Introduction 

The African Continental Free Trade Area (AfCFTA) was signed by Cameroon on 21 March 2018 and is the largest free trade area across the world. Its potential is enormous, with the World Bank forecasting that it will bring 30 million people out of extreme poverty and raise incomes for 68 million poor Africans who live on less than $5.50 per day. There are a total of eight AfCFTA protocols; protocols in trade in goods, services, investment, intellectual property rights (IPR), competition policy, dispute settlement, digital trade, and women & youths. Out of these, the protocols on Investment, Competition Policy, Intellectual Property, and Digital Trade have been adopted.

However, this article focuses on the impact of the protocols in investment on the Cameroonian economy. Section one outlines the main elements of the investment protocol, section II outlines current progress in the implementation of these protocols, section III analyzes Cameron’s investment laws and Section IV looks at the economic implications of these laws and the investment protocol. It concludes with actionable policy recommendations to improve the functioning and implementation of the investment protocol.

Section 1: Main elements of the Investment protocol

The AfCFTA Investment Protocol, which was adopted in February 2023 aims to create a more favorable investment environment in Africa. It provides essential protection to investors such as national treatment and guarantees against expropriation. It promotes sustainable investment by providing a sound legal framework and a predictable environment that encourages the acquisition and transfer of technology facilitating investment and protecting investors.

Investment Promotion, facilitation, and sustainable development

The AfCFTA Investment Protocol provides a framework for promoting and increasing awareness among states via joint investment promotion, business matching events, and establishing a pan-African Trade and Investment Agency with regional economic communities undertaking investment promotion activities (Art. 6). The protocol also promotes investment facilitation by streamlining investment procedures to establish frameworks for cooperation. In contrast, sustainable investments are strongly encouraged in Article 8. Additionally, it addresses sustainable development issues and establishes mechanisms for dispute resolution, ultimately aiming to enhance intra-African investment flows and economic growth (Article 2).

Finally, an important part of the agreement is the mandate to designate national focal points (Art. 9) that will provide relevant instruments and all information, including requirements and fees, taxes and charges, financial and fiscal incentives, technical standards, construction permits, capital transfers, and procedures for appealing or reviewing decisions on applications for authorization.

Cameroon has an investment charter (Law No. 2002/004) that is committed to preserving free enterprise and freedom of investment, special measures, and a willingness to establish an appropriate institutional and regulatory framework designed to ensure investment security and prompt dispute settlement. The investment protocol provides guidelines to accelerate an appropriate institutional and regulatory framework that will unleash regional and international investments.

Section 2: What Steps Has Cameroon Taken to Implement the Investment Protocol

Cameroon has enacted several regulations to support its commitments under the AfCFTA. This includes;

• Law No. 2019/010 authorizes the president to ratify the AfCFTA agreement on July 19, 2019, laying down the legal framework necessary for the implementation of the agreement, which equally relates to trade and investment.
• Presidential Decree No. 2019/586, Issued on October 31, 2019, formally ratifies Cameroon’s participation in the AfCFTA agreement after parliamentary approval and emphasizes its commitment to create a conducive environment for trade and investment.
• This was followed by the Inter-Ministerial Committee Framework created through Prime Ministerial Order No. 039/PM on March 29, 2021. It provides a structured approach for coordinating various ministries, facilitates research and proposes strategies that are necessary for effective implementation.

Section 3: Cameroon’s Investment Laws

The Investment Promotion Law (Law No. 2013/004) – not explicitly tied to the AfCFTA – supports foreign direct investment via tax exemptions and guarantees against expropriation. However, they all work to attract investment under the continental framework. Furthermore, several laws that aim to simplify customs procedures have been enacted to smooth cross-border operations as stipulated under the AfCFTA guidelines. These legislative measures are essential in reducing non-tariff barriers that could hinder trade.

Section 4: Economic Implications of Investment Protocol

In itself, the investment protocol will not have a direct impact on investment flows in the short term as Cameroon has a range of laws and regulations designed to promote investment. However, the AfCFTA protocol will likely amplify capital flows as it provides a framework for Cameroon to effectively attract investments from other countries across the continent.

The investment protocol will allow greater harmony in Cameroon’s investment laws while ensuring a level playing field for investors across the continent willing to invest in Cameron. It is still too early to provide quantitative forecasts as an investment is driven by a range of factors ranging from interest rate differential, the ease of doing business, and corporate tax levels.

The Investment protocol will improve institutional quality, enabling trade and export organizations to effectively design procedures and laws that facilitate cross-border investment across Africa. The investment protocol will equally reduce the adverse impact of “investor bias” and prevent a race to the bottom by allowing or facilitating information sharing among countries and institutions.

Recommendations

Current investment laws should be adjusted to reflect the investment protocols to attract more capital for Cameroonian businesses. The Ministry of Commerce and the Ministry of Finance should coordinate to ensure that they balance their interest effectively as revenue generation and investment promotion usually diverge on an administrative level.

Investment fairs should be used to encourage more capital from around the continent. Rather than simply seeking to attract high net-worth investors, the investment protocols should be adopted to ensure that a level playing field can be provided for all investors across the company.

Policymakers should accelerate reforms to the business environment and remove harmful subsidies that distort the competitive environment for smaller firms. Considering that start-ups and Micro SMEs do not have the same capacity to invest, trade, export, and market themselves, unfair subsidies mustn’t be used as a tool to attract FDI flows, as this increases the risks of market capture and monopolies.

Conclusion

Cameroon signed the AfCFTA in 2018 and the investment protocol has now been approved by the African Union. However, Cameroon already has fairly attractive investment laws even as their effects are mitigated by a difficult business environment. However, investment laws must be further improved to ensure a level playing field for investors across the continent. The investment protocol provides a framework for more effective cross-border investments across Africa and the Inter-Ministerial Committee should ensure investment laws meet the requirements set in the investment protocol.

Henri Kouam

Economist & Executive Director

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