The realisation of AfCFTA’s objectives would significantly contribute to the growth and development of African economies over the next few years. The World Bank estimates that the effective implementation of the AfCFTA will, amongst others, increase the volume of intra-Africa trade by 81% by 2035, and increase total African exports by 29%. That in turn implies an increase of GDP by $450 billion or 7% per annum, lifting at least 30 million people out of extreme poverty by 2035.

There are, however, several hurdles African states must overcome in the short to medium term in order to effectively implement and realise the objectives of AfCFTA. The biggest of these challenges will be dealing with the poor state of roads, railways and port facilities as well as telecommunications infrastructure. There is thus a need for significant investment in trade-related infrastructure through initiatives such as the AU’s Programme for Infrastructure Development.

The Protocol on Investment (Protocol) is a critical instrument to foster intra-Africa investments. Its terms are, however, still being negotiated as part of phase II of AfCFTA’s instruments. The Protocol is important because it will provide investors with additional legal protection to mitigate against investment risk on the continent. Such protections are expected to include several protection standards typically found in new generation investment treaties on the continent and to reflect the policy position of African states on investment protection as espoused in the Draft Pan African Code on Investment, 2015.

The Draft Pan African Code on Investment, 2015 (Draft Investment Code) sets out the policy position of African states on fundamental investment protection standards required on the continent and is generally viewed as the foundation for any future investment protection instruments on the continent. One would therefore expect that Protocol will reflect, to a large extent, the fundamental aspects of the Draft Investment Code.

The standards of protection that can be expected in the Protocol are, amongst others:

• expropriation and compensation;
• the Most Favoured Nation Treatment standard;
• National Treatment standard; and
• free transfer of funds.

Save for the standard listed above, it is unclear whether the Protocol will contain provisions such as Fair and Equitable Treatment (FET Standard) or, at the very least, the Minimum Standard of Protection standard found under customary international law, including whether intra-African investors will have recourse to investor-state arbitration or a pan-African investment court, or whether investors will be limited to domestic courts.

The Draft Investment Code appears to suggest that the Protocol will omit the FET Standard in totality and that access to investor-state arbitration will be subject to the policy position of a particular host government. It is not clear what role investor-state arbitration will ultimately play under the Protocol as a direct enforcement mechanism for investors of guarantees and/or commitment by host states. The current position expressed by African states in the Draft Investment Code is that investment disputes between investors and African states “may be resolved through arbitration, subject to the applicable laws of the host State and / or the mutual agreement of the disputing parties, and subject to exhaustion of local remedies”. And so, it would seem that the Protocol will not, by default, introduce prior written consent for investment disputes to be submitted to arbitration by African states. The result being that there will be no automatic right by any intra-African investor to enforce the guarantees under the Protocol, watering down the guarantees and commitment of states to investors.

The AfCFTA member states must fast track the negotiation of the Protocol as it will play a critical role in driving private sector investment in trade-related infrastructure. There is also a need for more transparency by the AU on the status of various critical instruments of the AfCFTA such as the Protocol. Such transparency will ensure that the private sector can actively participate in providing the input and support necessary to ensure the AfCFTA’s success.