Compact with Africa 2.0 and EU Global Gateway: breathing new life into investments in African States

New political and legal developments, initiatives like Compact with Africa (CwA) 2.0 and the EU Global Gateway are set to breathe new life into international investment across African States. As opportunities expand — especially in strategic sectors — well-drafted arbitration agreements can be a practical tool to manage cross-border legal and commercial risks. 

The CwA initiative, launched in 2017 under Germany’s G20 Presidency, aims to mobilize private investment in Africa by improving macroeconomic, business, and financing frameworks. Its first phase, CwA 1.0, ran from 2017 to 2024. There are now a total of 15 CwA African states involved, as the Republic of Zambia and the Republic of Angola have joined the Compact in 2025.

The CwA has been a successful platform for bringing together African States, the broader international community and private investors to improve macroeconomic performance of participating States, particularly when compared to non-CwA peers. The initiative supported over 100 reforms that improved business and financial frameworks. These efforts led to the mobilization of significant private capital in CwA States, including via foreign direct investments, notably in renewable energy projects, which led to the creation of jobs and an uptick in CwA African States’ exports. 

At the end of the CwA 1.0 programme in 2024, despite these notable improvements, challenges remained. The economic growth and involvement of private investors have not improved as hoped. A number of reasons are given for this, for instance:

• Foreign private investments are concentrated on extraction of raw materials and lack in higher value-added sectors;
• Domestic private investments decreased, creating a bottleneck for industrial improvements and job creation;
• Large infrastructure deficit in many African States;
• Foreign investors still perceive investments in Africa as risky, often exceeding actual reality;
• need to improve intra-Africa value chains and investments;
• vulnerability to geopolitical impacts and climate change;
• still underdeveloped finance sectors to support economic growth, particularly for small and medium-sized companies, and
• need of further technical assistance to implement necessary reforms.

1. Recent initiatives addressing ongoing challenges

Recent initiatives aim to address these concerns.

As a successor to its first phase, the G20 formed CwA 2.0. Going back to an adoption by the Africa Advisory Group (AAG) G20 meeting in December 2022, this new platform was officially launched during South Africa’s G20 Presidency in 2025. The second phase is scheduled to run until 2033.

The CwA 2.0 aims for "Bigger Ambition, Stronger Delivery, and Broader Reach" compared to its initial phase. Its key objectives include mobilizing private investments, with a focus on domestic and foreign investments, including intra-regional investments, and value chain development, targeting the creation of jobs and sustainable and inclusive economic growth. This is supported by the World Bank Group Multi-Donor Trust Fund (MDTF), which provides financial support and also technical assistance for partner governments in CwA States to help them implement critical reforms that improve the business and investment climate.

These goals also align with the broader G20 agenda announced under South Africa’s presidency.

The 7th African Union (AU) – European Union (EU) Summit took place on November 24-25, 2025, in Luanda, Angola. This marked the 25th anniversary of the AU-EU partnership, which began with the inaugural summit in Cairo in 2000. The summit aimed to advance a "partnership of equals" moving away from a donor-recipient relationship. The EU-Africa partnership places a significant emphasis on private investments, both foreign and domestic, to drive sustainable development, economic growth, and job creation across the African continent.

The EU’s Global Gateway initiative, established in December 2021, plays a pivotal role in advancing this objective. This includes a number of Africa-specific projects as well as the Africa-Europe Investment Package, announced at the 6th EU-AU Summit, where the EU committed to mobilise up to €150 billion by 2027 to enhance, among others, Africa’s digital connectivity, infrastructure, and energy transition. Private investments are backed by strategic implementing partners, such as the European Investment Bank (EIB), the African Development Bank (AfDB), and the European Bank for Reconstruction and Development (EBRD). The initiative is expressly directed to businesses to increase their investments.

2. Specific focus areas

These developments focus on specific sectors that are of particular interest given their growth potential and geopolitical relevance. The goal is to foster sustainable investments, which contribute to economic, social, and environmental developments in line with the United Nations’ Sustainable Development Goals.

Green energy transition: One such key sector is the green energy transition. The Africa-EU Green Energy Initiative aims to increase renewable energy generation capacity by at least additional 300 GW by 2030. Similarly, the Mission 300 platform, led by the World Bank Group and African Development Bank, aims to connect 300 million people to electricity in Africa by 2030. 

