Islamic finance is set to play an ever-increasing role in bolstering trade and investment between the Gulf and much of Africa. Sukuks have been launched across Africa, from South Africa to Gambia, Senegal and beyond and are increasingly offering a consistent alternative to other finance methods.
A recent report by Standard Chartered Bank stated that “the strength of demand for sukuk bonds by Sub Saharan African issuers is evidence of Middle Eastern investors’ interest in [Sub Saharan African] investment”, the report went on to state that ” Nearer-term, deeper markets and a Middle-Eastern investor base more familiar with Africa should help to advance Sub Saharan African sukuk issuance.”
Islamic finance options are expanding with the continent as highlighted by recent initiatives in Morocco, South Africa and beyond. While Islamic finance appears to be on the rise in Africa, a report by Standard & Poor claimed that the global sukuk market will this year, following the Central Bank of Malaysia’s withdrawal from the market.
GCC investment in Africa has increasingly been directed toward infrastructural projects as countries seek to improve existing networks in order to bolster intra-Africa and Middle Eastern-African trade. Trade between Sub Saharan Africa and the Middle East has increased by a factor of five, reaching $35 billion in 2014, compared to $7 billion ten years ago. However, despite this impressive growth, trade with the Middle East has only grown by 12 percent annually since 2000, whereas trade with China (27 percent) and India (18 percent) has consistently been of greater importance.
According to The Economist, Middle Eastern countries have invested approximately $30 billion in infrastructure projects in Africa over the past decade and have focused on ports, telecoms and energy. The UAE emerged as the fourth largest investor in Africa in 2014, behind the USA, the UK and South Africa. Capitalizing on its advantageous geographical position and strong logistical market, the UAE is acting as a gateway to the continent for firms from across the world, as well as benefitting in terms of direct trade and investment with Africa.