Shades Of Shanghai On The Nile

These problems are real but surmountable. Governments in Africa need to recognize that their legitimacy is, in a very important way, a direct function of their ability to deliver a better quality of life. And regional and international partners can and should help. This is particularly the case for foreign investors, who need modern relationships with talented local partners in order to navigate African markets.

The bottom line is that the African economy is on the move, but has not yet entered a breakout phase that allows for the type of self-reinforcing dynamics that are benefiting millions of people in China. Africa urgently needs to capitalize on the recent gains to give its boom deeper regional roots. For many of the continent's medium- and small-size countries, this is the only way to overcome what Paul Collier, the author of the insightful and influential book "The Bottom Billion," recently described as one of their major structural obstacles: too many African countries are too large to be a nation and yet too small to be a state.

The simple message for international investors is this: yes, do put more money in a continent on the rise, but do not be seduced by those who would sell you on a vague and aggressive "Africa bet" that involves rushing headlong into top-down investments across nations that still have major structural challenges. You need to think carefully about which countries and which companies will yield the best return, and—I would argue—you should also reflect carefully on how and where your money will do the most good. Africa's progress will be inevitably uneven, over time and across countries, but we can all help this boom spread.

El-Erian is co-CEO and co-CIO of PIMCO. He is the author of “When Markets Collide: Investment Strategies for the Age of Global Economic Change.”

© 2008