The Second Japan-Africa Business Forum

Session 4

Plenary, Infrastructure, Trade and Industry
Quality Infrastructure for Better Business
Moderator

Kapil Kapoor
Director, Strategy and Operational Policies, AfDB, African Development Bank

Mr. Kapoor stated that the session was going to reflect on infrastructure,trade and industry in presence of a diverse panel consisting ofrepresentatives from Japan from the government, development agencies,
and private sector and representatives from Africa from government andprivate sector. It would be very interesting if in the beginning, they would
at least talk for 3 or 4 minutes about how they view the infrastructure
challenge in Africa from their vantage point, because the respective
vantage points are very, very different.
To start with, solving Africa’s infrastructure challenge is critical. Right
now, Africa growth rate is at about 3%-4% per year. It is estimated that
if Africa continues to grow at 3%-4% per year, by the year 2030, 500
million Africans would be living below the poverty level, leading to failure
to meet SDG targeting elimination of absolute poverty.
The shortage of infrastructure costs Africa 2 percentage points a year inlost economic growth.
To bridge the continent’s infrastructure gap,
Africa’s economic growth needs to be accelerated by 2 percentage points
by taking it from 3% to 6%. This would reduce poverty levels from the
projected 500 to less than 100 million.
There are many estimates that say about $100 billion a year is needed toinvest in African infrastructure. Currently, only about 50 billion is getting
done. It is a collective challenge on the part of both Japanese and African
governments and private sector to bring this to about 100 and bridge thisgap.
With this, he invited the panelists to give a talk.
Yuji Sudo

Assistant Vice-Minister, Minister’s Secretariat
Ministry of Land, Infrastructure, Transport and Tourism, MLIT

Mr. Sudo talked about the Japanese government and MLIT’s policy tocontribute to quality infrastructure investment in Africa.
In TICAD VI, in 2016, Prime Minister Abe announced that Japan will invest
in the high-quality infrastructure for 3 years and $30 billion will be
invested in Africa. He also asked the India-Pacific region to be considered
as one area with a free and open India-Pacific Strategy.
The MLIT together with 76 Japanese companies held the Africa-Japan
Conference for high-quality infrastructure, where 700 people both from

Japan and Africa participated. This was an epoch-making event. In thismeeting, ministerial leaders adopted to collaborate and promote quality
infrastructure investment in African countries. Based on this statement
and with MLIT’s high-growth potential, Public-Private Infrastructure
conferences are being held in many places like Ghana and recently the10th meeting was held in Madagascar.
Japanese private sector companies are also interested in this movement.
At TICAD VI, with private sector companies present, Japan-Africa
Infrastructure Development Association or JIDA was held presided by Mr.
Miyamoto, Chairman of Shimizu Corporation.
It has 152 member
companies not only from construction but top-rank companies from many
fields.
Activities like creating networking opportunities are being
conducted in the Japan-Africa Infrastructure Development Association.
In the future, TICAD VII will be held in Yokohama in 2017 at MLIT. At
TICAD VII, the Second Africa-Japan Conference for high-quality
infrastructure could be held. This meeting would have many companies
and government agencies participating both from Japan and Africa. The
African Development Bank is also expected to participate. This meeting
would have business matching. Plans are afoot to hold this meeting andmake it fruitful. These approaches can help promote cooperation between
Japan and Africa.
Ryuichi Kato
Director-General, Africa Department, JICA

Mr. Kato stated that is essential to develop cross-border physicalinfrastructure that contributes to strengthen connectivity and activates
intra-trade among the African countries. This intra-trade represents 15%of Africa’s total trade and should be accelerated for further economic
growth.
The IMF report entitled Against the Headwinds, published 2 years ago,states that the major constraints of trade in Africa are a lack of things likeinfrastructure, access to domestic credit, rule of law and tariffs. Physicalinfrastructure functions under the condition that harmonized policy andproper human resource development are accompanied.
To share an actual example for trade facilitation and regional integration
for Africa, JICA focuses on customs modernization and smooth tradefacilitation, including One-Stop Border Post, OSBP, development because
inefficient facilitation at border caused extremely expensive transport costin logistics.
Physical infrastructures like road, bridges and border have also beendeveloped using financing scheme in combination with capacity building.
At the Malaba OSBP, which is between Kenya and Uganda, the transit timethrough cross boat has reduced from 24 hours to only 4 hours as a clear
outcome of the compilation. Nowadays, the OSBP sourcebook acts as a
guideline for OSBP beginners collaborating with many agencies such as AU,

