The initial article ?CNN In Ghana? dated Friday April 23, 2004, may be referenced at link. That article showed how the World Bank (WB) and CNN tried to advertise the success of the Ghana Stock Exchange (GSE) as a good investment bet in emerging markets.Let?s look at the relationship between stock market and a country?s economy. The general rule-of-thumb (in western world) indicates that economic trend usually lags behind stock market growth by 6 months. In the case of Ghana (a developing/third-world country), this lag may be in the 12-to-18 month neighborhood. In effect, the better days of Ghana are ahead of us!
The basic questions to ask are ?Is Ghana?s economic train dead locked in its track, has it been unlocked and about to take off, has it just taken off, or is rolling along just fine?? Due to experiences that many of us have had or have heard from others, most Ghanaians are very skeptical about doing business with ourselves. We do not have many track records to reference. Thus, many people in the Diaspora are content to keep their money in pillow cases, under their beds, or in savings/money market accounts ?to be safe?. Currently, the annual interest rate paid for the typical savings account and money market account in the USA is a mere 0.5% (i.e. half percent for a year) and 1.5% respectively. Let?s assume that either interest rate improves to a ?decent? 3%. Using Rule 72 (i.e. 72 divided by interest rate), it will take an investor in this category a staggering 24 years to double their money (i.e. 72 divided by 3). If one deducts the federal income taxes, then it will certainly take longer than 24 years to double such savings. Some may argue that they invest in their company stocks with a higher Return On Investment (ROI). Yes, ROIs are great and may be higher. However, they can never be guaranteed anywhere. So, isn?t it prudent to diversify our portfolio and invest some of our money on GSE and help rebuild the country we (in)directly ruined? Should we only invest when the obroni/white man (e.g. CNN or WB) says it is safe to do so? Some may wonder if GSE is than good, how does it compare with other stock exchanges? For a fair comparison, please see below the World Stock Market Performance Rankings (gleaned from ?African Stock Markets Consolidated Gains in First Quarter? document, compiled by Databank Research).
Obviously, most people in the Diaspora are NOT ready to pack up and relocate just yet. So how may we partake in the GSE ?good news? ? help our folks back home and make money at the same time? Whether or not it takes 6 months or 18 months for Ghana?s economy to reflect GSE?s growth, let?s realize that the GSE train is working and it is real. How may we join this GOODS TRAIN from the Diaspora? These are many ways, including but not limited to:
- 1. Buy company stocks listed on the Ghana Stock Exchange
2. Join companies, business entities that already deal with GSE stocks
3. Start a new company to trade in GSE stocks
- Realistically, the best options for people in the Diaspora are the first 2. With respect to buying GSE stocks listed, one needs to work with GSE brokers (e.g. Databank Brokerage see http://www.gsedata.com/default.asp, http://www.natcorp.com/foreign.html, http://www.mbendi.co.za/exch/6/p0005.htm, http://www.liquidafrica.com/portal/, or http://www.csidata.com/csi/exchangelist/exchangelinks.html, for other brokerages or send email to email@example.com to obtain a list of GSE brokerages). Due to the tremendous growth in GSE returns, most holders of preferred GSE stocks (e.g. Ghana Commercial Bank, Standard Chartered Bank, Guinness Ghana Ltd, etc.) are reluctant to sell without appreciable premiums (e.g. 5-10% more than current rate). For economic reasons, most GSE stock brokerages (like their brethren throughout the world over) have a preference for large block buyers, not penny-pinching individual investors. In this respect, option 2 (i.e. joining existing companies that deal with GSE stocks) may have clear advantages over individual investors like you and I.
So what are these companies that deal with GSE stocks? Although many may exist, getting their names can be a monumental task since most do not advertise or feel that the average Ghanaian may not patronize, because of ?lack of trust? or proven results. The best known independent companies include EPA?K and Ghana Investment Club (GIC).
EPA?K is the First Licensed Mutual Fund in Ghana. The Securities and Exchange Commission (SEC) on December 4th 2002 awarded a license to Databank Asset Management Services Ltd (DAMSEL) to operate the first mutual fund in Ghana. DAMSEL is responsible for the asset management functions of the Databank Group. The mutual fund, EPA?K, is an equity for long-term investment. Check out EPA?K at http://www.databankgroup.com/internet/assetmanagement/epa?k.asp.
GIC is available for Ghanaians all over the globe. You do not pay any management fees at GIC so 100% of your investment actually makes money for you. To become a member, click ?How to become a GIC Partner? from the club's website, www.gicghana.com and download the Constitution, as well as the Application Form. Follow directions and send your investment to Databank (i.e. GIC brokerage at GSE) then mail your completed the application form
Knowing that cash flow to GSE will help Ghana?s economy to grow, it is incumbent for the government to open the investment gates to outsiders. So what are the different ways to encourage GSE investments, knowing full well that inflow of foreign monies may prevent the need for the government to borrow money from the IMF and WB for development projects? The simplest and perhaps easiest means is to provide incentives for such investors, such as low taxes on capital gains (Ghana government may take a page out of Bahamas? National Investment Policy by checking out - http://www.interknowledge.com/bahamas/investment/).
How may a new investor get involved? To be successful, the following criteria are suggested for this investor:
1. Focus on the plan (details).
2. Be ready and flexible.
3. Do not try to be a hero (Teamwork)
4. Be calm
Focus on the plan (details) - The typical investor should educate him/her self by reading about stock investments and personal financing (see http://www.morningstar.com/, http://www.investorplace.com/, http://www.fool.com/).
Be ready and flexible - Set aside a seed money with an incubation period of 2-5 years during which you may allow this investment to grow. Ensure that your selected GSE independent company provides periodic feedback investment statements to ensure that your investment roadmap/plan is being maintained. Consider further investments only when your investment shows positive rate of returns over a period of time (e.g. 6-15 months).
Do not try to be a hero (Teamwork) ? Do not try to be a Jack-of-all-trades. As stated above, individual purchase of GSE stocks may be ineffective. In investment, no one knows everything so work with companies that deal with GSE stocks (e.g. EPA?K and GIC). Using your focus on detailed plans, you need to know enough to exit (i.e. cash in and leave) when your investment objectives are met.
Be calm ? Realize that internal or external influences do impact the stock market. Thus, the GSE Index may experience periodic upward or downward fluctuations. It is suggested that you do not lose sleep over a slight downward trend of GSE index but to keep your eye on your stated investment objectives. In the long haul, calmness and astuteness (from investment education) should be the key ingredients in meeting your objectives.
How do you invest now when you do not have money? If you have access to introductory credit cards at low interest rate (e.g. 2.99% for 12 months) in North America, you may secure one making sure you pay off the entire balance in 12 months. For example, you may borrow $1,000 at 2.99% for 12 months and $50 processing fee. This means your total payment is $1,079.99 ($29.99 interest, $1000 principal and $50 processing fee) or 12 $90-monthly payments. After these payments, you will still have your $1,000 GSE stock investment plus accrued return on investment. Because GSE?s performance is more than 100% (see GSE Index performance below), your $1,000-investment may grow to $2,000 if current growth trends continue.
In closing, realize that what we are seeing today is the result of our combined effort of yesterday. If we want our tomorrow to be better, let?s pull up our sleeves and work today!!
If more Ghanaians invest in Ghana?s economy, there is a good bet that more rich Ghanaians will emerge and in a small way, and help to reduce the poverty rate in our country.