Japan and Africa look to strengthen ties at Yokohama’s TICAD

As African governments scour the globe for economic partners, Japan is not necessarily an obvious place to look. Few Japanese companies maintain a conspicuous presence in Africa, preferring instead to focus on markets closer to home in other parts of Asia. Africa received just 0.5% of Japan’s foreign direct investment by value in 2024 according to the Japanese Ministry of Finance.

Distance is one factor hampering the Japan-Africa relationship. Only one African city, Cairo, has a direct flight to Tokyo. The language barrier is another hindrance. And Japan’s historically risk-averse business culture also seems to hold many Japanese companies back from investing in Africa.

Signs of youthful enthusiasm

Yet there are signs that ties are beginning to deepen. Japanese companies are now “polarised” in how they view Africa, says Keiichi Shirato, a professor of international relations at Ritsumeikan University in Kyoto. “Some companies are very conservative, and they are very hesitant to do business in Africa,” he explains.

But this is balanced by companies led by younger executives – who often have a more international outlook and better English language skills – which are forging ahead with efforts to explore opportunities in Africa. These companies tend to recognise that Africa is a “potentially a big market in terms of population,” says Shirato. Many view the continent as a promising region to expand their businesses, given that their domestic market is set to shrink significantly as Japan’s population declines in the coming decades.

Shirato adds that although the government of Shinzo Abe, which led Japan between 2012 and 2020, had limited success in its efforts to encourage Japanese foreign direct investment (FDI) in Africa, the outlook may now be more promising. He points to a survey compiled by JETRO, the Japan External Trade Organization, showing that 57% of Japanese companies operating in Africa expect to expand over the next two years. This is the second highest level of any region globally, after southwest Asia.

Into Africa

Of course, some links between Japan and Africa are well-established. Japanese-made cars are ubiquitous across the continent, while Japanese technology plays a largely unseen role in energy systems and digital technology networks. Most major Japanese financial institutions have established some presence in Africa and the Japanese government has been promoting investment for more than 30 years since the first Tokyo International Conference on African Development in 1993.

Emma Ruiters, an expert in Japan-Africa relations and digital and tech transformation associate consultant at the Tony Blair Institute for Global Change, says Japanese investors are now placing “renewed importance” on the continent, while the triannual TICAD forums have become “a lot more prominent”.

And though Japanese businesses have tended to struggle with cultural differences while attempting to operate in Africa, some have found ways to adapt.

Indeed, Japanese businesses often work closely with Japanese government institutions while operating in Africa. In particular, Ruiters says programmes involving the Japan International Cooperation Agency (JICA) can provide a starting point for Japanese commercial investors to enter the continent.

“They’ve definitely taken a different approach, in some ways a more developmental approach to their investment, because I think they’ve seen that there’s still quite a big need to fatten-up the pipeline of projects in Africa.”

Ruiters also notes that, in contrast to their counterparts in China, Japanese companies operating in Africa tend not to bring large numbers of expatriate staff. This reflects how, domestically, Japan has a “very constrained labour market”, meaning Japanese companies doing business in Africa need to find reliable local partners to work with.

Shirato offers a similar view, pointing out that a “typical failure case” for Japanese businesses in Africa has occurred when they attempt to rely on Japanese staff, who often struggle to develop a business network on the continent. “Sometimes it’s a waste of time and wisdom and cost to send Japanese people to the continent,” he says.

More recently, however, the professor says Japanese businesspeople are more likely to invest in local companies, rather than attempting to establish new ventures themselves.

Dealing with risk

Shirato cites the example of &Capital, an Africa-focused impact investment firm established to invest in local companies that was co-founded by prominent Japanese investor Ken Shibusawa following the last TICAD in 2022. JICA has taken a somewhat similar approach with its NINJA Accelerator programme, which helps African start-ups establish partnerships with Japanese companies.

Although the common outside view that Japanese business culture is inherently conservative and risk-averse does not tell the whole story, it does contain at least some element of truth. One of the challenges in encouraging greater levels of Japanese investment in Africa is therefore to find ways to address their concerns over business risks in Africa.

A significant obstacle is the lack of bilateral investment treaties (BITs) between Japan and African governments, warns Markus Burgstaller, a partner at law firm Hogan Lovells. At present, Japan has BITs with only five African governments, namely Angola, Côte d’Ivoire, Mozambique, Egypt and Kenya.

“What the investor always wants is that any disputes are being settled before an international tribunal rather than the host state courts,” says Burgstaller. “One of the beauties of these investment treaties is that if you bring a claim before a tribunal under an investment treaty, you have the international tribunal to apply international law, and not the local law.”

Many Japanese investors can mitigate this problem by investing in Africa via subsidiaries in countries that do have BITs with local governments, such as the UAE or Mauritius. But, in the absence of investment treaties with Japan, Burgstaller adds, Japanese companies have to to lean on their ties with the Japanese government to help ensure a dispute can be settled out of court.

Data gaps

Another issue, says Bernard Laurendeau, founder of boutique advisory firm Enkopa Lab, is that Japanese businesses tend to suffer from a “major gap” in access to data about African markets. “They don’t have the data that’s going to enable them to really make sound decisions,” he warns, adding that there is also a deficit in investment bankers and management consultants who can help Japanese companies navigate cultural differences.

But Laurendeau – a French-Ethiopian national who is now based in Tokyo – argues that although Japanese business leaders are often perceived as being slow to make decisions, this reflects how attention to detail is highly valued in Japanese business culture. “If you help that decision-maker with the right amount of data, they will actually deliver that decision quicker than maybe [those in] another geography,” he says.

And while much of the attention in the Japan-Africa relationship focuses on efforts to address Japan’s perception of risk in Africa, Laurendeau reminds us that African governments need to do more to promote their countries to Japanese investors. “There is a bit of a gap in terms of these countries promoting themselves properly,” he says.

The African Development Bank has been active in this regard. In 2012, it chose Tokyo as the location for its first representation office outside Africa. The bank also regularly leads investor delegations to Japan.

Such efforts are a good start, but more work is needed to help the Japan-Africa relationship flourish. “I think most of the ingredients are there for a lot of marriages to happen,” says Laurendeau, “but the groom – if the groom is Africa – needs to show up and promote itself.”