Accounting & Auditing
From trade pact to action plan: AfCFTA faces capital mobilisation test
As of this year, the African Continental Free Trade Area (AfCFTA) has moved decisively from vision to economic imperative, with success increasingly measured by its ability to mobilise capital at scale across the continent.
Source: Supplied. Andrea McKaiser-Walbrugh, senior associate at legal firm CMS South Africa.
Despite sustained GDP growth in several regions, intra-African foreign direct investment remains persistently low relative to Africa’s potential. The barriers are not dramatic but structural, rooted in legal fragmentation, technical inconsistencies and currency constraints.
Until these underlying issues are resolved, African capital will continue to seek returns abroad rather than driving growth, integration and industrial development within the continent itself, limiting the AfCFTA’s transformative promise.
In 2025, SA recorded a strong export performance with African countries accounting for a significant share of South Africa’s export market. This reinforces the strategic advantage we have seen in prioritising African markets over traditional export destinations.
Empirical evidence consistently shows the gap. Studies by the African Development Bank and the United Nations Economic Commission for Africa (Uneca) demonstrate that while intra-African FDI is more employment intensive and more resilient than extra-continental flows, it is constrained by fragmentation in rules, markets and enforcement.
According to the latest 2025 African Integration Report, regional integration in Africa remains moderate and uneven, with progress visible in institutional frameworks but persistent gaps in the implementation of trade, infrastructure and capital mobility protocols. The report’s comprehensive synthesis across key integration dimensions underscores how far the continent has come, and how much alignment is still needed to unlock truly integrated markets.
Against this backdrop, AfCFTA can act as a critical buffer. By strengthening and maximising regional and continental value chains, the continent can reduce its reliance on conflict-prone suppliers for critical goods such as fertilisers and machinery, turning external disruption into an opportunity for deeper self-sufficiency.
Compliance fatigue and the cost of fragmentation
One of the most underestimated barriers to intra-African investment is the sheer complexity of navigating multiple, often inconsistent investment regimes.
African firms expanding regionally face a patchwork of investment codes, sectoral caps, licensing thresholds and approval timelines that differ materially from one jurisdiction to the next. The result is compliance fatigue: not just higher legal costs, but delayed deal execution and elevated regulatory risk.
Recent research highlights that many intra-African investors are mid-sized regional champions rather than global multinationals. Unlike their international counterparts, they often lack the balance sheets or internal legal teams to absorb prolonged regulatory uncertainty. What might be manageable friction for a global fund becomes a deterrent for African capital.
Infrastructure gaps remain a challenge, particularly the lack of roads, rail, airports and other interconnectors between African countries that has a negative impact on the trade that can be done on the continent.
Capital trapped by currency rules
Even where legal entry is secured, capital mobility remains constrained. Restrictive exchange controls, opaque repatriation rules and underdeveloped cross-border payment systems continue to trap capital within domestic borders. Afreximbank has repeatedly noted that currency convertibility and settlement risk remain among the top deterrents to intra-African investment, particularly in sectors such as energy, infrastructure and fintech where revenue models depend on predictable cash flows.
However, it is worth acknowledging the role of Regional Economic Communities , such as the Southern African Development Community (SADC), the East African Community (EAC), The Common Market for Eastern and Southern Africa (COMES) and the Economic Community of West African States (ECOWAS) in acting as engines for intra-African Foreign Direct Investment (FDI) by reducing market fragmentation and harmonising regulatory landscapes. While not at the desired rate, the collaborative efforts of these entities are (slowly) shifting the needle toward self-sustained continental growth.
The irony is clear. Africa has made meaningful progress in trade liberalisation, yet investment capital still struggles to move freely. In practice, investors face approval delays for dividend repatriation, uncertainty over offshore borrowing structures and inconsistent treatment of shareholder loans.
These frictions raise the cost of capital and disproportionately affect African-led investment, which is more likely to rely on regional financing structures than hard-currency funding. These pressures are compounded by the current global environment, in which rising borrowing costs and currency depreciation are squeezing the financing capacity of both governments and private investors across the continent.
When protection becomes opacity
Local content rules and national security screenings play a legitimate role in safeguarding strategic interests. However, across many jurisdictions they are applied with limited transparency and wide administrative discretion. For regional investors, the issue is not the existence of such rules but their unpredictability.
Research on AfCFTA legal challenges shows that non-tariff measures affect nearly 30% of products traded on the continent, with particularly high impacts in energy, agriculture and manufacturing. When investment approvals hinge on undefined public-interest tests or unpublished security criteria, regional investors face risks that are difficult to price or insure. This uncertainty suppresses long-term investment precisely in the sectors AfCFTA seeks to scale.
The legal imperatives for 2026 and beyond
The next phase of AfCFTA requires a decisive shift from protection to facilitation. This is even more urgent given the deteriorating external environment. With traditional sources of FDI contracting, Africa cannot afford to leave its own capital immobilised by legal misalignment.
First, African states must accelerate the transition from fragmented Bilateral Investment Treaty’s (BIT) to the AfCFTA Investment Protocol. A unified continental rulebook would reduce compliance duplication, harmonise standards of treatment and send a clear signal that Africa is serious about mobilising its own capital.
Second, dispute resolution must evolve. International arbitration has its place, but it is costly, slow and often disconnected from regional commercial realities. Strengthening regional arbitration and commercial courts in hubs such as South Africa, Kenya and Morocco would lower enforcement costs and improve confidence for African investors who need timely, predictable outcomes.
Third, regulatory design must catch up with policy intent. One-stop-shop investment portals, backed by binding timelines and digital processing, are no longer optional. They are essential to unlocking African-led capital in strategic sectors such as renewable energy, payments infrastructure and financial services. Without them, facilitation remains rhetorical.
Lastly, the resilience case for intra-African value chains must be embedded in investment strategy. As global supply chains remain disrupted and external financing tightens, the ability to source critical goods from within the continent is no longer merely an efficiency argument. It is a strategic necessity.
For legal firms, this environment demands a recalibration of legal strategy. The future lies not in reactive compliance, but in proactive structuring that anticipates regulatory convergence, currency risk and dispute pathways from the outset. Advising African investors now requires a deep understanding of how AfCFTA instruments, domestic law and regional practice intersect in reality, not theory.
Intra-African FDI is not blocked by a lack of opportunity. It is constrained by legal misalignment and structural inertia. Aligning those frameworks with the reality of integrated markets, and Africa can finally unlock the scale of investment required for sustainable economic transformation.
About the author
Andrea McKaiser-Walbrugh is the senior associate in the banking and finance team at CMS South Africa.