Political parties are the custodians of democracy. Following the return of democracy to Africa during the ‘third’ and ‘fourth’ waves, political parties are undergoing structural changes (from military and one-party authoritarianism to liberal multiparty systems) for the development of sustainable democracy. This paper is not about institutionalised political parties or party systems, it is about understanding the historical development of political parties and their transformational nature in relation to the development of democracy in Africa. The paper therefore identifies some critical challenges that are threatening the institutionalisation process of the parties. These include party funding and finance, party ideology, the dominant-party syndrome, ineffective civil society opposition and problems of fragile electoral institutions. The paper argues that though these problems are part of the wider socio-political and economic dilemmas inherent in Africa they are more pervasive and have a devastating affect on political parties as instruments of modern representative democracy. The paper thus contends that, given the main concerns and attributes of good governance, it is the only panacea that can wholly address the institutional problems of political parties as well as other structural and institutional obstacles to the development of sustainable democracy in Africa. Good governance is presumed here to be the ideal and pragmatic solution to such institutional obstacles.