The market value of securities on the Ghana Stock Exchange (GSE) has surged beyond GH¢400 billion, equivalent to approximately US$27 billion according to the latest data from the exchange.
As a result, the market capitalization now represents approximately 39 percent of the GDP as of March 2024 – amounting to GH¢1.05 trillion.
The breakdown reveals that equities listed on the GSE were valued at GH¢84 billion, while the larger fixed income market stood at a significant GH¢328 billion. However, corporate issuances accounted for only a negligible 0.77 percent of the total value.
During an interview with B&FT on the sidelines of a meeting with the media jointly organized by the GSE and Institute of Financial and Economic Journalists (IFEJ), themed ‘Collaborating with the media to enhance the equities market’, GSE’s Managing Director, Abena Amoah, characterized the GH¢400 billion milestone as a positive stride.
However, she promptly acknowledged the necessity for further growth, particularly in line with the global market.
“It is a step in the right direction, but we know that it should be more – especially in dollar terms as we seek to reach a global audience,” Madam Amoah stated.
The Managing Director’s remarks mirror a larger trend observed across stock markets in Africa. As outlined in the African Stock Exchanges Focus Report by Oxford Business Group, African exchanges collectively possess a market capitalization of approximately US$1.6 trillion, constituting merely 2 percent of the global stock market capitalization. The Africa Stock Exchanges Association (ASEA) comprises 28 member exchanges spanning 38 nations, boasting over 2,400 listed firms.
Additionally, the GSE Managing Director emphasized the significance of cultivating a robust private capital market in Ghana.
“If indeed the private sector is the engine of growth, we should see more private participation,” she added.
“It is always the biggest market because government is huge. But we need to make sure that the private sector is actively participating in the fixed income market as well,” she said in acknowledgment of the public sector’s dominance.
On efforts to attract more companies to list through IPOs, Ms. Amoah said: “I think one of our biggest challenges today is having more credible companies come to the market and raise capital. We are seeing many investors with funds. How can they invest it? Where can they invest it? Investors gain confidence when strong and well-performing companies come to the market”.
She cited examples of state-owned enterprises (SOEs) and private firms with “good financials, strong management” that should consider listing to raise equity or debt capital from institutions like pension funds and high net worth individuals.
“That’s why we are working with the Mineral Income Investment Fund (MIIF) to launch new products like a gold-backed ETF. We are talking to issuers in sectors like real estate to launch real estate investment trusts, giving people access to diversified investment options,” Ms. Amoah explained.
The GSE is also launching an over-the-counter (OTC) market targetted at over 100 public unlisted companies in Ghana. Amoah said: “Their shareholders don’t know the share price, how to buy or sell securities. The OTC market gives them that transparency and avenue to trade”.
She also mentioned that it might facilitate these companies in efficiently accessing capital when necessary.
Concerning the GSE Alternative Market (GAX) designed for SMEs, where only Intravenous Products Ltd. is actively traded, Ms. Amoah emphasized the necessity for increased issuer involvement.
“When you engage with investors, share your strategy and plans, you engender confidence that gives them appetite for your securities.”
Ms. Amoah mentioned Jamaica, where over 50 companies listed swiftly as a result of corporation tax holidays for new issuers, as evidence that tax incentives could also aid in attracting SMEs.
“We are in discussions for some of these incentives in Ghana. If we say the private sector is the engine of growth, and their biggest challenge is access to affordable capital, we need to create incentives linking our US$50billion pension funds with SMEs needing growth financing,” she stated.
“If we have this cohesive capital markets approach – investors, issuers, the private sector working together – the economic growth we are looking for will happen.”
The OTC market is expected to be launched at end-June 2024, further boosting options for investors and companies seeking to raise capital in Ghana.