Nicknamed Mr Africa, Tetsuro Yano knows the continent well. As president of the Association of African Economy & Development Japan (AFRECO), which promotes economic partnership between Japanese and African businesses and people, he strives to persuade Japanese companies to extend their portfolios to Africa. Presiding over the 44-year-old association, which has individual, corporate, and governmental members, might not be an easy task if it were not for the 18-plus years of experience that Yano brings to the table. He served as State Secretary for agriculture, forestry, and fisheries between 1997 and 1999. He was also a Senior Vice-minister of Foreign Affairs between 2002 and 2004. His immense experience in politics, complemented with a university-level education in political science, gives him a rare competitive advantage to mediate between the varying interests that he confronts each day. In assuming the presidency of the AFRECO, Yano spends much of his time travelling across Africa. He spent 51 days of the 365 days of the past year, in Africa, he claims. In this exclusive interview with Getachew T. Alemu, OP-ED Editor, of The weekly Fortune, he discusses the challenges and opportunities that Japanese businesses face in Africa. Excerpts:
Fortune: Since the financial crisis of 2008, the economy of Japan remains in the doldrums; retail trade remains in the troughs; unemployment is still high, and economic recovery is still slow. Added to that is the continuing political squabbling between parties that has left the political space devoid of stability. Are you optimistic about the performance of the Japanese economy in light of the challanges?
Tetsuro Yano: In 2008, after the financial crisis hit everyone, not just Japan, we had an unemployment rate of five to six per cent, and we were in a crisis. We now have entered onto a track of stable recovery. The unemployment rate has now gone down to four per cent.
It is while we were on the path of such a stable recovery that the unprecedented earthquake and tsunami hit us. That was indeed shocking for the whole economy. We needed to let over 245.2 billion dollars of supplementary budget for the crisis. That had its own impact on the economy.
At the time being, we are struggling to stand firm on the path of recovery. Whatever happens henceforth will highly be dependent on whether we come out of the shock stronger or not. It is really crucial.
Q: Do you think that the current political climate in Japan is ready to push the recovery forward?
Three years ago, the Democratic Party of Japan took power. There have been three prime ministers since then. Before that, power was in the hands of the Liberal Democratic Party of Japan and there were three prime ministers within the same timeframe. That kind of political instability is indeed not a plus.
With such kinds of unconsolidated politics, it is difficult for Japan to extend policy influence in global platforms such as the G-8.
For example, the serious appreciation of the Yen against other currencies is becoming worrisome for Japanese businesses. We need the G-8 countries to scale up their interference. Yet, the lack of consolidated politics at home has limited our influence over issues as such. Therefore, Japanese politics is still fragmented. It needs improvement.
Q: Partly forced by the saturation of the business environment in Japan and partly pulled by the ever-increasing return on investment (RoI) in Africa, the interest of Japanese investors to invest in Africa has been revitalised. Unfortunately, the African business space is populated with other players from China, India and Turkey. What unique value would Japanese businesses bring to the scene to win through the competition?
The interest of Japanese businesses to come to Africa was there even when we establish the AFRECO. Yet, Africa did not have political stability by then. It didn’t even in the years after. We, however, were optimist enough. We knew that going to Africa is a must. Things have changed since then. Most African countries have become stable. The interest of Japanese businesses on Africa is increasing.
Africans have interest on Japanese businesses and that is exactly what I saw in my latest visit to Mozambique, Angola, South Africa and Ethiopia. Last year, I spent 51 days of the 365 days in Africa. In all of the countries that I visited and the heads of states I talked to, I have seen that the Chinese card is strong and unforgettable. However, the expectation to Japan is always high. Africans have trust on our technologies and businesses. The Japanese government might be slow, but that is not typical to Japanese businesses. Japanese businesses do, if they say they will.
Q: But, most of the Japanese enterprises are involved in the higher ladders of the global value chain. Africa, on the other hand, provides opportunities at the lower frontier of the value chain as the need is for labour intensive technologies. Where do you think the overlap lies?
It is not about striking a balance. It is about tailoring technologies. Japanese enterprises can provide even those kinds of technologies. Our amazing capability is on tailoring technologies and transferring it accordingly. In Africa, our focus is on transferring technology for the young Africans and helping them change their working environment. We are being successful in that regard.
