Doing business with Muslim communities – Part One

Introduction

In a global economy, it is a given that businesses will develop a multinational presence and have interests in a variety of jurisdictions.  Invariably, this creates the need to understand the multiplicity of laws that come into operation and the potential of conflicts between these laws. Adding to the complex challenge of legal compliance, awareness of cultural nuances is of critical importance for the success of operations in far flung jurisdictions, whether it be China, Russia or the Middle East.

“Doing Business in the Muslim World – Practical Issues for Employers and Employees” was recently published by Bloomberg Law Reports to provide an insight into employment matters that arise when conducting business in certain Muslim majority countries.

The attached Bloomberg article provides a helpful overview for companies that have business operations in these countries.  In particular, the Bloomberg article provides insights into the laws relating to women, harassment, sexual relations, drugs and alcohol, religion and discrimination.

In jurisdictions such as South Africa, where Muslims are a minority, the issues identified in the Bloomberg article do not unfold in precisely the same manner.  This is in part due to the fact that issues specific to the Muslim community do not generally find direct expression in the laws promulgated by parliament.  It is usually in the indirect application of certain laws and principles of South African law that issues specific to the Muslim community arise.  In addition, the constitutional prohibitions against discrimination on the basis of religion and the employment law principle of reasonable accommodation have given impetus to broader tolerance of the requirements of the South African Muslim community.

Historically, Muslim marriages, halaal food products, dress codes and religious holidays have been amongst the most important issues specific to the Muslim community that have played out in the public sphere.  In more recent times, the structuring of financial products and services in a manner compliant with Islamic law has seen an upsurge, with various large players in the financial sector now offering products purported to comply with the requirements of Islamic law.

Muslim Marriages in South Africa

In the past, the non-recognition of Muslim marriages historically left the Muslim community in a limbo as far as their social relations were concerned.  This impacted negatively on a variety of legal interests of the Muslim community, such as inheritance, maintenance, legitimacy of children and access to bank finance.  More recently, Muslim marriages have come to enjoy some degree of recognition.  Most of this recognition has been eked out by way of judicial precedent.  South African law now recognizes that Muslim marriages have consequences that are enforceable under South African law.  Spouses in Muslim marriages are also recognized for the purposes of intestate inheritance and maintenance claims.  Recently, there have been moves to promulgate a legislative enactment for the recognition of Muslim marriages, but the process seems to have been bogged down in bureaucracy and internal differences within the South African Muslim community.  Some recognition has taken place informally.  It is now quite usual for banks to take into account the income of spouses in Muslim marriages when assessing loan and other applications.  Similarly, employers generally do not balk at recognizing Muslim marriages for the purposes of employee rights such as compassionate leave and the like.

Halaal Products

The need for halaal food products in the Muslim community has spawned an industry dedicated to certifying that foods products comply with Islamic law.  Generally, a food product will be regarded as halaal if it contains no ingredients that are prohibited by Islamic law and there is no possibility of cross contamination with non-halaal products.  There are several Muslim organizations that certify compliance with Islamic law.  Certification is usually evidenced by organization specific halaal logos on the labels of products and indicates to the Muslim community that the product has been investigated and found to comply with Islamic law.  As certification does not in itself guarantee that each individual product complies with Islamic law, certifying authorities usually conduct random inspections without advance notice to ensure that agreed standards are implemented.

The precise legal status of the arrangements between certifying authorities and manufacturers of food products can sometimes be very uncertain due to the absence of properly negotiated agreements.  Often, the only evidence of these agreements is the standard terms of issue of halaal certificates.

Other Islamic Practices

The Islamic dress code and Muslim religious holidays have generally been well tolerated in broader South African civil society.  Notwithstanding occasional aberrations, employers generally permit their Muslim employees to comply with the Islamic dress code in large measure and allow them to take time off from work for religious holidays.

Islamic Finance

As far as financial needs are concerned, Muslims have historically conducted their affairs within the constraints of the South African legal framework and the financial products made available by the South African financial sector.  In practice, this meant that Muslims were invariably placed in a position where they violated the Islamic law requirements for financial transactions, particularly the prohibition against interest.

The 1980s saw the first steps towards a formal Islamic financial services sector with the establishment of two Islamic banks.  One of these has since been liquidated, whilst the other is reasonably active in servicing the needs of the Muslim community.  Several of the large mainstream banks now offer products that are designed to comply with Islamic law.  In addition, the asset management sector has been quite active in developing Islamic law compliant portfolios and investment products.  The insurance sector, however, has been slow to develop Islamic law compliant insurance products, probably due to the conceptual difficulty of giving effect to the relevant Islamic law requirements.

One of the difficulties faced in the development of Islamic law compliant financial products arises when attempting to give legal effect under South African law to structures designed to implement Islamic law.  Although the principle of freedom of contract allows Muslims the freedom to develop such products, the formulation of Islamic law structures in a manner binding and effective under South African law sometimes leaves much to be desired.  In certain instances, compliance with Islamic law is limited to the claims made in marketing material, without these claims trickling down to the structure of the products in question.

See Part Two next week for a more detailed look at the basic structures used for Islamic law compliant products and some of the specific challenges facing the South African financial services environment in this regard.

by Shahid Sulaiman
B ED (King Saud University) (first class honours)
MA (University of Jordan)
LLB (cum laude)
LLM (UNISA)
Certificate in Securitisation (UCT)