AFRICA’S energy sector is primed for significant growth, bolstered by the African Continental Free Trade Area (AfCFTA), a landmark trade agreement reshaping the continent’s economic landscape. According to Reuters, the continent’s most electrified nations, including South Africa, Egypt, Kenya, and Ghana, are at the forefront, attracting investments and fostering socio-economic development.
Renewable energy is playing a pivotal role in this transformation, as countries work towards diversifying energy sources to meet green energy goals. Infrastructure investments, supported by AfCFTA, are driving innovation and integration in Africa’s energy markets.
AfCFTA: a catalyst for energy transformation
Established in 2019, AfCFTA is the world’s largest free trade area, encompassing 48 ratified member countries. Designed to eliminate tariffs and streamline intra-African trade, the agreement is projected to significantly boost the continent’s GDP, reaching $7 trillion by 2035. The World Bank estimates that foreign direct investment in the region could increase by 111 percent during the same period.
By reducing trade barriers and harmonising regulations, AfCFTA opens new avenues for energy sector investments, particularly in renewables, power infrastructure, and regional electricity grids.
Investment incentives under AfCFTA
AfCFTA offers immediate and long-term incentives to investors, including:
- Tariff reduction: Eliminating duties on energy goods and improving customs procedures.
- Harmonised Laws: Replacing outdated bilateral treaties with a unified legal framework to promote investment protection.
- Infrastructure development: Stimulating projects in power, transportation, and telecommunications to lower operational costs.
These measures foster a predictable and transparent investment environment, paving the way for public-private partnerships and increased regional cooperation.
Renewable energy: a game-changer
Africa’s abundant renewable energy potential is gaining global attention. Large-scale projects, like the Namibia-Botswana solar initiative, are set to share electricity across 12 countries, reducing energy costs and fostering sustainability.
Major players like South Africa, Nigeria, and Egypt are leveraging AfCFTA’s platform to increase exports of solar, wind, and gas energy. Additionally, countries such as Mozambique and Tanzania are expanding their natural gas sectors, while Kenya focuses on geothermal energy development.
The UN Economic Commission for Africa estimates that removing tariffs will boost intra-African energy and mining exports by 5–11 percent, equating to billions in additional trade.
Addressing investment challenges
Historically, Africa’s energy investments faced challenges such as fragmented bilateral treaties and limited legal protections. AfCFTA resolves these issues by introducing a comprehensive investment protocol, which:
- Ensures equitable dispute resolution through international arbitration.
- Balances investor obligations with host state responsibilities, including compliance with human rights, environmental standards, and anti-corruption laws.
These measures enhance legal certainty and attract a broader investor base, promoting sustainable growth.
Global support fuels Africa’s energy ambitions
AfCFTA has garnered significant international backing. The US introduced the Africa Strategic Trade and Investment Partnership Act in 2024 to strengthen trade ties, while Gulf Cooperation Council members invested over $53bn in Africa last year. China and Europe are also leveraging AfCFTA’s unified market to expand energy partnerships.
A bright energy future for Africa
AfCFTA is unlocking unparalleled opportunities in Africa’s energy sector. By dismantling trade barriers and fostering collaboration, it promotes renewable energy initiatives and cross-border trade. The agreement’s legal framework balances investor protections with state accountability, creating a secure environment for transformative public-private partnerships.
As renewable projects gain momentum and investment flows increase, Africa is poised to become a global energy powerhouse, driving sustainability and economic growth across the continent.
