Since the early 2000s, Africa has been one of the fastest-growing regions in the world. The Kiel Institute’s researchers Rainer Thiele and Manfred Wiebelt find evidence suggesting that Africa’s boom was not only driven by high commodity prices, but was also associated with significant structural change towards productive activities outside the primary sector. Africa therefore provides many opportunities for international and German firms, but the conditions for an engagement in the continent remain challenging, as highlighted in the present paper: First, Africa’s development in the foreseeable future will be shaped by small enterprises mainly operating in the informal sector, for which the regulatory framework to be applied is insecure. Second, despite some reform efforts, the quality of institutions in most African countries still lags behind other regions. Finally, a lack of trained workers and inadequate infrastructure will render it difficult for Africa to live up to its economic potential. Against this background, German development cooperation should focus its support for partner countries on creating development-friendly public institutions, augmenting workers‘ qualifications and improving infrastructure.