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Wednesday, 7 December 2011

South Africa considers issuing Islamic bonds

JOHANNESBURG (Reuters) - South Africa's National Treasury is considering issuing Islamic bonds to diversify its investor base and could have its first sukuk in the market as early as the next financial year if approved.

"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 on Tuesday.

The National Treasury asked banks to submit proposals by the close of business on December 21 for the issuance of sukuks and short-listed bidders will be informed by January 20.

The successful bidder would advise the Treasury on structuring, managing, and coordinating issuance activities and drafting all required contracts

Treasury spokeswoman Bulelwa Boqwana said the finance ministry has been researching Islamic bonds since 2004.

"There has been ongoing appetite for the sukuk even before the roadshow," said Boqwana, referring to an overseas trip by Treasury officials last week for a non-issue investor roadshow after the finance ministry released its 3-year fiscal framework in October.

"The Treasury started the research on the sukuk market as early as 2004 as part of our ongoing funding strategy," she added.

On when the market could expect the first issue of sukuks, Boqwana said: "It is only after the budget that we get our funding strategy approved so this is in preparation for the next fiscal year."

The Treasury will unveil its 2012/2013 budget in February.

Islamic banking is one of the world's fastest growing financial sectors, according to industry estimates putting its annual growth at 15 to 20 percent.

Global issuance of sukuk -- or Islamic compliant bonds -- is likely to rise 60 percent, to above $22 billion in 2011, a Reuters poll showed. 
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