The government, through the Treasury ministry has in the recent past expressed interest in the uptake of sukuk bonds to plug the budget.Peeking through the uptake of the same in other African countries shows that it has been gathering some momentum. This article will seek to explore the opportunities that come with the Halal economy.
The global consumption of halal food and lifestyle products could rise to 10.8 percent a year until 2019 and the industry at large is estimated to be worth USD 3.7 trillion. This is based on the most recent Global Islamic economic Report. The past couple of years have seen a great leap and advancements in these sectors. Notably, is an investment by a Brazilian halal food provider in a UAE production plant, marketing of Dubai as the new halal Islamic economy hub and halal testing technologies from France, Malaysia and the UAE.
The halal tourism represent 11.6% of global tourism expenditure and has driven sales in food and beverage and has advanced product investments in Russia, Philippines, UAE , Maldives, Spain and Japan. The statistic excludes the Hajj and Umrah seasons and in totality, it is estimated to be USD 238 billion in 2019.
It is widely accepted that food is a culture sharing medium and it is on that premise that halal food sector has been on a growth trajectory. Estimates emanating from the same report indicate that in 2014, the sector was valued at USD 795 billion with a projected increase to USD 2.537 trillion mark come 2019 more than a fifth of global food expenditures. Many countries across the globe have been at the forefront of this consumerism particularly the Muslim dominated nations. Indonesia leads the pack at a valuation of USD 190 billion, Turkey comes in second at USD 168 Billion followed closely by Pakistan at USD 108 billion and Iran at USD 97 billion.
Nielsen, a research company based in the US conducted a research from 2012 through 2016 and concluded that grocery,convenience stores and similar outlets estimated that their sales in halal food reached USD 19 billion in the 12 months between August 2015 through August 2016.Nutrition Council of America estimated during the same period that the halal food sales in both restaurants and supermarkets would clock USD 20 billion. Pew Research Center projects a growth of the Muslims in the US from 2.3 million to 8.1 million by 2050 surpassing any other religion but Christians, Jews notwithstanding.
Nestle world’s largest food company prides itself with 151 halal factories, from Malaysia to Pakistan, distributing hundreds of certified products globally. Walmart on the other hand stocks halal products in 400 of its 4600 stores, Kroger stocks on demand. On the flipside, Denmark banned halal and kosher products in 2014 a directive that was meted with a lot of friction coming in the wake of a felled baby giraffe in one of their zoos in the full glare of an audience and the flesh later fed to lions. Sri Lanka a 70 percent Buddhist nation forced the Muslim minority to respect their traditions and placed a ban on displaying of halal certification on any store in the country.
The other segment that touches on the halal economy is Islamic financing. I’ll only delve into sukuk bonds for it touches on my aforementioned statement. Wikipedia describes sukuk as plural for the Arabic word sakk which is a financial certificate alias sharia compliant bonds.
The Accounting and Auditing Organization for Islamic Financial Institutions describe them as securities of equal denomination representing individual ownership interests in a portfolio of eligible existing or future assets. They are structured in accordance with Sharia Law which uphold the payment of profits arising from the venture and not interest as in the case of conventional bonds. This is made possible because a tangible asset is involved. They may also partially own a financed real estate project and collect rent as their profit. Issuance of such bonds is pegged on the structures of Islamic contracts namely Murabaha, Ijara, Musharaka, amongst others.
The sukuk has been an acceptable mode of financing since 1988 and has been growing since. The Global Economic Islamic Report 2016/2017 intimates that out of USD 2.004 trillion assets being managed in sharia compliant in 2015, USD 342 billion were sukuk valued from the 2354 issues.
Africa is home to 250 million Muslims, home to a quarter of world’s Muslim population. Sukuk bonds have their fair share of history in the continent. Sudan issued their maiden domestic short term sukuk worth 77 million Sudanese pounds in 20 00 on the basis of Musharaka, which means the sukuk holders are also the owners of the originator issuing the same and ultimately contribute to decision making.There’s a wide assumption that sukuk asset backed investments and risk sharing offers African nations more forgiving terms as well as going a long wayy of insulating them from volatility that come with the global economy.
Global sukuk issuance decreased from USD 101.8 billion to USD 66 billion in 2015 a drop that was informed by cessation of sukuk issuance by Bank Malaysia Negara, that offers 50% of the global market share. The saturation and the unstable traditional markets case in point Syria, Iraq and Turkey also contributed to the decline.on’s largest sukuk USD 200 million in 2014
Senegal issued the region’s largest sukuk USD 200 million in 2014 In 2016 another was issued of USD 263 million, Ivory Coast USD 526 million and Togo’s USD 263 million all in the same year.
South Africa in 2014 became the only third non-Muslim country to offer sukuk. Africa’s first dollar denominated sukuk ( USD 500 million)priced at 3.19% over 5.75 year span. It is positioning itself in a bid to position itself as a hub for import of halal products and financial services. It was more than four times oversubscribed on international capital markets.
As a country we have lately experienced a wave of banditry on the Northern frontier late and it has been a perennial thorn in the security flesh. Halal food industry may provide an avenue through which this problem can be alleviated. In a country populated with 10 million heads of cattle and 6 million slaughtered yearly, exportation of the same into halal markets could go a long way in changing the ravaged face of these areas. As the government looks into the diversification of exports, this virgin area could best provide killing two birds with one stone scenario.
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