One of the many pertinent questions a panel interviewer asked me at the recent Cambridge Africa Business Conference was what has changed, and what do global investors consistently get wrong, about risk in Africa.

As I write this on June 12, Nigeria’s Democracy Day, the answer must be the consistent shift to democratic rule. On June 12, 1993, Chief Moshood Abiola won Nigeria’s democratic elections, which were to send the corrupt military, which had been in power for a decade, back to barracks. The results of those elections – considered Nigeria’s freest and fairest – were cancelled. A military triumvirate led by General Sani Abacha intervened, imprisoned Abiola and continued its corrupt mismanagement for another six years.

Abacha imprisoned several of his opponents, several of whom died in prison, while he siphoned off billions of petrodollars via UK banks to Swiss accounts. Abacha’s death led to Nigeria’s successful transition to democracy in 1999, when Olusegun Obasanjo won. Abiola died on the day of his release from prison, never to take up the Presidency he legitimately won. Nevertheless, the period since 1999 is the longest uninterrupted stretch of democratic rule in Nigeria’s post-independence history.

Despite recent coups in France’s former colonies, the pan-African trend is towards deeper democracy and greater prosperity. When I first reported on the pro-democracy movement, it was grassroots driven. Now  Gen Z is leading the charge, using social media that focus the minds of would-be dictators.

Global investors have consistently failed to understand the size and scale of the opportunity that several countries present. This stems from a persistent failure to understand the real economy of less-developed countries. As an example, the “sachet economy” allows people to buy goods in markets in small affordable bundles. Businesses that have recognised the purchasing power of ordinary people and tailored their business models accordingly have become hugely successful. Take the pan-African growth through private-equity financing of Promisador, which delivered dairy products in sachets. Promisador was valued at $1.5-billion when it was sold – attracting major Japanese food manufacturer Ajinomoto to Africa for the first time. Similar business includes Safaricom’s M-Pesa, where even with a non-smart cellphone one can buy a mango in a market, pay school fees or a mortgage, and send money to relatives.

Several far-thinking private-equity firms have captured and transformed the sachet economy into a marketplace drawing layers of different types of private financing. Private equity has scoured the continent for family-owned businesses designed to serve local markets, transforming them into professionally managed scalable companies that serve regional and pan-African markets.

As the Promisador example shows, serving African consumers at scale and creating a pan-African market draws in major global investors. Japan’s Marubeni is buying out a private-equity investor in car parts retailer TiAuto to gain a foothold across Southern Africa. As regional and pan-African companies attract more corporate and commercial capital, reliance on development finance institutions is declining. Corporate investors now account for nearly half of total commitments, up from 7% between 2022 and 2024, while development finance institutions increasingly focus on broadening and deepening local capital markets. 

The inaccurate assessment of these markets and their risk has huge costs for governments and for banks serving local markets. African governments pay 300 to 400 basis points more than peer countries, which, the African Development Bank notes, contributes to a structural development financing gap estimated at over $400-billion a year across infrastructure, climate adaptation, energy, food systems and social investment.

Development finance institutions and private-equity transformation have largely wiped out business-to-business corruption that was so prevalent two decades ago. What has not changed is the high levels of State corruption in Africa’s markets. The remonstration by outgoing US ambassador Michael Gonzalez on Zambia’s President Hakainde Hichilema is a case in point. Gonzalez accused Hichilema’s administration of “institutionalised and refined corruption”. The criticism has shattered the illusion of HH as an ambitious President, ambitious for his country, not for himself. Corruption, tax evasion, trade mis-invoicing, money laundering and illegal mining cost Africa about $87-billion a year, according to the UN. Africa needs investment of around $70billion a year to deliver electricity to the whole continent. The logic behind stopping corruption and illicit financial flows is clear if governments are to give hope to Africa’s 800-million under-20-year-olds.

The final panel question was: “What gives you hope about investing in Africa?” What gives me confidence is the number of professionals from Africa who have “done their time” in the development finance and private-equity industries in Europe, the UK and the US, and are returning to the continent, exploring opportunities and projects that will bring further local and international investment. Governments that encourage and facilitate their return are the winning governments. What is needed is some of those mid-career professionals to move into politics and to bring to government the ethos and institutionalised professionalism that is transforming the investment environment.