Islamic finance has seen exponential growth in North Africa, particularly in Egypt, Libya and Tunisia, with many Middle East financial institutions investing in the region. However, considerable development has also been taking place in the south of the continent.
The irony is that South Africa is home to the one of the smallest numbers of Muslims in Africa, making up less than 2% of its total population. Islamic asset management began in the country in 1992 with the launch of South Africa’s first Islamic mutual fund, Futuregrowth Albaraka Equity Fund. Initially managed by Element Investment Managers from 2000-2005, it was then managed by Futuregrowth, which has since become a member of the Old Mutual Investment Group (OMIGSA).
There are 11 asset management companies in South Africa offering Shariah compliant investment schemes or mutual. This comprises a quarter of the total number of asset management companies registered under the country’s Financial Services Board (FSB). Oasis Asset Management currently manages the largest number of Islamic funds in the country, comprising domestic and offshore investments.
South Africa’s regulators are also now keen to promote Islamic finance in the country. The country became the talk of the industry on a global scale after it announced its intention to issue its first sovereign Sukuk, inviting banks in December 2011 to pitch for an advisory and structuring mandate.
Prior to this, the Financial Services Board also introduced several exemptions for Islamic funds: including allowing managers of a Shariah compliant fund to invest a maximum 50% of the market value of totals asset in a particular portfolio. As with the majority of Islamic funds globally, the primary demographic of investors in South Africa is retail. In a bid to lure institutional investors, asset management companies are now offering funds to which company employees can choose to make contributions for their retirement plan.