Deepening Africa–Japan Business Ties
Investment in people, innovation, and sustainable energy to play a key role at the TICAD 8 conference
Dots for’s Carlos Oba (third from left) and Emmanuel Agossou (far left) in a village close to Zagnanado, Benin.
On August 27 and 28, the Republic of Tunisia will host an international conference dedicated to deepening the economic ties between Japan and the 54 nations that make up the continent of Africa. Japan has taken the lead in the Tokyo International Conference on African Development, otherwise known as TICAD, since 1993, when TICAD 1 was held in Tokyo. Meetings take place every three years, and the Tunisian gathering—TICAD 8—is only the second to be held in Africa.
While the number of Japanese companies active in Africa has doubled over the past decade to more than 900, Japan continues to lag the European Union, the United States, China, and India. The Ministry of Economy Trade and Industry (METI) is focused on encouraging Japanese businesses to support sustainable growth in Africa through projects that address vital social needs, leverage digital transformation, provide technical skills training, and boost renewable power generation.
TICAD 8 comes as foreign direct investment in Africa more than doubled between 2020 and 2021 to about $83 billion, according to a report by the United Nations Conference on Trade and Development. This underscores the vital and timely role of Japan–Africa relations ahead of the upcoming gathering of African leaders, development partners, and international and regional organizations, along with representatives of the private sector.
As former METI Minister Koichi Hagiuda told attendees of a TICAD 8 preview event, “Japan sees three key catalysts for partnership opportunities with Africa.” He went on to highlight how compelling demographics mean one in four people will be African by 2050 and noted that a digital revolution is driving a thriving startup scene. He added that, as Africans seek alternative ways to grow their economies, the opportunities for green growth projects will increase.
Digital Revolution
Carlos Oba is a good example of how Japanese expertise is helping fuel digital startups in Africa. He is co-founder of Dots for Inc., a tech startup launched in October 2021 with a mission to provide internet access to 200 million people living in rural areas of West Africa by 2030.
While it was a trip through Tanzania in East Africa that opened Oba’s eyes to how people living in rural areas are being left behind as the digitalization wave sweeps through larger towns and cities, Dots for’s initial projects have been in West Africa, beginning with Benin in December 2021 and Senegal the following year.
Emmanuel Agossou, the Dots for country manager in Benin, said the challenges are daunting. “Most of our clients are farmers, often with just primary-level education and small incomes from farms and fisheries—though we also have a few university students, graduates, and teachers,” he explained. “They live in villages where there is almost no electricity and no—or very weak—mobile network coverage and internet.”
That lack of universal online access is fueling a rapidly widening disparity between rural and urban areas of Africa, and Oba was prompted to action when he realized major digital players would be reluctant to invest based on low foreseeable profits.
Dots for was awarded just over $300,000 in seed money from two projects initiated by METI: AfDX and J-Partnership. The funding has enabled Oba and his co-founder, Sho Nakata, to develop d.CONNECT, a distributed wireless network communication infrastructure that brings the internet to African villages at extremely low cost. This is accomplished through Wi-Fi routers equipped with mesh network technology, which cuts out dead zones and can provide uninterrupted Wi-Fi.
Residents connected to the village wireless network can use their smartphones to access services and digital content stored on a server also installed in the village. Oba envisions a “smart village,” where users can use online platforms for distance learning, telemedicine, and crowd work. Not only is this meant to improve overall convenience, but the ability to access government and corporate digital services may also boost income and quality of life.
Residents of a village close to Zagnanado, trying out smartphones
“As the Dots for services expand, villagers will get strong internet connectivity and digital platforms to boost their business, education, and work opportunities,” Agossou said. “Young people may be able to work remotely from their village homes, without the need to trek to the big cities, where they would be forced to live apart from their families.”
