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Investment Considerations of the African Continental Free Trade Agreement (AfCFTA)

The AfCFTA was created in March 2018, with the expectation of tying a USD 3 Trillion regional market with over USD 80 Billion in untapped intra-regional exports[1]. Of course, an agreement of this magnitude would have underlying protocols and arrangements for operational reasons.


The AfCFTA was created in March 2018, with the expectation of tying a USD 3 Trillion regional market with over USD 80 Billion in untapped intra-regional exports[1]. Of course, an agreement of this magnitude would have underlying protocols and arrangements for operational reasons. These protocols cover a number of areas and also have set time frames to conclude negotiations on these legal instruments such as the protocols on;

Phase 1- trade in goods/services and dispute resolution by June 2021

Phase II- investment intellectual property rights, competition and e-commerce policy by December 2021

Investment need in Africa

The need for value creation in Africa cannot be over-emphasized. The AfCFTA is a flagship project that if utilized properly could transform Africa into a global powerhouse. Foreign investment agreements are negotiated based on the strength of the parties. African countries most times cannot match up to most of these international institutional or state investors. This means that countries in Africa get piecemeal deals as much as their strengths can fetch them with the exception of a few countries such as South Africa, Nigeria and Egypt.

The implementation of the AfCFTA will see the increase of continental and foreign investments in Africa due to the obvious increase in market size, policies and economic potentials. Investors will be gaining access to a market of over 1 billion people in the second most populated region in the world. AfCFTA also ensures that other factors attractive to investors are met, including reduction and/or elimination of tariffs, zero and/or limited barriers to trade, market and economic integration, favourable trade treatments, and investment policies.

Beyond this, the African free trade agreement is a major opportunity for African countries to leverage on each other’s economic strength. Trade facilitation measures that cut red tape and simplified customs procedures would drive USD 292 billion of the USD 450 billion in potential income gains.  

The Investment Protocol

This protocol involves an international agreement for signatories to the AfCFTA. This entails these member countries amending their national laws to accept obligations related to investment laws and policies under the AfCFTA -domestication. These are simply general templates or guidelines, to protect the right of investors and spell out conditions for investors in the region. In this sense, the AfCFTA investment protocol is a co-operation agreement allowing member states to retain their powers on investment regulation.[2] The AfCFTA in this regard provides that;

‘the right of State Parties to regulate in pursuit of national policy objectives, and to introduce new regulations, on the supply of services, within their territories, in order to meet legitimate national policy objectives, including competitiveness, consumer protection and overall sustainable development….”[3]

Article 8 of the AfCFTA provides that the Regional Economic Communities will also be built on to foster their integration purposes. The legal obligation in these REC instruments will remain in operation and not be replaced by the investment protocol of the AfCFTA.[4]

To clarify, while Africa will not be operating a single regime as regards investment, states will retain the latitude to legislate on concerning investment areas however, the protocol will ensure that there is a set standard across board. This means that states must continue to position themselves as optimum locations for foreign investment and not rely entirely on the magical powers of the AfCFTA. It is interesting to see what the extent of the national powers of the member states will be- will the agreement list out areas where national legislature cannot make regulatory interventions on? Will states be precluded from negotiating independent investment treaties outside the investment protocol of the AfCFTA?

Significant Developments in Investment and Technology

Digital Markets and E-commerce

From Yaba to Nairobi, Africa is growing to be a hotbed of technological evolutions. Technology start-ups are springing up to either disrupt old ways or invent new methods of business. Within the first quarter of the year, financial technology companies especially in Africa have concluded deals of over billions in USD.[5]

What is the role of the AfCFTA in this?

The Pan African Payment and Settlement System (PAPSS) as the first centralized payment scheme for processing payments in Africa was launched in connection with the Afrexim Bank. This is to ensure that African companies and merchants can clear and settle transactions using local currencies and not the USD or Euro which usually means longer processing and more expensive costs of transactions.

The AfCFTA recognizes the importance of the digital market in its protocols on e-commerce and its AfCFTA application which is a mobile application that enables registrants with an AfCFTA number to gain a pan-African business identity and have access and connect to Africa as a market. Of course, there are data protection issues that must be considered.  Further efforts in investment towards this sector must be encouraged.


While the AfCFTA has gained traction over the months despite the effects of the Covid-19 pandemic on global business and trade, the investment protocol is quite important and is the life-wire of the AfCFTA itself.  Africa has a reputation for being a red zone as regards investment due to a harsh political climate, regulatory uncertainty and insecurity issues, a timeous conclusion of the investment protocol would go a long way in bringing a level of clarity to investors on whom the bulk of the true potentials of the AfCFTA lies.

Ibrahim Moshood

For Centurion Law Group’s AfCFTA Desk

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