NEPAD, LEX and WCO. JICA is also collaborating with the AfDB for
regional integration, which is clearly defined in the High Fives policy paper.
Mr. Kapoor summed up the talk by stating that Integrate Africa is one of
the High Fives of the African Development Bank. The reason it is so
important across the continent is because only about 15% of total tradetakes place within Africa compared to places like Asia, Europe, where it isabout 50% and 70% respectively.
Regional integration is beingemphasized to accelerate trade between African countries.
Shinichiro Yamazaki
Deputy General Manager, Global Trade Finance Department
Sumitomo Mitsui Banking Corporation

Mr. Yamazaki began by introducing SMBC.
SMBC is one of the large size banks with an asset book of about US $700
billion. SMBC is one of the systemically important financial institutions
globally, as it operates in 38 countries worldwide. SMBC has offices in
Cairo and Johannesburg, in African Continent.
When it comes to infrastructure, it is financed through corporate or
project finance. Corporate finance includes loan to the sovereign or thesovereign itself, Ministry of Finance, development bank and agency,
etcetera. The projects that have been closed in the past years include thegas-fired plant in Tanzania, coal-fired plant in Morocco, and undersea
water cable for Angola.
Some of the take-outs from the track records and history of SMBC
providing finance to sovereigns or projects is basically two things. First is
the partnership with the multilateral agencies, local banks, and various
equity sponsors, both Japanese and local. Proper risk sharing is theabsolute key to close the infrastructure deals.
Second is information and risk sharing, which is an absolutely basic key
concept. The banks, business partners and also the governments on bothsides need to share information and nurture risk sharing as a basic thing
Mr. Kapoor summed up the talk by reflecting on what the financial
institutions can do to bridge the $50 billion infrastructure gap on thecontinent, recognizing that as much as $8 trillion invested in bonds, giving
0% returns, can be used to fulfill the needs of African infrastructure which
can give double digit returns. The challenge for institutions is to bridgeeven a small percentage, say 5% of the $8 trillion to help build
infrastructure.
Eiji Yonezawa
President, Oriental Consultants Global, OCG

Mr. Yonezawa stated that since 1957, OCG has been one of Japan’s
foremost engineering consulting firms mainly for infrastructure,conducting studies, planning,
related-consulting services.

design,construction

supervisionand

OCG has two overseas branch office offices in Africa, one in Cairo and one
in Egypt. Maputo, in Mozambique, has one office. OCG has projectexperiences in most of the African countries. OCG covers all the major
fields in consulting services like urban and regional development
strategies, energy and power development and from software to hardware.
OCG has the following major projects in Africa: Volta River Bridge in
Ghana; West Africa Growth Ring Master Plan in Burkina Faso, Ghana,Togo and Ivory Coast; wind power plant in Egypt; New Nile Bridge in
Uganda; Urban Transport Master Plan for Kinshasa City; Matadi Bridge in
Democratic Republic of the Congo; Nacala Corridor Economic
Development Strategies in Mozambique; Urban Transport Master Plan for
Dar es Salaam in Tanzania; Namibe Port in the Republic of Angola andMaster Plan for Economic Axis for Tananarive and Toamasina in
Madagascar.
Infrastructure development is also an important necessity.
AfDB
implements policies and strategies such as High Fives for 10 years. The
JETRO survey in 2016 revealed that the 90% of the Japanese companies
have already expanded their business in Africa expecting the market’s
future to be robust, although 60% companies stated that infrastructure
inadequacy is Africa’s greatest investment risk. To promote private
investment by Japanese companies, the infrastructure development needs
to be accelerated. Industrialization is indispensable for Africa’s growth.
Private investment needs to be attracted to fuel industrialization.
OCG is involved not only in hard infrastructure, but also a Comprehensive
Development Master Plan spanning several countries such as Nacala
Economic Corridor Development and the West African Growth Ring
Corridor Development. OCG can support from the upstream of thestrategy and the master plan to the downstream from design toconstruction and supervision. Various resulting projects like finance toJapanese ODA, PPP, private sector or local governments can be expected
when the Master Plan is completed.
These projects can be supported through consultancy services. Japanese
ODA projects will especially expand local employment and contribute
greatly to acquiring local engineers’ skills and technology.
Mr. Kapoor, in summing up the talk, stated that one of his colleagues,
Professor Justin Lin from China, the former Chief Economist of the World
Bank, used to say that African infrastructure is much better today thanthe Chinese infrastructure 30 years ago. Despite this, huge investments
came to China 30 years ago, so the question is not really about the risk
but the perceptions of the risk and if it is real.
Analysis of infrastructure projects that failed on the African continent
reveal that the track record of such projects is the same in Africa as it is inAsia or in other parts of the world, so the perceived risk is different fromthe actual risk.
Carlos Ahenkorah
Deputy Minister of Trade and Industry
Member of Parliament – Tema West Constituency, Republic of Ghana

