Japan makes inroads into African infrastructure

A key focus at this year’s Tokyo International Conference on African Development (TICAD), much as it has been at previous events, is channelling Japanese investment into African infrastructure. Japan is, in theory, an ideal partner for African countries looking to develop their energy, transport and telecommunications infrastructure. Japan’s largest financial institutions mostly have healthy balance sheets and are looking to invest in projects that deliver long-term returns.

Japanese investors are also often in a position to offer capital on relatively attractive terms, given low domestic interest rates. Progress has been made in fostering cooperation. At the previous TICAD in 2022, Japan announced a target to invest $30bn from the public and private sectors in Africa, with much of this sum destined for infrastructure projects. The Japanese Ministry of Foreign Affairs claimed in a report last year that it “remains on track” to achieve this goal.

Yet the reality is that Japan’s role in African infrastructure development has been overshadowed by some of its geopolitical competitors.

Whereas Chinese construction teams have long been a common sight across Africa, with many high-profile projects funded and developed by Chinese state-backed companies, Japan has taken on a far less conspicuous role.

There is still a “lack of understanding” among Japanese companies of the risks and opportunities available in the infrastructure sector in Africa, says Airi Ikedo, strategy director at Index Strategy, a project management firm that specialises in public-private partnerships (PPPs) in infrastructure. “Whenever we have an initial discussion with a Japanese company, one of the reasons why they are not willing to enter the African market is basically the distance from Japan.”

Improving understanding and addressing mis-perceptions will be vital if Japan-Africa infrastructure ties are to blossom.

Building bridges

Perhaps the most famous Japanese project in Africa is the Freedom Bridge over the Nile at Juba, which opened in 2022. Prior to construction, residents of the South Sudanese capital had relied on a single

ramshackle crossing. The new $91m arched steel bridge was funded by JICA, the Japan International Cooperation Agency. Japanese company Dai Nippon Construction was the main contractor, while the works were overseen by another Japanese company, CTI Engineering International.

This is one of several infrastructure projects that have involved Japanese private sector companies working closely with JICA, or with other Japanese public bodies such as the Japan Bank for International Cooperation.

Ikedo tells African Business that the Japanese government has begun trying to promote PPPs over the past decade. JICA has a scheme called Private Sector Investment Finance, in which it allocates funds to help cover the cost of feasibility studies for Japanese companies that are willing to invest in projects.

Index Strategy is currently working on a PPP road construction project in Ghana, which originated from a memorandum of understanding signed between the Ghanaian and Japanese governments following the 2019 TICAD. A feasibility study is now complete, and Index Strategy has arranged a consortium that includes Japanese engineering company Maeda Corporation alongside partners from Portugal and Ghana.

The consortium hopes to sign a “basic agreement” at this year’s TICAD, which would serve as the foundation for contract negotiations ahead of construction on the first phase of the project beginning next year.

Ikedo believes more Japanese companies will eventually become involved in infrastructure projects in Africa – but she adds that patience is needed.

“It will take time, and we believe that we need a successful case,” she says, adding that a lack of proven successes in PPP projects is a hindrance in persuading Japanese companies to invest in infrastructure.

Critical minerals

One of the other promising areas for Japan-Africa cooperation is around the so-called critical minerals that are vital for digital technologies and energy systems. Japan, as a major industrial country that lacks significant mineral resources of its own, is dependent on the import of raw materials. Securing this supply is a key priority, given the dependence of strategic industries such as shipbuilding, electronics and semiconductor manufacturing on critical minerals.

The Japan Organization for Metals and Energy Security (JOGMEC) signed agreements with Namibia, DR Congo and Zambia in 2023 as it aims to secure investment opportunities for Japanese companies around developing critical minerals.

Ankit Khandelwal, head of Africa for sovereigns, development finance institutions (DFIs) and blended finance at MUFG Bank, says that major Japanese players are eager to invest in the sector.

“There’s a focus, a desire, an interest from Japanese trade houses to look at investing in natural resources, in critical mineral assets,” he says. “And when you have a natural resource investment, especially in the mining sector, you also have the associated infrastructure that needs to be built around it. And I think that’s where the investment is also going through.” Khandelwal believes Japan will not want to miss out to its geopolitical rivals in the race to strengthen security of supply. “Given the focus we

have seen from some of the other regional powers – the US, China and so on – I’m confident that there will be Japanese investment going into this space as well,” he says.

The Lobito Corridor, which links mining operations in DR Congo with rail and port infrastructure passing through Angola, could be a model that Japan seeks to emulate. The United States committed to rehabilitating infrastructure along the corridor under the Biden administration. The scheme “is a perfect example of what can be achieved if you’re supported by government,” says Khandelwal. “That was a US-centric project rather than a Japan-centric project. But that could be a template of how we can look at these projects.”

Final frontier for infrastructure

As well as projects in the more traditional types of energy and transport infrastructure, Japan is also a major player in the digital and satellite technologies that are increasingly vital to delivering essential services. Indeed, the country’s famous tech prowess means Japanese companies are well-positioned at the intersection of infrastructure and technology.

One example is Japanese company Space Shift, which uses artificial intelligence to deliver insights from multiple types of high-resolution satellite imagery. This includes data from synthetic aperture radar satellites, which carry out observations based on reflected information captured by radio waves. “For us, Africa is a very big opportunity,” says Naruo Kanemoto, the company’s CEO. “It’s a frontier for us to expand.”

Kanemoto says that a key use case in Africa is its ability to monitor agricultural land. It is currently working on a project in Nigeria, for example, that monitors farmers’ historic land-use.

This information is used to help farmers receive a credit score, which they can use in microfinance assessments.

Crop growth monitoring via satellite can also be used to help predict seasonal yields. Authorities can use this information to provide advice to farmers on crop selection and harvest and planting times.

Space Shift has received support from JETRO, the Japan External Trade Organization, as it looks for business partners in Africa. “We cannot expand our business just by ourselves in Africa,” says Kanemoto. “There’s the culture barrier, the language barrier.” Working with local partners to deliver technology to customers in Africa will be key to its future success, he says.

Ultimately, Kanemoto is convinced that Japanese technology delivered with the help of space infrastructure will be eagerly received in Africa. “I can feel the thirst for new technology,” he says.