Introduction
At a time when protectionism and nationalism have been on the rise globally, Africa is leading the way through the African Continental Free Trade Area (AfCFTA). Remarkable progress has been made in the AfCFTA project. Adopted on 21 March 2018, the Agreement that established the AfCFTA entered into force in May 2019 with three key protocols covering trade in goods, trade in services, and dispute settlement. Although its entry into force was immediately followed by the outbreak of the devastating Covid-19 pandemic, the AfCFTA project has been unstoppable. Already in August 2020, in the middle of the pandemic, the AfCFTA Secretariat was established in Accra, Ghana, while the Agreement secured the signature of 54 out of 55 African Union (AU) member States, 46 of which have since ratified it. Trading under the AfCFTA was formally launched on 1 January 2021, while actual trade under the terms of the AfCFTA Agreement started in October 2022 under the so-called Guided Trade Initiative. The AfCFTA is already the largest free trade area in the world by the number of participating countries, aiming to lay the foundation for a single market for a continent of 1.4 billion people and a combined GDP of close to US$ 3 trillion.
In a step that takes the AfCFTA well beyond typical free trade agreements, on 19February 2023, the AU Assembly of Heads of State and Government adopted three new protocols to the AfCFTA Agreement – on investment, on intellectual property rights (IPR), and on competition policy. The significance of these protocols in deepening continental market integration cannot be overstated. A snapshot of each of these protocols reveals the extraordinary ambition and speed of progress in the effort to establish a truly integrated African market in all its forms.
The Protocol on Investment
The Investment Protocol aims to establish a “balanced, coherent, clear, transparent, predictable and mutually-advantageous continental framework of principles and rules for investment promotion, facilitation and protection”. The objectives of the Protocol include the encouragement of intra-African investment flows by establishing a balanced, predictable and transparent continental legal and institutional framework for investment complete with appropriate mechanisms for the prevention, management and settlement of investment disputes.
A successful investment protocol will: (i) add free movement of capital to the current AfCFTA portfolio already that contains elements of free movement of goods and services across Africa; (ii) allow African businesses to take advantage of investment opportunities beyond national boundaries; (iii) enable investors take investment decisions on the certainty that they can sell their products and services to a market of over 1.4 billion people; (iv) enhance Africa’s capacity to produce the goods and services necessary to trade across borders under preferential AfCFTA terms; and (v) in the process, enhance the capacity of the AfCFTA to make a difference in the lives of Africans as business owners, workers and consumers.
In the pursuit of these goals, the Investment Protocol establishes obligations on State Parties to promote and facilitate intra-African investment and to adhere to such traditional standards of protection as national treatment (post-establishment), most-favoured nation treatment, and freedom from expropriation without compensation. At the same time, these obligations are subject to exceptions designed to preserve a margin of regulatory space for State Parties. It is notable that the AfCFTA Investment Protocol devotes a whole provision (Art 26) to the promotion and facilitation of investment that contributes to the fight against climate change.
Finally, the Investment Protocol also contains the ingredients of a dispute resolution mechanism under which disputes between State Parties, including cases of diplomatic protection under international law, are subject to the standard rules of the AfCFTA Protocol on dispute settlement (Article 44), while the thorny question of investor-state arbitration has been left to a future agreement that will be negotiated over the 12 months following adoption of the Investment Protocol.
The AfCFTA Investment Protocol is the ultimate expression of Africa’s aspiration to build an integrated continental market, foster structural transformation, and build a competitive private sector. Among the critical issues that will require continued attention are the relationship between the Investment Protocol and existing bilateral investment agreements, and the implications of the grandfather clauses contained in the Protocol (e.g. Articles 13.4 and 14.3) under which superior benefits conferred on investors from third States under existing or future bilateral or regional agreements would not become available to African investors governed by the Investment Protocol.
The Protocol on IPR
Recognizing the critical role played by IP in promoting innovation and fostering economic development in an increasingly knowledge-driven global economy, African countries have invested in establishing national IP regimes, and are party to several international treaties. However, the IP space in Africa remains significantly fragmented, with a plethora of initiatives and instruments at regional and continental levels. This is a major obstacle to the implementation of the AfCFTA. It also undermines the ability of African designers, artists, entrepreneurs and innovators to reap the profits of their creations, and thus the possibility of fully unleashing the creative economy on the continent.