Mr. Carlos stated that in today’s economic world, isolative growth cannot
be achieved through industrialization. It is, therefore, important for
African countries to build the necessary quality infrastructure to support
industrial transformation leading to accelerated growth of Africancountries, although it is difficult to understand why the African countries
get lumped together as the economies differ in each country’s case.
In this regard, what is happening in Ghana is that the President and thegovernment are of the opinion that for the economy to grow, it needs toindustrialize. Ghana has come up with a 10-Point Strategic Plan to growits economy within the next 4 years.
First is the Industrial Revitalization Program to support distressedcompanies, which collapsed or went down because of one problem or theother. The government is pushing in money to support and assist thesecompanies to take more people from the streets to work again.
Second is the 1:1 factory with a flagship program that the government isembarking upon. Ghana has 216 districts, which have been profiled andthe information pertaining to these districts has been endowed with thegovernment. The government calls on investors to call on them. Even if
the investors do not have a business plan, the government has one
developed that can be fine-tuned to match their agenda and carry it out tofruition.
Third is the strategic and core industry. Ghana is endowed with a lot of
raw materials and minerals like about 30 million tonnes of bauxite whichis untapped; iron ore and manganese that together give steel. In thesalts industry, the industrial salt is mined in about two or three places in
the world like Senegal, Ghana and Brazil. There is also the garment andtextiles industry.
The strategic and core industries form the pillars on which the industrial
transformation would take shape. Ghana has 10 regions and it intends to
set up an industrial park in each of these regional capitals. These
industrial parks will be large enclaves supporting factories, industries andpeople, who want to invest in Ghana, but are not finding land to set up
and so on. People are also being asked to invest as enclave developers inthis regard.
At some point of time, there would be 10 specific product enclaves, likepharmaceuticals, which would have everything in the enclave, like shops
and everything else that an investor would require.

Final would be industrialization leading to the development of the SMEs.
Ghana has about 90% of companies that are SMEs. Importantly, more
efforts need to be put to prop up the SMEs for the industrial revolution
ahead.
There is also the industrial superhighway to drive the transformations thatwill hinge on energy and agriculture rather than on policy reforms.
Aboubaker Omar Hadi
Chairman, Djibouti Ports & Free Zones Authority

Mr. Hadi stated that it is clear that Africa cannot develop without quality
infrastructure. Djibouti is investing heavily in infrastructure. In Djibouti,
three sea ports have been built and are operational and four more ports
are now being built. In December 2016, a rail line was built and opened
between Djibouti and Addis Ababa. It is not enough and more funds need
to be mobilized to invest in this area.
Investment in African infrastructure will not only boost the continent’s
economy, but also grow the economy of other continents as Africa iscentrally located in the world. Building transcontinental railways andhighways will shorten the transit time from Asia to East Coast of theUnited States and to East Coast of South America, will increase trade withthe rest of the world and also increase inter-African trade.
In total, Djibouti will have nine ports as it is located in East Africa. Africa
has a lot of landlocked countries. Djibouti can serve the economy of theselandlocked countries. Out of 17 landlocked countries in the continent, 10
are located in Djibouti’s area. To send goods from the Red Sea andDjibouti to Dakar, one needs to go around the continent through Suez
Canal, Mediterranean Sea and Gibraltar.
It takes 8 weeks in both
directions to go through the Cape of Good Hope. The cargo train runningat 120 kilometers per hour takes about 61 hours.
Africa Continent is the only continent with no transcontinental
infrastructure. The telecommunications infrastructure also needs to bebuilt. Djibouti gives fiber optic to its neighboring countries as it has sevensubmarine cables landing in it. Another example of the continent’s
economic integration is the train link worth US $4.2 billion being built
between Djibouti and Ethiopia. This rail link will not stop in Addis Ababa
and will continue to the Atlantic Ocean and Gulf of Guinea to connect the
majority of the African consumers.
Infrastructure is core to development.
Mr. Kapoor summed up the talk by reflecting on President Adesina’s
opening remarks, which talked about the existing business opportunity.
The African middle class is spending about $1.3 trillion in purchase of
consumer goods. The business-to-business transactions are approaching$3-$4 trillion. This year, Africa will attract about $60 billion and the world
has started to recognize this massive business opportunity.

