As Japan’s ambassador to Ethiopia, Kazuhiro Suzuki finds that briefing Japanese businesspeople seeking opportunities in Ethiopia is becoming a daily occurrence. From April, the flow of visitors could grow, after Ethiopian Airlines started the only direct flight between sub-Saharan Africa and Japan.
The service has been a decade in the works, but it comes at an opportune moment, as Japan ramps up its investment in Africa.
While China’s interest in the continent has dominated headlines for the past decade, Japan has quietly been building its position. Japanese companies and government agencies actually invested three times as much in project finance deals over the last 10 years as their Chinese counterparts. Currently most Japanese investment is outside Ethiopia but those such as Suzuki say it’s a matter of time, especially with the new flight, before Ethiopia gets more attention.
“Almost every businessperson I meet coming to Ethiopia is surprised – they don’t realise the level of the booming economy,” Suzuki says. “Currently Ethiopia’s needs are more low-tech but sooner or later it will need more high technologies, so I’m optimistic about the role for Japan.”
Previous Japanese travellers to Africa have flown via European airport hubs or through the Middle East, typically connecting in Dubai. Such journeys usually take between 21 and 23 hours, whereas Ethiopian Airlines’ new service will take about 15 hours.
“A big selling point is how Tokyo business staff could catch an evening flight after work and arrive in Addis the next morning and start work,” Suzuki says. “Or they could catch a connecting flight to another African country and be working there by afternoon.”
For Japanese businesses already operating in Ethiopia, the new flight using the ultramodern Boeing 787 Dreamliner aircraft will make it easier for headquarters staff and specialists to visit and bring their expertise.
“Currently, due to the longer flight time it’s difficult for them to arrange schedule-wise,” says Noriyuki Murabe, senior deputy general manager for Addis Ababa-based Marubeni Corporation, which trades in coffee, construction machinery and aeroplane components. “Also, psychologically many Japanese think Ethiopia is very far from Japan, and may be more likely to come with a quicker flight.”
Murabe says the flight should trigger strengthening connections between Japan and Ethiopia: “Ethiopian businesses are adopting the Japanese business philosophy Kaizen, and if Japanese businesses see this for themselves here that could encourage investment.”
The flight should also benefit tourism between the countries.
“It’s very exciting news,” says Miyuki Koga, with Addis Ababa-based tour operator Elmi Tours, whose clientele is between 30% and 40% Japanese tourists. “Already we’re getting more requests for quotations from Japanese tour companies preparing for the new service.”
Koga explains that Japanese workers’ limited holiday allowances makes visiting distant locations, such as Ethiopia, difficult; the reduced flight time could make enough of a difference to facilitate squeezing in an Ethiopia-bound trip, or elsewhere in Africa.
“Ethiopian Airlines has an excellent network throughout Africa, so if people make the effort to fly all the way to Ethiopia it makes sense to try other countries,” Koga says.
She notes, however, that the airline may have its work cut out to match Japanese expectations: “They’ll be coming from a country where service is taken incredibly seriously – Japanese expect excellent service.”
While tourism may take time to develop, business is a more immediate prospect. During the last five years Japanese investors increased project finance commitments in Africa by a “staggering” 576%, according to the global law firm Linklaters. This culminated with $3.54bn invested in 2014, mainly through a large focus on energy and infrastructure projects in Morocco.
“Japan has taken a much quieter and below the radar approach than China but has made significant inroads, particularly in countries such as Nigeria and Mozambique,” says John Maxwell, head of the Japan office for Linklaters.
“At the heart of this are Japanese investors’ needs to diversity their portfolio of projects. Just looking at the energy sector, part of the drive could be down to a desire to seek stable energy supplies, moving away from nuclear energy. Coupled with Prime Minister Shinzo Abe’s announcement in 2013 for a total of $32bn in public and private funding for Africa, including $14bn in development assistance and $6.5bn for infrastructure projects, the African continent is well and truly on Japan’s radar.”
Such numbers illuminate the Ethiopian government’s enthusiasm to place Ethiopia on that radar too, building on a relationship going back much further than Ethiopian Prime Minister Hailemariam Desalegn’s 2013 visit to Japan when he re-raised the possibility of a direct flight service. Ethiopia was the first African country to cement diplomatic relations with Japan in 1930, and they both share long imperial legacies; current Japanese Emperor Akihito visited Ethiopia in 1960 while he was crown prince.
Amid the fanfare observers note that the thrice-weekly direct flight between Bole International Airport and Tokyo Narita International Airport will have to refuel at Hong Kong. Others question whether passenger demand for the flights will be adequate.
“Ethiopia still isn’t the focus for many Japanese businesses,” says a general manager for a major Addis Ababa-based Japanese trading company, who couldn’t identify himself due to corporate media rules. He says Japanese businesses carefully assess opportunities across all of Africa, gauging numerous economic, political and sociological factors, before committing. Many are deterred by Ethiopia’s heavy import duties, especially when they can invest instead in the likes of Kenya, Uganda and Burundi with free-trade agreements.
“Japanese businesses are very different to Chinese ones,” says Kana Fukuda, who works for the Japan International Cooperation Agency in Addis Ababa. “They are very cautious with new frontiers, focusing more on quality over speed. They still view Ethiopia as risky with a more complicated business environment compared to other East African countries.”
Ambassador Suzuki acknowledges how such preconceptions can hinder while noting research undercutting them. For example, he says, the World Bank’s rankings for ease of business place Ethiopia at 132, above countries such as Kenya, Uganda, Nigeria and India. Also, Suzuki points out, Ethiopia’s per capita income of $500 is substantially lower than the regional average and will take 10 years – even if Ethiopia achieves annual double-digit growth – to match rates in countries like India and Vietnam.
“That offers huge comparative advantage in terms of labour costs,” says Suzuki, who will take the inaugural 21st April light from Addis Ababa to Tokyo.
“Better to come earlier to invest – that way you will get more fruit.”