Africa: Japanese Aid to Partner With Private Sector

| December 25, 2012 | 0 Comments

“Knowing that Africa’s market is going to grow, having closer and more dynamic relations with the region is very important”

On the back of recent economic success, Africa’s external relationships are being recast – away from an over-reliance on development assistance, towards a focus on trade and investment.

With the likes of China rapidly scaling up their trade with the continent, more established partners are re-assessing their relationships. Confronted with austerity at home, and anxious about “losing” Africa to emerging economies, commerce is replacing aid as the primary lens through which the continent is viewed.

Japan, which has just slipped into recession, is no exception. Historically, the donor’s principal vehicle for engagement is the Japanese International Cooperation Agency. With Japan’s overseas development assistance competing for priority with domestic needs in the wake of last year’s tsunami, some fear it may follow Europe, where many countries are reining in aid budgets.

While conceding that “there are difficulties in increasing our ODA budget substantially”, Masato Watanabe, vice president at Jica, is adamant that commitments to development assistance will be maintained, adding that “if you look at our commitment and disbursement to Africa for the last few years, there is certainly an increase”.

Despite this, commerce looks set to play a more prominent role. Investment from Japanese companies has grown in recent years, and is hoped to double to $3.4bn by the end of 2012 from 2008 levels. Trade has also increased, standing at about $25bn in 2010.

These numbers pale in comparison to competitors such as China, but mark an important shift in emphasis. To remain competitive on the continent, Mr Watanabe believes a stronger focus on investment will be necessary.

“Knowing that Africa’s market is going to grow, having closer and more dynamic relations with the region is very important. Resources from the public sector will not suffice. We need more involvement from the private sector. We need some kind of new thinking [about] how to attract more private financing, using ODA as leverage.”

The notion of using public money to “crowd-in” the private sector has become popular amongst donors in recent years, and is likely to feature heavily at next year’s Tokyo International Conference on African Development. Ticad, first held in 1993, is the flagship partnership platform for Japan’s engagement with Africa.

“Of course there are other pillars, but certainly this partnership with the private sector is going to be one of the most important ones,” says Mr Watanabe.

Infrastructure, which has been the core of Jica’s work in Africa for decades, will again dominate the agenda, but energy is likely to feature more heavily than during previous Ticad meetings, Mr Watanabe anticipates.

“In order to maintain growth you certainly need power. If you have power shortages you cannot expect countries or regions to be lifted in growth,” he says.

The emphasis may have as much to do with Japan’s energy security as with the need to scale up generation on the continent. Having switched off most of its nuclear power plants in the wake of the Fukushima disaster, Japan is keen to diversify its sources of energy imports.

LNG imports from Africa, for example, have shot up. At 7.6m tonnes for the first 10 months of 2012, they are up 140 percent on the previous year, with the private sector playing a role. Mitsui Co, one of Japan’s largest trading companies, is involved in a large LNG project in Mozambique. Such examples may be representative of the contours Japan’s development and trade policies in the region could take on in the coming years.

Mr Watanabe has no doubt that ties between the two will grow. “As far as our commitment to African countries are concerned, that will certainly be continued and I hope it will be strengthened,” he says.

Culled from :Here

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Category: Africa News