After the Japanese quake/
tsunami crisis, one of
Africa’s major trading
partners is on the blink,
according to Simon
Freemantle and Jeremy
Stevens, economic research
strategists at Standard
Bank – who have especially
released their latest study on
the situation to FTW.
“Japan has, traditionally,
been one of Africa’s most
relevant trade partners,” said
the economics duo.
In the immediate
aftermath of the earthquake,
it is likely that Japan’s
demand for African
commodities will taper off,
according to Freemantle/
Stevens.
“Firstly, their own
economic slowdown means
that fewer resources will be
needed,” they said. “Japan
is heavily dependent on
the manufacturing sector
– most notably vehicles
and consumer electronics –
which account for just under
a quarter of output.”
They pointed out that
several large corporates
had operations in the
areas most affected. For
instance, Honda, Toyota,
Mazda, Nissan, Suzuki
and Mitsubishi have each
temporarily suspended their
operations. Moreover, it’s not
simply vehicle makers that
have been affected: Sony,
Toshiba, Panasonic, Hitachi,
Canon and Nikon have shut
production at several plants.
“A fall in production
means less demand for
Africa’s commodities,” said
Freemantle/Stevens, “like
mineral fuels, precious
metals, iron ore and wood.”
A second factor leading
to a tapering off in Japanese
demand for African
commodities is that Japan
is an enormously important
global consumer – often
providing an end market
for products that have been
created by an increasingly
globalised supply chain.
“Africa’s raw materials
have proven particularly
agile in attaching themselves
to global supply chains,”
said Freemantle/Stevens,
“as direct inputs to the
manufacture-for-production
in China, Germany and
many others.”
A third inhibiting factor is
that Africa’s exports, again
mostly of commodities,
have benefited from the
industrialisation that has
occurred in key emerging
markets, like China and
India, which export a vast
amount of goods to Japan.
“Naturally, the near-term
fall in Japanese demand
will present a headwind to
economic activity in these
emerging economies,” said
Freemantle/Stevens.
A final factor is that
events in Japan will affect
prices of commodities,
which will impact on
Africa’s terms of trade.
“Already, palladium and
platinum have declined by
10% and 5%, respectively,
since the earthquake,” said
Freemantle/Stevens.
“It is important to note
that these implications are in
the near-term. In the longer
term the impact is far less
clear. Recall, approximately
9 700 megawatts of nuclear
power generation capacity
has been shut down in Japan,
representing about 8% of
the country’s total power
generation capacity.
“It is plausible that in
the rebuilding phase that is
inevitable, the demand for
Africa’s commodities could
increase.”
Economists analyse impact of Japan earthquake
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