Lots of talk at the moment about how Africa’s economy is looking up.  The International Monetary Fund, for one, reckons sub-Saharan growth will be 1 percentage point above the world average this year and it has put eight African countries in its top 20 fastest growing economies list for 2010.

Reuters has written a special report on the subject as part of its Davos coverage. You can read it here.

But before taking its place alongside Asia and Latin America, the continent has quite a lot of work to do with investors. It could start by giving them something to buy (beyond commodities that is).

Polls of leading institutional investors conducted by Reuters asked a new question about allocations to Africa and the Middle East. The results were a bit grim. On average 44 large firms in the United States, Japan, continental Europe and Britain had less than 1 percent of their equities allocated to the region and the bond allocation was 0.1 percent.

The problem, according to investors, is that while Africa’s economies may be improving, there is very little  in the way of a capital market structure. Nor, often, is there the liquidity needed to let investment in and out. 

When things are available, however, investors will show up. The poll showed yield-hungry Japanese investors to be the biggest fans of  Africa and the Middle East (albeit it relatively).  South African rand-denominatd uridashi bonds are very popular with Japanese retail buyers — to whom they are marketed — what with an 8 percent yield and all.

Source: Jeremy Gaunt