Is Japan’s African Investment Off Target?

Is Japan’s African Investment Off Target?

While Japanese companies are mainly interested in access to natural resources in Africa, African leaders and development experts urge investment in agriculture, a sector they say could have a more meaningful impact on employment and growth, according to a Wall Street Journal blog in Japan Real Time.

The Fifth Tokyo International Conference on African Development, held every five years since the 80s, wrapped up this week.

Japanese Prime Minister Shinzō Abe pledged a five-year, $32 billion package in public and private support for Africa including $14 billion in development aid and $6.5 billion for infrastructure.

Agriculture produces 32 percent of Africa’s gross domestic product and employs 65 percent of its labor force, the report says. Without growth in this sector, it would be difficult to provide the jobs needed to avoid social unrest among unemployed youth.

“Raising agricultural productivity is the key to raising employment,” said World Bank Vice President for Africa, Makhtar Diop, following one of the sessions.

Japan seeks new sources of energy following the shutdown of most of its nuclear power plants since 2011. Its reliance on Chinese rare earth materials has also been a concern, and trading companies like Sumitomo Corp. and Advanced Material Japan Corp. are involved in mining on the continent, the report says.

Of the 333 Japanese companies doing business in Africa, twice as many are involved in natural resources as are in agriculture, according to a  Japan External Trade Organization survey.

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Natural resource projects such as the off-shore natural gas project in Mozambique that Mitsui & Co. is investing in, often involve billions of yen, whereas private sector agricultural projects are more often in the millions, said Akiko Takamatsu, a researcher who helped produce the survey.

Yet despite the foreign investment in natural resources,  job rates have not increased significantly. For sustained growth on the continent, investment is needed in agribusinesses, experts say. “Growth generated by agriculture in Sub-Saharan Africa is 11 times more effective in reducing poverty than GDP growth in other sectors for sub-Saharan Africa,” according to a statement released Sunday in Yokohama by the International Fund for Agricultural Development, the report says.