2 ★ FINANCIAL TIMES Wednesday28 August 2019
African Development
WhenKansai Paintboughtthree east
African companiesin 2017 in what was
the largest corporate takeover in the
region for two years, many analysts pre-
dicted it would be a precursor togreater
Japaneseinvestment on the continent.
Inthe previous year, the Japanese gov-
ernmentheld its Africa-focused invest-
ment conference, known as Ticad, in
Africa for the first time, in the Kenyan
capital, Nairobi. The move lifted the veil
on a regionhitherto unknown to many
Japanese corporates.
“For many of the top Japanese CEOs it
was the first time they had set foot in
Africa,” says Moses Ikiara, managing
director of the Kenya Investment
Authority. “They were surprised that
Africa had made so much progress and
so we’re now seeing an increasing
awareness and interest.”
Kansai Paint, which first invested in
the continent in 2011 — in South Africa
— isconvinced of what itdescribed as
Africa’s “extremely high potential”.
“Currently the GDP of all of Africa is
about the same of India and the market
is becoming more attractive year after
year from the business perspective,”
Kansai Paint says, adding that itis plan-
ning a push into west Africa and across
the continent “at the earliest time”.
For Kenya, the Ticad meeting appears
to have had the desired result. Mr Ikiara
says the number of Japanese companies
investing in Kenya has jumped 45 per
cent since the 2016 Ticad meeting.Japa-
nese government data show that, in
2018, exports of goods to Kenya, led by
industrial giants such asToyota Tsusho,
grew 17.8 per cent on the previous year
while imports from the east African
country rose 13.1 per cent. “If you look
at the number of consulting firms that
are operating on behalf of companies,
you can see growing interest from Japa-
nese companies,” Mr Ikiara says. The
figures for countries such as Egypt and
Ivory Coast are equally robust.
But across the continent the picture is
mixed. For all of Africa in 2018, Japa-
nese exports grew 8.8 per cent com-
pared with the previous year, while
imports rose 8.1 per cent. Foreign direct
investment fell 2.8 per cent in 2018 com-
pared with 2017, to $1.6bn — 4.3 per cent
higher than invested in 2014.
While the slowdown in major com-
modity-dependent economies such as
South Africa, Nigeria and Angola played
a role in crimping this growth, some of
Japan’s main rivals, notably China, have
not been so restrained.
This was highlighted in May this year
in a speech by Hiroshige Seko, Japan’s
minister for economy, trade and indus-
try, in which he noted that African
imports from Japan had grown only
modestly since 2001, while those from
China had jumped more than 18 times.
But it is not only China that has surged
ahead of Japan. In 2004, Japan was the
fourth largest trade partner with all the
countries of sub-Saharan Africa, with
two-way trade of $11.7bn, according to
IMF figures. Now it is the sixth largest
trader with sub-Saharan Africa, having
been overtaken by India and the United
Arab Emirates.
Inhis blunt speech, Mr Seko said that
Japan’s difficulty in gaining greater foot-
hold in Africa arose in part from the
country’s success at penetrating devel-
oping markets in Asia. The develop-
ment model Japan followed in Asia —
where Japanese manufacturers entered
and established local supply chains —
was being leapfrogged by African start-
ups and through digital reforms. Japan,
said Mr Seko, needed to create anew
development model.
Kansai has learnt this for itself, plac-
ing much more trust than elsewhere in
local management. “Introducing Japan’s
best-selling products or excellent
products overseas is not always a
success,” Kansai Paint says. “In
that sense, local staff are most knowl-
edgeable about the local business
especially in terms of the operations.”
In an attempt to catalyse such change,
the next Ticad meeting —startingtoday
in Yokohama — will coincide with the
establishment of a permanent joint
council between the Japanese govern-
ment and corporations on promoting
investment in the continent.
But while the data show Japanese
engagement with Africa might be stand-
ing still at best, economists say invest-
ment could accelerate soon.
“While China’s engagement has
largely been state-to-state,Japanese
corporates have been seeking out pri-
vate sector opportunities and that’s why
there’s been a slower pace of growth,”
says Razia Khan, chief Africa economist
for Standard Chartered bank. “It’s a
much more gradual story, they pick and
choose and find the right projects and
carefully assess the risks involved.”
