As Europe's debt crisis continues, and confidence in Western and Eastern European debt has waned, demand for African debt has gone up.

Global debt issuance fell 6 percent, in 2011 from a year ago. Debt issuance by African countries and companies however, jumped 17 percent in 2011, to a record $12.4 billion, according to Dealogic data cited by The Financial Times.

Demand for African debt is going up because it has a lower correlation with global markets. Investors have increasingly seen emerging market debt move in response to headlines out of Europe, but most African countries that issue debt are frontier markets that operate independent of the global economy.

The yield of JPMorgan’s Nextgen Africa index fell 70 basis points (bp) to 8.4 per cent so far this year. The broader Nextgen frontier markets index is down 15 bp this year, according to The Financial Times report.

African debt however continues to remain at the periphery of the global financial markets for many reasons. First, while these economies are not heavily linked to developed economies, and have escaped relatively unscathed from the rout in the global economy, they are still reliant on commodity exports.

There is also the concern that liquidity in these markets is weak. And funds could be hit hard, if there was a sudden onslaught of bond redemptions. It doesn't help that last year, the Ivory Coast defaulted on $2.3 billion of bonds last year after civil unrest in the country. Investors can however expect more first-time euro-denominated bond issuances in 2012.

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