Buyouts Give Japan Companies Fast Track Into Africa

Buyouts Give Japan Companies Fast Track Into Africa

Japanese companies seeking to establish a foothold in Africa are overcoming differences in language, customs and business practices by buying African companies, according to a report in Asahi Shimbun.

There are 333 Japanese companies operating in Africa, according to the Japan External Trade Organization, the report says.

For $183 million, Kansai Paint Co. bought South Africa’s top paint manufacturer, Freeworld Coatings Ltd. in 2011 and made it a subsidiary. The move gave Kansai Paint a strategic foothold to expand business in the sub-Saharan region, whose economy is expected to grow particularly strong in Africa.

In 2013, Japan Tobacco Inc. purchased the Nakhla group of waterpipe tobacco manufacturers in Egypt for an estimated $200 million.

In 2010, Nippon Telegraph and Telephone Corp. bought Dimension Data Holdings, a major information technology company in South Africa.

The Japanese government is encouraging more Japanese companies to do the same, according to Asahi Shimbun, a Japanese daily newspaper. Expanding trade and investment in Africa was the theme of the Tokyo International Conference on African Development opening June 1 in Yokohama.

Japanese businesses face hurdles in Africa including uncertain political situations and underdeveloped legal infrastructure.

A survey of 168 Japanese companies doing business in Africa showed that 87.8 percent cited political and social stability as a key challenge in the market, and 77.7 percent cited “establishment and operation of laws and regulations.”

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It’s hard to win confidence from business partners unless they speak the local languages, the survey found. Corruption is still prevalent, the report said.

“You can establish a network with people only after you blend into the local community,” says Takuma Kinjo, who runs 43 businesses in Africa including used-car imports in Tanzania, and was interviewed in Asahi Shimbun. “It takes time to cultivate a new market from scratch. An acquisition is an effective means.”