Rare earths: Another key area concerns rare earth minerals that are increasingly needed in green and digitized industries. The EU considers projects for rare earths in Africa as strategically relevant for diversifying supply chains, in competition with Chinese and US investors. African soil contains a large quantity of these minerals. But reaping their benefits requires high up-front investments, the creation of new supply chains and measures to avoid unwanted ecological impacts. Critical earth minerals are also a key consideration at the G20 level. The G20 Critical Minerals Framework is a voluntary blueprint to ensure these resources drive prosperity and sustainable development by promoting local beneficiation and value addition, rather than just raw material exports.

Infrastructure & digitization: A further area of focus are infrastructure investments. The EU sees investments in energy and transport infrastructure as a geopolitical project aiming to avoid geopolitical dependencies. It also includes digital connectivity, for instance by building fibre-optic cables. The G20 Leaders recognize the potential of digital and emerging technologies, including AI, for sustainable development. South Africa’s presidency launched the AI for Africa Initiative to promote access to computing power, AI talent, and infrastructure in African countries.

Intra-Africa trade: Finally, CwA 2.0 and the EU are supporting the African Continental Free Trade Area (AfCFTA) as a key enabler of economic growth and investment. The South African Presidency launched a G20 Africa Cooperation Agenda on Trade and Investment to support AfCFTA implementation and mobilize investments into Africa's productive sector and infrastructure projects. The idea is that strengthening intra-Africa value chains will also improve international trade connections and thereby generate opportunities for foreign direct investments.

3. Legal risks are manageable

These developments underscore a politically strong encouragement for foreign investments in African States, particularly in the mentioned sectors. But a boost in foreign investments also requires sensible socio-economic and legal frameworks. The recent and ongoing political developments aim to improve both. 

There are manifold options for financial support for specific investment projects, backed by State and private money, to promote investments in strategic sectors. Technical Assistance and trade facilitation cooperation aim to modernize and internationalise the regulatory framework. To provide one example, the EU-Angola Sustainable Investment Facilitation Agreement (SIFA) entered into force in 2024. 

A particular emphasis of the recent development is the support for intra-Africa trade, which will also benefit foreign investors who will be able to plan and scale their projects for a specific region more easily rather then being confined to a specific jurisdiction or local market.

These broader value-chains may come with a higher commercial and legal risk exposure. Each investor will do its own risk-opportunity analysis. But uncertainty over potential legal disputes should not be a driving factor against further investments. There are ways to proactively structure investments and contracts to make potential future disputes manageable. 

Most notably, investors can include arbitration clauses in their contracts. If drafted well and in consideration of potential future risks in the value chain, arbitration allows for the necessary flexibility to provide comfort to the foreign investor, while also establishing a fair dispute resolution forum to African business partners. In particular, arbitration allows for:

• a one-stop shop for multi-contract and multi-party disputes, for instance in case of supply chain risks;
• a dedicated dispute resolution body for projects that have an international and pan-African angle;
• the selection of internationally accepted and proven procedural rules, by still acknowledging regional peculiarities;
• the avoidance of lengthy multi-instance (foreign) court proceedings and therefore a faster resolution of the dispute;
• the determination of the applicable law in the contracts, including widely accepted international uniform rules of law, or the combination of multi-contract disputes that are governed by different laws. Further, arbitrators chosen by the parties have experience in interpreting and applying different laws; and
• an internationally more effective enforcement option than court judgments.

Additionally, a wide network of investment treaties or investment laws allow investors to challenge State measures should they unduly thwart investments. Although investor-State dispute resolution has been under reform discussions over the last years, it can still provide foreign investors with the necessary comfort. There are 300 Bilateral Investment Treaties (BITs) in force between European and African States. For instance, Germany has 21, France has 22 and the UK has 19 BITs in force with African States. For pan-African investments, UNCTAD lists 50 BITs in force, in addition to broader regional treaties with investment chapters. These BITs usually provide the investor with the option to resolve the dispute via an international arbitration proceeding. The investment protection system within the African continent is currently being updated, particularly with the AfCFTA Protocol on Investment, which is signed but not yet in force. The available forum for investor-state disputes under the Protocol is also still being negotiated.

4. Benefits for foreign and local investors

In summary, recent initiatives, particularly at the G20 and EU level, aim to promote further investments in African States. The sole focus on foreign direct investments has shifted to regional and local investments, which includes domestic investors. This hopefully creates the fertile ground for breathing new life into private investments in African States. While international investments have their specific risk profiles, including potential cross-border disputes, arbitration clauses can help manage these risks if adapted to the needs of the specific investment.