Slower Chinese growth and the fall in oil and commodity prices meant that 2015 was a tough year for many African countries. However, American investor Robert Scharar believes there are still lucrative investment opportunities which can be identified with a local understanding of the markets. He is the president of financial planning and investment firm FCA Corp, and the manager of the US-based Africa Fund, a mutual fund listed on the NASDAQ Stock Market that invests predominantly in publicly-traded companies across Africa.

Here are his tips for spotting overlooked opportunities in Africa this year.

1. Economic opportunities are not necessarily contained within borders

Economic activities extend beyond national boundaries. One example is the mining activity in Tete Province in Mozambique that has spilled over to neighbouring southern Malawi. Scharar noted FCA Corp has invested in a hotel in Blantyre (a Malawian city situated near the border), which is often occupied by business people working in Mozambique.

“I see Malawi and Zambia benefiting from changes in Mozambique because of better cooperation. I know the local chambers of commerce are starting to meet with each other, trying to see if they can figure out ways to make the border a little less of a ‘border’ with regards to those local economic activities.”

2. The opportunities exist around consumers

Scharar advises investors to look beyond Africa’s natural resources and extractive industries. While the continent is rich in minerals and oil and gas, he believes the greatest opportunities lie within the emerging consumer class, which is growing due to improved education levels and urbanisation.

“It’s not necessarily a middle class by standards in the US, but it’s certainly an emerging consumer class looking for, and demanding, a host of commodities to make their lives better – whether that is in education, healthcare, consumer goods, or access to communication… And that to me is where the story is.”

3. Great investments can be hidden behind weak financial reporting

Markets in Africa have different levels of financial sophistication. Many comply with International Financial Reporting Standards (IFRS) and investors can easily access company information and get reports from brokers. However, Scharar warns that this information might, in some areas, lack depth.

“The fact that it is not as deep means there is great opportunity, just like in other places where you have significant parts of a market unresearched. There are great opportunities for people to… devote time to begin to visit companies and see what they are doing – and to then understand those dynamics and seek out companies that are really well-run businesses and [offer] a lot of opportunities to investors going forward.”

4. Expect volatility

Like most emerging markets, investors need to be prepared for more volatility when investing in African countries.

“Because there are so many different currencies, you are going to have currency volatility. And you will also have unexpected impacts – whether it be political or due to the weather – that affects these markets because it is a huge continent.”

5. Have boots on the ground

Understanding African markets comes with local experience, says Scharar.

“Until you have walked through a Shoprite or a Pick n Pay (South African grocery retailers with a presence in other African countries), you do not really have a comprehension of what those business are, or their products and how they fit into the local market. So you need either your own boots on the ground or the boots of other people who can share with you information about what is really acceptable from a business opportunity [perspective],” he continues.

“If you have ever been in a Game (a pan-African retailer) store, you know why Walmart bought them. Walmart looked at Massmart (Game’s parent company) and said ‘these guys are doing what we are doing’… And if you look at Shoprite you can see why they can take their platform and expand it over what, I think, will be most of Africa.”