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Ticad VI key to Kenya’s industry plan

Ticad VI key to Kenya’s industry plan
Photo credit: Embassy of Japan in Kenya

05 Mar 2018

The sixth Tokyo International Conference of Africa’s Development, TICAD, took place for the first time in Africa in Kenya in August 2016, and opened doors for more business between Kenya and the Asian nation. Mr Toshitsugu Uesawa, Japanese ambassador to Kenya, reflects on the impact of the meeting.

I first came to Kenya as a young diplomat way back in 1982. And I returned to serve as the ambassador on May 2016.

With the knowledge that comes from this depth of exposure to a country, I can confidently predict that Kenya will rise to the status of a newly industrialised country.

And when the history of this achievement is written, I believe that August 2016 will go down as one of the significant milestones in Kenya’s economic transformation.

That is when Nairobi had the honour of hosting the Sixth Tokyo International Conference on African Development – Ticad VI.

It was the first time that a Ticad summit was being held in Africa. Since the inaugural one in 1993, Ticad conferences were always held in Japan.

And Ticad VI proved to be a historic event, which took relations between Japan and Africa to a whole new level.

Development agenda

The Ticad summit has met regularly to promote high-level policy dialogue involving Japan, African leaders and development partners.

This way, Ticad serves as an international platform to raise global awareness as well as ensure continued support for Africa’s development efforts.

The conferences are underpinned by the twin principles of international partnership and African ownership.

Ticad VI was an overwhelming success. It brought together 35 Heads of State from all over Africa.

And, of course, the Prime Minister of Japan, Mr Shinzo Abe, was in attendance.

There were more than 11,000 accredited participants, including technocrats from international institutions and the private sector.

Targets

And at the end of it came the Nairobi Declaration – a three-year plan to promote structural economic transformation, resilient healthcare systems and social stability through shared prosperity.

The declaration outlines areas of engagement such as promoting economic diversification and industrialisation; a renewed focus on agriculture; innovation and ICT-led economy; quality infrastructure; and skills development.

The three-year plan also includes collaboration on peacebuilding, cross-border security and preventing violent extremism.

Such, then, are the ambitious targets we have in mind when we speak of the Ticad VI Nairobi Declaration.

It is about 18 months since the declaration was signed.

Monitoring and evaluation

And so, we thought that the time had come to have a workshop in Nairobi to review its progress, as well as to see how best to align the Ticad VI targets to President Uhuru Kenyatta’s ‘Big Four’ development priorities.

To illustrate, let me give one example of how Japan-Kenya development works:

I explained in an opinion article a few years ago that, while Kenya is one of the world’s leading producers of geothermal power, Japan is proud that this success has come in collaboration with Japanese companies that supply most of the turbines.

One remarkable fact is that Olkaria 1 unit 1-3 started operating 36 years ago and is still generating power on the same set of Japanese turbines.

This is because when Japan supplied those turbines to Kenya, we gave the very best that we had.

That is the kind of win-win outcome that Japan always aims for in its dealings with African nations.

Employment

But inexpensive geothermal energy is not an end in itself. It should be a catalyst for industrialisation, and job creation.

For what Kenya needs is to create jobs for its hundreds of thousands of youth who graduate from various levels of tertiary education every year.

The ongoing Special Economic Zone project and its associated Mombasa Port expansion project, both supported by Japan, are also key initiatives in job creation.

The SEZ concept offers the perfect combination of facilities to attract investment (both foreign and local) to encourage manufacturing industries, which will create many jobs for Kenyans.

Technology

My embassy has been facilitating visits by trade missions from all over the world who hope to take advantage of the opportunities that the SEZ project will provide.

The day will soon come when you will see a world-class SEZ in Mombasa, supported by a modern port, beautiful access roads and other quality infrastructure.

It will embody the best and the most advanced of Japanese technology – just as the Olkaria geothermal plant did in its time.


Results of JETRO’s 2017 survey on business conditions of Japanese-affiliated firms in Africa

Between August and October 2017, the Japan External Trade Organization (JETRO) conducted its latest survey on business operations of Japanese-affiliated firms in 24 countries in Africa. The survey received a record-high 315 replies.

