With the global economy showing signs of a possible recovery, investors have been re-evaluating their portfolios and have started adding risk in order to seek better returns. These include emerging markets investments, which have surged over the past few months. The broad-based iShares MSCI Emerging Markets Index (NYSE:EEM) is up nearly 30% year to date. Most investors focus on traditional emerging markets or the BRIC economies, but there are other opportunities in Asia, Eastern Europe and the Middle East. Right now, one of the more intriguing areas for investment is Africa. (Please see The Frontier Awaits for more emerging markets ideas.)

Inside Africa
There are several reasons for investing in Africa. The region has experienced some growth, averaging 6% since 2004. Africa is also home to one of the planet's largest concentrations of natural resources. Nearly 40% of earth's total gold reserves and 30% of its mineral deposits lie within Africa's borders. These resources have been flying off the shelf, with exports to nations like China increasing nearly 40% since early 2002. In addition, several nations via trade pacts have favorable terms. Ghana's exports qualify for duty-free access in the U.S. and European Union markets. These resource dollars are beginning to see their way back into African infrastructure and telecommunications, thus increasing growth even further.

However, one of the main reasons why Africa is becoming a viable growth investment vehicle is due to increasingly politically stable nations. In the '70s and '80s there were failing governments throughout Africa, including Ghana, Uganda, Tanzania and Nigeria. Since then, Nigeria has cleaned up its balance sheet, enacted real financial laws and redesigned its banking system from the ground up. South Africa has been tackling its 23.5% unemployment rate, the highest on the planet, by enacting far-reaching multi-year public works projects. The nation hopes to half this number by 2014. Rwanda has made telecommunications a top priority, setting up fiber optics networks in its capital of Kigali. The African landscape is changing due to improving education, healthcare, justice systems and building new infrastructure. (Investing overseas begins with a determination of the risk of the country's investment climate, read Evaluating Country Risk For International Investing.)

How to Invest
With the recent proliferation of exchange-traded products, Africa is not missed, as there are several low-cost options for long term investors in the space. Volatility is the name of the game for these ETFs, as this an "emerging" emerging market and only investors with a long-term timeline, perhaps with a decade to spare, should be investing.

As the largest economy on the continent, South Africa gets most of the investment pie. It's no surprise that the iShares MSCI South Africa Index (NYSE:EZA) is also the largest ETF in the space with nearly half a billion dollars in assets. While the ETF focuses just on South Africa, it does include many of the continent's largest players, including oil and chemical giant Sasol (NYSE:SSL) and miner AngloGold Ashanti (NYSE:AU) via their Johannesburg exchange listings. The fund is up an impressive 210.64% since its inception in 2003, and counts materials as its top sector holdings. Expenses run a relatively cheap 0.63%.

You can also play the South African recovery via its currency. The WisdomTree Dreyfus South African Rand ETF (AMEX:SZR) seeks to replicate both money market rates in South Africa and changes in value of the South African rand relative to the U.S. dollar. Currently, the fund yields nearly 6% and has returned 12% since its inception in mid-2008.

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Broad Choice

While South Africa makes up 31% of Van Eck's Market Vectors Africa ETF (AMEX:AFK), the remaining holdings are spread over various African nations including Nigeria, Kenya, Morocco and Zambia. Based on the Dow Jones Africa Titans 50 Index (DJAFK) the ETF includes holdings in developed and undeveloped markets, giving investors a broader choice for African investment. While the fund hasn't truly captured the imagination of investors yet, with only $29 million in assets under management, it does show promise. Volume is light, with a three-month average of 24,000 shares daily. Investors with a truly long timeline may want to give this one a go.

Bottom Line
With more and more political stability developing on the continent, Africa seems poised for growth. Though there are some risks in investing here, longer-term focused investors may want to think about placing some money in this area. The preceding ETFs make it easy to invest in Africa.

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