More Japan firms open shop locally in confidence vote
Nakuru Governor Kinuthia Mbugua and deputy Ambassador of Japan to Kenya Mikio Mori enjoy a glass of goat milk courtesy of a women’s group in Elburgon whose activities have been funded by the Japan Social Development Fund. PHOTO | FILE
What you need to know:
The list of Japanese firms opening shop in the country has risen sharply over the past five years.
The rising tide of Japanese setting up base in Kenya cements Nairobi’s position as a leading investment destination for the Far East economic power house.
Japanese companies have increased their presence in key sectors of the economy, stepping up competition for Chinese and European firms that have long dominated Kenya’s big business.
Trade data shows that the list of Japanese firms opening shop in the country has risen sharply over the past five years, gaining a foothold in infrastructure development and the consumer goods business.
President Uhuru Kenyatta recently pitched Kenya as a lucrative investment destination for Japanese firms during a visit to Tokyo, urging the more than 100 big companies present at a forum to consider setting up shop in Nairobi.
Trade between the two countries is hugely imbalanced against Kenya, whose exports to Japan last year stood at Sh3.52 billion and mainly consisted of commodities like tea, coffee, fruits and fresh flowers, according to the Economic Survey 2015.
Japan, which is also referred to as the Land of the Rising Sun, in turn sold to Kenya motor vehicles, auto parts and engines, iron and steel products worth Sh86.6 billion, a 48.7 per cent increase since 2010.
“We welcome proposals on how to improve the current level of support to the private sector,” said Mr Kenyatta, his unspoken intention being to bridge the glaring trade imbalance.
But many Japanese business people did not need Mr Kenyatta’s nudging, having already made significant inroads into different sectors of the Kenyan economy.
High-end camera maker Nikon last Friday opened a multimillion-shilling showroom at the Thika Road Mall, joining the likes of Toridoll Corporation, Canon, Toyota Tsusho Corporation, Nissin Food Holdings, Lixil – a consumer goods conglomerate – and Honda Motor which have established a presence in Nairobi recently.
The rising tide of Japanese setting up base in Kenya cements Nairobi’s position as a leading investment destination for the Far East economic power house.
State-owned Japanese External Trade Organisation (Jetro), which has an office in Kenya, said Japanese investors fully understood Kenya’s economic potential about 10 years ago, triggering their increased presence in the country.
“Kenya is endowed with a lot of natural resources and those that have been well exploited have greatly improved the economy, increasing the purchasing power of citizens in the process,” said Atsuhiko Naoe, Jetro’s executive director in Kenya.
“Japanese companies have taken note of Kenyan’s increased spending power and that is why the country stands out for those expanding their operations into Africa.”
Over the past 10 years, Japanese firms, operating through subsidiaries or exclusive dealers, have set up multi-billion shilling businesses in Kenya.
This trend, if sustained, could redefine the trade (and imbalance) between the two countries, which is currently anchored on Japanese motor vehicles. Kenyans bought Sh53.7 billion worth of Japanese vehicles last year.
Nikon’s Nairobi showroom is the first such facility in Africa. The company deals in products like cameras, lenses and binoculars.
“Kenya has a growing culture of photography and we would like to nurture that,” Takashi Yoshida, the managing director for Nikon MEA and North Africa, said during the opening of the showroom.
Nikon’s investment comes two months after Toridoll Corporation, an international fast food chain based in Kobe, opened an outlet, Teriyaki Japan, along Nairobi’s Mama Ngina Street at a cost of Sh100 million.
The chain plans to open nine more eateries in Nairobi and a similar number in other towns in the next two years, its aspirations pegged on the “growing middle class”.
The list of Japanese businesses that have set shop in Kenya in the recent past includes Canon, a marketer of printers, cartridges and toners that opened a regional subsidiary in Nairobi in 2013.
High-end watchmaker Casio is also seeking to enter the market through local distributors.
In the oil and minerals front, Japan Oil Gas and Metals Exploration Company has signed an agreement for oil exploration with State-owned National Oil Corporation while conglomerate Toyota Tsusho Corporation in May completed the feasibility study and design of a Sh400 billion oil shipment pipeline to run from Uganda to Lamu, setting Kenya on the path to shipping out its first crude exports by 2018.
Toyota Tsusho last September also signed an agreement with the government to construct a Sh103 billion fertiliser plant in Eldoret which will help reduce the cost of the input by up to 40 per cent.
Japan’s Nissin Food Holdings has established a Sh500 million joint venture with the Jomo Kenyatta University of Agriculture and Technology (Jkuat) to manufacture food products such as noodles for local consumption and export.
Jkuat has also partnered with Lixil, a consumer goods conglomerate, to produce a “green” toilet that does not use water and recycles human waste into fertiliser.
Japan’s Honda Motor Co. in 2013 set up a Sh450 million assembly plant in Kenya to manufacture 25,000 motorcycles every year, having made a comeback into the market in 2012 after a seven-year absence.
Toyota Kenya, one of Honda’s rivals, has also invested Sh500 million in a truck and bus assembly plant.
Other Japanese firms with operations in Kenya include Suzuki, Mitsubishi Corporation, Mitsui and Company and Sharp Corporation.
Next Thursday, the Japanese Embassy will host a conference where more than 50 Japanese contractors and consultants in the infrastructure sector will meet their Kenyan counterparts.
Tatsuya Takada, the commercial attaché at the embassy, said the companies are increasingly seeing Kenya as a gateway to East African and other parts of the continent.
“Kenya is easy to penetrate as it has always responded well to Japanese products like Toyota,” Mr Takada said in a telephone interview.
The embassy, he added, assists Japanese firms to surmount any business hurdles they encounter through a task force that comprises the Kenya Revenue Authority and the ministries of Immigration and Trade.
Kenya has rooted its case in historical ties with Japan besides offering a conducive environment for the Asian giant’s multinationals to do business in Africa, with aid money as a big feature in this relationship.
Japan’s cumulative assistance to Kenya currently stands at Sh445 billion.
The Treasury has opened talks with Tokyo seeking funding for a number of projects through Yen-denominated loans with single digit interest rates, seeking to get a slice of the $32 billion that Japan has set aside for investment and aid to Africa.
The list of projects in the pipeline include construction of the Nakuru-Nandapar Road linking Kenya with South Sudan at a cost of Sh32.9 billion.
Others are universal health care and the Olkaria V geothermal power plant that KenGen has said will produce 140 megawatts at a cost of Sh31.5 billion.
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