Sovereign Issuance was a Challenge – South Africa Debt Director

South Africa’s debut sukuk was “very tough” stated Tshepiso Moahloli in an interview with Global Financial Conferences, Director of Debt Issuance and Management for the National Treasury Republic of South Africa.

The biggest challenge was understanding the sukuk product and the nuances of the market, as well as asset identification.

She also stated the issuance was motivated by the desire to diversify funding sources, and the investor base as well as to set a benchmark for domestic corporates looking to fund infrastructure projects, and was hopeful state owned companies would follow through with issuances.

South Africa issued its debut sukuk in 2014, a US$500M sukuk which was more than 4 times oversubscribed with an order book of US$2.2 billion. The South African Treasury has previously stated it may make further sukuk issuances in 2016.

Sukuk are not Bonds

Sukuk tend to reply upon underlying assets which are securitised which must meet Sharia guidelines based on religious and ethical requirements. Further challenges arise due to the transfer of assets and associated tax liabilities due to the securitised sale and sell back.

Bonds on the other hand, can be created with the click of a button and tend to supported based on the credit risk rating of the issuer, as opposed to any underlying asset.