This year, $57 billion will come in foreign direct investment. Earlier,investment used to take place in the extractive industries alone. This is
no longer the case now. A breakdown of investment taking place on thecontinent shows that it is taking place in ports, railways, roads, retailbusinesses, and manufacturing. This is a critically important time forinvestment in Africa.
Neels van Niekerk
CEO, International Steel Fabricators of South Africa

Mr. Neels stated that he was from the steel construction industry, which isover 100 years old.
The steel fabrication industry in South Africa developed on the back ofmining originally. As the mining companies spread around the world, theindustries followed. ISF is involved all over the globe, but the key focus
remains Western, Eastern and Southern Africa where ISF has done
literally hundreds of projects. In the past 20 years, ISF has increased its
involvement in African infrastructure projects. There is an increasing
involvement in other activities as well.
Infrastructure has two very important elements. One is creation, which
many companies are focusing on. Equally important is maintenance ofinfrastructure creation.
In Africa, ISF has a strong association culture with the technical as well as
the ICT sector. Over the past 50 years, Africa has seen a huge growth ofsimilar capacities and associations, but when many foreign companies
enter into Africa, they largely ignore the local capacities. This cannot be
afforded.
Whenever ISF works in other African countries, the first thing is to look for
local capacities and partners. They find smaller partners sometimes, but
partnership builds them up as they will be needed again during the next
project there. To maximize the African content in African projects is an
important aspect. Involving and engaging the industrial associations willlead to a free and open access to gain knowledge about risk and thegovernments’ view of risk in the countries.
Private sector companies from around the world should engage with thelocal private sector in those countries. The local private sector companies
know better than anyone else what the risks for private sector are in theirown countries. The same is applicable to all other countries around theworld. Investors need to engage with the private sector before they enterand not afterwards. This engagement helps in offensive duplication.
Foreign companies come in duplicate capacity.
To satisfy certain
requirements, they get involved in many already existing activities thatthey do not need to. By engaging with their associates, they will be able
to mitigate risks, avoid duplication and understand the countries muchbetter.

Mr. Neels stated the he specifically traveled to Japan to invite Japanesecompanies and agencies to engage with them. ISF is open at any time
and welcomes engagement that will be rewarding for the investors.
Kapil Kapoor started with follow-up questions to each of the panelists,
following which the floor would be opened for audience questions.
Mr. Kapoor asked Minister Sudo to define quality infrastructure, some ofits key characteristics and some examples of quality infrastructure.
Yuji Sudo stated that the concept of high quality infrastructure includes avariety of factors.
First is where infrastructure itself is quality, so
infrastructure must last long, be easy to use and be environment friendly.
Quality does not necessarily mean high costs. In the long run, the above
factors make it relatively cheaper.
Second is relationship with the local community, not about infrastructure,
but through infrastructure is important.
Maintenance operation of infrastructure will create jobs for local people
and enhance the skill level of the local population. This is necessary.
Additionally, it is important to not only use public but also private sector
financing.
One example in Africa is a very well-known case. Over the Congo River,the Matadi Suspension Bridge was built in 1983. It is 700 meters longand recently celebrated its 30th anniversary.
The Japanese and the Congolese cooperated to build this bridge. The
engineers involved in the construction of the bridge visited it for the firsttime in 30 years and were surprised that it resembled a newly built bridge.
The bridge was in a good shape because the good quality of construction,
maintenance and the technology of maintenance were well penetrated
among the local populace. By doing so in the mid and long range, a
relatively cheaper but good infrastructure is established with othernecessary things and approaches.
Kapil Kapoor stated that while regional integration is important, places like
Djibouti lack a transnational railway connecting the entire continent.
He invited Mr. Yamazaki to talk about JICA, which has been investing a lot
in regional integration, but sometimes there is a lot of emphasis on hard
infrastructure rather than soft infrastructure. JICA also places a lot ofimportance on things like One Stop Border Posts.
Why is this so
important and going forward what does JICA intend to do in this area?
Shinichiro Yamazaki stated that in the last decade JICA has focused ontransportation corridor development, meaning hard infrastructure. Thisshould be accompanied with soft infrastructure, like legal framework or
the human resource development. In that sense, it is now time totransform the transportation corridor development to the economic

