In 2018, the Ghana Stock Exchange was one of the very few stock markets anywhere in the world that ended the year with less companies listed on it than when the year started. There was only one new listing on the GSE itself, although admittedly, the Initial Public Offer done by MTN Ghana was far and away the biggest done so far.
Instructively the only other IPO done last year failed, despite the fact that it was attempted by a bank, (Energy Commercial Bank) the very type of institution that in the past has had equity investors reaching enthusiastically for their cheque books.
On the other hand three companies were delisted in 2018, meaning the GSE ended the year with two less companies than it started it with. In January yet another company was delisted – the fifth in all since late 2017 – bringing the number of listed companies down to 41.
Two decades ago, when the GSE was still in its early years, the dearth of listings could be excused for reason of the stock market’s youth – traded equities were still a new phenomenon in Ghana and indeed, even share ownership and trading on the secondary market was still dominated by foreign investors. Now however, the bourse is nearly three decades old. That old excuse is no longer tenable.
The dearth of stock market equity listings in Ghana is a disappointment for all the GSE’s stakeholders. It is instructive that the GSE’s management has itself lost its earlier intensity with regards to marketing for new listings; a sense of apathy seems to have taken hold.
This is understandable. Several initiatives proposed by the GSE to get corporate Ghana to embrace the market – such as compulsory listings for the biggest multinational corporations – have been ignored by successive governments, which have regularly opted to sell state owned companies up for divestiture wholesale by private arrangement rather than list them on the stock market.
Even government’s minority stakes in highly reputed, well performing corporations such as Barclays Bank and Coca Cola were sold to the foreign parent companies rather than to Ghanaians through the stock market.
The result of all this is that corporate Ghana largely ignores the stock market, keeping its focus on debt financing from commercial lenders rather than equity financing from a wide range of anonymous shareholders. This is despite the relatively high interest rate regime in place most of the time in Ghana, which itself is largely the result of inordinately high demand for credit with which to finance private enterprise and which significantly constrains corporate profitability margins.
There is therefore the need to actively promote new listings on the GSE. Last year’s IPO by MTN which raised over GHc1 billion suggests that the bourse can accommodate several smaller issues in a year – the second largest IPO after MTN’s was Agricultural Development Bank’s GHc326 million IPO in late 2016 and MTN’s out turn suggests the stock market could cater for three of such size within months of each other if the issuing companies have good fundamentals, are well known and the shares offer itself is cleverly marketed.
The history of new listings on the Ghana Alternative Market (GAX) suggests that the problem has more to do with the unwillingness of company owners to dilute their controlling stakes rather than concerns over the cost of listing. Despite the deliberately lowered listing costs adopted by GAX, with a view to making it more attractive to SMEs, most of the listings on that market are for medium term corporate bonds, rather than for equities.
The main issue that should concern the GSE’s managers then in their efforts to attract new listings should be how to give business owners some level of guarantee against losing control of their companies as a result of stock market listings. If such protection is provided through new regulations to enterprise owners who continue to perform very well and comply to good corporate governance practice, then new shareholders taken on through IPOs would stand to gain as well.
Surely, more listed companies, less corporate debt and higher returns on equity investment accruing to bigger shareholder bases would be a good thing for everyone concerned as well as for the economy as a whole.