Home | Publications | Al-Jamiat Volume 9 No. 1 | The Question of Capital

The Question of Capital

The Muslim community of South Africa can count itself lucky in many ways. In particular, we can be grateful for the infrastructure that we have as a minority community. There are thousands of Masaajid, Madaaris and other institutions serving the Muslim community. But, where did these come from and will they be sufficient to take us forward in an ever changing world? Every single structure and institution that serves the Muslim community today began with a very simple act: the contribution of capital. The contribution of capital ensured that the community had the infrastructure that was required to develop and grow and live a productive life. The apartheid system that was in place in South Africa meant that the State prioritized the development of Whites before any other race group, and was simply not interested in building religious infrastructure for Muslims. The Muslim Ummah was faced with an uncaring state that did not fulfill its functions towards them. The Muslims were a minority with no State support, and had to operate against harsh laws. But, they had two things going for them: successful family businesses that generated capital and a desire to develop themselves. As a result, Muslims generated their own capital and invested in the infrastructure that they required.

In a democratic South Africa, the Muslim Ummah once more needs to develop their vital infrastructure. The breakdown of the Group areas Act means that Muslims have spread their reach geographically, requiring more Muslim schools, masaajid, etc. Just like under the apartheid government, Muslims are faced with a State whose funding priorities lie elsewhere. Thus, just as the apartheid government was primarily concerned with the advancement of Whites, the current government is concerned with redressing the previous wrongs, particularly with regard to Africans in particular. So, what do we do? The obvious answer would be to do the same as we did before, namely, to raise funds from within the community and thus develop Muslim infrastructure. Unfortunately, the fabric of Muslim society has fundamentally changed. In particular, Muslim business is under threat, and the characteristic of Muslims to invest in their own development has significantly receded.

The fear in every town and city amongst small and medium sized family owned Muslim businesses is the stiff competition that they face from much larger, listed companies and the realization that perhaps, their days are numbered. This decline in the force and profitability of Muslim business can be explained in a number of ways. Firstly, upon closer examination of the issue, it often emerges that the very businessmen who complain about chain store competition, for instance, own shares on the stock market through so called Shariah equity funds. And, amongst the shares that they own are shares of the very company that is driving them out of business!! They have invested in their own destruction! Secondly, businesses often face a lack of capital for expansion. The owners bemoan the difficulty that they experience with conventional vendors of finance, where they are either required to have significant security in place or are forced to partake in interest against their religious duty to abstain from interest. They ask “Where is a Muslim Business Development Fund?”. However, should someone ask them to invest in such a fund, they prefer to invest in the stock market instead. So, they want a fund for Muslim business, but they do not want to invest in it, they only want to draw from it. They would rather invest their cash in the very companies that are trying to destroy them!

Where has Muslim capital gone? Why are there virtually no Muslim investment schemes that invest according to the Shariah and in a manner that develops the infrastructure of the Ummah? The answer lies in following the money trail! The phenomenon of the Shariah equity fund is greatly to blame for siphoning off Muslim capital from causes that need it, to a meaningless application on the stock market. The only consideration that concerns the Ummah of today is the % return and the promise of quick money. The Ummah does not consider whether their funds are being usefully employed, in a Halaal manner to further the interests of the Ummah. The rise of the so-called Islamic banks with their fractional reserve system has lead to the widespread “legalizing” of debt under the guise of promoting Islamic finance. In a conventional bank, debt is created through the issuing of interest bearing loans, and in Islamic banks it is generated through credit sales agreements – in either event, Muslims are becoming more indebted daily, leaving them with fewer resources to invest in their own needs.

The only way for the Ummah to ensure that their needs are met in the future is to become more selective about where they invest their capital, and to move away from % based assessments of investment returns and start to analyze the bigger strategic picture. Muslims need to invest in Muslim owned companies and investment offerings. They need to set up schools, hospitals, security companies, etc. all run on commercial lines so that they fulfill a need as well as provide a Halaal return. There is a notion that community-based projects must be charity, and that everything else must generate high returns – this notion will lead to our downfall. There is a need to combine investment with servicing the needs of the community. Let us vow to reclaim our resources from the stock market and conventional financial system and invest it in ourselves. The opportunities to do so exist – ask the Ulama.

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