The adoption of the IP Protocol is a step in the right direction. It aims to support the realization of the objectives of the AfCFTA by establishing harmonized rules and principles on the promotion, protection, and enforcement of IPR. The Protocol covers a comprehensive array of IPRs including plant variety protection, geographical indications, marks, patents, utility models, industrial designs, undisclosed information, layout designs of integrated circuits, copyrights and related rights, traditional knowledge, traditional cultural expressions and folklores, as well as genetic resources. The Protocol espouses the notion of the preservation of the acquis at national, regional and multilateral levels by providing a framework compatible with prior international IP treaties.
A prominent feature of the Protocol is its development-oriented and pan-African approach, aiming to strike an appropriate balance between IP protection, advancement of public welfare, and the promotion of African interests. Moreover, the Protocol has a strong emphasis on technical assistance, multi-layered cooperation and capacity building in the administration and enforcement of IPR, a forward-looking perspective addressing emerging technologies, and special attention to the needs and interests of micro, small and medium enterprises, as well as women and youth entrepreneurs.
The implementation of this Protocol will streamline and strengthen processes and mechanisms for the protection and enforcement of IPR across the continent. It has enormous potential to stimulate innovation, fostering technology collaboration among firms and individuals along continental value chains, and unleashing a sustained wave of intra-African investment to support expanded and sophisticated trade under the AfCFTA.
Notwithstanding its significance, the adopted Protocol only provides a framework agreement, with several issues, obligations and modalities for the protection and enforcement of IPR covered therein to be further negotiated and adopted by State parties. Importantly, clarity and guidance will be required regarding the role and mandate of the AfCFTA Intellectual Property Office (Article 31), especially in terms of its linkages with, and implications for the existing regional IP organizations, namely the African Intellectual Property Organization (OAPI) and the African Regional Intellectual Property Organization (ARIPO).
The Protocol on Competition Policy
The adoption of the AfCFTA Protocol on Competition Policy constitutes a significant step in the process of continental integration. In the absence of safeguards regulating anti-competitive practices, businesses can abuse their dominant market positions through price fixing cartels, predatory behaviour that eliminates local competition and other market-sharing agreements. Competition law is at the heart of making market economies functional. The objective of the protocol is therefore to eliminate anti-competitive and other restrictive business practices for improved market efficiency, inclusive growth and to ensure that gains from trade liberalization are not negated or undermined by anti-competitive practices.
The Competition Protocol includes definitions of key provisions such as “anti-competitive business practices” which decide the practices that are to be considered incompatible with the proper functioning of the market. These include, amongst others, decisions on mergers and acquisitions, prohibitions of certain horizontal and vertical anti-competitive business practices or related practices that lead to market distortion.
Other provisions include the establishment of the AfCFTA Competition Authority, which will function as an autonomous body with powers to administer and enforce provisions of the Protocol and decide on any undertakings, including approving mergers.
Today, competition in many African countries is restricted by business practices that undermine competitive dynamics and by government interventions and regulations that create obstacles to healthy competition, often aggravated by the absence of competition laws or weak enforcement of existing laws. As the AfCFTA effectively eliminates tariffs and non-tariff barriers between its State Parties, new opportunities for competition to a wider continental market arise. The Competition Protocol will play a key role in the effort to ensure healthy competition on the continent, accelerate reduction of consumer prices, and improve business practices conducive for Africa’s socioeconomic transformation.
The next steps towards realizing the AfCFTA Protocol on Competition, are built into the agreement. The Protocol establishes the AfCFTA Competition Tribunal as an autonomous body to decide on appeals from the decisions of the AfCFTA Competition Authority. The rules governing the functioning of the Tribunal are to be determined by the Council of Ministers in the future.
Conclusion
The adoption of the three protocols by the AU Assembly is a testament to the political commitment to underpin intra-African trade relations with mutually agreed rules and institutions. Ratification of these three protocols and bringing them into force is the next step. Even then, however, the gains from this expanded AfCFTA package will not be automatic. AfCFTA State Parties will need to take steps to ensure these protocols are fully implemented through domestic laws, regulations and institutions. Creating coherence and synergy between the new continental norms and institutions, on the one hand, and their equivalents at the regional level on the other will be crucial for the full realization of the potential benefits of the AfCFTA.