South Africa’s National Treasury hires banks for debut sovereign Sukuk (By IFN)

SOUTH AFRICA: The country’s National Treasury has appointed six banks to advise on a much anticipated sovereign Sukuk issuance.

Al Baraka Banking Group, BNP Paribas, Liquidity Management House, Nova Capital Partners, Regiments Capital and Standard Bank were hired to advise on the transaction, which will mark South Africa’s debut into the sovereign Sukuk market.

The Treasury has yet to decide on the amount, currency or timing of an issuance which could make up part of its plan to tap US$3 billion from the global markets over the next three years.

“From what we have observed, issuance tends to be from US$500 million to about US$700 million and movement around the five-year Sukuk area looks like it’s the most favored,” Tshepiso Moahloli, a senior analyst at the Treasury, is quoted as saying.

A move by South Africa to diversify its funding sources could prove crucial at a time when the economy, which is Africa’s largest, is threatened by declining tax revenue on the back of lower exports to Europe; due to the region’s ongoing crisis. “The European crisis and the fact [that] there are lower growth patterns around the world today does mean that we must have lower expectations about what the budget could look like,” said Pravin Gordhan, the finance minister of South Africa. Earlier this year, Gordhan unveiled a record ZAR1.06 trillion (US$131.27 billion) budget for 2012-2013.

The Treasury’s appointment of banks to advise on a sovereign Sukuk follows its request for proposals sent out in December last year; and continues on from the government’s efforts to open up the country’s Islamic finance space. In the past few years, its budget announced the leveling of taxation on Islamic financial products with that of conventional financial instruments. It has also proposed to amend legislation to address Ijarah products to facilitate the sale of sovereign Sukuk.

See: http://redmoney.newsweaver.co.uk/9u611q8mpaeh38rwoni3wx?email=true&a=6&p=25569815&t=21587885