One of Africa’s biggest challenges has long been a lack of transportation infrastructure. Most of those roads that do exist are little more than rut tracks in the plains that are more of a hindrance than a help. In many areas of the Continent, only the most intrepid souls attempt travel of any significant distance.

But as Africa comes of age in the 21st century, it’s enjoying the benefits of modern technology. While other developed economies were dependent on trains and later trucks to facilitate their industrialization, Africa can skip straight to airplanes.

It’s impractical to transport iron ore, oil or agricultural harvests by air, but air travel is a critical facilitator for service-based economies. That’s especially true in Africa, where Internet connectivity remains sparse in many areas.

Air travel allows business people, doctors, lawyers and other professionals to offer their services over a wider area. Africa’s air revolution has also helped spur the country’s development, because foreign investors are now better able to access the Continent, allowing them to make connections with key politicians and businesspeople, as well as conduct their due diligence for projects on the ground.

The growing cohort of middle-class Africans is also driving growth in air travel on the Continent, both in terms of intra-Africa volume and international travel. Growing foreign investment in Africa has helped it post some of the fastest income growth in the world, pushing airline seats into high demand.

However, despite leapfrogging into the 21st century, African air travel still has a long way to go towards meeting 21st century standards.

Safety is a major concern, because many African air carriers are using second- or even third-hand airplanes that are decades old and, in some cases, receive spotty maintenance. Due to safety concerns, African air carriers make up most of those black listed by European and North American air regulators, preventing them from flying into those regions.

In a recent address to the African Development Bank, Tanzanian President Jakaya Kikwete called on the African public and private sectors to improve the Continent’s airline industry. He called the lack of direct connections to many regions of the world a serious threat to Africa’s growing tourism industry and to its economy. High fares deter many potential travelers; if the airline industry were to modernize and expand it could potentially employ millions of Africans.

To overcome the safety challenges, the International Air Transport Association (IATA) has said that it will help 15 African airlines pass safety audits to meet global industry standards next year. Through educational and mutual assistance programs, the IATA also aims to bring the rate of African accidents down to the global average by 2015.

Governments are also getting in on the action, upgrading critical infrastructure. In Senegal, for instance, a new international airport is expected to become operational early next year. Costing EUR566 million, Blaise Diagne International Airport will have more than four miles of runways and the capacity to serve about 5 million air travelers annually.

Improved infrastructure and safety records are critical for African airlines if they don’t want to miss out on huge growth in their own markets. The IATA estimates that African air travel will grow by an annualized 7 percent over the next few years, translating to about 200 million new travelers. That makes the African air travel market the only one expected to see any appreciable load growth over the next three years.

However, African airlines are now handling only about a third of existing air traffic, with their international route capacity steadily declining over the past decade.

South African, Ethiopian and Kenya Airways, just to name a few, have been losing share to international airlines out of the Middle East and Europe and even US-based carriers such as Delta Air Lines (NYSE: DAL) have been expanding their capacity to the Continent. Since Delta began offering direct flights to Africa, it has become the largest carrier between Africa and the US, handling more than a third of the traffic between the two continents.

Africa’s economic growth this year is expected to eclipse that of Brazil, Russia, India and China, the so-called BRIC nations. That makes expanded market share in Africa critical to the success of Africa-based air carriers. Past experience in the BRICs shows that when economic growth takes off, so does air travel.

The BRICs represent another significant opportunity for Africa’s domestic carriers, with trade between those nations and the Continent exploding in recent years.

There’s huge, still virtually untapped potential in the African airline market, particularly if the carriers are able to overcome their poor past safety record.

Portfolio Roundup

Despite announcing that it has signed four new projects with a design capacity of about 929,000 tons of waste water per day, shares of Beijing Enterprises Waster Group Limited (Hong Kong: 0371) have declined.

The culprit: a recent Reuters story revealing that a number of Singaporean water companies are planning to enter the Chinese market. For instance, Singapore-based HyFlux (Singapore: 600) has signed on for two Chinese projects worth SGD1.2 billion.

Water scarcity is becoming a serious economic issue, prompting the central government to recently set water use quotas for each of the nation’s provinces. The Chinese government is slated to spend USD850 billion over the next ten years on water-related infrastructure.

More than 300 million people are expected to move into cities by 2030, marking a massive need for additional infrastructure. Singaporean companies aren’t likely to score more than a quarter of the total spending pie, given the home field advantage of companies like Beijing Enterprises Water.

The company also enjoys solid relationships with regulators at both the provincial and national levels, as reflected by its rapid expansion and the fact that it has been unmarred by scandal. Thanks to that and rapid growth in its business, net profit at the company has shot up from HKD192.7 million in 2009 to HKD750.3 million last year.

With increased competition unlikely to significantly slow Beijing Enterprises Water Group’s growth, it remains a buy under HKD3.