The Islamic finance opportunities in Africa are indeed enormous and extremely attractive. However, indications are that the GCC may come late to the game. Unless the perception of Africa as a risky, unstable market is changed, we are likely to see the West and Southeast Asia taking the lead here. Africa is THE frontier market. It has good assets/projects and offers the best returns in the world. However, it is my opinion that the substance of Islamic finance (as opposed to the form) could very well find expression in Africa. Knowing your partner is critical. Investors must consider investing in local currency. There is also the added benefit of Islamic finance driving real infrastructural and other development that is critical to Africa. Lotus Capital is the arranger for a sub-sovereign local currency Sukuk in Nigeria in 2013. Will there be appetite from the GCC? We will see.
HAJARA ADEOLA
Managing director/CEO, Lotus Capital
Since the beginning of the financial crisis, we have noticed that more and more GCC investors have started to invest massively in Africa as well as other emergent markets as there is a higher potential of return compared to the traditional American and European countries. Indeed, certain African countries have been benefiting from important economic growth rates in the last years and such a trend is expected to be confirmed in the years to come in consideration of their natural resources, their expanding middle-classes, etc.
The GCC investments are not limited to the Arabic and Muslim countries, but have been extended to other African countries. As such, the GCC isin competition with other countries which are trying to become leaders in the African markets like China.
I believe that the GCC will, however, focus more specifically on the African-Arab countries affected by the so-called the Arab Spring where there is a potential of profits in the short to medium-term.
SUFIAN BATAINEH
Managing director, Dananeer
Islamic finance remains in its infancy in Africa but there is considerable potential. The elections of Islamist governments in Egypt and Tunisia have however, as yet, failed to live up to expectations as far as Islamic finance is concerned. Although the Shura Council in Egypt approved the issuance of Sukuk, President Morsi has been forced to refer the legislation to the Al-Azhar scholars under the new constitution. This is resulting in confusion and delay, which makes it unlikely that there will be any sovereign Sukuk issuance in Egypt this year. In any case, given the poor state of Egypt’s finances, it is doubtful if Gulf investors will want to subscribe.
More Gulf interest is now focused on sub-Saharan Africa rather than the north. Gulf African Bank, part owned by Dubai based Islamic private equity company Istithmar, is steadily expanding its presence in Kenya, and is looking at opportunities in Uganda and Tanzania. The latter already has two Islamic banks, Amana Bank and the Peoples Bank of Zanzibar. In Nigeria the second-largest African economy, Jaiz Bank, which operates according to Shariah, has opened branches in Abuja, Kaduma and Kano following the award of a banking license by the central bank. The Federal High Court of Nigeria has however challenged the approval given by Sanusi, the central bank governor. Although Jaiz Bank is entirely locally funded, Gulf investors are unlikely to commit any capital until the position is clarified.
In conclusion it appears that for the present it is East Africa which is the focus of attention by Gulf investors, but legal obstacles appear to be hindering the spread of Islamic finance in North and West Africa.
RODNEY WILSON
Emeritus Professor, Durham University, UK; Visiting Professor, INCEIF