Among the many challenges Africa faces is hype. Global advisers, consultants, investment bankers, asset managers and others with a vested interest in getting international capital to Africa, one way or another, sold us the "Africa rising" story.

The strategy succeeded. Billions of dollars flowed in, Africa-specific investment funds mushroomed and international private equity giants rushed to secure lucrative assets on the continent. Valuations of blue-chip local companies jumped as funds competed for their attention. But the hype did not always live up to the reality. The pan-African assets fund managers sought were in short supply and local companies were not always eager to sell chunks of their companies. Local stock exchanges, despite high returns for a while, turned out to be mostly shallow and illiquid, making exits difficult. Some of the much-touted fastest-growing economies in the world turned out to have feet of clay, as the commodities downturn so harshly proved.

The billions of dollars earmarked for African assets often failed to find a home. In 2015, the Overseas Development Institute, an independent UK-based research group, warned of a bubble developing as too much money chased too few investments. The low-hanging fruit was quickly snapped up. In 2014, about 70% of funds went on buyouts of more than R250m. But in the past two years, the sizeable deals dwindled as investors found that out that there were few big-ticket items. In 2015, most deals were below $100m and in the first half of 2016, the total value of private equity deals was just $900m, according to the African Private Equity and Venture Capital Association.

Finding mid-sized companies is the new challenge for investors — well-priced companies that can absorb large investment, with shareholders who are open to outside stakeholders and that have growth potential even in tough times. Most companies in Africa are small by international standards. Researchers claim there are only 3,000 companies across Africa with revenues above $50m, with about 1,600 of them listed. One of the reasons for it is most companies are family-owned.

They are often reluctant to cede management control to outsiders and have no  interest in complying with stock exchanges’ onerous corporate governance and financial requirements.

Although bank lending is expensive in Africa, it remains the preferred way to raise capital. Firms often prefer to pay the premium than grapple with the intricacies of a stock exchange or the "interference" represented by private equity companies. An example is Africa’s biggest retailer, Nakumatt, which investors have been eyeing for years. The CEO says he has had queues of fund managers in his office over the years. But when the company needed money, it turned to commercial lenders, although there is now talk of selling shares to plug a deepening financial hole.

The optimism of a few years ago has turned to reality. The new mood is to find deals that reflect the state of the continent — smaller investments into smaller companies, which have high growth potential. That is where the opportunity lies. It was reflected in an article last week citing the $54m investment by Actis in Food Lover’s Market, a chain with 128 stores in 11 countries and $750m in revenues.

It is a good time to sniff out cheap assets in readiness for a future upturn but this requires a realistic understanding of how Africa works. It is not a time to be derailed by hype. - Published in Business Day SA, 21 November 2016. Picture: AFP / Grant Lee Neuenberg.

• Games is CEO of advisory Africa @ Work.