Japan, 29 August 2019
I would like to express my deep appreciation to Jetro and Japan for this exciting day where we can exchange thoughts on business relationships and opportunities between Japan and Africa.
Firstly a few macro-economic observations:
Despite the global economic slowdown, it is likely that Sub-Saharan African growth will accelerate in 2019.
Now looking at some specific success factors for Japanese companies doing business into Africa:
It is often difficult for Japanese companies and African companies to conclude sound and profitable transactions because of barriers like the long distance, language issues, local business practices, legal systems and so forth. Japan is one of the most developed economies and cultures in the world, while most African countries are still finding their way. In many cases it might make most sense to form a partnership, rather than being purely transactional.
In Standard Bank’s case, we had the on the ground presence in Africa, but we had no effective way of tapping into the major Japanese corporations to understand their banking and strategic needs. It was just too difficult to navigate, especially as so many Japanese companies have many diverse divisions with separate decision making. So, we structured a formal strategic partnership with Mizuho in 2012, where they used their network in Japan to link into our network in Africa. It has been very successful Mizuho and ourselves, and this week we have expanded the relationship even further. Over the years we have done something similar with ICBC in China which has also worked out extremely well. Having said that, partnerships of this sort require utmost trust on both sides and hard work to maintain and grow.
Another critical factor is commercial risk appetite. We find that in many complex projects on the continent, Japanese companies quickly ask for a Government guarantee. The reality is that it is often more important to really concentrate on structuring the transaction in such a way that the underlying commercial cash flows are even more certain than having a government guarantee. Structuring transactions properly in complex environments is absolutely fundamental and often requires good professional advice.
Corruption is another big issue which is often raised with me. In every country in the world there is some corruption, but in our experience, it is always possible to find enough good business with trustworthy and ethical counter-parties. In the long run it is always best to do straightforward business and walk away from corrupt government officials or businesses.
A final important issue is being truly relevant to the country in which you operate. All governments and communities are sensitive to foreign operators. As Standard Bank, we always prefer to have local chief executives in country, not foreigners. In the case of Japanese companies on the continent, this is generally not the case. Of course, you always also need the correct balance of head office people and controls.
Turning to my other role as an Investment Envoy for our President, trying to attract local and foreign companies to invest $100bn into South Africa, the messages from potential investors are clear and consistent. Companies making fixed investments want to be able to earn a fair return taking a 10- or 20-year view. So, they need to be confident of the rule of law, be certain of policy knowing that things will not keep changing, and to operate in a relatively “business friendly” environment. They want to benefit from our country’s growth, not be the engine of that growth - that is our responsibility. They need to be appreciated for the technical skills, the jobs and prosperity they create.
Sadly, this is not the attitude in many African countries and as African business people it is a message we need to keep repeating to our governments if we want more foreign investment, particularly from Japan.