While the Japanese government has made available $32 billion (R319bn) in overseas development aid for Africa, little of this, if any, will make its way directly to South Africa.
But the doors to expanding long-standing business interests with South Africa have been opened wide and there looks set to be massive growth in mining beneficiation, agro-processing and the country’s infrastructure build programme following President Jacob Zuma’s visit to the country.
Zuma, accompanied by Tourism Minister Marthinus van Schalkwyk and Trade and Industry Minister Rob Davies, went to Yokohama, the neighbouring city to Tokyo, for the Tokyo International Conference on African Development (Ticad), the fifth meeting of its kind in 20 years.
Prime Minister Shinzo Abe, who was returned to office in December for the Liberal Democratic Party after about a seven year break, then hosted Zuma on an official visit on Tuesday.
Japan has radically changed its economic course under “Abenomics” – as the prime minister’s fiscal and monetary stimulus programme has become known – and this, until recently, has had a major impact on economic growth, as well as the performance of its stock market.
However, Abe faces core economic problems also experienced by his predecessors – Japan has an ageing population and the structural reforms are, ironically, starting to throw young people out of work. While there are security programmes in place for employed workers – which kick into operation once workers lose their jobs – there are no social nets for unemployed people.
Abe is, thus, unashamedly looking to Africa to provide the growth potential for his country – through its multinational companies – to make up for these economic running sores. This explains Japan’s emphasis on foreign investment, particularly in Africa – where the population is still growing and also becoming progressively younger.
The business Japan is looking for includes public-private partnerships – mainly in mineral beneficiation – as well as in infrastructure and agriculture, particularly agro-processing projects.
Japan has about 2 million farmers out of a population of almost 130 million. Most of them run small farms and the average age of the Japanese farmer is 66. Thus in the years to come, Japan is likely to become more and more dependent on food imports.
Hence Davies, who held talks last week with his Japanese counterpart Toshimitsu Motegi, said his department was talking to Japan about assistance in setting up special platinum economic zones. It is envisaged Japanese companies that were involved in fuel cell technology, which uses platinum as its foundation, would set up shop in the zones. Fuel cell technology is also used to power small-scale electricity plants.
In February, the Department of Trade and Industry (dti) and the Bank of Tokyo-Mitsubishi signed a memorandum of understanding (MoU) that would see the two parties collaborate in increasing Japanese investment into South Africa and strengthening relations between the two.
Davies also visited Japan late last year. SA News, the government news agency, reported dti director-general Lionel October – who witnessed the signing of the MoU in February – as saying that South Africa had seen an increase in Japanese investment in the country. He cited Toyota as an example of a Japanese company that had invested and grown its business in South Africa.
“We now want to expand, using South Africa as the base into the African continent. We want to co-operate in terms of exports into the continent as a joint venture between South Africa and Japanese companies,” October said.
He noted that special economic zones were envisaged in North West and Limpopo. These would be zones where platinum could be beneficiated into fuel cells, platinum coils and jewellery.
Legislation is currently before Parliament to set up new economic zones, which the government argues are an improvement on the industrial development zones, which the state acknowledges have been of limited success.
The MoU, which also makes mention of co-operation in the area of platinum beneficiation, was signed by Muneo Kurauchi, the senior managing executive director of the Bank of Tokyo-Mitsubishi and dti deputy director-general Pumla Ncapayi.
Kurauchi described it as a pleasure to sign the document, and reflecting his prime minister’s enthusiasm to expand business with Africa, he added: “Africa is a promising area for Japanese companies.”
Davies reported that he and Motegi had met to discuss the results of a joint study on economic co-operation. The study suggested co-operation on auto components, mineral beneficiation and agro-processing to foster South Africa-Japan trade. The study was conducted by Mitsubishi Research Institute, Huda Consulting and Mthenthe Research and Consulting Services.
During his visit to Japan, Zuma emphasised the massive Japanese investment in infrastructure projects including the north-south rail and road corridor, which will run from Dar es Salaam to Durban.
October reported earlier that there were about 350 prospective projects related to this corridor, dubbed the AU’s North-South Corridor project, linking Tanzania with South Africa.
The MoU significantly also looks at technical assistance and financial support for rail and infrastructure projects.
While Japan and South Africa have had diplomatic ties since the Union of South Africa in 1910 and were formalised before World War II, Japanese businesses have traded with South Africa since the time of Jan van Riebeeck. Nissan and Toyota were active investors during the 1960s.
More recently Kansai Paint turned Freeworld Coatings – a top South African paint manufacturer – into a subsidiary. It paid ¥18.4bn (R1.9bn at Friday’s rate) in 2011.
In 2010, Nippon Telegraph and Telephone, bought Dimension Data for ¥286bn, then about R24bn.
During Ticad, Zuma spoke glowingly about the presence of major corporate banks in South Africa. The Japan Bank for International Co-operation is reported to have provided low interest loans and guarantees to Eskom and Transnet – which were spearheading the state-driven infrastructure programme.
A leading Japanese lender, Mizuho Corporate Bank, would be opening a branch in Johannesburg in 2014 to service Japanese companies operating in South Africa and in the Southern African Development Community (SADC) region.
Abe told officials from foreign governments ahead of Ticad that investments “in a growing African continent are investments in our future”.
The integration of three economic regions – Common Market for Eastern and Southern Africa, SADC and East African Community – underscored this point, the prime minister said.