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Africa counts on Japanese investment

NAIROBI, Kenya -- African leaders expressed high expectations for Japan to expand investment in Africa during the sixth Tokyo International Conference on African Development, a two-day meeting that ended Sunday.

Japan signed a memorandum to strengthen cooperation with each country. However, the outlook for expanded investment remains unclear. Africa faces challenges as it seeks to make progress in solving problems including terrorism and other security concerns, corruption, and an economic slowdown caused by a sharp decline in natural resource prices.

In a meeting that took place in connection with the conference on Sunday, Kenyan President Uhuru Kenyatta welcomed Japan's cooperation in diversifying industries and creating jobs and said he would make his country less reliant on natural resources. He said Kenya aims to achieve a quick economic transition from exports of raw materials to the production of high-quality industrial products.

Although rich in natural resources, Africa faces headwinds amid a plunge in the prices of crude oil and other resources. The price of Brent crude hit $115 a barrel in 2014 but is hovering at about $50 now. Angola is struggling with rapidly worsening finances as most of its revenue comes from crude oil. Nigeria has been prompted to devaluate its currency.

Even South Africa, which has made most progress in diversifying its economy among African countries, is hard hit by the softening of China's economy. Its strong economic relationship with China has backfired.

Slowing growth

According to the International Monetary Fund, the economy of sub-Saharan Africa is expected to grow by 1.6% this year, compared with 3.3% last year. Soaring prices of natural resources, which supported high economic growth in Africa in the last decade, are unlikely to return in the short term.

Hiroyuki Ishige, chairman of the Japan External Trade Organization, said Japanese companies are "watching Africa closely in terms of long-term business prospects," rather than taking a temporary view on the economy, and will step up operations on the continent.

There are many problems to be solved before African countries can receive regular investment. Major obstacles that companies need to clear are security issues including terrorist attacks and civil wars. In Libya, an oil-producing country, Muammar Gadhafi's regime was overthrown in 2011 and the Islamic State extremist group increased its power by filling the void. In Nigeria, Islamic militant group Boko Haram has continued to cause havoc through abductions and suicide bombings. In South Sudan, fighting continues between forces supporting two rival leaders, President Salva Kiir and Riek Machar, a former first vice president. United Nations peacekeeping operations in the country, in which the Japan Ground Self-Defense Force takes part, are at a crossroads. Somalia has become a hotbed of Islamic extremist groups, making the environment there far from ideal to ensure Japanese companies can conduct business safely.

Throughout much of Africa the development of transportation infrastructure, essential for distribution, has been delayed, although the level of development varies among countries. Insufficient development of roads, railroads and airports makes travel costly and time-consuming, a heavy burden for companies.

Some countries are also struggling with deeply rooted problems such as corruption. South African President Jacob Zuma has come under fire for alleged misuse of public funds. In Zimbabwe, President Robert Mugabe has stayed in power for nearly three decades. In Congo, constitutional revisions were made to allow the president to serve for a longer term. In countries where the government is led by the same leader for a number of years, corruption is believed to have become common, making it difficult for companies to conduct operations.

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