corridor development, to boost the industrial potential along the corridor
to add economic growth and social sector development as well.
Hence, industrial, agricultural and socioeconomic developments, which
include capacity building, should be done at the same time to generatedomestic demand and provide enough supply to meet the demand. A
comprehensive approach necessary for foreign investment andindustrialization needs to be taken.
Finally, reflecting on the experience of the economic growth in Asian
countries or region, specifically the Greater Mekong Subregion
Development, Mr. Yamazaki stated that the AfDB needs to play a leadingrole towards promotion and realization of economic corridor development.
JICA has been formulating Economic Development Master Plan for threecorridors; Northern and Nacala Corridor and West African Growth Link. In
addition to the hard infrastructure aspect, this master plan took into
account industrial and socioeconomic development.
Integration should be emphasized for inclusive development, regionalbalance and boosting intra-regional trade.
Kapil Kapoor stated that infrastructure is not an end in and of itself but ameans to an end. Good infrastructure can increase trade and investment.
He asked Mr. Yamazaki to comment from a financial sector or from abank’s point of view on what can be done to increase trade andinvestment across the continent.
Shinichiro Yamazaki stated that this is an extremely relevant point. Tradeis an essential part to economic growth. Trade financing is one of the key
products that SMBC provides.
On that aspect, JICA has a risk
participation program that has been closed. This program allows SMBC toshare the risk with the African Development Bank. This enabled JICA to
expand their trade financing book. It is not only doubling or tripling thebook size, but enabling JICA to reach out to the African SMEs’ importationfrom Japan. JICA was able to facilitate this from the financing aspect.
Whether it is trade or infrastructure project financing, it helps in building
the African bank’s capacity. This is one of the things that SMBC can doalongside with multilateral agencies such as AfDB. Building capacity
includes providing facilities to African banks, sharing information on what
Japanese companies want with the African banks, and using the wide
customer base that SMBC has with the African banks. Together with the
African banks, JICA supports the import to Africa and the export fromJapan.
JICA continues to share firsthand information with the Japanese
corporates of its coverage of Africa. To expedite Japanese companies’
trading investment in Africa, JICA uses such knowledge and network. As
the information flows in both directions, the Africa information is relayed
to the Japanese companies. This does not end there. Bringing Africa toJapan is another key aspect as it has a massive impact to the Japanese
corporate view and aspect and prospection to Africa.
In conclusion, a bridging between Africa and Japan is essential to form abankable deals and trades for private banks like SMBC. That is also basedon the sustainable environment created by the governments and themultilateral agencies. There are multiple aspects to the holistic approachto promote the trade and investment from Japan to Africa.
Kapil Kapoor talked about the risk-sharing arrangement and theperceptions of risk across the continent being very high. Today, all kindsof risk-sharing instruments can be introduced to reduce actual risk,
whether real or perceived. In fact, one of the areas where a lot of work is
being done and one of the types of instruments that are being developed
are the risk sharing instruments which allow to eliminate the perceived orreal perceptions of risk that exist.
Mr. Kapoor reflected on the argument across the African continent thatJapanese infrastructure is very expensive. Are there some examples of
how the Japanese private sector can promote cost-effective
infrastructure?
Eiji Yonezawa stated that usually for the infrastructure project, OCG’sconsultant is selected by tender, which evaluates QCBS or Quality and
Cost Based Selection, which is the ratio between quality and cost, say
80% and 20%. This is why cost is very important for OCG’s consultants
to win the competition. OCG collaborated with a Korean company toreduce cost. As Korean engineers are cheaper than Japanese engineers, it
is a very good way to collaborate with the Asian countries.
In Uganda, OCG introduced the New Nile Bridge project, which was a joint
venture with Korean consultants and Japanese contractor. Since thebridge is under-construction, the Japanese contractor made a joint
venture with a Korean contractor to reduce the construction cost of the
project.
OCG hopes to form a similar international joint venture for their New
Bridge Project in Kenya. It is possible to expand collaboration andcooperation between private sector firms representing different Asian
countries. OCG also has some local subsidiaries in Asian countries, like
India, Myanmar and Indonesia. In India, it is called OC India, as it is a
joint venture with a local subsidiary in India. This is the best way for OCG.
Kapil Kapoor asked Mr. Yonezawa to comment on what more can African
governments do to provide critical infrastructure services to their citizens.
Eiji Yonezawa stated that the most critical infrastructure development tosupport industrialization is energy. Industries cannot be driven without
energy.
Ghana has an installed capacity of energy of 4000 megawatts, of which
about two-thirds is thermal energy, which is very expensive. By the end

