(Adds investment flow estimates)

By Matthew Tostevin

LONDON, Jan 3 (Reuters) - Kenya's bloody crisis is a reminder of the fragility of a promised African economic renaissance despite the continent's fastest growth in decades.

The shine has quickly come off once-stable Kenya, until now a star performer, as its disputed election led to violence.

But wary investors are also following South Africa's wobbly change of leadership even though the continent's biggest economy is in a different league from others and much steadier.

And while second-ranking Nigeria is still seen as a promising investment, chronic unrest besets its main oil region and permanent questions hang over its political stability.

Some investors see Africa as a good bet because it is relatively isolated from global financial turbulence, but Kenya has made clear that long-standing risks cannot be brushed over.

"Now it seems it will be the other emerging markets that will benefit to the cost of Africa," said Richard Segal at Renaissance Capital, which is increasing its presence in Africa.

Sub-Saharan Africa is doing its best for decades -- lifted by a commodity price boom, debt relief, new investment from Asia, technological change and in some countries better management of public finances and an end to conflict.

The International Monetary Fund projects gross domestic product growth of 6.8 percent in 2008 from 6.1 percent last year and 5.7 percent in 2006. It is one of the few regions where growth is expected to accelerate next year.

SCRAMBLE

More adventurous investors have been keen to snap up assets on a continent traditionally better known for war, famine and disease than for its economic health. Investment bankers have been happy to tout Africa as a new frontier.

"I'd like to think people were coming to this with eyes wide open but some of the pricing suggests the risk is not priced in adequately," said Stephen Bailey Smith of Standard Bank.

Net private capital flows to the continent, excluding Egypt and Libya, are forecast by the IMF at some $46 billion in 2008 from $17 billion in 2004. Private portfolio flows are seen at nearly $15 billion in 2008 from just over $5 billion in 2004.

China, seeking natural resources to power dramatic growth, has become a big new investor in Africa with less concern than Western buyers over issues such as stability or democracy.

Fast growing economies do not always ensure greater stability, particularly when benefits are not felt by everyone.

That is a big complaint in Kenya as well as South Africa, where populist Jacob Zuma shouldered aside President Thabo Mbeki as head of the ruling party and is almost sure to become president himself if he beats corruption charges.

Dangerous ingredients for political risk -- some present in Kenya -- include ethnic rivalries, routine official corruption and a lack of any belief that authorities will respect or enforce the law if it is not to their personal advantage.

Kenya's shilling dropped sharply amid the troubles over President Mwai Kibaki's disputed re-election while stock market trading stopped early on Thursday due to the violence.

The World Bank said Kenya's unrest could threaten its impressive recent growth and have a big regional impact.

"If the political structure is not suitable then how safe will your investment be?" said Bismarck Rewane of Financial Derivatives Co. in Lagos. "You cannot have fake democracy."

Africa investment bulls remain optimistic about Kenya as long as the violence tails off soon -- some pointing to flawed elections elsewhere as an example.

NIGERIA

"Elections in Nigeria were not as pure as the driven snow, but people saw the way things were and then moved on," said Segal of Renaissance, referring to elections last year marked by massive fraud.

"The only country really beyond the political cycle now is Nigeria. It's almost Nigeria or no place."

High oil prices are another strong point for Nigeria, but the situation does not look so pretty on the ground as on paper given oil region unrest and uncertainty over President Umaru Yar'Adua's ability to bring change to Africa's giant.

Oil has boosted Angola and Sudan too, but they do not offer such obvious opportunities for investors.

South Africa is a different case in that political uncertainty has less impact on economic prospects.

Not only is South Africa much more developed, but it has stronger institutions than most on the continent, better able to limit radical change that any new leader could try to bring.

Smaller economies are a problem even when they are doing well. Such markets rarely have the liquidity to mean assets can easily be bought or -- crucially -- sold in times of trouble.

Ghana in West Africa is seen as one bright spot. Its landmark eurobond issue last year was four times oversubscribed. Although Ghana has elections this year, it has much more practise at democratic polls than Kenya.

"I am hoping events in Kenya will affect decisions about Ghana positively," said Daniel Ogbamey Tetteh, head of research at Databank in Accra. "If we are able to project what we have been able to achieve, we should be able to achieve some inflow."

Peace is returning to Ivory Coast after a civil war wrecked its stable reputation, but potentially divisive elections loom.

Possibly the bitterest lesson in Africa comes from Zimbabwe, where one of the continent's most vibrant economies has been wrecked under President Robert Mugabe's rule, although some see eventual opportunities there too.

"I think Africa has turned the corner, but this is a 30 year industrialisation story not an overnight industrialisation story," said Jonathan Chew of the Imara investment banking and asset management group. (Editing by Giles Elgood)

For a FACTBOX on Sub-Saharan Africa's economies please click on [nL03664491]

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