For all the talk about Africa being the next economic miracle, misconceptions about its business environment are still common. Some stem from the tendency to lump together 54 different countries with diverse histories, cultures and assets into one single unit. Others can be ascribed to the negative messages that news outlets drum into the subconscious of anyone who follows current events. In other words, it seems that distortion and fantasy have taken precedence over reasoned investigation and analysis. In 2007, French President Sarkozy boldly declared that "the African man had not stepped enough into history" - a vision corrected in Davos during the "de-risking Africa" conference in January 2013. There, Rwandan President Paul Kagame said, "For me, the major problem I see is that Africa's story is written from somewhere else, and not by Africans themselves." This may explain why perception of risk can be so different from actual conditions.

Broadly speaking, Africa is an economic jigsaw puzzle. The economic vibrancy of some countries (Angola, Mozambique, Kenya, Uganda, Nigeria and South Africa) is matched by the promise of future economic booms in others (Ghana, Democratic Republic of Congo, Cote d'Ivoire and Cameroon). The remaining countries have varying levels of economic promise, tempered by governance and/or stability issues. These countries should not, however, be classified as hopeless; doing so risks undermining the next "economic miracle." When deciding where and how to invest, it is important to perform thorough due diligence before passing judgment on a country's economic situation. Without such precautions, businesses risk losing their invested capital. Cautionary tales include the recent case of Rio Tinto CEO Tom Albanese, who was forced out after the company lost $3 billion on a bad investment in Mozambique. Indeed, navigating the sometimes-rocky shoals of Africa's business environments is more of an art than science, but it can be well worth the effort.

Looking at the lifecycle of a business venture in Africa is one way to perform a basic risk analysis.

As an example, take site selection. While many retail businesses may be situated at the investor's discretion, mining operations are dictated by the location of mineral deposits. Such enterprises can be risky investments if they are located in insecure areas, such as Eastern Congo or Somalia, where roving bands cross borders.

Importing machinery can be another difficulty, with investors drowning in the sheer volume of paperwork that they are asked to submit. The message here is usually clear. Most, if not all, of the paperwork requirements will be waived if the right person is paid a special "fee," which creates another burden on a company's operational extension. 

Once legal documents are filed and a site has been selected, one then needs to find and train appropriate personnel. A human resources headache inherent to business operations in Africa is the potential for employees to be deported for a lack of proper documentation. Porous borders in Africa are a blessing for many employees, allowing them to move from job to job, but they can leave employers at risk of losing key employees to immigration crackdowns. This happened in Nigeria in December 2012.

A further complication may be that local power figures occasionally wait until a significant investment has already been made before starting to demand extravagant fees or increasing bureaucratic pressure on the company. The current Congo Mining Review is such an example: Several executives have expressed concerns that the government may raise its ownership and royalty fees as a result of this review.

Finally, infrastructure conditions add to the risk premium. An unreliable electrical grid can cripple operations. Few companies have seriously considered the implications of not having a disaster recovery plan despite the odds and potential for losses.

Perhaps the most elusive and challenging issues facing Chinese investors in Africa are those of adaptation to culture and climate. Local climate conditions (including heat, sand and humidity) can be difficult for the uninitiated to endure. Lack of access to Chinese essentials, distractions and isolation can lead to low morale and productivity losses. Keeping close tabs on expatriate workers may help detect problems with assimilation and allow for any necessary interventions.

Companies can also encounter problems when trying to manage the expectations of local traditional power figures. Such relationships can lead to tensions, such as those caused by the Mtwara gas pipeline in Tanzania, a project which was co-financed by China Petroleum Technology and Development Corporation (CPTDC). In this instance the issue is quite straightforward: the locals demand assurance that the development of the pipeline would also benefit the region.

This quick overview highlights some of the diverse potential risks of investing in Africa. It is impossible to devise a plan that could be used as a risk template for all 54 countries, however, some basic precautions can make an enormous difference. Preparedness requires humility and keeping an open mind. The good news is that the entire continent has made significant strides in enhancing transparency and improving governance standards. In fact, 35 countries in Africa were ahead of Russia on the 2011 Transparency International's Corruption Perception Index, according to a recent report by Ernst and Young. The time is right for talk about de-risking Africa, but one must put risk in the proper contexts and be clear about what investments entail.