"Public companies not for gov’t"

Many Ghanaians continue to hold an erroneous impression that public enterprises belong to government perhaps due to the limited public knowledge on the subject of ‘public companies’ and ‘government-owned entities.’

The term ‘public company’ is often erroneously equated with government ownership of enterprises, especially in instances where the said public companies have ‘Ghana’ or ‘State’ prefixed to their names.

Nevertheless, these companies are truly ‘public corporations,’ which only happen to have the government or government entity as one of their several shareholders and in many instances, not even the majority shareholder.

The State Insurance Company (SIC) for example is not a government company. Government holds 40 percent equity share in the company.

Government also has only 21.4 percent shareholding in the Ghana Commercial Bank, the largest bank in Ghana, while the remaining 78.6 percent is owned by institutional and private investors.

Although the Metro Mass Transport company is widely perceived as a government organization, the government has only 45 percent share in the company.

Government may buy shares in a listed company because it has good prospects for profitability, and the government wishes to raise revenue from its operations to finance development projects and programmes.

Government-owned corporations are legal entities that undertake commercial activities on behalf of the government.

Government corporations, which are also called state-owned enterprises, can be part of government or stock companies, with the state as a regular stockholder.

While they may have the same public policy objectives as other government agencies, government-owned corporations are different from other government agencies or state entities established to pursue state policy objectives, which are purely non-financial.

Public confusion over the difference between government organizations and state-owned enterprises on the one hand, and public corporations in which the governments or its agencies have shares on the other hand stems from the lack of information about how public companies operate.

Sometimes, one publicly traded company can buy out one or more other publicly traded companies so that they become either a subsidiary or joint venture.

If the original companies cease to exist, their shareholders are given cash for the value of their shares. If they take it primarily as shares in the new company, then the deal is called a merger. Mergers and acquisitions are on the rise in Ghana.

For a example, this year, after a strongly contested takeover bid, Fortis Equity Fund Ghana acquired Merchant Bank Ghana and changed the bank’s name to Universal Merchant Bank (UMB) after the much-touted takeover.

Wilmar Group’s acquisition of the Benso Oil Palm Plantation in the agricultural sector and the merger of Keegan Resources, and PMI Gold in the mining sector all go to indicate that mergers and acquisitions are picking up steam in Ghana.

The likelihood in the wake of these developments is that the Ghana Stock Exchange (GSE) may be a theatre for robust stock and securities trading activities in coming months and years with good prospects for investors.