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Japan Invests In South African Steel Plant

STEPPING tentatively toward a long-term involvement in South Africa, a Japanese steel company has made the first Japanese direct investment here in 25 years.

The Nippon Denko Company and South Africa's Samancor, the ferro-alloy branch of the General Mining Corporation (Gencor), announced on April 21 a tentative joint venture in the production of ferrochrome. The Japanese company will purchase half of a $20 million Samancor production plant.

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The Japanese steel group will be replacing production capacity in Japan with a cheaper unit price in South Africa. Plants here are running at only half capacity. Samancor will benefit by being able to restore a Tubatse plant furnace to full capacity.

The decision follows a two-year assessment by Japanese businesses, including two visits by the influential Japan Federation of Economic Organizations (Keidanren).

"The Japanese have bought at rock-bottom prices in a cash-strapped South African market," says a Johannesburg mining analyst. "But I think it is significant that they are getting involved in joint ventures at a time when other potential foreign and local investors are adopting a wait-and-see attitude."

Japanese officials say the landmark investment signals the beginning of a long-term Japanese investment program. In a March 23 address to Japanese business management students in Johannesburg, Japan's ambassador in South Africa, Katsumi Sezaki, said that there was "enormous potential" for developing business relations between the two countries.

But Mr. Sezaki added that potential investors remained cautious because of political instability, continuing sanctions by states and municipalities in the United States against South Africa, and uncertainty about future policies on taxation, immigration, and protectionism.

Japan lifted all economic sanctions against South Africa in October 1991, and reestablished full diplomatic relations in January 1992. Japanese officials say that firms are first seeking joint ventures in South African mineral production - particularly iron ore, manganese, platinum, vanadium, and coal - and joint manufacturing ventures second. Japan is also interested in diamonds, gold, and other precious metals.

Total Japanese trade with South Africa fell from $4.1 billion in 1987 to $3.3 billion in 1990 after the Japanese government, embarrassed by its position as South Africa's major trading partner, ordered a reduction in trade. In 1990 Japan ranked fifth among South Africa's trading partners after Germany, the US, Britain, and Italy.

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