The strategic commercial opportunities in Africa remain abundant. With a growing middle class, underexploited frontier markets, enormous demographic advantages, and its ongoing digital transformation, Africa continues to grow in importance economically and geopolitically. The potential for foreign businesses to take advantage of Africa’s investment opportunities is tremendous. However, to maximize existing opportunities, these businesses must first address the issue of information and risk asymmetry on Africa’s investment opportunities. Knowledge about business opportunities on the continent is limited abroad, giving rise to high search and other transaction costs, as well as disproportionate weighting of perceived risk — as against actual risk — leading to asset mispricing. This paper provides a basic understanding of five broad areas that will be important to offer a balanced perspective for any business entering an African market to mitigate the information asymmetry associated with doing business on the continent: 1) the labor market, 2) spending and income, 3) governance performance, 4) investment, and 5) Africa’s diaspora capital. While important advances have been made over the past decades, they have not translated into uniform economic prosperity across all countries on the continent. This variation in progress translates into variations in opportunities both within and between countries. Nonetheless, the opportunities for businesses looking for profitable investments are available and those companies that are able to capitalize on them are likely to open doors to some of the fastest growing economies in the world. This paper provides some insights into broad factors that will affect business decisions. Businesses considering opportunities to enter or increase investments in Africa will need more specific motivations. While some of the discussion in this paper centers on Africa as a continent, there are significant differences in the economies, governments, and people across the continent. Those differences and their implications are highlighted in much of the discussion.

Published by the William Davidson Institute at the University of Michigan, ECANY Board Directors Professor Fred Olayele and Professor Paul Clyde contributed to this paper.