Seven Key Areas of the African Continental Free Trade Area (AfCFTA) Investment Protocol

Introduction

In its most recent Investment Report, UNCTAD highlights a significant rebound in foreign direct investment (FDI) inflows to Africa. In 2024, foreign investments across the continent rose dramatically by 75% to reach $97 billion, which represents 6% of the global FDI, compared to 4% a year before.  However, Africa’s infrastructure needs are estimated at $130-170 billion annually. While the surge was driven by large international urban development projects in Egypt, FDI still rose 12% to $62 billion, representing 4% of global flows. Investment facilitation efforts are estimated at 36% of favorable measures, as explained in this case.

In 2018, African countries signed the African Continental Free Trade Area (AfCFTA), a flagship project under the African Union’s 2063 agenda for a peaceful, integrated, and prosperous Africa. This AfCFTA will lower tariffs and non-tariff barriers, making it easy for businesses to trade their goods across the continent without and facilitating the free movement of capital and people. More importantly, it will help plug Africa’s investment shortfall.  In February 2023, African policymakers adopted the African Continental Free Trade Area (AfCFTA) Investment Protocol. It is a pivotal framework designed to boost intra-African investment, promote sustainable development, and harmonize investment policies across the 54 African Union (AU) member states.

This brief will outline seven important aspects of the investment protocol, summarized under seven broad themes, including Administrative and Operational, Sustainable Development, Dispute Settlement, Termination of Intra-African Bilateral Investment Treaties (BITs), and other key areas. Each aspect is supported by relevant articles where available, based on the Protocol.

1. Administrative and Operational: National Focal Points (Article 6)

Under Article 6, the Investment Protocol establishes National Focal Points to streamline investment processes and enhance coordination at the national level. Due to the multitude of bilateral investment treaties and updates to national investment laws, National Focal Points will serve as centralized hubs to provide information, facilitate interactions between the state and investors, and promote investment opportunities. They are tasked with simplifying administrative procedures, ensuring transparency, and supporting investors in navigating regulatory frameworks. This is vital in a continent with eight regional economic communities as it creates a mechanism to reduce bureaucratic hurdles, fosters investor confidence, and aligns with the AfCFTA’s goal of creating a seamless continental market. By decentralizing operational support while maintaining a standardized approach, National Focal Points address the diverse administrative landscapes across African states, making investment more accessible and efficient.

2. Administrative and Operational Tool: Pan-African Trade and Investment Agency (Article 7)

Article 7 introduces the Pan-African Trade and Investment Agency, a continental body designed to coordinate investment promotion and facilitation across AfCFTA state parties. This agency supports the implementation of the Protocol by providing technical assistance, harmonizing investment policies, and promoting intra-African investment opportunities.

It will become a catalyst for regional integration by identifying strategic investment sectors, supporting small and medium enterprises (SMEs), and fostering cross-border partnerships. The agency’s role is critical in ensuring that investment aligns with the AfCFTA’s broader objectives of economic diversification, industrialization, and sustainable development, making it a cornerstone of the Protocol’s operational framework.

Figure 1: Foreign direct investment (FDI) inflows to Africa by region, billions of dollars, and percentage

Source: UNCTAD (2024)

• Sustainable Development: Investor Obligations and Environmental Protection (Articles 18–21)

The Protocol places a strong emphasis on sustainable development, embedding investor obligations to align with environmental, social, and governance standards. Unlike most investment protocols, it does not favor investors at the expense of states. Articles 18 to 21 require investors to comply with environmental protection measures, respect human rights, adhere to labor standards, and combat corruption. These provisions ensure that investments contribute to sustainable economic growth rather than exploiting resources or communities. For instance, investors must conduct environmental impact assessments and engage with local communities, particularly in disadvantaged regions. This focus reflects Africa’s commitment to balancing economic growth with social and environmental responsibility, ensuring that investments support long-term development goals, such as poverty reduction and climate resilience.

• Sustainable Development: Prioritizing Disadvantaged Areas and Local Communities (Article 17)

Under Article 17, the Protocol encourages investments that benefit disadvantaged areas, local communities, and underrepresented groups, such as women and youth. Governments are urged to create specific incentives for investments in regions with lower economic activity, promoting inclusive growth and reducing regional disparities. This aspect is crucial for addressing Africa’s uneven economic development, ensuring that investment flows reach underserved areas and contribute to job creation, skills development, and technology transfer. By prioritizing inclusivity, the Protocol aligns with the African Union’s Agenda 2063, which envisions equitable and sustainable development across the continent.