of 2020, the government resolves to produce at least 10% of its installedcapacity from renewable energy. Ghana has a lot of sun and wind. Thereis no reason why Ghana has to rely on energy that would cost between 18
to 20 US cents per kilowatts hour. This cost is very high for a lot of
African countries to grow.
With regards to agriculture, Ghana has about 60% of world’s arable landfor cultivation, yet it imports food more than any other continent and one
wonders if it is laziness or ignorance. The African governments shouldfind ways to push investments into this area as well as support quality
infrastructure. Many a times, quality infrastructure always refers tocapital intensive infrastructure. Policy reforms can formulate the brisk line
for business to thrive and for investments to roll in.
If governments can provide enabling environments for exports to thrive,
there is no reason why people from Japan would not come and invest in
Ghana, Nigeria or Togo.
The West Africa sub-region has an ECOWAS Trade Liberalization Scheme,
which is a multilateral agreement allowing member states to export toeach other’s country free of duty. If the government is able to harness
the potential of about 400 million people, it immediately gives them theplatform to be able to export and export out well.
The African map looks like a broken mirror, with small countries and thelines within them. OCG would like to have a magician clear all thesebroken lines and have one Continental Africa. This is what it would like towork on.
By the end of 2017, the CFTA or the Continental Free Trade Agreement
will come into force, where all customs and immigration barriers will be
brought down. African countries will be able to trade with each other.
This tells the Japanese investors that this is the time for them to come to
Africa and showcase what they can do.
Another thing is to improve domestic trade amongst the African countries.
Why does not Africa eat what it grows and why does it not improve its
retail infrastructure for people to walk into shops and have a reason tobuy from that shop instead of going to the market.
The Industrial Subcontracting Exchange refers to the serializing of all thelarge-scale companies in a country and introduction of SMEs to the largescale companies and informing the SMEs what these large-scalecompanies need to produce or manufacture. An exchange situation isformed whereby raw materials required by large companies are produced
in a country and are used by the country.
At one point in time, a buyer in Netherlands will buy goods in Ghana andask them to be shifted to Morocco, meaning that the Moroccan buyer did
not know that the Ghanaian supplier was able to supply or keep a good
supply of required needs. Regular business regulatory reforms giveinvestors the confidence. It is an infrastructural base that people will lookat anyways.
The final point is institutionalization of public and private sector dialogue.
Many African countries refuse to work with OCG if they engage with theprivate sector. It has become increasingly difficult and frustrating for theprivate sector to identify who to take their problems or report theirmatters to. Shaping these platforms up will be a basis where industries
can thrive and investments pouring into the country.
Ghana has this methodology, which they have adopted, which covers theinvestors entering Ghana.
The Japanese investors, and the Africancolleagues, who want to come to Ghana, should come and see what
Ghana built for itself.
Kapil Kapoor reiterated the fact that countries should trade more witheach other.
Recently, the amount of trade within Africa, just on
aggregate remains at about 15%, has actually gone up pretty dramatically.
The trading amongst African countries reveals that these are value-added
manufactured products and not raw materials. The trade that takes place
within the African continent has much more value addition than the tradewith the rest of the world. The suggestion that there should be moretrade between African countries is critically important and regional
infrastructure can help in facilitating this.
Mr. Kapoor asked Mr. Hadi to comment on Djibouti’s experience of how
the free economic zones or free ports are going to be successful in
integrating the continent?
Aboubaker Omar Hadi stated that the objective of investing in the freezones is to industrialize the country and export to other African countries
and the rest of the world. The inter-trade, which is 50% in Asia and 70%
in Europe, will contribute to increase this percentage.
Instead ofimporting something from another continent, if it is produced with a goodquality, one can buy it from the next door.
This will change thecontinent’s economy. Djibouti is doing this for job creation and saving
foreign currency.
By 2035, Djibouti aims to become a middle-high income country as it
would import less and export more from the free zone. This would lead to
growth in foreign currency income and economy and control the inflation
as the goods will be produced from the local raw material in Africa.
Djibouti is investing in two free zones, one is light industry free zone andthe other is heavy industry free zone. The heavy one will have a ship
repair and a ship building yard, oil refinery, cement factory, and power
generation plant.
Plans are afoot for a cross border free zone between Ethiopia and Djibouti.
The Master Plan is being made for tis and it is not yet under construction.

Kapil Kapoor stated that he was unaware that the steel that went into the
Burj came from Africa, so Africa needs to advertise its successes a bit
more. People do not know of accomplishments that are subtly advertised.
Will it work if many African countries put in place local content
requirements, where a certain percentage of whatever is being produced
should be produced locally?
Neels van Niekerk stated that even the best intention of governments
specifying increasing use of local content in terms of goods, employment,
and ownership is typically very wide. There are no specific requirements
for the number of foreign workers employed requiring permits or for the
locals.
The construction companies that do infrastructure projects have their own
well-established supply networks. When they do a project, they intend tocomplete it within budget, within time and according to specifications.
When it is left for them to create the local content, they do not spend themoney on the project itself but spend it on local schools and hospitals andequipments.
They employ people just to get the quotas right for
employment. People are seen digging trenches or waving flags on theroad to justify the foreign contact which is clearly not productive.
When these companies leave, there is no maintenance facilities createdand maintenance becomes very expensive as it has to be imported. The
created infrastructure often gets degraded as the lifecycle approach toinfrastructure project in Africa is still lacking.
For this reason, thegovernments should engage with the industry associations.
The local industries in the countries must maintain the infrastructure after
the foreign companies leave, so the contract with the foreign companies
should specify the requirements of what needs to be created. It should
use associations to assist, advice, and be a watch dog, to ensure that thecreated capacity is sustainable. Many over-created capacities fail anddisappear just to be re-created time and again. Failure to avoid this leads
to increased costs. This is the main reason for not being specific enoughwith the local contacts.
More investors are openly saying that the investments are being chasedaway from the mining industry in Africa as it is becoming too strenuous tocomply with all the requirements, as they are not realistic. In this regard,
the local industries can advise governments on what is realistic and what
can be expected.
Kapil Kapoor opened up the floor for audience questions.
Ingénue Cajun Kingsley, from OJ Kings Company Limited, which is a civilengineering company from Nigeria, stated that his comment was a bit
specific to the Japanese investors. As a civil engineer operating in Nigeria,
there are not many Japanese companies participating in the infrastructuredevelopment of Nigeria, but there are others like Europeans, Chinese,
Americans, etcetera, and companies like Julius Berger which is one of thebiggest construction companies, if not the biggest in Nigeria.

