...But Ghanaian own companies unwilling
to list
By Fred Sarpong
One of the major sources of revenues for
companies in Ghana has been the Capital Market. But many companies especially
the local enterprises have failed to utilize the services of the market.
The capital market, since it started
operation in the country has witness various developments. Currently, the
market is one of the highly regarded performing markets in Africa.
The capital market provides
a market for raising long-term capital, it serve as major link between
companies and Government with long-term capital needs and the public with
savings to invest, and it makes provision of long term capital to businesses
and government promotes economic growth.
It also makes provision of
long term capital to businesses results in job creation, efficient capital
market encourages savings, and it provides liquidity to investors who hold
long-term instruments.
Apart from these positive initiatives,
the Ghana government and private institutions in the country have failed to take
advantage of the capital market to raise long-term capital for their business activities.
Apart from the Ghanaian own enterprises,
which have failed to utilize the services of the market, foreign companies have found it prudent
to list on the Ghana’s capital market and raise enough funds for businesses.
About 34 companies listed on the Ghana
Stock Exchange (GSE) have managed to raise long term finance and also expanded
their operations, since it started operation in 1990.
The government for that matter, who knew
the importance of the market has several failed to list most of the state own
enterprises on the bourse. In 2012 Budget statement presented to Parliament, the
then Minister of Finance and Economic Planning, Dr. Kwabena Duffour stated that
‘for the past 20 years the GSE has enjoyed tax holidays yet total
capitalization of the stock market has not met the country’s expectation.’
‘To
improve the capitalisation, the government is extending the stock market tax
holiday for another five years. In addition, the exemption form capital gain
tax has been extended for further five years to promote investment and deepen
activities on the stock market. Mutual funds and unit trust funds that invest
in stocks on the stock market will also be exempted from VAT on financial
services.” This was contained in paragraph 198 on page 55 of the 2012 Budget
statement.
Despite this initiative by the
government, it has never been interested in raising funds from the stock
market, let alone Ghanaian private companies.
The
Ghana stock market cannot be developed on these lines alone. It takes more
effort and deliberate government policy to widen and deepen the growth of any
stock market. Apart from having the macro-fundamentals right to create that
platform, there must be a deliberate and conscious government policy to grow
the market.
Regulatory bodies are established to provide integrity
to the financial markets, to protect consumers, to protect the national interest
and to protect the integrity of the economy.
There are a lot of state own
enterprises, which the government can list them on the GSE, in order to raise
more money for expansion and development of those enterprises. Government
institutions like Ghanaian Times, Graphic Communication Group Limited,
Agricultural Development Bank, National Investment Bank, GHICO Distilleries,
among others have all that it takes to be listed on the bourse.
The Government inability to list its own
companies on the stock market shows that it does not have confident in Ghana’s
capital market. This attitude from the government has not given a good signal
to some Ghanaian private companies to even list on the market.
Ghanaian companies like Zoomlion, RLG,
Ernest Chemist, KAMA Industry, Midland Financial Services, Business and
Financial Times, SMS Ghana, Persol, SOFTtribe, and others can be listed on the
stock market, so that Ghanaians will buy into them and become part owners. The
perception behind Ghanaian company’s inability to list on the stock market is
simple because, the owners of those companies are ‘selfish’ and want to put
everything on their checks.
Mr Adu Anane Antwi, the Director-General
of Security and Exchange Commission (SEC) told this magazine that a lot of
people in Ghana lacked the financial literacy to make informed decisions, and
at the same time the privileged for few who had some knowledge about securities
equally lacked the intimate understanding of how the market really worked.
He indicated that the importance of the
capital market in providing investment opportunities that would lead to
personal wealth creation for the individual’s secured future. He said the
capital market held the key to unlock the great economic potential of the
country; hence, the need for a national crusade to create awareness and get all
to use the capital market as the key to wealth creation.
In 2012, the composite index change was
22% as compared to negative 3.10% recorded in 2011. The market capitalization
of the stock market was GHc57, 217.48 million at the end of 2012, compared to
GHc47, 347.23 million in 2011. Volume traded was 279.80 million in 2012
compared to 419 million. However, value traded in 2012 was 167.93 million as
compared to 446.5 million in 2011 and amount raised in on the stock market was
GHc1, 919.21 million as against GHc1, 891.63 million.
Oxford Business Group magazine stated in
its 2012 edition that ‘the most heavily traded stock on the exchange in terms
of value in 2011 was Ghana Commercial Bank, with GHc3.52 million worth of
transactions. This accounted for close to half of all trading in financial
shares, which were the most traded shares by sector, at GHc7.61 million.’
It’s also noted that ‘Tullow, oil
producing firm is currently the largest firm listed on the GSE by market
capitalisation, at GHc34.96 billion, representing 63.3% of the GSE’s entire
market capitalisation. This is followed by AngloGold Ashanti at GHc13.01
billion, representing 23.6%, and Ecobank Transnational Corporation at GHc1.62
billion, representing 2.9%. All other listed firms have market capitalisation
of less than GHc1 billion. Among the top 10 firms by market capitalisation,
four are financial services firms, two are petroleum firms, two are mining
firms and two are manufacturers.’
The managers of the stock market have
plan to allow small and medium-sized enterprises (SMEs) to list on the GSE on
the basis of relaxed regulatory requirements and a move by GSE to raise minimum
capital requirements for brokerages firms more than ten-times, from GHc100,000
to GHc1 million. Firms have until the end of 2013 to meet the new requirements,
which also include increasing minimum tradable assets from GHc80,000 to
GHc800,000.
In other regulatory developments, the
Security and Exchange Commission, the regulator of the market is working on
reforms that would allow for borrowing and lending securities and could permit
short-selling. There are also plans to develop a derivatives market, though
concrete details yet to be made available.
‘The capital market has assumed
increasing importance in the financial markets in Ghana. However many citizens
have been left out of the market either as issuers or investors. Public
education on issues affecting the market is therefore critical, in order to
ensure greater financial inclusion in the country. It is time for Ghana to move
from engaging in poverty reduction to the promotion of in wealth creation,’
said Mr. Anane Antwi.
The success and performance of financial
markets including the capital markets depend on flow of information and the
degree of knowledge of the public and investors at large.
The Securities and Exchange Commission
(SEC), the sector regulator is a statutory body set up by the Securities
Industry Act, 1993 (PNDCL 333) as amended, with the primary responsibility of
regulating the capital market in Ghana.
The SEC is given both regulatory and
market development mandates under PNDCL 333 as amended. The SEC also has
investor protection mandate.
Its key function is to advise the
Minister of Finance and Economic Planning on all matters relating to the
securities industry; and to examine and approve invitations to the public made
by issuers.
Also is to register, license, authorise
or regulate securities exchanges, commodities and futures exchanges, securities
depositories, clearing and settlement institutions, credit rating agencies, fund managers, investment advisers, unit
trusts, mutual funds, hedge funds,
private equity funds, venture capital funds, nominees, underwriters, issuing
houses, registrars, custodians, trustees, primary dealers, and broker-dealers.
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