AfCFTA Protocol on Investment: Trojan horse for foreign investors?

By Danilo Desiderio

An article published on Bilaterals, a platform known for its critical stance on free trade agreements, particularly those involving nations with varying levels of development, raises concerns about the potential impact of the African Continental Free Trade Area (AfCFTA) Protocol on Investment. The article suggests that, without proper implementation by State Parties, the Protocol could exacerbate land grabbing in Africa, particularly by foreign investors.

Land grabbing refers to the acquisition or leasing of large tracts of land by foreign entities for agricultural or other purposes, often to the detriment of local and indigenous communities. This practice has become a growing concern across Africa due to the associated risks of forced expropriation and abuse, particularly among marginalized populations.

While the AfCFTA Protocol on Investment acknowledges the need to safeguard the land rights of local communities, its provisions are not automatically enforceable within State Parties. Instead, they must be incorporated into national legislation.

This reliance on domestic legal frameworks introduces the risk that the community rights outlined in the Protocol may not be upheld if State Parties fail to adopt corresponding laws.

Currently, few African nations formally recognize the customary or traditional tenure rights of indigenous peoples and local communities to land, forests, or water. Consequently, it is imperative that, during the domestication of the AfCFTA Protocol, State Parties enact specific legislation to protect these rights.

For example, measures should be put in place to prevent expropriation of community lands for investments deemed to be of “public interest.” This concern is particularly relevant given that over 90 percent of foreign investment in Africa originates from non-African entities.

The Protocol also extends its benefits to non-African investors, provided they conduct “substantial business activity” within an AfCFTA State Party. The criteria for determining such activity include the nature, size, scope, and sector of the business, as well as the investment amount.

However, leaving the interpretation of these criteria to individual State Parties introduces the risk of favoritism or corruption in favor of foreign investors. More critically, it could allow foreign entities to exploit an agreement originally designed to promote African businesses.

As a result, the Protocol’s effectiveness in achieving its intended goals may be compromised.

Ensuring that State Parties implement robust legal frameworks to address these challenges will be crucial in safeguarding the rights of African communities and maintaining the integrity of the AfCFTA’s objectives.

Danilo Desiderio serves as the CEO of Desiderio Consultants Ltd in Nairobi, Kenya, specializing in African customs, trade, and transport policies. He is a customs and trade expert at the World Bank and a senior associate to the Horn Economic and Social Policy Institute (HESPI).