Adesina Woos Japanese Investors to Africa

By Adedapo Adesanya

The president of the African Development Bank (AfDB) Group, Mr Akinwumi Adesina, has called for a significant increase in Japanese investment in Africa, saying the continent is the world’s best investment destination now and in the future.

He led a delegation on a five-day visit to Japan, during which he will meet senior government officials, large Japanese companies, development partners and members of the African diplomatic corps in the country.

Delivering a lecture at the Japan-Africa Investment Ecosystem Co-Creation Forum in the capital, Tokyo, Mr Adesina said Africa offers enormous investment opportunities and gave examples of Japanese companies that have been running profitable businesses on the continent for many years.

The forum was organized by Keizai Doyukai, a private, non-profit and nonpartisan organization that brings together nearly 1,400 top executives of some 1,000 corporations.

Mr Adesina pointed out that Japan’s foreign direct investment in Africa declined from $10 billion in 2016 to just $4.7 billion in 2020 during COVID-19 but recovered to $6 billion in 2021.

Africa accounts for only 0.003 per cent of Japan’s $2 trillion global foreign direct investments whole in terms of trade, the volume of exports and imports between Africa and Japan remains lower than 2 per cent.

Mr Adesina said there was every reason to change the trend noting that the state-owned Japan Bank for International Cooperation (JBIC), which, together with TOTAL and other investors, including the African Development Bank, co-financed the $24 billion Liquified Natural Gas project in Mozambique—which will make it the third largest in the world. Japan will buy 30 per cent of its production.

JBIC and Mizuho Bank, along with the lender and nine other financial institutions, invested $2.7 billion to build the Nacala corridor railway and port in Mozambique.

Mr Adesina cited Japanese multinationals such as Toyota Tsusho, Mitsubishi Corporation, Hitachi and Komatsu, whose businesses make billions of dollars in profit every year.

“These companies will tell you investing in Africa pays!” said Mr Adesina, “there is now a greater pulse and excitement for more Japanese investments in Africa.”

The AfDB chief said the successes of large Japanese companies operating in Africa are spurring a new generation of young Japanese to turn their eyes to venture capital and private equity funds to support small- and medium-sized enterprises.

He gave the example of a startup company, Kepple Africa Ventures, which has raised $43 million and is investing along with African private equity funds in 100 seed-stage enterprises in 11 African countries.

The Uncovered Fund, founded only in 2019, is another Japanese venture capital fund that has invested in 26 African startups.

While the number of Japanese companies in Africa increased from 520 in 2010 to 900 in 2020, Mr Adesina called for more venture capital and private equity funds to tap into the continent’s huge potential.

The AfDB chief spelt out areas in Africa with enormous investment opportunities for Japanese investors.

He pointed out that Africa has the world’s highest demographic asset. Its population will rise to 2.4 billion by 2050. The continent has the largest number of young people in the world, with over 75% of its population aged less than 35 years.

“With appropriate skills, they will form the labour force for global industries as many countries face a rapidly ageing population,” said Mr Adesina.

The recent establishment of the African Continental Free Trade Area (AfCFTA) makes Africa the largest free-trade zone in the world in terms of participating countries. Manufacturing opportunities alone will reach $1 trillion in 2025. And Africa’s consumer spending will reach $6.7 trillion by 2030.

In addition, Africa has the world’s largest renewable energy sources, including solar, wind, hydropower, and geothermal.

Mr Adesina reassured investors that, “Africa is also not as risky to investments as many perceive,” and added, “Let’s ramp up Japanese private sector investments in Africa. Let’s do more together in Africa, faster and at scale.”