South Africa to launch sovereign sukuk
On the southern tip of the continent, at the same time, South Africa’s Finance Minister, Pravin Gordhan, confirmed in his 2014 National Budget speech to Parliament in Cape Town in February that the country’s debut sovereign sukuk will be launched this year.
Some of the banks involved in advising on the debut Sukuk issuance, stress that “good progress has been made with this project and at this stage we have no reason to believe that the issuance will not proceed as indicated by Minister Gordhan.” One banker, quoting a National Treasury source said that the size of the Sukuk would be in the region of $500m.
Shabir Randeree, a member of the Board of Directors of Albaraka Bank (South Africa), the first and only stand-alone Islamic bank in South Africa, speaking in a personal capacity, confirms that Islamic finance is gaining prominence in South Africa to the extent that amendments have been made to taxation legislation to recognise Islamic banking products.
“The amendments,” he told African Banker, “have opened the way for Islamic finance to grow very significantly in the years ahead thereby offering an ideal opportunity for Islamic financial institutions to demystify Islamic banking and to educate the South African business community and public at large of the benefits of ethical banking. In essence, Islamic banking requires a concerted marketing and advertising effort.”
The South African Islamic banking market is currently estimated at R80.6bn ($7.63bn) in terms of assets under management (AUM). Albaraka Bank’s AUM, alone, grew by 18% in 2013 to pass the R4bn ($379m) mark to reach R4.4bn ($417m) at year-end. The bank has a customer base of 40,000 in South Africa. In 2013, Albaraka Bank also launched an International Banking Division following approval by the South African Reserve Bank (SARB) for it to commence trading as an Authorised Dealer in Foreign Exchange; and a Shariah-compliant cheque account product.
“The bank,” confirmed Randeree, “has also made significant progress in structuring a Basel III compliant sukuk issuance. In this regard, an application has been submitted to the SARB for its consideration and approval in due course.” Others such as Ebrahim Moolla at FirstRand Treasury, part of the FNB Group, speaking in a personal capacity, agrees that the potential for Islamic banking in Africa, is enormous.
“My sense is that people don’t want handouts; they would rather have opportunities that they can pursue, and I think that this fits perfectly with the ethos of Islamic finance. In South Africa,” he says. “There is scepticism still about Islamic banking. However, with time, this could be overcome.”