Japan Slowly Challenges China’s Dominance As An Investor In Africa

Japan Slowly Challenges China’s Dominance As An Investor In Africa

Japan raised its investment to Africa in 2014 with a pledge of $32 billion that included aid, loans and commercial projects over the following three years. From 2008 to 2012, the well-off East Asian country had put out just $9 billion for Africa, geopolitical intelligence service Stratfor Enterprises says. Two years ago Japanese Prime Minister Shinzo Abe said in Kenya that another $10 billion would be go toward an African infrastructure plan for advances in farming, energy, roads and ports. That amount was just one-third of a bigger amount that Japan and its companies will spend in Africa through 2019, this new report says.

We’re talking about Japan, not China. The continent that’s rich in natural resources yet undeveloped compared to much of Asia, has traditionally looked to China for foreign investment over the past decade. China leads Japan, by most accounts, with figures varying from $32 billion in foreign direct investment from 2010 through 2014 to $66.4 billion spent on projects hatched since 2005. This report from a year ago notes a $60 billion commitment from China for capital projects in Africa.

Japan playing catch-up

The upswing in investments shows Japan is trying to catch up to China, according to analysts. Both countries are eyeing Africa’s natural resources and overseas opportunities for domestic companies. Both are chasing political alliances in increasingly far-off places to build positions that are good for trade as well as geopolitical influence, though China is unhappy with Japan’s ambitions for Africa.

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“Japan is lagged behind China for sure,” says Yun Sun, East Asia Program senior associate at the Stimson Center think tank in the United States. “But Japan enjoys advantages in terms of the quality of its projects. China’s strength lies in the government-led model and the scale of it.”

How China got so far

China leads at least for now because of its large, numerous, state-supported projects. The Chinese government or its state-owned firms come up with much of the investment. State support also lets China blur investment and official development aid. China’s development aid to Africa totaled 47% of all Chinese foreign assistance in 2009 alone. From 2000 to 2012 it funded 1,666 official aid projects in Africa, the Brookings Institution says.

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