As the Olympic glow fades in China, it is time to shift our attention to Africa, which some analysts are talking up as the next emerging-market hot spot. A continent once shunned by international investors is now attracting interest, as a number of leading African nations begin to spend revenues generated by the recent global commodity price boom to stabilize their economies. Recent increases in the flow of private capital raise the question of whether Africa is on the verge of a China-style breakout, one that has extremely important consequences for global welfare, as it could dramatically change the lives of millions of poor Africans if it spreads. Unfortunately, much of the new progress is still too narrowly focused—on specific sectors like raw-materials extraction, and a limited number of countries led by Ghana and Uganda—to justify a generalized "Africa bet" today.

The macroeconomic numbers are clear: Africa as a whole is on the rise. After decades of subpar performance that undermined social stability and fed poverty, regionwide economic growth hit an annual average of 4 percent from 1997 to 2002 and rose to 6 percent in the following five years. During the same period, inflation declined from more than 13 percent to 8 percent, and the financial balance sheets started to look reasonably healthy for the first time in memory. International reserves have risen from less than four months of imports of goods and services to a comfortable six months. Debt to official creditors, who have long claimed too big a chunk of meager African government revenues, is down from 45 percent of GDP to less than 10 percent.

The improved economic and financial picture now makes Africa relatively attractive at a time of financial turmoil in many industrial countries. Inflows of capital from foreign investors have quadrupled over the course of a decade to $22.5 billion in 2006, according to the IMF, albeit from a low base. The credit ratings of several African countries are on the rise and, most important in my eyes, spending on health, education, housing and other social services is expanding.

Still, it's too early to call Africa the next China. The continent has been turbocharged by spiking prices for various agricultural and energy-related export commodities. A number of countries prudently invested the windfall revenues. Those moves buffered these countries against the recent fall in commodity prices.

Yet there are still major problems. High political risk in Africa continues to be a deterrent to foreign investors. Africa's political and economic institutions are still maturing, and are often not taken seriously on the global stage. Corruption, while clearly on the decline in several countries, is yet to be sufficiently contained. The weakness of African institutions leaves the continent's economies vulnerable to political winds and, at the extreme, the kind of implosion that we are now witnessing in a country such as Zimbabwe.

The expansion of the private sector is also inhibited by poor infrastructure in many countries. The upgrade of roads, ports and distribution channels must continue, particularly in landlocked economies, where the lack of infrastructure makes the cost of doing business high and variable.

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.”