An event co-organized by SOAS and ODI

Time: 13:00-15:00 (UK Time), Wednesday, 8 June 2022
Chair: Prof. Victor Murinde, SOAS University of London
Online venue: Click here to join the seminar on Microsoft Teams (For any inquiry about how to join the online seminar, please contact Dr. Athina Petropoulou: ap102@soas.ac.uk)

Seminar Summary

On the 8th of June 2022, CGF seminar discussed the African Continental Free Trade Area (AfCFTA) and the links with foreign direct investment. The research seminar was moderated by Victor Murinde, AXA Chair in Global Finance and Director of the Centre for Global Finance at SOAS University of London, who welcomed all seminar participants and started with a number of high-level remarks, from a variety of perspectives, on the relevance of AfCFTA for attracting more and higher quality investment for Africa. The opening remarks were followed by a discussion of new research on the topic, led by Prof. Dirk Willem te Velde, and country- level reflections.

A number of distinguished speakers made valuable remarks.

Prof. Faizel Ismail, Nelson Mandela School of Public Governance at the University of Cape Town, former South African negotiator to the WTO and currently working on African regional integration and value chains, including with the AfCFTA Secretariat, made the following comments:

• He highlighted how problematic the global multilateral rules-based system is

• There does not seem to be a strong correlation between bilateral investment treaties and foreign direct investment

• The bilateral investment treaties have been very controversial because of the asymmetry between large multinational private companies and relative weak states

• The AfCFTA creates a fantastic opportunity for Africa

• It is important to be mindful of the needs and concerns of African countries in the way in which they engage with the African continent and in the advice they provide about the type of investment agreement that is built for the African continent by the continent itself

Andrew Skipper, Chair of Africa Practice, Hogan Lovells and co-chair of UK government's Africa Investors Group added the following points:

• The AfCFTA is something that the private sector is and should be excited about, however it will take some time to be fully implemented

• Intra- Africa trade has benefited a lot

• Africa could play a pivotal role in global supply chain in Europe and elsewhere due to its geographical position

Prof. Dirk Willem te Velde, Professor of Practice, in the Centre for Global Finance, SOAS University London and Principal Research Fellow and Director for International Economic Development at ODI London, made important remarks based on ongoing research and work by ODI’s Supporting Investment and Trade in African programme, working with AfCFTA secretariat, UNECA, African governments and others:

• There is a range of provisions apart from the investment protocol that can have an impact on investment both among the countries that are member of the agreement and also form countries that are outside

• It is unlikely that investment protocol will lead to liberalization on its own and it is questionable whether it will replace the existing bilateral investment treaties

• Regional integration can lead to income growth and thus more FDI. The effect is clearer for the extra-regional FDI than for intra-regional FDI

• There is less clarity around the predictability of investment framework and liberalisation. The type and strength of provisions are important

• Estimates show that an increase in income can lead to a £2.5 bn increase in UK FDI

• A stronger investment protection protocol will be beneficial for investors outside the region

• AfCFTA could increase UK FDI in Africa by 25% (£12.5) through income effects, trade provisions and investment provision

• Different sectors are likely to have different interests in AfCFTA provisions

The presentation was followed by country-level reflections on AfCFTA and investment.

Dr. Martha Belete, University of Addis Ababa presented findings from her research on the opportunities and challenges of AfCFTA investment rules for Ethiopia and how it can attract investment:stment:

• Ethiopia can benefit from joining AfCFTA by attracting investors not just from Africa but also from outside Africa

• The national investment law was amended recently and has shown great improvement in terms of opening up sectors and creating a perception of predictability for the foreign investor

• One of Ethiopia’s challenges is that the laws are not easily accessible to everyone. With the AfCFTA coming to the picture, the expectation is that laws will be more transparent and accessible

Sherillyn Raga, research fellow at ODI added her reflections based on a recent paper by ODI and KNCCI on Kenya:

• Kenya’s inward and outward investment between 2015 and 2019 has a very strong intra African component which makes it natural for Kenyan firms to be interested in comprehensive AfCFTA investment rules that would be relevant for them in moving forward

• Although more than 85% of the firms are aware of the AfCFTA, a very small proportion of them is convinced that the private sector is actually ready for the AfCFTA implementation

• The impact of the protocol is not yet determined but will depend on what is negotiated

• Some of the measures that are needed in order to boost intra-African trade and investment are improved private sector involvement in AfCFTA negotiations, predictability of investment policies, seamless cross-border logistics, market linkages and information flows and complementary policies to improve business environment

Hannah Ryder, CEO of Development Reimagined offered her insights on how China views AfCFTA:

• Most of the African countries that are part of the AfCFTA are also signatories to the Chinese Belt and Road initiative. This overlap paves the way for greater strategic cooperation and for African governments to think more strategically about trade with China and close trade deficits

• Africa has the potential to become as important for trade as Latin America and Caribbean is now for China

• There are a number of different options for greater coordination between AfCFTA and China. First is the business-as-usual status quo and uncoordinated approach. Second is the greater coordination between AfCFTA and Belt and Road initiative. Third is to use AfCFTA as a hook to create preferential trade framework for the continent

• It is important for the AfCFTA protocol to take into account the diversity of investors’ interests

The presentations were followed by a lively and inspiring discussion.

The full seminar recording is available to view on the CGF Youtube channel. For ease of access, the video has been segmented into sections. When you click on the timeline bar, you will see the corresponding speaker