State has no interest in GSE – Tutu Agyare

The actions of government has shown it has no interest in supporting growth of the Ghana Stock Exchange (GSE) and the capital market in general, Tutu Agyare -- Chief Executive Officer of UK-based Nubuke Investment, an asset management firm focused on African markets -- has said.

Mr. Agyare believes government has several institutions and companies that it could but is not listing on the stock exchange to boost liquidity on the bourse from a supply side.

Speaking at the 25th anniversary lecture of the GSE in Accra, he added that the removal of several tax exemptions, which served as incentives for both investors and companies to come into the market, would go a long way to derail the GSE’s progress.

“Why has the state not listed COCOBOD; why is its stake in Vodafone and Airtel not listed for individuals and institutions to buy into? The state has no business owning businesses.”

“I believe the state should have a privatisation policy where companies that are not core to its principles and running of the country should be left for the people to own. That would solve a lot of the supply issue,” he said.

Many market analysts and investors have called on government to put many state-owned enterprises -- GIHOC Distilleries, Volta River Authority (VRA), and Electricity Company of Ghana (ECG) -- on the stock exchange to promote accountability, high reporting standards, and transparency.

“I think the state has a role to play in helping the stock exchange progress. The government has no interest in the stock exchange, because if it did it would have listed all the companies and there wouldn’t be the need for another Eurobond,” Tutu Agyare insisted.

Dr. Kwesi Botchwey, Chairman of the National Development Planning Commission (NDPC), and Deputy Finance Minister Mona Quartey however called for caution on the calls for listing government companies on the bourse just to boost the supply side.

“There is a need for extensive dialogue in preparing government companies before they are listed. These institutions must be well-prepared for constant scrutiny and be on the path of profitability,” Dr. Botchwey said.

The Deputy Finance Minister stated that SOE’s cannot be listed for the mere sake of it, and unless they have a strong balance sheet.

“What we want to do is to prepare the state-owned enterprises and bring them to the stock exchange when they have a stronger balance sheet.”

Government, she insisted, has done a lot in bringing companies to the bourse -- including GCB Bank and Ghana Oil Company (GOIL) -- and even prompting other private institutions to list.

“Through the Ghana Investment Promotion Centre (GIPC) we now select certain companies that lend themselves to be listed on the stock exchange, and we ask that after a few years of operation they get listed as part of the requirements for getting exemptions and the enabling environment to grow…so this is happening,” she said.

Ghana’s 25-year-old stock market has seen tremendous progress over time, but still faces several challenges including low liquidity -- due to which there are few buyers and sellers, and it takes stocks days and weeks to be bought and sold.

The GSE’s liquidity as measured by the market turnover ratio is well below key African markets such as Botswana, Nigeria, Kenya and South Africa. Low liquidity increases volatility, thus creating additional risk for investors.

The limited number of listings leaves a lot of room for improvement, as the GSE only has 38 listed companies -- an average of one new listing every year.

Also, the GSE has limited investor participation: the Central Securities Depository reports there were only 80,000 equity accounts as at the end of 2014.

While acknowledging some successes chalked up by the GSE over the past 25 years, Tutu Agyare said the bourse can do a lot more to lead the transformation that the economy needs. He urged the exchange to relax its rules to get more companies listed.

“The concept of profitability to list shouldn’t be an issue; there are countless businesses that are not profitable but have massive growth prospects and are listed on exchanges. If a company is profitable enough there will be countless institutions and individuals ready to invest, and so that company will be thinking about profitability.”

He noted that young entrepreneurs in this economy have no chance of using the capital market as the three years of a dividend policy and profitability track-record doesn’t make the stock market attractive.

“We have created an environment where by the time I am profitable I don’t regard the capital market, and also the incentives available have been taken away.”