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News & Updates

Results of JETRO’s 2017 Survey on Business Conditions of Japanese-Affiliated Firms in Africa

Mar 02, 2018

A clear contrast depending on the destination country – Companies in the black mark a record high in Morocco

Between August and October 2017, the Japan External Trade Organization (JETRO) conducted its latest survey on business operations of Japanese-affiliated firms in twenty four countries in Africa. The survey received a record-high 315 replies. Below is a summary of the results.

Summery points:

  1. Evaluation of Morocco growing due to its remarkable economy
  2. While competition has intensified through China's entry in the market, some Japanese companies see benefits
  3. Concern regarding the political situation and governance is extremely higher than in other regions
Survey period From August 21 to October 13
Destination of questionnair 376 companies (315 respondent companies including 84 manufacturers and 231 non-manufacturers, Response rate: 83.8%)
Question items (1)Status of operations, (2)Future business outlook within the next one or two years, (3)Problems in administration, (4)Investment environment, (5)Collaboration with third countries and stance toward China

Summary of results:

1.Operating profit forecast and future business outlook: Morocco stands out

  • Results vary largely depending on the destination country. The ratio of the companies reporting a surplus ranges from over 60% in South Africa and Morocco to 25% in Kenya. Morocco has had the highest ratio in the past four surveys. When asked about their future business forecast, 90% of all respondent companies in Morocco answered that they will expand business. Among the reasons behind expanding business, the highest was "increased sales" (70.6%) and "the high growth potential of the local market" (70.6%). (Page 6 to 7 and 12 in the attached document)
  • Morocco has been focusing efforts on cultivating exports mainly in the fields of automobiles and aircraft and proactively drawing foreign direct investment. Approximately 50 Japanese companies are active in Morocco as of 2017, and the largest foreign employer is a Japanese parts manufacturer.
  • This is the fourth year in a row in which over half of respondants across Africa reported intentions to expand business, meaning that the trend toward expansion will continue. Over 40% of all respondent companies plan to increase the number of local employees. (Page 12 to 13 in the attached document)

2.Change in business environment: Market entry in pursuit of private-sector demand, reduction of ODA from Japan by half

  • Among the reasons for entry to Africa, there was in increase in answers of "growth potential" and "market scale" in what is believed to be pursuit of private-sector demand. In comparison with 10 years ago, the ratio for "natural resources" and "ODA from Japan" were down by half. (Page 17 in the attached document)
  • The number of companies taking advantage of FTAs, such as the Southern African Development Community (SADC), has steadily increased. (Page 18 to 19 in the attached document)
  • Progress has been seen in the Initiative of the African Economic Community (AEC), which aims at establishment in 2028. (Page 18 to 20 in the attached document)

3.Change in business environment: While Competition has intensified through China's entry, some Japanese companies consider it as benefits

  • Regarding China's strengthening of economic ties with Africa, 44.4% of respondants reported that it has intensified competition and had an impact on their business. (Page 21 in the attached document)
  • On the other hand, 15.7% of all respondents answered that the situation is bringing about business opportunities and benefits. Comments from them included "China's speedy and aggressive entrance into Africa has led to the creation of new business by spotlighting overlooked needs in the local region, and there is a sense that new markets are taking shape."
  • Looking at the greatest competitors by nationality, "European companies" (26.8%), "Japanese companies" (20.5%), "local companies" (17.8%) and "Chinese companies" (14.1%) were cited. (Page 22 in the attached document)
  • Conversely, regarding potential partners by nationality, "France" (21.5%), "India" (20.2%) and "South Africa" (18.5%) were ranked in the top. Japanese companies have placed great expectations on collaboration with French companies in the markets of francophone countries in Africa, where Japanese companies have had a late start. (Page 22 in the attached document)

4.Problems in administration: Concern over political situation and governance extremely higher than other regions

  • As befoe, the most commonly cited problem was "establishment and implementation of regulations and laws" (80.6%).
  • While "political or social instability" was the next most cited concern across the region (77.4%), over 85% of companies in South Africa, Egypt, Nigeria and Kenya considered it the biggest issue. (Page 23 in the attached document)
  • It is believed that these results reflect the following events: the ruling party's presidential race for the upcoming presidential election in 2019 in South Africa, deterioration of peace and order in Egypt and Nigeria (concerns about terrorism, abductions and actions of armed insurgents) and the presidential election in Kenya (from August to October in 2017).
Reference: The ratio of respondents answering "establishment and implementation of regulations and laws" and "political or social instability" as big concerns(%)
Problems in administrationAfricaMiddle EastRussiaSouthwest AsiaASEAN
Legal system 80.6 61.7 45.7 42.8 33.3
Political instability 77.4 40.7 51.1 39.2 28.7

5.Countries of note: Kenya, Nigeria and South Africa rank top three years in a row

  • Kenya, Nigeria and South Africa were highly rated from the following perspectives: Kenya as a business hub in Eastern Africa, Nigeria as Africa's largest country in terms of economy and population and South Africa as having the most developed economic infrastructure. (Page 24 in the attached document)
  • The evaluation of Morocco by Japanese companies rose to sixth place from eleventh in the previous year. The reasons were high expectations toward enhancement of investment incentives, peace and order and excellent human resources capable in both English and French.

Ms. Takazaki and Mr. Komatsuzaki
Middle East and Africa Division, JETRO
Tel: 03-3582-5180 E-mail: orh@jetro.go.jp