capital in natural resources at a time when most western investors have shunned the continent.
According to attendees at TICAD VI, the gap for investment in African natural resources has grown nearly threefold, particularly beyond 2016 where capital expenditures (CAPEX) were drastically cut internally.
The challenge for Japan is China deploying more cash at a rate the Japanese government and private sector cannot match.
Japan first raised concerns in Beijing in 2011 when it opened a military base in Djibouti. The Japanese government consistently maintains that the expansion onto the continent was to help combat piracy. The Chinese government unsurprisingly views this as Japan’s initial steps in military expansion. Finding allies in African nations (and dressing the allegiance in piracy concerns), Japan can grow its presence on the continent with commerce spearheading its efforts. But as maritime issues cross into the larger commerce discussion, Japan can expect China to push back.
Observers are very aware that the East and South China Seas are a glaring source of anger between China and Japan. African leaders are closely watching the developments and stand to benefit from the sociopolitical competition. As one observer noted, Ethiopia has done well playing the United States against China for dollars as the two major powers compete for influence.
Kurt Davis Jr. is an investment banker with private equity experience in emerging economies focusing on the natural resources and energy sectors. He earned a law degree in tax and commercial law at the University of Virginia’s School of Law and a master’s of business administration in finance, entrepreneurship, and operations from the University of Chicago. He can be reached at email@example.com.