ISLAMIC ECONOMY AND AFRICA’S ECONOMIC DEVELOPMENT

If information technology has enabled emerging economies such as India to change the commercial equations with the developed world, another economic segment is being recognized globally for its potential: the ‘Islamic Economy’.  Sitting at the heart of the Global Islamic Economy are Halal industries: encapsulating those wider processes, goods and services, experiences and relationships – that are religiously permissible, ethical, wholesome and family-friendly – with cultural values and market objectives.

The Islamic economy ecosystem comprises various inter-related industries that may be clustered into four sectors, namely: Agro-Halal Food Chain (Production, Distribution, and Logistics); Travels (Hotels/Resorts, Airlines, and Restaurants); Lifestyles (Cosmetics, Pharmaceuticals and Media); Islamic Finance (Banking, Takaful and Capital Market). Despite the word ‘Islamic’, an Islamic economy ultimately benefits the entire community as most of the founding principles of an Islamic economy are naturally aligned with the universally recognized values of ethics and sustainability. As a result, halal products and services are attractive to non-Muslim consumers, particularly in the light of current global sentiments where the demand for ethical and socially-conscious product offerings are on the rise.

According to the State of the Global Islamic Economy Report 2020/21, an annual industry report produced by Thomson Reuters, the burgeoning Halal economy is growing at nearly double the global rate.  The report states that as at 2014 the Global Halal economy totalled USD3.2 trillion, and with an annual growth of 20%, it is forecasted to double to USD6.4 trillion by the year 2020. The annual value of the halal Food sector alone totalled about US$1.17 trillion, representing 17% of the total global food market, and projected to reach US$1.38 trillion by 2024; Islamic banking and finance assets totalled US$2.88 trillion, representing 1.27 of the total global market, and projected to reach US$3.69 trillion by 2024; Travel was valued at US$142 billion, representing 11% of the total global market and projected to reach US$233 billion by 2020; Muslim spend on travel increased by 2.7% in 2019 to $194 billion from $189 billion in 2018. With the impact of the COVID-19 pandemic, it was expected to fall to $58 billion in 2020 and make a recovery to 2019 levels by 2023, and grow at a 5-year CAGR of 1.4% from 2019 levels to 2024. Fashion was valued at US$277 billion, representing 11% of the global market and projected to reach US$311 billion by 2024; Media and recreation was valued at US$222 billion, representing 6% of global market and projected to reach US$ to $270 billion in 2024. Halal Pharmaceuticals was valued US$94 billion in 2019, representing 7% of global market and was projected to reach US$105 billion. Cosmetics was valued US$66 billion, representing 7% of Global market and projected to reach US$76 billion by 2024.  In 2013 alone, Sub-Saharan African consumers spent an estimated US$114 billion on halal food (halal meats, halal franchises, and prepared meals, canned, frozen, and instant foods).

What is astounding is that this impressive growth performance were recorded at a time the world economy has been undergoing through turbulent times, affecting all regions and countries as a result of the COVID-19 pandemic. This indicates that Global trade in halal goods and services remained robust at a time when overall level of international trade fell.

From the foregoing growth figures, this segment emerges as one of the biggest opportunities for Africa. With more than 60 percent of the world’s arable land, agriculture accounting for 32% of its robust GDP growth, and over 1 billion population with considerable purchasing power, Africa possesses an enviable market for halal goods and services, and a tremendous untapped market potential in the global Halal market. In addition to the domestic market, Islamic economy offers to African countries a feasible option and new opportunities to leapfrog into emerging high-growth areas of the global economy.

Times of crises, they say, offer an opportunity to look at newer options, approaches, and strategic directions. While the Islamic economy is not in itself a panacea, it does potentially offer more resilient inclusiveness and environmentally viable paths to economic growth. Even if there is no one-size-fits-all prescription, we believe that African governments can play a catalytic role by putting in place the policies, regulation and institutions needed to strengthen their Islamic economies.

Overall, the Islamic economy sectors can contribute a lot to growth and prosperity, especially for African countries seeking to diversify their economies and build resilience to future economic crises.