Japan Has Invested More Africa Project Financing Than ChinaKevin Crowley and Ijeoma Ndukwe
Japan has invested more in project financing in Africa than China as Asian nations continue to strengthen their economic influence on the continent, according to Linklaters LLP.
Japanese investors accounted for $3.5 billion of the $4.2 billion of project funds that Asian nations poured into Africa last year to improve roads, water and sanitation and build oil and gas pipelines, according to the London-based law firm.
“Japan now ranks as the most active Asian project finance sponsor in Africa, investing almost three times as much as China, which is often regarded as the most active Asian investor on the continent,” according to the report published Monday.
Sub-Saharan African nations are seeking to reverse years of under-investment by moving forward with road and rail projects to help boost economic growth, which is forecast by the International Monetary Fund to expand 4.9 percent this year, more than double the rate of advanced economies. Asian investors are among those seeking deals to develop oil, gas and mineral deposits in African nations, which are exploiting their natural resources to boost revenue to fund development plans.
China ranked as the second-biggest Asian financier of projects in Africa, committing more than $11.9 billion over the past decade, with more than half spent in South Africa, while India placed third, Linklaters said.
“Japan has a much quieter and below-the-radar approach, less headline-grabbing than Chinese investment,” said Andrew Jones, head of Linklaters’ Africa unit, in an interview with Bloomberg TV Africa. “We had a phase 10 to 15 years ago where there were some big Japanese investments into Africa and now there’s a new wave of investment coming.”
A significant amount of Japanese investors’ money for projects went into Morocco last year, according to the study. The North African country said in September that Japan will provide the majority of funds to build a coal-fired power plant in the western city of Safi, which will produce 1,386 megawatts, or 25 percent of the country’s needs.
“We’ve seen a mixture of securing fuel and natural resources, but also selling equipment like turbines for power stations,” Jones said of Japanese investment in Africa.
Nigeria, South Africa and Mozambique have attracted the most project financing from Asian investors in Africa over the past 10 years, according to Linklaters.
Project financing is a method of funding whereby debt repayments are sourced primarily from the forecast cash flows of a venture and security is limited to its assets.