The system is operated on a subscription basis, targeting users who can see the prospective advantages and are prepared to commit to making ongoing payments. According to Agossou, Dots for employs local agents in or near villages who promote the services either face-to-face with farmers or in village meetings that include young people and village heads. The emphasis is on explaining the advantages of the service to the community as well as to those looking to run businesses, he added.
The service has been successful in helping men and women aged 23 to 45 find steady jobs, Agossou said. But the reality of life in an African village remains harsh, and he notes that payment challenges exist for villagers with small incomes as well as university students and new graduates who have yet to find employment. As a result, Dots for is testing a lower-fee business model to boost client interest.
Based on forecast population increases, and the rising desire to be connected, the need for the company’s offerings is likely to extend to other African nations.
“Dots for services have a huge potential market, and I can see the model expanding from Benin to many other French- and English-speaking African countries, such as Côte d’Ivoire, Ghana, and Nigeria, to name just a few,” Agossou noted.
Sharing Skills
Japan is also committed to providing high-quality technical training to 5,000 young Africans over the next three years.
In Kenya, METI is cooperating with the Kenyan Association of Manufacturers (KAM) to promote training for human capital in the Kenyan manufacturing industry. METI seeks not only to raise technical levels throughout the entire Kenyan manufacturing industry, but to enhance the Japanese presence in the former British colony.
In February, METI dispatched a specialist team to Kenya, which conducted a 10-day guidance program. A further eight-day program was directed by similar specialists in June.
In May, representatives of the Kenyan Ministry of Industrialization, Trade and Enterprise Development, together with KAM, were sent to Thailand, where they took part in third-party training conducted by Japanese experts.
Among KAM’s client companies is Nairobi-based Plast Packaging Industries Ltd., a family-run business involved in the manufacture of environmentally friendly plastic bottling, packaging, and printing products. The company participated in a technical guidance program during which Japanese experts installed sensors on factory equipment and instructed program participants on how to apply the gathered data.
“Japanese technology has helped us monitor our production capacity on a real-time basis,” said Group Chief Executive Officer Mary Ngechu.
The sensors were installed at the Plast Packaging production line without disrupting operations. As a result, production efficiency has improved. This should also have a knock-on impact on sales, she added.
Ngechu has been impressed with the devotion of the Japanese engineers. “The Japanese team are committed to ensuring any project they spearhead goes to completion and that the companies benefit,” she said. “They have offered immeasurable support to me and my family in our business, and we look forward to partnering with them in different areas.”
Mary Ngechu
A METI team visited Plast Packaging in May 2022.
Future Power
At the Second Japan–Africa Public-Private Economic Forum, held on May 3 in Nairobi, participating countries reaffirmed their commitment to green energy. Given the number of African states, and the different issues they face, there is no one-size-fits-all solution to green-energy requirements. METI’s stance is that the most realistic approach is for each nation to select the path that best suits its needs.
To solve the challenges of limited supply and higher costs for electricity, due to power generation through heavy fossil fuel use and power importation from neighboring countries, Toyota Tsusho Corporation has conducted studies financed by METI on the feasibility of solar power generation with battery storage in several countries, including Zambia, Angola, Eritrea, and Benin. One possible approach using this method is to store power generated during the day in batteries and discharge this energy at night.
Against the backdrop of a rapidly growing population, the Egyptian government is targeting the supply of 20 percent of electricity from renewable sources by 2022 via initiatives that include onshore wind power created with support from Japan.
Toyota Tsusho and its subsidiary, the renewable-energy company Eurus Energy Holdings Corporation, in partnership with France’s Engie and Egypt’s Orascom Construction PLC, have developed the 262.5-megawatt Ras Ghareb Wind Energy project. The wind farm is located on the west coast of Gulf of Suez, 260 kilometers southeast of Cairo. This project raised $320 million of limited recourse financing, of which the Japan Bank for International Cooperation (JBIC) provided $192 million as overseas investment loans. The remaining $128 million came from commercial lenders Sumitomo Mitsui Banking Corporation and Societe Generale as loans covered by Nippon Export and Investment Insurance (NEXI) Overseas Untied Loan Insurance.
