Sophia Magazine vol.2 / WINTER 2015

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Hirosato (Hr): I see that the African market has been grow-ing recently and is playing an ever more important role in the global market. What would be your views on recent develop-ments in Africa? Yokoyama (Y): Over the last 10 years, economic growth rate in Sub-Saharan Africa has annually exceeded 4%. This is above the global average. During the same period, the population in Africa has been growing at a rate of around 2.5%, which is lower than the economic growth rate. This confirms that per capita production in Africa is improving. In addition, the total popula-tion of Africa is expected to grow to 2.5 billion in 2050, a dou-bling of the current population in just 35 years. That number approaches China and India’s combined current populations. Furthermore, Africa is rich in natural resources including min-erals, water, solar and geothermal energy, and so on. These facts suggest that a proper approach to development will expand the opportunities for business and investment in Africa. Hattori (Ht): One of the reasons for the growth in the last 10 years is that China had already invested a vast amount in the African market to acquire natural resources while we were still discussing what to do there. China’s investments have had a big impact and accelerated growth. Hr: As far as economic growth is concerned, Africa is mov-ing towards a brighter future. But, it seems that very few are profiting from the growth, and the growth does not actually reach the poor. Ht: I suppose that there are three reasons. The first reason is the lack of basic infrastructure development. Despite the rich natural resources, there is not enough electricity or even ade-quate provisioning of drinking water. Neither is transportation infrastructure well established, so internal distribution costs are higher than the costs of shipments from Europe to Africa. Y: Filling the infrastructure supply-demand gap could increase GDP growth by an estimated 2 percentage points per year. Ht: Yes, so that contributes to making it the biggest reason. The second reason is the lack of production capacity in agri-culture. Africa used to be a net exporter of agricultural prod-ucts, but now it is largely an importer. The gross amount of food imports to Africa is even higher than that of Japan’s. The third reason is education. There are indeed some people who study abroad and give something back to their home coun-tries; yet, there are not enough educational opportunities for the majority. Raising the standard in these three areas is vital. Hr: The Japanese government is providing some support, isn’t it? Ht: Yes, it is. In the eastern and southern part of Africa, the Japanese government is committed to the development of a cross-border Economic Corridor, which includes the construc-tion of inland transportation routes and the development of electrical infrastructure, specifically geothermal power plants for sustainable energy. It’s a positive situation, because Japa-nese and African governments share an understanding of the problems to be solved. Y: ODA is certainly indispensable, but the amount is limited. In addition to mobilizing domestic resources in African states, in-vestments by private companies, including those from Japan, are necessary. If Japanese companies launch production bases in Africa, as Toyota has done, new employment is created and Africans can profit from on-the-job training and learn the work ethics of Japanese companies. Moreover, income levels of African people rise, and markets for higher quality products, including Japanese products, at affordable prices can be de-veloped further. This is a virtuous cycle which brings about a win-win situation between Japan and African states. Hr: Inclusive business practices contribute to poverty reduc-tion as well, and are considered to be effective over the long term. The challenge is to include the poor in the value chain. Ht: That’s right. With “Base of Pyramid” (BoP), a business model that designs and distributes goods and services for poor communities, enterprises can contribute to improving the livelihood and quality of life of many people. For example, when we assisted with building a geothermal power plant in Kenya, electricity prices fell by 10%. This is because geother-mal is more reliable than hydroelectric — there is no risk from droughts. It also costs less than thermal because raw materials like natural gas or crude oil are not required. Also, we recently launched a fund to invest in nurturing entrepreneurs who have great ideas but no capital. This initiative addresses CSR, About Inclusive, Base of Pyramid (BoP) Businesses27Cooperation