Summary of results

1. Operating profit forecast and future business outlook: Morocco stands out

  • Results vary largely depending on the destination country. The ratio of the companies reporting surplus ranges from over 60% in South Africa and Morocco to 25% in Kenya. Morocco has had the highest ratio in the past four surveys. When asked about their future business forecast, 90% of all respondent companies in Morocco answered that they will expand business. Among the reasons behind expanding business, the highest was “increased sales” (70.6%) and “the high growth potential of the local market” (70.6%). (Page 6 to 7 and 12 in the attached document)

  • Morocco has been focusing efforts on cultivating exports mainly in the fields of automobiles and aircraft and proactively drawing foreign direct investment. Approximately 50 Japanese companies are active in Morocco as of 2017, and the largest foreign employer is a Japanese parts manufacturer.

  • This is the fourth year in a row in which over half of respondents across Africa reported intentions to expand business, meaning that the trend toward expansion will continue. Over 40% of all respondent companies plan to increase the number of local employees. (Page 12 to 13 in the attached document)

2. Change in business environment: Market entry in pursuit of private-sector demand, reduction of ODA from Japan by half

  • Among the reasons for entry to Africa, there was in increase in answers of “growth potential” and “market scale” in what is believed to be pursuit of private-sector demand. In comparison with 10 years ago, the ratio for “natural resources” and “ODA from Japan” were down by half. (Page 17 in the attached document)

  • The number of companies taking advantage of FTAs, such as the Southern African Development Community (SADC), has steadily increased. (Page 18 to 19 in the attached document)

  • Progress has been seen in the Initiative of the African Economic Community (AEC), which aims at establishment in 2028. (Page 18 to 20 in the attached document)

3. Change in business environment: While Competition has intensified through China’s entry, some Japanese companies consider it as benefits

  • Regarding China’s strengthening of economic ties with Africa, 44.4% of respondents reported that it has intensified competition and had an impact on their business. (Page 21 in the attached document)

  • On the other hand, 15.7% of all respondents answered that the situation is bringing about business opportunities and benefits. Comments from them included “China’s speedy and aggressive entrance into Africa has led to the creation of new business by spotlighting overlooked needs in the local region, and there is a sense that new markets are taking shape.”

  • Looking at the greatest competitors by nationality, “European companies” (26.8%), “Japanese companies” (20.5%), “local companies” (17.8%) and “Chinese companies” (14.1%) were cited. (Page 22 in the attached document)

  • Conversely, regarding potential partners by nationality, “France” (21.5%), “India” (20.2%) and “South Africa” (18.5%) were ranked in the top. Japanese companies have placed great expectations on collaboration with French companies in the markets of francophone countries in Africa, where Japanese companies have had a late start. (Page 22 in the attached document)

4. Problems in administration: Concern over political situation and governance extremely higher than other regions

  • As befoe, the most commonly cited problem was “establishment and implementation of regulations and laws” (80.6%).

  • While “political or social instability” was the next most cited concern across the region (77.4%), over 85% of companies in South Africa, Egypt, Nigeria and Kenya considered it the biggest issue. (Page 23 in the attached document)

  • It is believed that these results reflect the following events: the ruling party’s presidential race for the upcoming presidential election in 2019 in South Africa, deterioration of peace and order in Egypt and Nigeria (concerns about terrorism, abductions and actions of armed insurgents) and the presidential election in Kenya (from August to October in 2017).

The ratio of respondents answering “establishment and implementation of regulations and laws” and “political or social instability” as big concerns (%):

Problems in administration

Africa

Middle East

Russia

Southwest Asia

ASEAN

Legal system
80.6
61.7
45.7
42.8
33.3

Political instability

77.4

40.7

51.1

39.2

28.7

5. Countries of note: Kenya, Nigeria and South Africa rank top three years in a row

  • Kenya, Nigeria and South Africa were highly rated from the following perspectives: Kenya as a business hub in Eastern Africa, Nigeria as Africa’s largest country in terms of economy and population and South Africa as having the most developed economic infrastructure. (Page 24 in the attached document)

  • The evaluation of Morocco by Japanese companies rose to sixth place from eleventh in the previous year. The reasons were high expectations toward enhancement of investment incentives, peace and order and excellent human resources capable in both English and French.

Read more and download the summary report on the JETRO website.

Author Toshitsugu Uesawa
Source Daily Nation
Website Visit website
Date 05 Mar 2018
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