They are not much there in Germany and the same holds true for some
Chinese companies.
With regards to the quality infrastructure, theJapanese companies or the Japanese have and can provide quality
infrastructure, which constitutes not just the effectiveness of the structure,
but the comparative analysis or the cost effectiveness of the structure, so
there is a competitive advantage for these companies.
Second is the ease of doing business. The Nigerian government and manyother African countries have paved the way for companies to come andpartner with local companies to champion growth in infrastructuredevelopment.
Over the last 3 years or so, the Chinese companies gave loan to a
Nigerian company with the caveat that the development projects like
airports, etcetera, would be executed by the Chinese companies. This is a
win-win situation both for Japanese and African companies as well for
Africans.
One can make use of what is available to not only develop the African
Continent, but also encourage growth of their own company.
Julius Berger has stopped importing some of the construction equipments
and only import equipment made in Europe. Komatsu and many otherJapanese companies can leverage on this forum and on this partnership to
encourage growth of both African countries and Japan.
Courage Kamusoko, from Asia Air Survey, questioned Ghana about what
is being done to bring down the barriers on corruption, as there is a highperception that corruption is a problem for doing business in Africa.
Johannes, an ABE Initiative participant, recently graduated and interningwith Oriental Consultants Global, questioned Mr. Yamazaki from SMBC.
Most of the Japanese banks have negative interest rates, yet SMBC has
not been able to take any initiative to invest in Africa, where interest rates
are more than 20%. It is better to invest in zero cooperative bondinterest. Can the risk to invest in Africa be not mitigated?
Karim Quamir, from Côte d’Ivoire, studying international relations fromthe International University of Japan, questioned Mr. Yonezawa about
investment in Africa being risky. Someone said that it was riskier toinvest in China 30 years ago than it is to invest in Africa today. Ghana,Côte d’Ivoire, Burkina Faso and many other countries belonging to thesame region, faced with the same realities, are looking forward toinvestments. In concrete, what are the challenges or the risks being
faced to invest in infrastructure in this region? Ghana has advanced wellinto democracy and is a good example. If democratic transitions are oneof the risks, Ghana should not be a risky country to invest in.
Kapil Kapoor invited the panelists to answer the questions.

Yuji Sudo answered the question of there being fewer investments fromJapan to Africa. From a position of a person-in-charge of infrastructuredevelopment in the government, the Japanese government imparts
infrastructure development cooperation to other countries.
Recently, the government emphasized on this approach at the top level,
one reason being infrastructure development in Japan that kept MLIT busy
so far. In the last several years, a major movement started with regards
to Africa. Although it may be difficult to distribute evenly to all places, thefocus will be on major areas and gradually expand investments into Africa.
Ryuichi Kato commented on the partnership of Japanese enterprises withlocal African entities. It is important for the Japanese investors to haveenough information of the local African resources. In JICA’s project in
grant aid and concessional loans, many Japanese companies have African
partners in the field. JICA’s project will enable Japanese companies togain more information and develop more networks with the African
entities.
Shinichiro Yamazaki answered why there were no investments in Africa,even in a negative rate environment. SMBC is a commercial bank, which
finances the relationship and the business. SMBC is not a financial
investor or hedge funds, and are not simply chasing after the interest
rates as a business. SMBC would like to finance a sustainable business,preferably linked to Japan.
Kapil Kapoor asked Mr. Yonezawa to answer the question addressed tohim.
Eiji Yonezawa answered the question regarding the risks in African country.
The results of the survey conducted by JETRO revealed that 60% ofJapanese companies said the greatest risk is infrastructure inadequacy,
but OCG actually does not feel any risk in Africa, and thus are included in
the other 40% that do not perceive Africa as a risk in terms of investment.
OCG has many experiences in most of the African countries, so it isdifficult to understand why 60% of the Japanese companies feel risk ininvesting in Africa.
Carlos Kingsley Ahenkorah stated that although the talk about corruption
on the African continent negates whatever good is being said about Africa,
the perception that Africa remains risky in terms of investment is borneout of some facts. When an African President would die, there would benews about him leaving a mass of wealth behind, and one would wonder
what this man was going to do with all the money. This and many otherreasons have characterized Africa in a certain niche, where investors find
Africa to be a risky spot.
By the end of this year, the CFTA is going to be in place and the whole of
Africa is going to become one continent. All immigration and customs
barriers will be dropped. Investors will have a reason to locate theirindustry as they can ship it anywhere free of duty.

