The Tokyo International Conference on African Development (TICAD), an initiative of the Japanese government aimed at promoting high-level policy dialogue between African leaders and development partners just concluded its 7thedition (TICAD7) at the Pacifico Convention Plaza, Yokohama, Japan. It was co-sponsored by the United Nations (UN), United Nations Development Programme (UNDP), World Bank and African Union Commission (AUC). TICAD7 focused on the theme, “Advancing Africa’s Development through People, Technology and Innovation”. The conversations focused on the shared passion for the future between Africa and Japan. The interesting part of the discussion is in the “shared passion”. While Japan, the convener of this conference is clear about its passion for Africa, I sincerely hope African leaders are also clear about their passion for the continent because only clarity of passion can spur African leaders to action.
At TICAD7, 120 Memoranda of Understanding (MoUs) between Japan and different African countries were signed. The Japanese Prime Minister, Shinzo Abe, promised that over the course of three years, Japan’s private sector will invest US$20 billion in Africa. Before we roll out the drums let us be clear on the channel of transmission of this money from Japan to Africa. This is fiat money backed by the Bank of Japan which has a balance sheet of over US$4.87 trillion as at December 2018. Reuters reports that Bank of Japan has assets bigger than the combined Gross Domestic Products (GDPs) of five emerging markets – Turkey, Argentina, South Africa, India and Indonesia.
Japan has no intention of giving this money to any African government or African-owned private sector operator. The money would be strategically allocated to Japanese-owned businesses with interests in Africa. For instance, at TICAD7, Toyota sealed a deal to site vehicle assembly plant in Ghana with August 2020 as kick-off date. Ownership, operation and management of this assembly plant will be vested in Toyota. However, this greenfield investment is not without its benefits to the host country. Ghana should expect benefits such as employment and capacity development, expansion of government earnings via taxation (both personal and company income taxes), and welfare gains resulting from the elimination of an estimated 25-30% cost associated with freight and duty on automobile importation. Here’s why Japan’s investment in Ghana is strategic:
The image above is a model of the US$57 million Tema Motorway Interchange Project financed under a grant from the Japanese government and executed through the Japanese International Cooperation Agency (JICA). It is part of Japan’s West African Corridor Development Growth Ring Master Plan implementation being executed by Messrs Shimizu-Dai Nippon Joint Venture, with CTI Engineering International Co. Ltd as consultants. The expected date of completion is June 2020 while Toyota’s assembly plant kick-off date is August 2020. The plan is to make Ghana the automobile hub of West Africa with Nigeria (Lagos in particular) as the main target market.
For analytical convenience, let’s focus on Lagos. If you are wondering why Lagos, here are some indices: Lagos has an estimated population of 22 million people, with an economy valued at US$136 billion in 2018, accounting for 30% of Nigeria’s GDP. If Lagos were a country, its economy would be the seventh largest in Africa, behind Angola but ahead of Morocco, Kenya, Ghana and Côte d’ Ivoire. The driving distance between Accra and Lagos is 412 km and at 100km/h, you will arrive in 4 hours 7 minutes. Other cities in West Africa such as Abidjan, Cotonou, and Lomé are all less than 425 km of driving distance to Accra. Ghana is maximizing these opportunities because Ghana was ready. How ready are other African countries as Japan and other donor agencies make the strategic policy shift from government aid to promoting private-sector led growth through private sector investment?
I conclude this piece with a quote by one of Africa’s finest technocrats and President of the African Development Bank (AfDB), Dr. Akinwumi Adesina – “Africa is not rising. African has already risen. Therefore, Africa should not be seen from a development lens but from an investment lens”. Africa, this is our chance, let’s seize the opportunity!