TURMOIL in Tunisia? Conflict in Mali? Fraught elections in Kenya? Investment in Africa is thriving regardless.

African investment funds have grown nearly five times in value in the past six years and are attracting new forms of capital, from local pension money to sovereign wealth funds.

However, investors have worked out that economies and markets vary widely on this large continent, and that businesses can carry on through difficult political times.

They are also looking beyond the region’s natural resources. Favoured investment plays now include banking stocks, particularly in Nigeria, with demand for financial services from a growing middle class.

Telecoms, pharmaceuticals and breweries are also in demand, while mining stocks remain attractive, although these are often listed outside Africa. Investors have become more knowledgeable about the continent and focus more on how, rather than whether, they will commit funds.

"When I was in Europe a few weeks ago, I noticed that people no longer ask so many questions about Africa but more about us," said Renaissance Asset Managers head of frontier market Sven Richter. "They have come to a realisation that Africa is not one country — if you heard there was a problem in Slovenia, would you worry about investments in France?"

Equity funds that badge themselves Africa or African, held assets of less than $1b n in 2006, according to Lipper data. That rose to more than $3b n by the end of 2011, and to nearly $5b n by the end of last year. That is small compared with more than $38b n in funds labelled Latin American at the end of last year, but with a much stronger growth — a near fivefold rise in six years for Africa funds, versus less than 40% growth for Latin American ones.

African equity funds include major names such as Templeton and Morgan Stanley as well as Africa specialists such as Investec and Renaissance. The sum covers funds bunching North Africa and the Middle East or focused mainly on north or south, but excludes those invested mainly in better developed SA and the Africa component of many frontier funds.

The economies of Africa are among the fastest-growing, although it’s from a low base, at only a few percentage points of the world’s gross domestic product. The change is driven by youthful populations coupled with improving mortality rates and an expanding middle class, as well as by exports to richer economies. Analysts point to economic reforms in many countries, even when these do not go hand in hand with democratic ones.

"Countries are starting to enter into their second series of free and fair elections, but to paint all of Africa as a Switzerland is pushing it," said Gus Macfarlane, director of political risk consultancy Maplecroft. He said corruption has not lessened significantly in recent years.

Nevertheless, economic reforms have allowed local pension funds to set up, while intra-regional trade has also risen.

Sovereign wealth funds, particularly from the Middle East, are increasingly enamoured of the high returns in the riskier markets of Africa, compared with the developed world. African stocks can be volatile, dropping 30% in 2011.

However, they have outperformed broader frontier and emerging market indices since climbing 38% last year and more than 9% so far this year. Some of the best-performing stocks in the past year have been Nigerian banks such as Guaranty Trust and Zenith, as investors reckon financial services will catch up with ballooning demand for cellphones and consumer brands.

Big Pharma is also attracted by opportunities to treat chronic diseases afflicting the new middle classes, rather than just firefighting infection.

Private equity deals in Africa have attracted mainstream houses such as Carlyle, which last year set up offices in Johannesburg and Lagos, and invested in a cashew nut trader in Tanzania.

Standard Chartered invested in Zimbabwe last year and said this month it was looking for more deals there, while local bond markets across the continent are also in the radar, alongside several billion dollars of hard currency bonds.

African markets are a useful diversification play. They are neither closely correlated to the larger emerging markets such as those of the Bric countries — Brazil, Russia, India and China, nor even to one another.

There have been flashpoints across the continent over the past few years, starting with the Arab Spring regime changes in Tunisia and Egypt two years ago. However, that failed to deter veteran emerging market investor Mark Mobius, who was in Cairo’s Tahrir Square during protests last year and kept Egypt holdings in his $1b n frontier fund, while local stock Orascom Construction has attracted the attention of Bill Gates. Senegalese telecoms firm Sonatel, which has 64% of the market share in Mali, beat 2012 profit forecasts.

However, investors may grow more cautious ahead of the Kenyan elections, after a vote in 2007 set off unexpected post-election violence. In Zimbabwe, a March 16 referendum on a proposed new constitution should pave the way for presidential and parliamentary elections in July.

Low volumes also make getting in and out of trades difficult and expensive, while governments may not always pay up — Côte d’Ivoire restructured debt in 2010, only to default on it less than a year later, following civil war. The continent is so complex that investors also complain the level of analyst research on various markets is not always sufficient, favouring specialist emerging market investors who are able to carry out their own on-the-ground checks.

Local Africa-watchers say investors may not take into account the fact that newfound wealth is not trickling across the populations — in Nigeria, the gap between rich and poor is rising, even though the country is expected to grow nearly 7% this year. Investors may ignore these issues at their peril, as social unrest can hinder investment.

It’s a concern for Alquity Investment Management, which runs an Africa equity fund on a sustainable model. Failing to take account of those risks can destroy long-term shareholder value, Alquity says.