If democracy is anything to go by, then Ghana will be part of thosecountries where people would have to look inside their companies anddecide about other countries.
Mr. Carlos used this platform to appeal to the politicians, who think ofamassing wealth on being elected, is the only way to showcase oneself tothe world that they have arrived. This is wrong.
One can leave behind a legacy of what they did when they were in politics
or the time when they saved their people, otherwise certain countries will
never attract investment from other countries. It has become increasingly
clear that some countries are not getting investments because of theperception of things not being right. If things are not done in the rightway, if nothing is done to negate or remove the wrongdoings, thennegative stereotypes exist in the minds of the investors, due to whichsome African countries would never get investments from some countries.
This is especially true for those who want to sit and perpetuate power
forever.
Kapil Kapoor invited the audience for a few more questions.
S. Kuppuswamy, from the Shapoorji Pallonji group in India, representing
the Confederation of Indian industry with a reasonable amount ofexperience in Africa, stated that he strongly supported the argument thatthe perceived risks in Africa are mere perceptions to a large extent.
From personal experience, Shapoorji Pallonji Group has built the
Presidential Office in Ghana. When the current ruling party was in power,
there was a transition. There were fears that the entire project would be
scrapped off and be made into a hospital or something like that. Once the
newly elected government saw that the work being executed was worldclass and was listed among the top 10 presidential offices in the world,
they moved in. They asked the Shapoorji Pallonji Group to help built theTema-Akosombo Railway Project.
Again, there was a change in the government. The earlier government
had passed the rail project. The current government saw the merits in it
and saw the excellent companies that were handling it and they went
ahead with the project.
Therefore, countries with true democratic practices in place do not face
the risk as long as best practices are being followed.
In Zambia, there was a project for the decongesting Lusaka City which theearlier government had argued and talked about. There was a transitionin the government which led to the fears that the project could becompletely scrapped. This did not happen as the new government saw
the project’s merits and the merits of the company executing the project.
Japanese companies are considered as the best in the world. For cases
where there is a perceived risk, there is greater scope for collaboration
with countries like India with greater experience in Africa. This will make

it possible to execute world class projects, making it a win-win situation
for all three parties involved.
Daud Abulama, from Nigeria, and a part of ABE Initiative, stated that hewas excited about the fact that Africa needs investment, but questioned
the African leaders about their plans for their graduates, because all over
the world graduates from Africa are doing well, but the African
governments do not seem to trust these graduates due to which they getfrustrated and go to Europe or America and they strive well in all aspectsof the industry, be it medicine or pharmacy.
What plans are there for these good graduates to sustain theinfrastructure? It is being said today that Africa needs Japan and someother countries to come and invest. If Africa is going to ask othercountries to come and invest, what plans are there in the future to stop
borrowing and go and invest or contribute to other countries in the world?
Carlos Kingsley Ahenkorah stated that it is true that Africa today has a lotof unemployment situations, especially for graduates. Fortunately or
unfortunately, this is the time when Africa seems to be churning out a lotof graduates.
First and foremost, what is wrong is the unavailability of jobs for thesegraduates. To solve the problem, the simplest way would be to haveinvestors come in and invest and open up the jobs for the graduates andabsorb the graduates them by giving them the jobs. But it is not as easy
because the risk factor or the perception factor of Africa makes it difficultfor Africa to open up the investors and for investors to come in and open
up these jobs for the local youth and giving them work to do and reduce
unemployment. It is now incumbent upon the African governments tocome up with strategies to engage these youth.
First is the Ghanaian example. The Entrepreneur Program was justlaunched, where startups or graduates fresh out of the school, with start a
company with IBS. They are given some kind of a start-up capital andideas and are bugged by some business advisory centers to open up theirown job consents and get going. They do not only have to rely on thesewhite collar jobs and think that as soon as they finish school, they have to
get employment somewhere and that is it. They should imbibe in their
youth the idea of creating their own world by being innovative and that iswhat people from this part of the world did and did best.
In Ghana, all the polytechnics have been turned into technical universities,
to give them the power of knowledge and knowhow, and to see how it canbe contained. Computers are assembled in Ghana. Not many Africancountries have the capacity to manufacture or produce their own things,
but Ghana does. The social media is abuzz with a Ghanaian student
coming up with a search engine, which combines Google and all othersearch engines together and he is probably going to be the best, whencompared to what Ghana has already. It is important to give technicalknowledge to the students.

Even though the population of Africa keeps on increasing and thegraduates keep coming out, there is no job. There can be jobs only ifthey are showed how to create their own wealth or develop their own
skills.
Kapil Kapoor thanked the panelists and concluded the session.