Just as Africa is being touted as the last investment frontier capable of delivering super returns, the recent populist ousting of Egyptian president, Hosni Mubarak, and Tunisian president, Zine al-Abidine Ben Ali, has raised for many investors the continent’s old ghost of political risk.

And, yes, in extreme situations such as we have seen in Egypt, where trade and tourism stopped almost completely for nearly three weeks, it is difficult for businesses of most types and sizes to escape the negative consequences.

However, for those of us who’ve been operating in the private equity field in Africa for more than a decade, the political upheavals happening now are very different from the internecine and anti-colonial warfare that has scarred the continent in the past. They’re part of the positive transformation of Africa – leading to democracy and greater stability.

What the world is seeing is an inevitable extension of what happened in South Africa in the 1990s, with the release from prison of Nelson Mandela and the conversion of the country into a democracy with one of the most advanced bills of rights in the world – and an economy that is now ranked 45th out of 133 by the World Economic Forum’s 2010 Global Competitiveness Report.

It’s also an extension of the socio-economic changes that have resulted from steady investment by organisations like ours in mid-market businesses that supply the basic necessities of life to their local communities.

Entrepreneurs running good mid-sized businesses that directly serve their communities create employment, and, as the usual knock-on effect, more wealth within their societies. Once that bug bites, it’s very difficult to keep a repressive regime going.

So, private equity in Africa’s mid-market hasn’t just provided much needed funds. It’s laid the groundwork for political change – and, ultimately, transformation at every level of society: social, economic, and political.

And it has done so at an extraordinary juncture in history. The comprehensive transformation of society on which Africa is now embarking, wittingly or otherwise, has never been attempted in modern times or in such a globalised environment.

By contrast, when affirmative action - aimed at bringing economically disadvantaged people into positive economic action - was initiated in the United States (US) about 50 years ago, country economies were more isolated. What the US did in order to bring the more or less 15% of its racially underprivileged people into the mainstream had little knock-on effect on its economic partners or, really, on global opinion of the US.

The same can be said of Japan’s extraordinarily successful attempts during the latter half of the twentieth century to transfer its economy from the hands of a financial, political, and social elite into the hands of the middle class. No-one was watching. Very few outside of Japan were affected – until the transformation was complete and Japan had become an economic force. Aside from the strategic interest followed by economic support from the US, Japan was free to implement, misstep, and tweak its system until it got it right.

As Egypt and Tunisia have realised, African countries have no such luxury. They have to grapple with policy reforms and socio-economic problems of massive dimensions under a global spotlight. Worse, they must participate in a knowledge-based, globalised economy along with other developing countries, all competing in the same markets and for the same investment funds. If a country slips in terms of competitive capability, its place will be taken by any one of 20 or 30 others.

That said, Africa has a huge advantage. In the absence during the past several decades of large corporates and multi-nationals, the small and medium-sized businesses have kept local economies alive.

Because the businesses are localised, changes in national politics don’t have an enormous impact. For instance, they’re probably not importing goods, but buying them from local, even smaller suppliers. So, whoever the president is, it’s always business as usual.

This view was shared by most of the private equity institutions that participated in the South Africa Private Equity Congress (SAVCA) that took place in Cape Town on 10th February 2011. One panellist noted that "adversity and change are no strangers to many of the businesses that operate in these markets. They are equipped to manage the risk and, if properly resourced, are in a position to get a leg up on the competition by taking advantage of the opportunity that comes from chaos."

That’s very good for investors.

What does limit mid-cap companies, however, is knowing how to grow, how to move into a bigger league, how to capitalise on a more open economy - and access to capital.

So, they don’t just need finance, they need hands-on help setting up systems (there are usually the bare minimum) and learning about management that isn’t seat of the pants. Which is why private equity firms that are prepared to roll up their sleeves and work alongside their investees have always seen significant returns, even under the most intractable of African political situations.