Q: Would that continue be in the long-term interest of Japanese businesses, as they have to, at the end of the day, make profit?
Of course, it might not be profitable in the short-term. But, Japanese businesses do not think about short-term profit. They, instead, think about the long-term profit. This is the attitude unique for Japanese businesses.
For example, if a Japanese company come to Ethiopia and could not find what it expects, it would not just live. It would root itself deep into the country and within the people to sort out the potentials.
You must know that Japanese companies are very good in doing business, insightful in negotiating and wise in investment. They might take time to decide but once they decide they will stay.
Q: It is only recently that the Ethiopian government has established a Kaizen Institute with the aim of enhancing the productivity of manufacturing industries. In view of your experience with Japanese businesses, do you think that it could work in Ethiopia?
It is clear as a day light. We have seen it being successful in some Ethiopian companies in the textile sector. I am sure that it would work.
Q: Though political risk has reduced, critics claim, infrastructure and institutional deficits still make the business climate in Africa less conducive for foreign investment. How do you evaluate the business climate in Africa and Ethiopia?
I agree with the critics. I do believe that lack of infrastructure is one of the major challenges for Africa to attract Japanese businesses. It will be one of the issues to be raised in the upcoming Tokyo International Conference on African Development (TICAD) to be held in June, 2013. It is because I believe so that I, as president of AFRECO, would like to see a dynamic infrastructure project to be tabled into the resolution of the fifth TICAD.
African countries and Japan have to collaborate in corporate, public and public private partnership (PPP) forms to solve the infrastructure problem. I know that Japanese businesses are ready for this kind of partnership. What they lack is information and we are working to improve that. I believe that the upcoming TICAD will open the window for stronger partnerships in these terms. As a strong supporter of the TICAD, I hope that Prime Minister Meles Zenawi will be taking part in the conference.
Q: In the discussions you had with Ethiopian higher officials, I hope that you have been informed about the five-year economic plan of the government. What do you think is the opportunity for Japanese businesses in this Ethiopian project?
I believe that there is a lot in it for Japan. One area that we have discussed with Ethiopian officials is the initiation of soft loan schemes. Right now, the cooperation between the two nations involves grants. With grants, the scale is limited. Just yesterday, I talked with the state minister of Finance and Economic Development (MoFED) of Ethiopia, Ahmed Shide, about the potential for investment in a geothermal project through soft loan. I think, it is something that we need to pursue swiftly.
Q: It is known that the soft loan scheme is effectively used by the Chinese in their engagement in Africa. Do you see the same level of interest from the side of Japanese businesses, including financial institutions?
We will be testing that in the years to come. This is the future of our partnership. But, it would not be the far future; instead, it will be the near future of it. Where we are now is at the starting point. What I am sure at now is that Japanese businesses would be interested in it.
Q: With the ongoing crisis in Europe and a slower recovery in United States, there exists global investment paranoia. What do you think should African governments do differently to attract foreign investment at this critical point in time?
I think that Africa governments need to ensure good governance, improve democratisation and enhance human security. That will give investors essential confidence to invest. That is exactly why the Japanese government is supporting African governments to improve their governance regimes.
I believe that doing so is more important at this time of slumping global investor confidence. Providing information for foreign investors is also important. High level official exchanges will have a lot to offer for this as they will help us share our dreams. For Ethiopia, however, the success of the Growth & Transformation Plan (GTP) will be important to attract more investors. I wish all Ethiopians the best.
Q: More often than not, the attitude towards corporate associations entails hesitance and cynicism. What peculiar approach does AFRECO bring to the scene?
We are trustworthy. That is why we are supported by the government of Japan. Our work has a government support. That has helped us be effective in our engagements. As president of the AFRECO, I put my effort to exploit my connections for a bigger cause that will benefit Japanese businesses. What we uniquely bring to the scene, then, is trust worthiness.
Q: Do you think that Japan, as a country, has recovered from the Fukishma earthquake crisis?
I think that Japanese people are extraordinarily resilient. We stood united during the crisis. Although there are still challenges that we need to rectify, I believe that we will pass them with a winning heart.