Four goals for Africa at TICAD8

“Africa, a brilliant continent full of dynamic growth, is no longer a recipient of ‘aid,'” former Japanese Prime Minister Shinzo Abe said in a 2014 speech in Addis Ababa. So why, you might be wondering, is Japan now preparing for the 8th Tokyo International Conference on African Development (TICAD), to be held in Tunisia in August 2022?

TICAD began in 1993 – and was then billed as a conference bringing together development partners and African leaders, as well as Japan. Thus, it was organized and continues to be organized in collaboration with the African Union Commission (AUC), the World Bank and the United Nations Development Program (UNDP).

This distinguishes it from successors like China’s FOCAC, which hardly involve other bilateral or multilateral partners. Nevertheless, given Japan’s co-hosting, the now triennial TICAD meetings have also functioned as a means of coordinating Japan’s development relations with the African region, and vice versa.

What can we expect from TICAD8?

The latest TICAD, held in 2019 in Yokohama, featured Japan’s focus on private sector investment in Africa, building on Japan’s achievement of investing over $20 billion between 2016 and 2019 on the continent. Thus, in 2019, there were 796 Japanese companies operating in Africa compared to 520 in 2010.

According to a survey of the business conditions of Japanese companies in Africa, conducted by the Japan External Trade Organization (JETRO) in 2020, one-third of these companies were in the manufacturing sector, with the largest number located in Southern Africa, followed by North Africa. Africa.

Thus, during TICAD7, the former Prime Minister said, “The Japanese government will do its utmost to support Japanese companies setting up in Africa”, and there was a great expectation that Japanese companies would continue to grow. their investments on the continent, given the size of its market. and growth potential.

Japan’s then-Prime Minister Shinzo Abe (right) applauds during the closing ceremony of TICAD7 in Yokohama on August 30, 2019. (Photo by Toshifumi KITAMURA / AFP)

But with Covid-19, that expectation has been dampened. Japanese companies continue to perceive the African market as a high-risk market, with 65% of companies citing the development and implementation of regulations or legislation as a risk of investing in Africa. This is followed by financial matters (46.7%), followed by poor infrastructure (44%), hiring and labor issues (39.4%) and business regulations (33.5%).

Moreover, although this is the first TICAD since the launch of the African Continental Free Trade Area (AfCFTA), it also comes at a time of great geopolitical uncertainty – with the Russian-Ukrainian war, tensions ongoing between the United States and China and concerns about ripple effects on African countries – from the food crisis to potential energy and debt crises.

The Japanese government has therefore started to play down the summit, suggesting that TICAD8 will focus on three very broad pillars: economy, society, and peace and stability, and fewer participants are expected to join in person in Tunisia due to Covid-19.

Four goals for Africa

So should African leaders and businesses bother to attend? What can they take away from such a summit, at such a difficult time?

Our view is that four useful outcomes could be possible from the summit, although Africans will have to push for them to happen.

1. Investment higher up the value chain

First, Japan’s private sector has significant potential in Africa, but investors need to stop viewing the continent as a market for selling – say, used cars, but rather as a place for adding value and manufacturing – beyond assembly. The Japanese government can help with this.

For example, Japan has almost no trade-related agreements with African countries, beyond the standard quota-free regimes for least-developed countries, which are often underutilized due to non-tariff barriers. It has not concluded a preferential trade agreement (PTA) with any African country.

Only four African countries – Egypt, Morocco, South Africa and Zambia – have double taxation agreements (DTAs) with Japan.

In business and asset protection, Japan has agreements with five African countries, including Egypt and Kenya.

African governments can therefore urge the Japanese government to encourage its companies to invest higher up the value chain in Africa, which itself will act as a risk management measure – avoiding issues such as the impact on prices raw material. Japanese companies such as Sumitomo in Madagascar. experienced, while taking advantage of, for example, Japan’s own consumer markets for African branded goods – from fashion to chocolate and coffee.

In turn, African governments could commit to engaging at the regional or sub-regional level to agree some of these mechanisms with Japan – for example a continent-wide preferential trade agreement, which can ensure Japanese companies higher returns on investment.

In this way, TICAD8 could begin to bridge the gap between the Japanese government and the Japanese private sector, while aligning Japanese investments with AU frameworks such as the African Mining Vision.

2. Infrastructure development

Second, Japan is a member of the G7-led B3W initiative, which is expected to focus on infrastructure – but little has been said about how Japan can add value in this area. What kind of infrastructure development can Japan offer, for example, that China or other G7 members cannot?

Japan’s experience in designing and building efficient urban infrastructure for dense populations is highly relevant to an urbanizing African continent. In 2022, for example, Lagos has 15.4 million inhabitants in an area of ​​1,171 km2, while the greater Tokyo area has 37.2 million inhabitants in 2,194 km2. But the population of the Lagos region is expected to reach 32.6 million by 2050, so it’s time to benefit from Japanese expertise and investment in urban planning. Yet, so far, what has been seen in Africa from Japan is advice and the transfer of the cheapest methods – bus rapid transit systems, not large-scale underground or overhead systems. speed.

Buses, of course, have their place, but African businesspeople deserve modernized systems as much as Japanese businesspeople. African leaders can encourage Japan to do better and even specialize in supporting this kind of urban infrastructure, truly suited to African cities “built better”.

3. Local partnership

Third, African governments are under pressure to avoid further debt – which means public-private partnerships (PPPs) are now all the rage in development. However, the experience of PPPs in Africa is mixed. Optimal social pricing is particularly difficult to achieve – risk-averse foreign companies often choose to charge high prices, but these discourage use. Japanese companies have however invested in some PPPs, particularly in the energy sector, and have the potential to do more and better, especially if they partner with African companies. Pressure for the Japanese government to induce Japanese companies to partner locally with all African projects could be another key outcome to seek.

4. Support for Africa in international forums

Last but not least, despite only 10% of Japan’s ODA budget going to Africa, Japan has – rightly in our view – continued to provide concessional finance, including through multilateral development banks. and regional.

Japan has some leverage on these boards and can advocate for some degree of structural reform in banks that would benefit African countries – for example an overhaul of debt sustainability frameworks (Japan can talk about it), or an overhaul of how banks assess different forms of collateral such as natural resource payments (this would pull on the loans that Japan itself has offered to countries like China), or how banks appraise regional infrastructure projects – such as those under the AU’s Program for Infrastructure Development for Africa (PIDA).

Encouraging Japan to listen more carefully to the needs of African countries and support them in multilateral and plurilateral forums could be another result to be sought in TICAD8.

Yes, Tunisia’s TICAD8 is unlikely to act as a pledging conference for Japanese aid to African countries. But there are still reasons to engage – if Japanese leaders are truly open to working in a new, respectful and mature way, hand in hand with their African counterparts.

Bonny J. Streater