Ms Khan expects Japanese invest-
ment in sub-Saharan Africa to acceler-
ate —due to the lead taken by the Japa-
nese government and because opportu-
nities at home are stagnating in many
sectors, but also because the region’s
main economies are starting to pick up.
“We’ve just started to see a turning point
in [sub-Saharan Africa’s]key econo-
mies, it’s hard to see the growth remain-
ing as weak as it has been,” she says.
Mr Ikiara is also confident he will see
more Japanese investors. “There are so
many problems that need solutions
here and that’s an opportunity for
business,” he says. “More and more
Japanese companies are showing that
you can do good business in Africa and
they’re taking that story back home.”
Japan renews investment push in effort to catch rivals
FDI
China’s overwhelming
presence in the continent
prompts Tokyo to encourage
corporates to engage, write
Leo LewisandJohn Aglionby
It was a pan-African business deal ahead
of its time — in more ways than one.
When South Africa’sNaspersmedia
group launched a local pay-TV arm in
1985, it stole a march even on Rupert
Murdoch’sSkyin Britain.
When the venture, called Multi-
Choice, launched digital satellite TV
across several African countries in 1995,
it became one of the first companies
outside the US to offer such services.
Nearly a quarter of a century later,
Naspers has evolved into an internet
business that reaches far beyond Africa,
partly due to its stake in Chinese tech-
nology groupTencent. MultiChoice is no
longer part of the empire, after it listed
separately this year as a business worth
billions of dollars in its own right.
Yet as a snapshot of pan-African
investment in 2019,the story ofMulti-
Choice’s pay-TV foray would not be out
of place today.
Despite the intervening decades, such
investment is still characterised by
South African businesses looking north
for opportunities. Such moves are
not for the faint-hearted or impatient.
It is only this yearthat MultiChoice’s
subscribers in the rest of Africa out-
numbered those at home — 7.7m versus
7.4m. In July, Econet, Zimbabwe’s big-
gest telecoms group, axed its attempt to
create an all-African pay-TV player.
Kwesé TV fell victim to both fierce com-
petition and Zimbabwe’s own economic
crisis, which has made access to foreign
currency prohibitively expensive.
MultiChoice’s biggest cross-border
rival in Africa is from outside the conti-
nent — China’sStarTimes, a low-cost
digital TV operator that has expanded
to a majority of African countries and
built a base of 10m subscribers. It has
gained traction partly with the backing
of Chineseloans to African govern-
ments for digital-migration projects.
While pan-African investment from
within Africa is growing — fuelled
by this year’s launch of the African
Continental Free Trade Area— the
continent’s most industrial nation
still stands out in what remains
a difficult cross-border climate.
“There is relatively little pan-African
investment that comes from within
Africa,” says Andrew Jones, a partner at
law firmLinklaters, who has been
involved in African cross-border invest-
ing. What pan-African investment there
is, he says, reflects “where the big com-
panies are located. As such, pan-African
investment by African companies is
dominated by South African companies
going northwards.”
According to theAfrican Develop-
ment Bank, the number of M&A deals
between African companies doubled to
418 in the decade after 2006 compared
with the previous 10-year period, while
the value ofinvestments more than
doubled to $10bn. About a third of this
total was derived from South African
investment.
Even pan-African businesses that
have originated outside of the country
have often been powered by South Afri-
can capital. For instance, theSouth Afri-
can Public Investment Corporation,
Africa’s biggest fund manager that over-
sees government employee pension
assets, backed Nigeria’s Dangote
CementandEcobankas they embarked
on regional expansion.
Jumia, the online commerce group
active in Nigeria and other African mar-
kets that listed in New York this year,
has South Africa’sMTN—the conti-
nent’s largest telecoms group by sub-
scriber numbers — as its biggest backer.
Nigeria has been a tough market even
for South African investors: MTN has
faced repeated regulatory assaults on its
broader business in the country, and a
number of South African retailers have
abandoned Nigerian expansion plans
over the past decade.
However, underlining perhaps why
South African investors remain major
pan-African players, companies such as
Shoprite, Africa’s biggest grocer, have
persevered.
