Japanese foreing direct investment in Africa : prospects for increased future activity

Abstract

This paper considers several factors which seem to inhibit Japanese investment in Africa. In Section 1 we will explain the history of Japanese intervention on the African continent, and try to ascertain why many multi-national corporations (MNCs) have developed a [perhaps unfounded] apprehension about investing there. Section 2 discusses how the negative impacts of Japan's historical presence in Africa are compounded further by current economic and financial sector trends, making the investment picture even more grim. By looking at financial trends over the past two years, we will better understand why Japanese investment in Africa is almost completely supply-side driven, and how this makes Africa's uphill battle to attract investment funds from a shrinking pool of available capital an even steeper climb. Since foreign direct investment is not entirely one-sided, Section 3 investigates why Africa's [demand-driven] efforts to promote Japanese investment have been largely ignored by the "Ninon Ren". 1/ Although we would like to argue that it is only investment capital [Yen] scarcity behind the current investment conservatism, even during times of capital availability Japanese investors still chose other markets over Africa. The current Yen scarcity simply adds to the unlikelihood that Japanese investments will be channeled towards Africa anytime in the near nature. Rather, Asia seems to be the destination for a larger and larger portion of Japan's venture capital. We will look at Asia as an investment site, and discuss how a more cohesive Asian market draws investment funds away from Africa.