Alternative Investments

Are you skeptical about investing on the Ghana Stock Exchange because of capital losses and small dividends? GSE Listed stocks like Cocoa Processing Company (CPC), Transaction Solution (TRANSOL), Clydestone Ghana Ltd (CLYD), Ecobank Transnational Incorporated (ETI), Golden Web (GWEB) have over the period remain less profitable to their shareholders as they return peanut dividends and capital losses to their shareholders. Most shareholders have regretted investing in such shares and often become hostile to the staffs that attend to them. All these can be avoided if investors consider the option of venturing into alternative investments.

Do You Want To Be A Cube Of Sugar In A River Or A Cube Of Sugar In A Cup Of Tea?

Do you want to be a cube of sugar in a river or a cube of sugar in a cup of tea? Do you want your taste to be felt? Do you want to have a real feel of what ownership is in a company? What does ownership mean to you? If ownership means providing capital for running a business and taking calculated risk towards the achievement of the business goals, then consider alternative investment. In theory, shareholders are the real owners of the business but in practice, do they really have a feel of ownership? (What happens during Annual General Meeting). Being a part owner, your voice has to be heard but that is not the case of investors whose shares are not many (minority shareholders), you end up being a cube of sugar in an river, you would be dissolved by so much water and you will lose your relevance. For instance with all your investment, the percentage of your ownership is little and insignificant compared to that of institutional investors. Mostly in the annual report, they give a list of top twenty shareholders, most of which are institutional investors.

Board Room Issues

There have been instances where minority shareholders of some listed companies on the GSE were intimidated by the decision of majority shareholders. These issues range from their decision to delist from the GSE with reasons that minority shareholders deem flimsy. Some shareholders alleged that their rights as shareholders are disregarded by management and Board of Directors. Consider the cases of CAL Bank, Accra Brewery Ltd and CFAO who are listed companies on the GSE.

CAL Bank: In 2009, there were issues with the corporate governance of Cal Bank. One majority shareholder wanted his voice to be heard, so he tried buying more shares of the company in order to get a good percentage to achieve his aim of making his voice heard. The resultant effect of this action was the artificial rise in the price of CAL Bank shares over that period. Thanks to GSE and SEC for their intervention. He also who demanded the removal of the Managing Director (MD) of the bank because the MD and his management had allegedly shown disregard for the rights of shareholders http://www.modernghana.com/news/168034/1/cal-bank-saga-afare-donkor-gets-support.html you can read the full story here. What if you have no extra money to buy more shares in order to get majority stake? How would you be heard?

Accra Brewery Limited (ABL): ABL tried delisting from the Ghana Stock Exchange. This decision was mainly influenced by SABMiller (majority shareholder with over 60% stake in the company). The majority shareholders of ABL (SABMiller) decided to delist from the GSE because SABMiller want to recapitalize to in order to be competitive. If a listed company wants more capital to remain competitive, there are many other options available like rights issue to its existing shareholders in the proportion of their shareholding but this was not the case. Mr. Joseph Abeka Biney, a minority shareholder, who was not in favour of the decision made known his disapproval but could do nothing. He further lamented benefits such as capital gains, dividend, bonus and right issues that accrue to shareholders would not be due them when the company gets delisted. http://www.ghananewsagency.org/details/Economics/Accra-Brewery-ready-to-delist-from-the-Stock-Exchange/?ci=3&ai=20122

CFAO Ghana: in my opinion, I would say shareholder of this company did not benefit from their investment in CFAO Ghana since they never paid them dividends and there were no capital gains either, no right or bonus issue. But finally, after getting shareholders money to expand their business and made enough return from Ghana the majority shareholders decided to delist. I know you will agree with me this is not fair. The CFAO group holds majority shares in CFAO Ghana and the suddenly decided to delist from the Ghana Stock Exchange. Read full story by clicking this link, http://www.ibrokerghana.com/news-and-market-information/press-releases/15-press-release-content/344-de-listing-of-cfao-from-the-gse.html since they were majority shareholders, they had their way.

