Africa has changed from the continent of disaster to the continent of growth opportunities and this has brought about a shift from aid to trade and investment, said Japan’s ambassador to South Africa, His Excellency Mr Toshiro Ozawa, at a recent GIBS Forum on The Role of Japan and SA in Promoting Growth in Africa.
Japan has a history of assisting the continent through the Tokyo International Conference on African Development (TICAD) which started in 1993, but since it began this process Africa has changed, so there is now also a need for Japan to develop infrastructure on the continent.
TICAD was the forerunner to the new pattern of engagement with Africa that has been followed by other countries, such as China and India. It was launched to promote high-level policy dialogue between African leaders and development partners and has since evolved into a major global framework for initiatives promoting African development.
Together with Asia, Africa is the region that will be the fastest-growing in future, as a consequence of its large youth population, more democratic forms of government and economic reforms, said Ozawa.
“However, an obstacle to economic growth in Africa is the fact that it is still a continent of 54 nation states, and the nature of these sovereign states imply they are not viable economic entities: 21 of these states have a population of less than five million, 32 have per capita income of below $5 and 16 are landlocked,” said Mike Spicer, the former CEO and now vice president of Business Leadership South Africa.
“In Africa, regional co-operation is key, but the building of common markets and regional integration is a long process that is complex and difficult.”
Spicer said there is a need to integrate markets on the continent as a whole, as corporates are all looking for large markets. A case in point is that South Africa, which has joined BRICS, has a market of only 50 million people, which is significantly smaller than that of the other BRIC members.
Political will in this regard is shifting, with countries of the most southern, eastern and central parts of Africa recently deciding to form a grand free trade association that will have a combined population of more than 550 million people and a substantial GDP of $860bn. Japan and South Africa have to pay central attention to this in their quest of promoting growth in Africa.
“In Africa, regional co-operation is key, but the building of common markets and regional integration is a long process that is complex and difficult. South Africa aspires to play a leading role in this process and can get some tips from Japan, which has experience of the Association of Southeast Asian Nations (ASEAN),” said Spicer.
Importantly, it is not possible to run an efficient economy if the cost of moving goods is high and therefore infrastructure development forms the platform for growth, said Ozawa. Africa needs investment of $22bn a year in energy, telecommunications, transport and water to achieve the African Millennium Development Goals and Japan’s role in this is to give technological co-operation.
He added that Japan does have experience in infrastructure development in Asia, particularly in rail and ports, and that it can provide Africa with new technologies. The country is currently engaged in a number of projects of the North-South Corridor which links southern and eastern Africa and Japanese companies have a keen interest in energy development and transportation modernisation in Africa.
Japan’s view is that growth of inter-African trade is crucial for the continent’s growth but populations are spread out, which means distance is the enemy of this growth. “However, distance can be closed through infrastructure,” he said.
In the corporate sector there are a number of classic examples of co-operation between South Africa and Japan which span the mineral resources, IT and transport sectors, and the finance and banking sector is another area to watch for future co-operation.
Spicer related that Business Leadership South Africa conducted a Vision 2040 study last year to determine what it would take for South Africa to become a developed nation by 2040. One of the outcomes was the development of the African market and the positioning of South Africa as a gateway to the continent.
An example is Walmart that is already using a traditional company, Massmart, as launch pad into Africa. He said the company did not come to South Africa because of the local market but to gain access to a market of 1 billion people.
But unless South Africa gets its policies in order, there are other gateways on the continent that will take its place – Mauritius is already being more innovative than South Africa as a gateway and Nigeria is a sleeping giant that only has to show a 10% improvement in democratic government and economic reform to overtake South Africa.