OBG talks to Kofi Yamoah, Managing Director, Ghana Stock Exchange (GSE)

Interview: Kofi Yamoah

What possibility is there for floating portions of the state-owned companies on the stock exchange?

KOFI YAMOAH: In 2011 the GSE had mixed results. The index was down about 3%, but we had higher volumes and values traded. A number of new programmes were initiated in 2010 and we are hoping they bear fruit in 2012. We did create rules for exchange-traded funds (ETF) to be traded on the market. We hope to have our first ETF on the market in 2012.

This year the focus is on how to get more companies listed and improve the liquidity on the market. The idea is to allow the state-owned enterprises to raise money. Hopefully if Agriculture Development Bank, a state-owned bank, gets the approval to raise money on the stock market, others will follow suit.

Together with the national bond committee, we are also looking at the bond market to see how we can strengthen the corporate bond market as well as improve the government bond market. We are concentrating on bonds because of the pension fund reforms where most of the funds are expected to be channelled into bonds instead of equity. Overall, we are trying to develop the bond market, as well as increase investor education to boost buying and selling.

How can small businesses be encouraged to attract financing through the stock exchange?

YAMOAH: We initiated the idea of creating an alternate market that will cater to small and medium-sized enterprises (SMEs), as well as start-ups. This will be a completely new market with a different governance structure than the stock exchange. It will also have incentives to make the market attractive, such as bearing part of the operating cost of going public.

A revolving fund is being set up with help from the Securities and Exchange Commission to get more local companies onto the market. There will also be mandatory underwriting, at least to the minimum amount that companies want to raise. Financing in advance of an initial public offering will also be made available.

Regarding education, we plan to offer workshops for targeted companies in collaboration with the Association of Ghanaian Industries. A mass media campaign will be launched to increase awareness. Private equity companies will also be involved. We are working with these funds to create an option to exit the market.

What can be done to enhance the volume of turnover in the Ghanaian market?

YAMOAH: This is a function of having more listed companies and also having more shares out there. If we do not get more companies on the market, there is no way we can improve volume and liquidity. The amount of shares of listed companies is also small. We are encouraging such companies to increase their listings to at least 100m shares. All new companies must have 100m shares as well, with 25% in public hands. We must also make the market more attractive. This can be done either through promotion or via brokers who can find more clients and explore avenues to enter the market.

To what extent can retail investment be increased?

YAMOAH: We cannot do it directly. We can advertise and talk about it, but we need the brokers to go out there and get their clients, and keep them. They can go out and get investors when the market is attractive. Short-term interest rates are hovering around 10-15% and the listed companies are posting very good results, which is making the market appealing. We are hoping with macroeconomic stability and the listed companies doing well, brokers will find clients to invest.

When do you expect to see tangible results from the recent pension reform?

YAMOAH: It will take a few months. They are now going to start releasing funds to the fund managers. They just licensed the operators, so the effects might take several months to show. The Ministry of Finance is spearheading the push to develop the bond market and ensure the majority of the funds will be put into bonds.