Building a Halal Investment Portfolio in South Africa
South Africa’s Islamic investment accounts give savers access to Sharia-screened unit trusts, managed share portfolios and tax-free or retirement wrappers that exclude interest-bearing assets and prohibited industries, with profits purified of non-permissible income under a Sharia board’s supervision.
Screening shares for Sharia compliance
Managers first exclude companies whose main business is prohibited, such as alcohol, pork, conventional financial services, gambling and adult entertainment. Remaining shares are tested against financial ratios that limit debt and interest income, as Oasis describes on its compliance page.
Purifying non-permissible income
Small amounts of impermissible income, such as bank interest on cash awaiting investment, are removed from the fund. Oasis pays such income to the Oasis Crescent Fund Trust, which distributes it to disaster relief, education, sport and healthcare causes.
Replacing bonds and cash in a balanced fund
Islamic balanced and income funds cannot hold conventional bonds or money-market instruments. They use sukuk, Islamic deposits, listed property and other Sharia-compliant income assets instead, which changes their risk profile compared with conventional balanced funds.
Tax treatment of fund returns
Unit trust dividends, profit distributions and capital gains are taxed under the normal rules for collective investment schemes. Section 24JA of the Income Tax Act recognises sukuk and mudaraba, so income from these instruments is treated like interest for tax purposes.
Using tax-free and retirement wrappers
Sharia funds can be held in a tax-free investment account under section 12T, within the annual and lifetime limits, or in a retirement annuity. Contributions to retirement funds are deductible within statutory limits, and Regulation 28 restricts asset allocation in retirement products.
Asset managers with Sharia ranges
Oasis and Camissa Asset Management run dedicated Sharia fund ranges, and Al Baraka Bank distributes a Shariah fund range with Old Mutual as well as tax-free and linked unit trusts. FNB Islamic offers discretionary managed share portfolios through FNB Securities.
Camissa's Islamic funds
Camissa lists an Islamic Equity, Islamic Global Equity, Islamic Global Feeder, Islamic Balanced and Islamic High Yield fund. Oversight is provided by a Shariah Supervisory Board chaired by Mufti Zubair Bayat, with Mufti Ahmed Suliman and Maulana Muhammad Carr.
Oasis's product range
Oasis offers unit trusts, endowments and pre- and post-retirement products, with Shari'ah certificates published for its collective investment, property, retirement and insurance funds. Its management company is approved under the Collective Investment Schemes Control Act.
Who regulates fund managers
Unit trusts are governed by the Collective Investment Schemes Control Act and supervised by the Financial Sector Conduct Authority, which also authorises financial advisers. Sharia compliance is certified privately by each manager's board, not by the regulator.
Starting a Sharia-compliant portfolio
Investors can buy directly from a manager, through a linked investment platform or with an adviser. The steps below suit a first-time investor building a long-term portfolio, whether the first contribution is a lump sum or a modest monthly debit order from a bank account.
- Define the goal, time horizon and risk tolerance before choosing funds.
- Decide on the wrapper: discretionary, tax-free account or retirement annuity.
- Check the fund's Sharia certificate, board members and purification policy.
- Compare total investment charges and minimum lump-sum or debit-order amounts.
- Complete FICA with ID, proof of address and bank details.
- Invest via lump sum or monthly debit order and keep the confirmation.
- Review performance and Sharia certificates once a year.
Charges and paperwork to compare
Fund charges are disclosed in each fund's minimum disclosure document. The table summarises the cost items and documents to look for, without quoting fees that vary by fund class, platform and adviser arrangement, so each fact sheet should be read directly.
| Item | What to expect | Note |
|---|---|---|
| Annual management fee | Percentage of assets | See total investment charge in fund fact sheet |
| Platform or adviser fee | Only if using a platform or adviser | Negotiable with advisers |
| Performance fee | Applies to some funds | Check fund documentation |
| Tax-free limit | R46,000 a year, R500,000 lifetime | Penalties on excess contributions |
| Identity documents | ID or Smart ID, proof of address | FICA requirement |
| Banking details | Account for debit orders and payouts | Can be an Islamic bank account |
Mistakes that undermine returns
Halal investing involves the same market risks as any other investment, plus a few specific considerations. Investors should avoid the following common errors, which are seen in discretionary, tax-free and retirement portfolios alike, whichever manager or platform is used.
- Assuming a Sharia fund is low risk; equity funds can fall sharply.
- Holding several funds with overlapping portfolios and similar risk.
- Ignoring total investment charges, which compound over time.
- Withdrawing from a retirement annuity without understanding the two-pot rules.
- Exceeding tax-free contribution limits by using several providers.
Limits of the halal fund universe
The local Sharia-screened universe is narrower than the full JSE, as banks and many highly leveraged companies are excluded. Portfolios therefore tend to lean toward resources, industrials and offshore holdings, which can increase volatility compared with conventional benchmarks.
Can a Sharia fund be held in a retirement annuity?
Yes. Oasis offers pre-retirement products built on its Sharia-compliant funds, and Islamic balanced funds designed for retirement savings are offered by other managers, including those listed above. Contributions follow the same tax deduction rules and two-pot withdrawal system as any retirement annuity.
Are offshore Islamic funds available?
Yes. Camissa offers an Islamic Global Equity Fund and a rand-denominated Islamic Global Feeder Fund. Oasis also manages a Dublin-based global umbrella fund. Rand feeder funds avoid the need to use the investor's own offshore allowance.
What happens to dividend purification?
Purification is normally done at fund level, so investors receive already purified distributions. Investors holding shares directly, for example through a managed portfolio, should ask whether purification is calculated for them or must be paid personally.
Can zakat be calculated on fund holdings?
Yes. Many scholars calculate zakat on the zakatable portion of a fund's value. Some managers publish guidance or zakat factors, and Islamic scholars or welfare bodies can help investors apply the correct method to their holdings.
How do Sharia funds differ from ESG funds?
ESG funds screen on environmental, social and governance scores but may still hold banks, bonds and alcohol producers. Sharia funds apply religious exclusions and debt and interest-income ratios, so the two approaches overlap only partly and are certified differently.
Where to access these solutions
- Oasis – Shari'ah-compliant savings products — Oasis unit trusts, endowments and retirement products, screened by an independent Shari’ah board with purification via its trust.
- Camissa Asset Management – Shariah investor range — Camissa Islamic Equity, Global Equity, Global Feeder, Balanced and High Yield funds under a Shariah Supervisory Board.
- FNB Islamic Wealth Management — FNB Islamic, with FNB Securities, offers Sharia-compliant discretionary managed share portfolios.
- Al Baraka Bank – Tax-Free Investment — Al Baraka’s tax-free investment: a 12-month profit-sharing deposit with no tax on profit, within statutory limits.
Official and legal references
- Financial Sector Conduct Authority (FSCA) — Supervises unit trust managers under the Collective Investment Schemes Control Act and authorises financial advisers.
- Income Tax Act, section 24JA – Sharia compliant financing arrangements — Defines sukuk and mudaraba for income tax, relevant to income held in Islamic balanced and income funds.