The world has changed dramatically since the African leaders made their long journey to Yokohama in 2019. Over the course of six years, the Covid-19 pandemic has brought about a major setback on development advancements. Russia's invasion of Ukraine deepened Africa's major food security crisis. And the second Trump administration overthrew decades of US involvement on the continent.
A more positive trend was a steady increase in trade and investment between Africa and Japan. Africa continues to receive a small share of Japan's foreign direct investment, but the number of Japanese companies and financial institutions is increasing, establishing its footprint on the continent. For example, a consortium of Japanese investors has played an important role in financing LNG development in Mozambique, while many Japanese brands are looking to invest in African startups.
Japan's presence in Africa is far less noticeable than its Asian rival China, but there is no doubt that goodwill exists on both sides to expand relations between Japan and Africa. Japanese investors are increasingly aware of the opportunities offered in Africa, even if many tend to emphasize risks too much. Meanwhile, with reduced US support and even traditional European partners reducing aid, the African government hopes that Japan will support its role as a continental partner.
Additionally, ahead of TICAD 9, which features participation from various multilateral institutions, African businesses are considering four things to note at showpiece events in Japan-Africa relations.
Aid and Investment
At the final TICAD of 2022, the headline announcement was the Japanese government's pledge to provide an additional $30 billion in aid to Africa over the next three years.
The pledge was based on pillars of economic development, including the private sector support initiative with the African Development Bank and the $4 billion “green growth initiative.” Social programs focused on health and education. It focuses on peace, security and support for peacekeeping operations. The Japanese government has provided little public clues regarding the scheduled announcement of TICAD 9. It is unclear whether the summit will feature similar pledges on development assistance. While Japanese officials often show that they prefer to move from aid to trade, domestic budget constraints can make another multi-billion dollar commitment politically challenging.
Toshihiko, director of the African Affairs Bureau of the Japanese Ministry of Foreign Affairs, spoke to African businesses in June.
One important signal is the signature of a bilateral investment treaty between Japan and African countries.
These bits provide great comfort to investors as they provide that disputes will be resolved before the international court. At this point, only five African governments have signed with Japan, but negotiations are understood to continue with many others. Transactions signed to TICAD 9 mark important milestones that allow you to unlock your investment flow.
TICAD could also offer a stage for financial institutions in both Africa and Japan to sign transactions with new partners. For example, at a previous event in 2022, Mizuho Bank signed a Memorandum of Understanding (Mous) in cooperation with banks in South Africa and Namibia and the African Finance Corporation (AFC). Modupe Famakinwa, head of corporate funding and investor relations at AFC, has told African businesses that they hope that the bank will sign several more Mouss at this year's event.
Diplomatic engagement
The extent to which TICAD 9 is judged to be successful, either correctly or incorrect, depends in part on who appears.
With the growing importance of Africa-Japan relations over the past 20 years, Tikhad has become considered a must-see event by the majority of African leaders. Recent summits usually bring together around 40 national heads from the continent.
However, TICAD 8 saw a decline in attendance at the state level, with only about 20 African presidents participating in Tunis directly. The relatively insufficient turnout may have been because Japanese Prime Minister Fumio Kishidida had to announce that he would not be able to attend due to a community infection a few days before the summit.
Sources have suggested to African businesses that TICAD 9 is likely to ensure strong participation from both the government and the private sector, reflecting the increasing recognition of Japanese institutions as key partners on the continent.
The importance of attending events goes beyond public relations. Japanese investors often look for powerful government signals before they step into unfamiliar environments. In fact, Japan's investment in Africa is often characterized by private sector companies supporting initiatives established by JICA, the Japanese international cooperation organization.
“We want to see more and more government dialogue, cooperation and identification of opportunities from government,” said Tomo Ishikawa, Chief Regulatory Engagement Officer at Mitsubishi UFJ Financial Group. Opportunities for dialogue like this are essential to “building trust,” he adds.
Important minerals
One sector that Japanese officials are increasingly emphasizing their involvement in Africa is key minerals.
The island nation lacks substantial domestic sediments of minerals that play an important role in both green energy transitions and defence technologies. Reliance on China on these minerals is considered a potentially dangerous vulnerability in Tokyo.
While key minerals were mostly on the agenda in previous TICAD, Japan's interest in partnering with African countries on mining value chain projects is now significantly increasing. In 2023, Japan signed contracts with five African countries to accelerate its important mineral projects. And in May this year, the Japanese government launched a project with UNCTAD to promote value-added investment in South Africa's important minerals.
It may be too early for Japan to try its own version of Reut Coridor. Reut Corridor is a US-led project that promotes Dr. Angola and potentially important mineral exports from Zambia. However, TICAD 9 almost certainly sees its focus on collaboration opportunities with key minerals, and there is a strong possibility that a new investment partnership will be realized.
Green hydrogen
Japan's experience in the African energy sector is not without hiccups. The country plays an important role in Mozambique's LNG development, with Japanese utilities signing off-take agreements to receive gas exports, and Japanese banks helping to finance the construction.
However, the project appears to examine the worst fears that Japanese companies may have felt about their involvement in Africa. The uprising that took place near the project site ultimately led to operators' large-scale declarations in 2021. Even if work can resume quickly, the project is delayed several years.
Nevertheless, green hydrogen is another area for potential cooperation. Green hydrogen could become more important as Japan moves away from its dependence on LNG. Due to the limited possibilities for domestic production, Japan must work with overseas partners to ensure supply.
Executive Director of European Investment Banks, Junaid Bellozaghey, the Middle East and Bank of Mizuho, said earlier this year that he and other stakeholders were lobbying to Japan to subsidize Africa's green hydrogen development in return for supply contracts. The TICAD sign that the Japanese government is accepting partnership arrangements will be a welcome boost for the African sector.
