South Africa launched sub-Saharan Africa’s first Islamic bond, paving the way for issues by other countries in the region. National Treasury has announced that, following the entry into force of tax provisions for Islamic financing at the beginning of 2013, the Republic of South Africa has successfully concluded its debut USD500m, 5.75-year sukuk bond issue.
The $500m sale was more than four times subscribed, with an order book of $2.2bn according to the SA Treasury, indicating that appetite for emerging market Islamic bonds matches that of developed world issuance.
The bond, which matures in June 2020, is a Sukuk Al-Ijara structure with cash flows based on infrastructure assets, although the country has not made public what these assets are. The sukuk market has grown rapidly over the past decade, brushing off periodic squalls from the global financial crisis and Dubai’s flirtation with default in 2009. Global Islamic bond sales have reached almost $90bn so far this year, up 17.2 per cent from last year’s total, according to Standard & Poor’s.