• Dispute Settlement: State-to-State and Investor-State Mechanisms (Articles 31–34)

Articles 31 to 34 establish a robust dispute settlement framework emphasizing both state-to-state and investor-state mechanisms. It prioritizes negotiation, mediation, and alternative dispute resolution (ADR) to resolve conflicts amicably, reducing reliance on costly and adversarial investor-state dispute settlement (ISDS). For investor-state disputes, the Protocol allows limited recourse to arbitration but imposes strict conditions, such as exhausting local remedies and adhering to time limits. The established under the Protocol, oversees dispute resolution processes and facilitates the development of future annexes to refine these mechanisms. This balanced approach protects state sovereignty while ensuring investors have access to fair dispute resolution, fostering a stable investment climate.

• Termination of Intra-African Bilateral Investment Treaties (BITs) (Article 38)

Article 38 mandates the termination of approximately 173 intra-African Bilateral Investment Treaties (BITs) within five years of the Protocol’s entry into force. This provision addresses the fragmentation caused by outdated BITs, which often favored investor protections over state regulatory rights. By replacing these treaties with a unified framework, the Protocol eliminates inconsistencies, reduces legal risks, and aligns intra-African investment with modern standards. Notably, it excludes traditional fair and equitable treatment (FET) standards, replacing them with administrative and judicial treatment (AJT) to prioritize transparent and non-discriminatory regulatory processes. This aspect strengthens the AfCFTA’s role as a cohesive legal framework for investment governance.

• Investor Protections with Regulatory Balance (Articles 10–14)

The Protocol provides core investor protections, including national treatment (Article 10), most-favored-nation treatment (Article 11), protection against unlawful expropriation (Article 12), and the right to transfer funds (Article 14). However, there is a requirement in Central Africa that states invest up to 20% of their retained earnings. However, these protections are carefully crafted to balance investor rights with state regulatory authority. For example, portfolio investments and government debt securities are excluded from the Protocol’s scope, limiting speculative financial flows. Additionally, the Protocol allows states to impose performance requirements and regulate in the public interest, ensuring that investment policies align with national development priorities. This balanced approach distinguishes the AfCFTA Investment Protocol from traditional investment agreements, which often prioritize investor interests over state sovereignty.

The Investment Protocol Matters

These seven aspects collectively create a forward-looking investment framework that prioritizes intra-African economic integration, sustainability, and equitable development. One of the forward-looking aspects of the Investment protocol is the establishment of the National Focal Points and the Pan-African Trade and Investment Agency, which will inevitably address operational challenges while streamlining processes and fostering coordination. Finally, the focus on sustainable development is necessary for Africa, where resource exploration has come against the interests of communities. The investment protocol is distinct from others as it ensures that investments contribute to environmental protection, social inclusion, and economic equity, aligning with global trends toward responsible investment.

The dispute settlement framework and the termination of intra-African BITs modernize Africa’s investment landscape, reducing legal fragmentation and enhancing predictability. We note that its emphasis on sustainability and inclusivity responds to Africa’s unique challenges, such as regional disparities and environmental vulnerabilities. By mandating investor obligations and prioritizing disadvantaged areas, it seeks to maximize the developmental impact of investments. The termination of BITs and the refined dispute settlement mechanisms address criticisms of traditional investment agreements, which often disadvantaged African states.

Conclusion

Together, these aspects position the AfCFTA Investment Protocol as a transformative tool for fostering intra-African investment, supporting the continent’s ambition to create a single market that drives economic growth and resilience. However, the Protocol’s success will depend on effective coordination among state parties, robust institutional support, and ongoing engagement with investors to ensure alignment with Africa’s development goals. This will be a boon for the private sector if we allow it.

Reference List.

1. World Trade Institute. (2025). PROTOCOL TO THE AGREEMENT ESTABLISHING THE AFRICAN CONTINENTAL FREE TRADE AREA ON INVESTMENT. https://edit.wti.org/document/show/8993cb69-cbc5-4f07-a372-5ef5c74e7b78
2. UNCTAD. (2024). Investment statistics and trends. https://unctad.org/topic/investment/investment-statistics-and-trends

Dr. Egbe Fride is a Research Fellow at CEPI, a recent PhD graduate, and lecturer at several private universities in Yaounde and Douala. She helps shape CEPI’s gender policy research and fintunes programming for women trainees.

Henri Kouam is the Founder & Executive Director of the Cameroon Economic Policy Institute (CEPI) of the Henri Kouam Foundation. CEPI is the only think tank in Cameron that has verifiably consulted with the government and led to tangible business-friendly policy reforms. He is a contributor at the Economist Intelligence Unit (EIU).