The Financial Times reported that the Tanzanian government will ask the International Monetary Fund for permission to issue a $1 billion bond. If it is granted Tanzania will join a select group of high-growth African countries now offering sovereign debt on global capital markets.

For U.S.-based investors the question is whether African sovereign debt is attractive enough to offset the risk – especially now that the U.S. Federal Reserve has announced it intends to taper off U.S. asset purchases in the near future. This will raise both the value of the U.S. dollar and yields on U.S. bonds as U.S. interest rates move upward.

Still, even as holding U.S.-based debt instruments become more attractive vis-à-vis foreign assets, African sovereign debt can still be an attractive choice for investors willing to accept a modicum of risk. Tanzania, for instance, issued an unrated, private-placement $600 million note earlier this year as a trial run for bigger, rated issues this fall and it sold with a yield of 6.284 percent – a little over 2.2-times the current yield on 10-year U.S. treasuries. Analysts estimate the yield for the upcoming issuance of the $1-billion Tanzanian note could run from 7.5 percent to 8 percent. 

While Tanzania is a newcomer to international capital markets – the country will receive its first sovereign debt rating by the end of September or October – it has racked up years of respectable growth in one of Africa’s high-growth regions, making the country a hot commodity. Indeed, global investors have lately been snapping up African sovereign debt on the rare occasions it is offered.

Countries in sub-Saharan Africa have issued $2 billion in bonds so far this year, up 11 percent compared to the same time in 2012, according to the Wall Street Journal. If issues hold pace, this means by the end of 2013 African sovereign debt could come in at over $9 billion, up from the $7.25 billion issued in 2012 and the $5.2 billion issues in 2011.

Tanzania will not be the only African state to tap global capital markets for the first time this year. Neighboring states Kenya and Rwanda have also announced they will issue sovereign debt by issuing notes worth up to a $1 billion and $200 million, respectively. Thus, it would seem that 2013 is something of a “coming out” year for East Africa on global capital markets – a milestone in the region’s economic development and a measure of how far these states have progressed since “taking off” economically a decade ago.

Previously in Africa only oil-rich states like Nigeria and Gabon or South Africa, which possesses the continent’s largest non-oil economy, routinely accessed global capital markets, so the entry of many more states will be good for investors looking for higher returns in the region.

More states issuing debt will mean more competition for investor cash and, in theory, better macroeconomic management and performance over the long run – especially if the debt is used to build up desperately-needed transport and power-generation and distribution infrastructure instead of squandered on vanity projects and unsustainable social-welfare spending.

Still, not all is smooth sailing – and many risks accompany these higher returns. The above mentioned “tapering” off of asset purchases by the Federal Reserve, for instance, is but one that investors will have to look out for.

Another is the damage any potential fall off in Chinese demand may cause to the region’s export-dependent economies – which have grown rich off shipments of raw materials to East Asia.

Political risk, such as the violence that hit Kenya in the aftermath of elections there is also of concern as growth tends to promote inequality, which can exacerbate conflict within already divided societies.

All these problems exist, but with returns of 7.5 percent to 8 percent, who can resist the temptation to diversify that portfolio by dipping at least a few investment toes into East African sovereign debt?

Given the relative ease with which African states are issuing debt nowadays, very few – that’s who.