In July, Pieter Engelbrecht, Shoprite’s
chief executive, said that trading condi-
tions for the grocer’s African operations
were “relentless”, not least as local cur-
rencies tumbled in its big markets such
as Angola, Zambia and Nigeria. Outside
South Africa, Shoprite’s sales fell 7.7 per
cent in the year to the end of June, even
as they rebounded at home.
“But given our optimism for the long-
term food retail opportunity on the con-
tinent, we remain resolute in our pur-
pose to be Africa’s most affordable and
accessible retailer,” he said at the time.
The resilience might be because
South Africa’s immediate neighbour-
hood has provided an ideal testing
ground for further African expansion.
The region has some of the continent’s
best infrastructure — roads, rail net-
works and container ports — as well as a
century-old customs union between
South Africa and its close neighbours
such as Botswana and Namibia.
Border-crossing retailers that have
emerged outside South Africa often
have southern African origins, such as
Botswana-basedChoppies, or Zambia’s
Zambeef.
“Southern Africa is well integrated,
so it’s a relatively small next step
across the border and then further
north from there,” says Mr Jones.
South Africa remains driving force behind pan-African business
Deals
Cross-border climate is not
for the impatient or faint
hearted, writesJoseph Cotterill
South Africa’s Naspers media group
has expanded beyond Africa
T
he UK last month
announcedthat part of its
£14bn aid budget would
henceforth be spent on
helping developing coun-
tries learn from itsexpertise on trade
deals and attractinginvestment.
Putting aside the ironyof the UK —
mired in thesaga of Brexit — teaching
theworld how to clinch a trade deal, the
decision is part of ashift in rhetoric from
aid towards trade and investment that
mirrors a global change in emphasis.
Liam Fox, then UK secretary of state
for international trade, said of the plan:
“Rather than having developing coun-
tries dependent on the largesse of rich
countries, we want them able to get sus-
tainable development — and trade their
way out of poverty.”
The nomenclature of aid and trade is
controversial. “When we talk about us
getting huge sums of money in aid, I
worry about the tone,” says Joyce Banda,
Malawi’s former president. “It’s like we
were just sitting for ever, for ever and
then the west came as saints and gave us
and gave us — and we are not grateful.”
Africa, she argues, is losing tens of bil-
lions of dollars every year by selling its
commoditiestoo cheaply. “In the Demo-
cratic Republic of Congo, there are strips
where a plane will come, land, load and
leave,” she says, contrasting the central
African country’s enormous mineral
wealth with its widespread poverty.
The disappointment with aid as a
long-term development tool has
spurned a whole literature on the conti-
nent. “When I read Dambisa Moyo’s
bookDead AidI really began to say she’s
got a point,” says Lazarus Chakwera, the
head of the opposition Malawi Congress
party. “The problem...is that [aid is]
not being used to empower people but
rather to keep them down so they
merely subsist. By and large, aid has not
aided our nation.”
Elnathan John, in his recent satirical
workBecoming Nigerian: A Guide, writes
a mock Lord’s Prayer in praise of aid.
“Our donors who art abroad, hallowed
be thy purse... Thy will be done in our
countries as promoted by Bono. Give us
this day our yearly funding. And deliver
us not into self-reliance.”
Nana Akufo-Addo, Ghana’s president,
is a proponent of self-reliance,arguing
that African countries must wean them-
selves off development flows. In his
vision of a Ghana — and an Africa —
“beyond aid” he has prioritised educa-
tion as part of a strategy to boost pro-
ductivity and lift the value-added con-
tent of exports, for example by produc-
ing chocolate rather than selling
unprocessed cocoa beans.
Though he says it will be a long slog,
his initiative comes asAfrican leaders
are stressing the virtues of free trade.
Some 22 nations haveratifiedthe Africa
Continental Free Trade Area, which
shouldin theory allow the specialisation
and economies of scale that are a pre-
requisite for economic take-off.
Partly in response to China’s harder
engagement with the continent — Bei-
jing prefers to extend finance rather
than give aid, or to swap investment for
commodities — some western donors
are adopting acommercial approach.
They are pushing more money
through organisations such as Britain’s
CDC, which makes a profit for the UK
taxpayer by investing in private busi-
nesses that it judges will make money
and have a social impact.
