Equity market for SMEs to be revamped

Authorities of the Ghana Stock Exchange (GSE) have disclosed that as part of their short-term plans, the Ghana Alternative Market (GAX), the special equity market for small and medium enterprises (SMEs), will be revamped.

Since its establishment in 2013, only five companies have been listed on the GAX, which targets SMEs by providing for less demanding listing requirements and rules than the GSE.

Most market experts have described this outturn as disappointing against the high expectations when the GAX was created.

However, in an interview with Business24, David Tetteh, Technical Consultant with the GSE, disclosed plans to revamp the market.

“The GAX will be revamped this year, so entrepreneurs should be looking to it for their capital requirements in the medium term. This is something that is going to happen this year, by the fourth quarter.”

He further explained: “The revamping will involve increasing the number of listings on the market and getting more buying interest as well as getting more trading to happen on the GAX.”

The five companies listed on the market are Samba Foods, Meridian Marshalls Holdings, Hords, Intravenous Infusions, and Digicut Production & Advertising. The companies hold a total of 594.72 million shares valued at GH¢48.99 million.

Prior to the start of the financial sector crisis in September 2017, the GSE had said there were about 20 SMEs being prepared for listing on the market.

However, the Technical Consultant noted that the process stalled during the financial crisis, which has been followed by the coronavirus pandemic.

“For some time now, the main exchange has not been active because there aren’t too many persons that have surplus to trade on the market, except the institutional investors. So if the stock market is suffering, naturally the alternative market would suffer,” said William Mensah, an investment banker.

“Government should target the alternative market possibly with the 1D1F companies. Those companies under its special initiative that are seen to be successful can be made to list on the GAX as part of the condition for support under the 1D1F initiative,” he added.

He emphasised that unless such an integrated policy targeted at the 1D1F companies was developed, the alternative market would struggle to achieve its objectives.

Some experts have also called for intensified education on the GAX to boost the confidence of owners of SMEs and startups in the market.

Unlike the GSE, where listed companies must have a minimum stated capital of GH¢1m, the GAX requires only GH¢250,000 and does not require that a company have a proven track record of profitability before listing.

In addition, listing and application fees are waived on the GAX, whereas companies listed on the GSE pay an annual fee of GH¢2,000. The GAX also announced a listing support fund in April 2018, which aims to provide companies with advisory services during the listing process.