The Ras Ghareb Wind Energy project is the first independent wind-power production project in the country. After reaching financial close in December 2017, it began commercial operation in October 2019—two months ahead of schedule. With 125 wind turbines, it continues to generate enough electricity to power 500,000 Egyptian households.
In December 2019, a €110 million project-financing loan agreement for the Taza onshore wind farm in Morocco—led by Parc Eolien de Taza, the shareholders of which are EDF Renewable and Mitsui & Co., Ltd.—was signed by JBIC, the Bank of Africa, Sumitomo Mitsui Banking Corporation, and MUFG Bank, Ltd. The funds provided by the latter two commercial banks were insured by the state-owned export credit agency NEXI. The electricity generated by the project will be bought by Office National de L’Électricité et de l’Eau Potable, Morocco’s public electricity and water company.
Wind power is beginning to play a key role in the energy mix of nations such as Egypt and Morocco.
Kenya has committed to the realization of a green, hydrogen-based society as it looks to reduce its reliance on fossil fuels and has established a working group led by the Ministry of Energy. A strategy and roadmap are currently being drawn up, and institutional design and development of pilot projects will follow.
Japan’s public and private sectors are expected to work together to lead the development of greener energy resources. For the 2022 fiscal year, Toyota Tsusho and METI have decided to implement a feasibility study on green-hydrogen value chain development in Kenya. This study aims to pursue the formation and commercialization of pilot projects which lead to a green economy. The goals of such projects include unlocking the potential of green hydrogen as a new energy source through various industries, such as freight and passenger transportation, port cargo handling, steelmaking, fertilizer manufacturing, and alternative fuel and electricity storage solutions.
Financial Foundation
Project finance is risky in some respects. The special-purpose vehicle set up to run the project has limited underlying capital, and repayment of loans is funded only from project proceeds, which can take years to come to fruition. Such long-term finance risk is higher in developing countries.
One way to mitigate risk is to have loans insured by organizations such as NEXI, which provides coverage for loans made by private-sector Japanese banks to overseas businesses in which Japanese companies participate. NEXI was founded in 1993 and, according to a NEXI International Relations Group spokesperson, a high-level African focus has been in place since TICAD 1, which was held the same year in Tokyo.
In December 2020, NEXI insured a $520 million loan made to the African Export-Import Bank (Afreximbank) by Mitsubishi UFJ Bank, Ltd. and Mitsubishi UFJ Trust and Banking Co., Ltd. as support for the Pandemic Trade Impact Mitigation Facility (PATIMFA) for African countries affected by the Covid-19 pandemic. Through the PATIMFA program, the money is being widely used to support medical care, hygiene, environmental, and educational projects in Africa.
The spokesperson also revealed that NEXI has decided to participate in a telecommunications project in Ethiopia—jointly conducted by Sumitomo Corporation and Vodafone Group Plc of the United Kingdom—which began in May. The project will be reinsured by the African Trade Insurance Organization (ATI) based on a memorandum of cooperation concluded in 2019 at TICAD 7 in Yokohama.
Leading up to TICAD 8, NEXI is planning to host joint webinars with Afreximbank and ATI as side events to introduce these projects in more depth, the spokesperson said.
Tunisia is in an optimal position to host TICAD 8 given its unique geographical advantage as the gateway to the continent, as well as being an important partner for Japan in the Middle East and Africa. The conference has won the broad support of the African states, and Japanese Prime Minister Fumio Kishida is scheduled to attend. Tunisian President Kais Saied will chair the conference—a role which he is scheduled to share with Macky Sall, president of the Republic of Senegal and chairperson of the African Union.
Backed by more stable funding sources for clean energy projects, high-level training facilities, and the rapid uptake of digital services across the continent, TICAD 8 is on its way to securing a firmer and more deeply founded relationship between Japan and Africa as we move toward 2050.