The CDC has beencriticisedboth for
making too much money and for losing
it on particular investments, such as its
$140m bet in 2016 onARM Cement,a
failed Kenyan company. Still, the CDC is
considered by many to be asuccess. It
was an early investor in theM-Pesa
technology that has revolutionised
mobile money transfers in much of
Africa and last year it invested$180min
Liquid Telecom, Africa’s largest inde-
pendent fibre optic and cloud comput-
ing provider. Theresa May, the former
UK prime minister, said it would pump
a further£3.5bninto Africa by 2022.
The US, which had been sceptical of
backing commercial opportunities in
Africa with state funds, has come
around to the new thinking. President
Donald Trump had been poisedto scrap
the Overseas Private Investment
Corporation, the US version of CDC.
Instead,he approved legislation last
year that more thandoubledOpic’s
investment cap to $60bn and allowed it
to invest in equity as well as debt.
In all the talk of trade and investment,
say experts, two things should be borne
in mind. One is that trade rules are still
skewed against Africa. European and
American farmers are, for example,
heavily subsidised. And while raw com-
modities fetchlow prices, if countries
try to add value they can be penalised.
When Rwanda banned the import of
cast-off clothingin order to build a local
garment industry it was punished by
Washington, which threatened to
remove its preferential trading status.
While aid has been widely criticised,
there have been huge, often hidden, suc-
cesses in vaccinating children, tackling
malaria and bringing finance to the
poorest communities.
Even Mr Akufo-Addo says he is not
“disclaiming aid”. But it is time, he says,
forAfrican leaders to “help bring dig-
nity and prosperity to our continent”.
Shift from aid
to trade offers
fresh hope for
self-reliance
Economic assistanceEmphasis moves to business as critics say international handouts have failed the continent as a development tool, writesDavid Pilling
Critics say African countries must wean themselves off foreign development aid and lift value-added content of exports such as coffee and cocoa beans— Getty
‘Aid is not being used to
empower people but
rather to keep them down
so they merely subsist’
Japanese companies are
showing you can do good
business in Africa and they
are taking that story home
RELEASED
partly due to its stake in Chinese tech-
RELEASED
partly due to its stake in Chinese tech-
nology group
RELEASED
nology group
longer part of the empire, after it listed
RELEASED
longer part of the empire, after it listed
BY
business that reaches far beyond Africa,
BY
business that reaches far beyond Africa,
partly due to its stake in Chinese tech-partly due to its stake in Chinese tech-BY
"What's
Nearly a quarter of a century later,
"What's
Nearly a quarter of a century later,
Naspers has evolved into an internet
"What's
Naspers has evolved into an internet
business that reaches far beyond Africa,business that reaches far beyond Africa,"What's
News"
it became one of the first companies
News"
it became one of the first companies
outside the US to offer such services.
News"
outside the US to offer such services.
Nearly a quarter of a century later,Nearly a quarter of a century later,News"
vk.com/wsnws
Nearly a quarter of a century later,
vk.com/wsnws
Nearly a quarter of a century later,
Naspers has evolved into an internet
vk.com/wsnws
Naspers has evolved into an internet
business that reaches far beyond Africa,
vk.com/wsnws
business that reaches far beyond Africa,
partly due to its stake in Chinese tech-
vk.com/wsnws
partly due to its stake in Chinese tech-
nology group
vk.com/wsnws
nology group
longer part of the empire, after it listedlonger part of the empire, after it listedvk.com/wsnws
TELEGRAM:
nology group
TELEGRAM:
nology group
longer part of the empire, after it listed
TELEGRAM:
longer part of the empire, after it listed
separately this year as a business worth
TELEGRAM:
separately this year as a business worth
t.me/whatsnws
Nearly a quarter of a century later,
t.me/whatsnws
Nearly a quarter of a century later,
Naspers has evolved into an internet
t.me/whatsnws
Naspers has evolved into an internet
business that reaches far beyond Africa,
t.me/whatsnws
business that reaches far beyond Africa,
partly due to its stake in Chinese tech-
t.me/whatsnws
partly due to its stake in Chinese tech-
nology groupnology groupt.me/whatsnws