We can draw a straight line from regional instability to the increased financial burden on businesses and establishments in the affected regions. Regions facing armed conflicts, banditry, violence and terrorism experience greater costs in the transportation of goods due to additional security measures to protect merchandize, insurance premiums and logistical inefficiencies. When trade routes pass through areas embroiled in conflict, insurance companies charge higher premiums to mitigate risks such as hijackings, theft and destruction of goods. For instance, in northern Nigeria where the insurgency of Boko Haram persists, insurance costs for transporting goods have surged.

Insecurity and violence compel transporters to avoid dangerous routes, thus leading to longer distances and increased transport costs, undermining the AfCFTA’s goal to facilitate the smooth and efficient movement of capital, goods and services. In the Sahel, truck drivers travelling between Mali, Burkina Faso and Niger are forced to take alternative routes due to terrorist activity. These diversions not only increase operational costs incurred by businesses and delay deliveries but also undermine efficiency, disrupt the ease of doing business, and weaken regional value chains.

Additionally, businesses operating in high-risk areas often have to hire armed escorts or private security outfits to protect shipments. They are unable to depend on state or governmental protection and must take these matters into their hands. Private security companies, such as G4S, who provide security for businesses and mining companies in the DRC are the major beneficiaries of this arrangement.

The financial burden borne by businesses is worsened by the bribes they are forced to pay at illegal checkpoints set up by armed groups and local militias. These groups impose levies on traders plying trade and supply routes to finance their activities. These added expenses in moving goods across the border are ultimately shifted to the consumers, leading to higher product prices in markets.

Importantly, the instability and perpetual conflict in these regions, encompassing violence, terrorism, insurgency and crime also discourage long-term foreign direct investment (FDI) into African markets. It causes a decline in investor confidence which in turn leads to a decline in FDI due to perceived risks to investment safety and personnel well-being. According to global affairs think tank, ODI Global, countries that are in conflict have on average 40 per cent less in FDI flows than countries that are at peace. Conflict and instability disrupt business operations by hindering supply chains and increasing costs, thus deterring potential investors. It also impedes infrastructure development and political stability, both critical elements for attracting FDI.

This poses a serious threat to the implementation of the AfCFTA Protocol on Investment, which aims to create a unified, secure and attractive investment landscape across Africa. The Protocol is designed to promote intra-African investment flows and FDI by ensuring investor protection, improving the ease of doing business and fostering stable and transparent regulatory frameworks. However, the continued rise of insecurity and instability across several African regions poses a direct threat to the realization of these goals, casting doubt on Africa’s capacity to offer the investment promises envisioned under the Protocol.

Generally, long-term investments thrive in stable environments where risks are minimal. Regions plagued by political instability often see a decline in investment, as persistent conflict creates an image of unsafe investment grounds to the international community. This makes these areas a much less viable option for investment in the minds of African and foreign investors.

Nonetheless, it is worth noting that FDI still enters conflict zones, particularly in industries accustomed to operating under difficult conditions, where the high risks investors take may pay off during a country’s reconstruction. The United Nations Development Programme found that during the last five years of the Algerian Civil War (1998-2002), FDI increased over 155 per cent, ‘because the oil majors were circling around and keen to get involved at the earliest opportunity.’ Yet, these remain exceptions and not the norm. For most investors, stability and security are non-negotiable.

Insecurity in regions like the Sahel and Great Lakes has severely disrupted local business operations in many ways. The persistent fear of violence and terrorist attacks, including bombings, kidnappings and armed assaults, has forced many business owners to close their shops temporarily or permanently. The situation is particularly worse for micro, small and medium-sized enterprises (MSMEs), which are the main engine of economic growth and the major generators of employment globally. In Africa, MSMEs account for nearly 90 per cent of all businesses, provide about 80 per cent of employment, and contribute 40 per cent of the continent’s GDP. Despite the central role they play in Africa’s economy and the success of the AfCFTA, MSMEs face persistent challenges such as limited access to finance and markets. In conflict-affected regions, these challenges are further compounded by instability that disrupts supply chains, raises operational costs, and deters investment. Consequently, MSMEs in these areas are among the hardest hit, struggling to survive amid economic uncertainty.

Finally, the general economic decline resulting from insecurity diminishes the purchasing power of consumers. As local economies weaken, disposable incomes decline, leading to reduced demand for goods and services. This reduction in consumption makes it difficult for businesses to cover operational costs and sustain themselves. Thus, affecting the livelihood of traders, who depend on their businesses for survival.