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.”
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.”