South Africa National Treasury is considering issuing Islamic bonds to diversify its investor base and on Tuesday asked interested banks to submit bids.
"There is a great interest in the sukuk market and this is the first step towards meeting the growing appetite for government-backed Shariah compliant investments," said Lungisa Fuzile, Director General of the National Treasury, in a statement.
Another sign that the mainstream banks in South Africa are taking Islamic finance as a serious niche market business is the acquisition last week of the local Islamic insurance company, Takafol SA, by Absa, one of the republic's largest banking groups.
In a deal which could have implications for the reach of Takaful (Islamic insurance) beyond the borders of South Africa to southern, central, West and East Africa, Absa Insurance Company Limited (AIC), a wholly-owned subsidiary of Absa Financial Services Limited (AFS), bought the book of business of Takafol South Africa (Pty) Limited (Takafol SA), which is a subsidiary of the Hannover Reinsurance Group, a major global reinsurer, and which was established in 2003.
South African asset management company, the Oasis Group, a leading provider of Islamic and socially responsible investment products, is aggressively expanding its overseas operations and is set to open an office in London later this year as part of its expansion strategy.
“High level financial and business services in South Africa and London share a great deal and are on a fast track for much closer cooperation. I particularly welcome the move by firms such as Oasis Group Holdings to make such links concrete by opening London operations.
In May this year the National Treasury issued proposed tax amendments as part its stated intention of putting Islamic banks in South Africa on an equal footing with traditional conventional finance. National Treasury also stated that, "The development of Islamic finance in South Africa is critical to the expansion of National Treasury's strategy to position South Africa as a gateway into Africa. The Treasury envisages South Africa being a central hub for Islamic product development and ensuring the rollout of such products into African markets.'
Africa’s Islamic finance industry needs to overcome negative perceptions among non-Muslims to successfully expand into predominantly Christian sub-Saharan Africa, an industry leader said on Tuesday.
Northern Africa is largely Muslim and countries such as Egypt and Sudan have offered Islamic banking for decades.
Now some lenders are looking to expand into sub-Saharan nations, such as Uganda which is 80 per cent Christian.