In the past decade, nations around the world have sought to transition to an investment-focused strategy in Africa, recognizing the continent’s substantial $100 billion annual infrastructure financing gap. In this era of a global transition towards investment-focused strategies in Africa, Japan emerges as a proactive player, steering the trajectory toward sustainable growth with its substantial financial commitments and innovative initiatives.
Japan’s Active Position for Investing in Africa
While China’s Belt and Road Initiative dominated the global scene, Chinese lending to Africa has been on the decline since 2016. This has prompted a series of “Africa+1” summits in 2022, with countries like the United States, the United Kingdom, India, and Russia placing significant emphasis on investment and trade deals.
Among these nations, Japan has taken a proactive stance, particularly highlighted at the Eighth Tokyo International Conference on African Development (TICAD) summit held in Tunisia last summer. Japan pledged an impressive $30 billion to be financed by both public and private sectors over the next three years, surpassing its 2019 commitment. This commitment materialized as the Green Growth Initiative with Africa (GGA), launching with a dedicated $4 billion fund combining public and private financing. The initiative aims to steadily expand climate change mitigation and adaptation businesses through proactive investment, accompanied by memoranda of understanding (MOUs) between Japanese and African partners.
Despite Japan’s political commitment to Africa, trade relations have been sluggish, with Japan’s market share falling from seventh to seventeenth between 2000 and 2018. However, the silver lining lies in a renewed private interest in green growth for Africa and a more flexible public role in incentivizing and structuring such interests.
Japanese Companies and Banks’ Investment Interest
Japanese companies, particularly those with a presence in Africa, are recognizing the potential in the “resources/energy” sector, with a recent survey showing a doubling of interest compared to “natural gas and oil”. African gambling businesses can also be interested in cooperating with their Japanese colleagues. We can name this kind of economics green, too, because of the minimal environmental impact, unlike real physical casinos. To know more about Japanese online casinos and bookmakers where you can play with confidence visit this website. Also, major trading houses like Toyota Tsusho and Sumitomo Corporation, which have the most local subsidiaries in Africa among Japanese companies, are actively investing in renewables and green supply chains. Toyota Tsusho Corp, for instance, recently acquired SoftBank’s renewable energy unit, doubling their Africa-based business sales to 1 trillion yen in 2022.
Even Japanese commercial banking institutions are recalibrating their interests with a focus on green growth. Africa-based institutions like the Africa Finance Corporation (AFC) have played a role in incubating these interests. AFC secured $389 million through a samurai bond, with many Japanese megabanks participating. Mizuho Bank, a major Japanese lender, joined the African Hydrogen Partnership (AHP) in 2022, signaling Japan’s growing interest in the hydrogen economy. AFC and Mizuho are set to co-finance infrastructure projects in Africa, leveraging Africa’s institutional partners to address project bankability concerns.
Blended Financing
While Japan has lagged in blended financing mobilization, it is increasingly seen as a viable and strategic instrument to lower risks and incentivize private interests. The Green Growth Initiative with Africa (GGA) exemplifies this approach, emphasizing the mobilization of public insurance schemes to structure financing and reduce risks. The LEAD Initiative, part of Japan’s broader efforts, is actively co-financing projects in Egypt, providing critical commercial risk insurance coverage.
Conclusion
As Japan chairs the G7, heightened concerns over energy security following the war in Ukraine define its priorities. Maintaining the momentum from the 2022 TICAD promises, Japan must chart a distinct course, catalyzing mechanisms like the LEAD Initiative to incentivize and structure green investments. With increased private interest and a flexible public role, the outlook for Africa-Japan relations appears positive, signaling a strategic shift towards sustainable growth and partnership.
