Kotaka delivered a lecture on the investment environment in Africa.
Scene from the COFACE Country Risk Conference 2016
On November 8, 2016, Teruaki Kotaka, Senior Economist, Country Credit Department, Japan Bank for International Cooperation (JBIC) participated in the Country Risk Conference 2016: Major Trends in the World Economy, hosted by a member company of the COFACE Group, COFACE Japan, by giving a lecture titled "Africa: Upcoming Challenges of the Continent of the Future," and taking part in a discussion with fellow economists on the world economy.
The conference, an international seminar in which globally active experts analyze the trends of the world economy based on current country risks and their impacts on Japanese enterprises, included discussions on the latest credit risk management as well as business opportunities in Asia. Over 250 people attended the conference from companies, banks and research institutes, and after the presentations delivered by experts in the relevant fields, an active question and answer session was held concerning prospects for world economy and risks pertaining to overseas investments and other transactions.
Kotaka, who is in charge of Africa at the Country Credit Department of JBIC, started his lecture by giving an overview of the African economy. Based on the statistics of the IMF and other institutions, he pointed out that Africa has been a growth center second only to Asia, despite the prospect of economic growth slowdown during the period from 2016 to 2017, and that various high growth countries and sub-regions still exist in Africa, mostly those less reliant on resources, although the economic situation varies depending on country and sub-region.
In addition, while referring to the downturn of resource prices from the upward trend which was a major factor for the growth of Africa, he indicated that fund flows into Africa have been maintained in various forms, which contributed to a certain degree of growth of the African economy that continued even in the downturn phase of resource prices.
Furthermore, he pointed out that the population in Africa is expected to grow rapidly from a medium-term perspective, which will lead to the rapid urbanization, a shortfall in infrastructure, environmental problems, and other various challenges, but that growth in labor population is likely to become one of the factors that support medium-term growth.
Subsequently, based on the above-mentioned overview, Kotaka expressed his views on investment in Africa. Firstly, he explained that while challenges in investment included the small economic size of markets and high country risks, business opportunities have been expanding in line with the aforementioned growth and population increase in Africa. Secondly, he pointed out, focusing on electric power infrastructure, that huge demand for infrastructure is expected in the future, which means that Africa has great potential considering that infrastructure businesses will be able to properly address the issue of investment in Africa such as small market size and high country risk, and that the know-how and technology that Japanese companies used in other emerging countries can be easily applied to Africa in infrastructure businesses compared to other businesses.
To close the lecture, Kotaka summarized his views on investment in Africa based on the following points: 1) Given the great growth potential of Africa, we see a tremendous range of business opportunities; 2) Selection of host country and business strategies that fit the target country will be the key to success, taking account that the economic situations are vary depending on sub-region and country in Africa, ; and 3) Focus on the base country at first and expansion of business from the base country to the region as next step will be strategy to invest in Africa, while regional integration and infrastructure is yet in the process.
Finally, Kotaka participated in a panel discussion, titled "Will China and Japan Drag on Asia's and Africa's Growth in 2017?" where he exchanged views with several other economists. With respect to the potential for high quality infrastructure business in Africa, he showed the significance of and expectations for deepening understanding by the local people of high quality of Japanese products, transmitted through their experience, taking the example of the sale of Japanese used cars in Africa.
JBIC will continue to provide a wide range of information related to the international economy and finance through participations in such international conferences.
* The content of the presentation in this conference is based on the personal view of the presenter, not JBIC.