Kenyans call it Hell’s Gate, a volcanic area where steam and sulphurous gases gush out from below the ground to produce a renewable form of energy that supplies roughly half the electricity for the east African economic powerhouse.
But the fact that Kenya ranks among the world’s top 10 producers of geothermal energy, according to KenGen, the state-controlled power company, is largely thanks to Japanese backing.
“Without Japanese technology, there would hardly be any geothermal production in Kenya,” says Iwasuke Shimada, managing director for Toshiba in Africa, as he watches steam emerging from a unit at Olkaria. The continent’s first geothermal power station, Olkaria, is still increasing its output.
Japan provides between 70 per cent and 80 per cent of geothermal turbines worldwide, Shimada adds. Moreover, Japan International Cooperation Agency, JICA, says that it has financed 17 per cent of the world’s geothermal capacity, or ¥397bn ($2.9bn), in Africa, Asia and Latin America. This includes ¥99.6bn for Olkaria and its power transmission lines.
Thanks to low-interest, long-term loans from JICA, Kenya is at the forefront of geothermal energy production in Africa. And Japan’s support for the country goes back almost 60 years, to Kenyan independence. But, for years, Tokyo has watched in dismay as China’s leaders criss-crossed Africa, cutting deals for oil and minerals, courting governments and becoming its largest source of development finance.
In recent years, though, Japan has stepped up efforts to engage with African countries as it seeks to contain China’s influence. That is especially the case now that Beijing has put the brakes on lending. And, while China has dominated the financing and construction of Africa’s highways, railways and glitzy skyscrapers, Japan is focusing on other areas such as user-friendly roads and renewable energy.
“Geothermal in Kenya wouldn’t be where it is if not for Japanese financing,” says John Mudany, finance director of KenGen, echoing Shimada’s point about technology. And the terms for Japanese loans are better than those that China offers, he adds.
Beijing’s $382mn loan to support geothermal drilling in Olkaria carries a 2.5 per cent interest rate repayable over 20 years with a grace period of seven years, according to AidData, an international development research outfit based in the US. By contrast, says Mari Kato, senior representative in Kenya for JICA, Japan’s ¥29bn loan for the construction of some Olkaria units carries a 0.2 per cent interest rate repayable over 30 years, with a grace period of 10 years.
Tokyo’s involvement in African development aims to focus on growth in exports, capital expenditure, and productivity. That means putting money into roads, ports, agriculture, manufacturing — and renewable energy.
“We have experience in assisting Asian countries in their development,” Kato says. “We thought we could utilise that knowledge, and the technology and expertise we have, in Africa, coming in as a friend, because we have not been colonising Africa.”
Still, Japan is undeniably looking to boost its presence in African countries.
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At the seventh Ticad (Tokyo International Conference on African Development), held in Yokohama in 2019, late prime minister Shinzo Abe said Japan would boost private-sector investment in Africa by $20bn.
Japan “wants to project itself as a different and alternative development partner”, says Kenichi Ohno, an economics professor who researches Africa at the National Graduate Institute for Policy Studies in Tokyo. He also notes that the 2022 Ticad will take place in Tunisia in August.
However, he adds: “Japan promised to link development with business at previous Ticad meetings, but actually very few Japanese companies invested in Africa.” For them, he says, African countries are “far, and unfamiliar”.
Instead, the key to further Japanese engagement with Africa is likely to be via financing, including favourable loans and grants.
China’s recent cuts to lending in Africa may well lead to an increased Japanese presence, says Patrick Anam, a Nairobi-based trade policy lawyer who focuses on Japan. JICA’s loans and technical co-operation grew from a total ¥188bn in 2019 to ¥226bn in 2020.
Last year, JICA signed a ¥73.6bn loan agreement to help replenish the main development fund of the African Development Bank (AfDB). The Japan Bank for International Cooperation grants commercial loans to projects, sometimes co-financing with other organisations, such as the AfDB.
The massive scale of China’s lending has drawn accusations across Africa that it creates “debt traps” that keep countries beholden to the lender. Japanese regulation of loans to developing countries is, by contrast, both stricter and more cautious. Recently, Tokyo even went as far as freezing new lending to some African nations amid fears of debt distress.
It is keen, however, to expand its presence in Africa, as lawyer Anam notes. “In Kenya in particular, and in east Africa in general, Japan has been here even before China became prominent,” he says. “But now . . . we have seen Japan moving to take a more critical position, becoming more aggressive.”
