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The African Continental Free Trade Area (AfCFTA) offers a promising opportunity to revive stagnant investment and development. According to World Bank research, fully implementing the AfCFTA Agreement could boost intra-Africa FDI by 68% and external investment by 122%. But the devil is in the details: to achieve these gains, countries need to implement the AfCFTA Agreement and its protocols, including the Investment Protocol.
Drawing on regional integration successes in the Association of Southeast Asian Nations (ASEAN) and the European Union (EU), we know it is imperative to proactively initiate and organize efforts to implement investment reforms. After all, an agreement is only as good as its implementation. The AfCFTA Investment Protocol is a bold step forward. It goes beyond investor protections. It also addresses sustainability, transparency, and long-term growth. To unlock its potential, African countries will need to undertake a comprehensive set of legal, policy and institutional reforms. Here is how this could look:
1. Strengthening and balancing Investment Laws
The Investment Protocol requires countries to update their domestic investment laws to align with AfCFTA standards. This will ensure a balance between investor protections and a country’s right to regulate in the public interest. This is vital for fostering sustainable investment.
2. Boosting Sustainability
The Investment Protocol emphasizes sustainable development. Countries will need to enhance their environmental, labor, and consumer protection standards. Additionally, investors will be required to meet human rights, anti-corruption, and climate obligations. This is Africa’s opportunity to integrate environment, social and governance (ESG) standards directly into national strategies, including those on investment, for example through the FDI strategy, industrial policy, Nationally Determined Contributions, policies on climate finance.
3. Streamlining Investment Processes
Member countries are asked to facilitate private investments that further contribute to sustainable development. The protocol calls for simplifying work permits, providing electronic access to laws and regulations, and promoting technology transfer. Rwanda’s recent expansion of its One Stop Centre , which offers 440 services from 23 agencies at one desk is a good example of what needs to be done at scale.
4. Building a Stronger Institutional Framework
State Parties must establish AfCFTA National Focal Points, that is, institutions within the government tasked to help investors navigate the regulatory landscape, and a dispute prevention and grievance management mechanism to prevent legal disputes.
5. Fostering State-State Cooperation
The Protocol encourages cross-border cooperation on issues like climate change, public health, and market distortion. Greater cooperation will help create a more integrated and resilient investment environment.
Preparing for Implementation
The clock is ticking. While the AfCFTA Investment Protocol is not yet in force, the time to prepare has started. To support the implementation of the measures outlined above, governments will need the following elements for success.
- Political will, reform coordination and monitoring
Strong leadership is essential to build political will and coalitions for reform coordination. Each country should appoint a dedicated "AfCFTA Champion" to drive and monitor reforms, ensuring coordination across investment, climate finance, trade, environment, and labor at the national, regional, and continental levels.
- Resources and Capacity Building
Governments should assess the costs and resources required to implement the Protocol and focus on building the capacity of key institutions, especially those responsible for investment, sectoral ministries, Investment Promotion Agencies (IPAs). Member states can accordingly prioritize reforms and prepare their own reform action plans.
- Private Sector, Civil Society and Development Partner Engagement
Governments should partner with the private sector and civil society to identify barriers to investment and work with the AfCFTA Secretariat and development partners for technical expertise and financial support.
Making the AfCFTA Investment Protocol a Reality
The AfCFTA Investment Protocol is an exciting opportunity to unlock sustainable investment in Africa. By fast-tracking reforms and coordination efforts, African countries can boost FDI, create jobs, and pave the way for long-term economic transformation—so long as African governments remain committed to taking action and to the shared vision for the continent.
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