|Japanese water purifier venture Nippon Basic president Yuichi Katsuura (right) displays a portable water purifying system, carried on a bicycle. "Cycloclean" is powered by pedaling a bicycle to make a maximum of 5 litres of clean water in a minute during the African Fair. — AFP/VNA Photo
by Thu Hang
During the global economic crisis, developed countries have increasingly targeted Africa as a potential market with which to trade in order to boost their sluggish economies and global leaders are travelling to Africa to try and gain a foothold in one of the world's fastest-growing economies.
Against this backdrop, trade and investment relations between Africa and Asia are growing in significance to the extent that Asia is fast becoming Africa's largest trading partner. Asian firm are making huge investments throughout the continent in the fields of telecommunications, mining, oil, banking, infrastructure and transportation.
At the beginning of this week, Japan hosted the fifth meeting of TICAD - Tokyo International Co-operation on African Development. African countries and major regional and international organisations mapped out the priorities and steps ahead for the continent's continued growth.
Africa will be the engine for development over the forthcoming decades, Japan's Prime Minister Shinzo Abe said on Monday after a deal was struck in which Tokyo pledged to provide huge aid.
He added that the continent would be at the leading edge of economic expansion, and consequently Japan had to make a commitment in a way that would benefit both sides.
"Africa will be a growth centre until the middle of this century… Now is the time for us to invest in Africa," Abe told press conference at the end of the three-day conference.
Japanese officials have stressed the need to transform Japan's relationship with Africa into a business partnership, as Tokyo firms seek to tap a burgeoning market.
Japan promised African leaders US$32 billion in public and private support to help growth and encourage Japanese firms to invest there over the next five years.
Japan is also aiming to double jobs offered by Japanese firms in Africa to 400,000 by the next TICAD in 2018.
In addition to Japan, China and other East Asian nations have promised to invest in resource-rich Africa. During his first overseas trip as head of state in March, Chinese President Xi Jinping reaffirmed China's pledge of $20 billion in loans to Africa over the next three years.
Much of this aid is being used for massive infrastructure and resources projects – from airports to mines to highways – and China's imports of African crude oil have been rising during recently years.
China usually attaches a significant amount of such funding to infrastructure projects, which forms the foundation for Africa's industrialisation and economic development.
So what next?
With more and more countries attempting to lure Africa, the ball is now in Africa's court. More investment means that it will have the chance to develop its market to other countries, particularly in Asia, which is in a better macroeconomic shape than other continents. Europe's growth has stalled, North American economies are sluggish and South America is growing at a moderate rate.
With the rapid population growth in Asia driven mainly by China and India, Asia's consumer market for luxury automobiles, food and financial and insurance products will be the biggest in the world, which further hits at the need for African companies to seriously consider investment in Asia.
A number of African firms have already been expanding their operations into Asia, including Naspers, SABMiller, Econet Wireless, Mondi and Standard Bank.
Naspers is a South African multimedia corporation with major operations in electronic media, pay-television, internet and print media. The company has operations in China, South East Asia and India.
Investing abroad is not without challenges and risks. The main obstacle for African firms is the size of Asian and foreign competitors. Most of these companies are large and perform far better at a global level than their African peers. These challenges, however, are not insurmountable.
East Asia's engagement does not only come in the form of money and support. Africa may also learn something from East Asia's development experience and countries will benefit from reflecting on its successes and failures.
And so Africa should prioritise opening up opportunities for Asian firms. This would provide a basis upon which Asian businesses can tap for opportunities in Africa while at the same time African firms are provided access to opportunities in Asia, giving them access to perhaps the world's largest market. — VNS