Becoming the Cube Of Sugar In The Glass Of Water Instead Of A Cube Of Sugar In A River

There are several other investment channels you put your resources into apart form shares or bonds that comes with higher return on investment, quite an amount of risk (depending on the agreement signed) and a better level of control. If you lost a chunk of your money through the activities of the stock market, why not try the following alternative investments, such as buying an existing business (smaller companies that have shares on the Over the Counter), Angel investment and other forms of equity investment.

Buying a Business

Click this link to read more on buying a business. It is one of the articles I published http://www.ghanaweb.com/GhanaHomePage/NewsArchive/artikel.php?ID=201267

Angel Investment: An Angel Investor is someone who provides capital for start-ups or new businesses with prospects in exchange for a percentage of ownership. They do so by reviewing business plans of startups and give seed money with the condition that is favorable to them. Since most angel investors are experienced businessmen, they opt to groom these new businesses and direct management towards achieving set goals. The term angel investor started from the Silicon Valley in California. This concept was introduced to help develop businesses through the help of few rich people. The silicon value is the home of the world’s top notch information and technology software development companies like Google, Apple, Ebay, facebook, AMD, Apple Inc, Intel, Oracle, Yahoo, Sun System amongst others. It contributes about 40% to the GDP of the United States of America. Why can’t net-worthed African investors try this model to help young and enterprising people with viable ideas, invest in them and reap both monetary benefits while getting the opportunity to take part in decision making, an opportunity you may never have investing in shares.

Private equity investment: there are private equity firms who pull funds from net worth individuals and form funds with it. You must enter into an agreement with them on your on return on investment. With this you would worry less on capital market fluctuations. Examples of such firms in Ghana are Fidelity Capital Partners, Grofin Capital, Oasis Capital Ghana and so on. Grofin Capital supports Small and Medium Enterprises (SME) by providing more than just finance to help them grow their businesses. Grofin is a South African Company with a branch in Ghana, Nigeria and Kenya. If you have some money and want to support SME’s in Ghana and Africa, you can take your money there, and negotiate for a good rate. By so doing, you are helping SMEs and still making some good returns. Fidelity Capital Partners Limited was established in February 1997 and commenced business in November 1999 as a venture capital and private equity funds Management Company and corporate finance advisory services provider. They have diversified shareholders that include their management team, local and international private investors and development finance institutions (DFIs). Oasis Capital Ghana is also a private equity and venture capital fund management firm that provides capital to entrepreneurial businesses in West Africa.

Protecting your investment interest in alternative investment

You need a legal team: once you decide to be an angel investor, you need a legal team that will give you a professional advice on all agreements you sign. If you think you cannot pay for one, then look for a family friend who is a legal practitioner to cross check all agreements and tell you the legal implication of that. But if you think it is expensive to get one, then be ready for bigger mistakes that will cause you more money that losses made on the GSE.

Investment advisory: No matter your experience in doing business, you cannot understate the role of financial advisors in any huge and major financial undertaking. You need financial valuers who would use both financial and non financial data to determine whether or not it is a viable business to invest in. They would use industry data, macro and micro economic data as well to arrive at their decision and recommendation to you.

Do restructuring if the need arises as a qualification for your investment. Money is hard to come by. So if you are going to investment your hard earned money in someone’s business, they you should set your control parameters in place. Restructure the business so that cash would not leak through any unlawful means. You have to jealously protect it in order to maximize returns. The caution here is don’t over do it, give some reasonable room to the entrepreneur to explore and grow the business.

If you are really poised for action, then try Buying a Business, Private Equity Investment and Angel Investment. These are the investment options available to everyone that can afford it. With these alternative investments, you have less to worry about capital losses, small dividend and intimidation by majority shareholders. Watch out for more detailed article on alternative investment in my next write up. For more information on the few private equity firms mentioned in this article, follow these links, http://www.oasiscapitalghana.com/, http://www.fidelitycapitalpartners.com/live/en/?pg=119 and http://www.grofin.com/AboutGroFinGroup/Offices/Ghana.aspx

You can direct all comments, suggestions and additions to skafuiteye@gmail.com,

©2011, Sophia Kafui Teye

Email: skteye@gmail.com.

Blog: www.skafuiteye.blogspot.com