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 GHANA STOCK EXCHANGE
Interview with
Mr. Yeboa Amoa,
Managing Director
September 9th 1999
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The Ghana Stock Exchange opened its doors in November 1990. Could you begin by telling us how it all began?
I had been in Merchant Banking since 1974 and in 1988 the chairman of the bank in which I was, who had been Deputy Governor before, informed me that the Bank of Ghana had asked that I be seconded to assist the Governor with the Stock Exchange and the capital market project. In 1989, I assumed office and one of the things we did was to get the Minister of Finance to appoint a 10 member national committee with the Governor as chairman and me as the Member Secretary. The Ghana Stock Exchange was one of the most tangible results of the deliberations of that committee. We wanted it to be a private sector initiative so private institutions came together and promoted the Stock Exchange. I was asked to run it and I have been doing that since 1990.
The Stock Exchange started with 11 equities, could you tell us how many there are today?
Today we have 21 equities. 3 bonds that belong to the same series, there is a fourth one which is yet to be listed and I believe there will be a twenty-second equity later this year.
The Ghana Stock Exchange has been recognized as one of the most successful stock markets in the world and in the emerging market in terms of performance. How has this been reflected in share prices?
I think the last time we looked at the numbers on average shares had upsurged by 70% per annum and inflation at that time was about 60% so we have kept ahead of inflation on average. In certain years there have been negatives. Currently, for example, I think the market has lost about 10% on average. Nothing goes up forever after being the best performing emerging stock market for the year ended 1998, what would you say this success has been due to?
I do not believe in single cause theories. I think it is due to a combination of factors both endogenous and exogenous. I will attribute it first to God in whom I believe. Beyond that humanly speaking I see the combination of measures that have been taken in this country with the support of our President like the E.R.P. and others. Without that kind of enabling environment we could not talk about any of these successes. Such measures include the law reforms that we have had, the constitutional framework, the peace and quiet that we have enjoyed. All these have generated a kind of goodwill to make Ghana desirable as a destination for investment capital, which has raised our profile on the international market place and generally made these things happen. Internally, I will attribute it to the quality of the companies that we have; Unilever, Mobil, the Standard Chartered Bank and so on. We have to remember that a company like Guinness Ghana has been the most profitable of the 51 Guinness Breweries worldwide and with it on the Stock Exchange it has a positive impact. There is also the high quality personnel we have here, it is encouraging to see 2 of our original team members, Dr. Asembri and Miss Quartey, moving on to become respectively, the Director-General and Deputy Director-General of the new Securities Regulatory Commission. Currently, our General Manager is the president of The Institute of Chartered Accountants, (Ghana). We have in Ghana some of the top brokers in the world’s emerging market: Ken Ofori-Atta, who was voted by the Euromoney Magazine as one of the 50 top men of finance for the 21st Century. The backgrounds of these people help very much, I have a colleague here from Yale Graduate School and I went to Princeton. Talking about the endogenous factors, the listed companies, the quality of personnel that we have and the fact that this stock market since its inception has received best professional advice from our external consultants – all these have contributed a lot. The standards here approximate to the generally accepted principles in the global securities market.
Talking about generally accepted principles, I think the international norm of settlement time is 3 days. What are you doing to bring the GSC to within these limits?
We have come a long way from 14 days to 5 and it is a short step to 3. We now have under implementation a clearing, settlement and depository project under which settlement will be automated and the settlement period reduced further to three (3) days within the next year.
What other measures are you implementing to bring the GSE up to the International Stock Exchange standards?
The quality of the market is always driven by several factors; the issuers, the investors, the intermediaries, infrastructure, information flow, incentives. The quality of these is in turn informed by regulatory measures, technology, human resource development and the promotional efforts. Therefore anyone who talks about improving quality must necessarily be focusing on those things that drive the several factors we have identified and that is exactly what we are doing. To make progress in the technological field, we have embarked upon the automated CSD project. We anticipate some more reforms because law is the cornerstone of modern business and civil society generally and therefore that has to be addressed. We are moving towards scripless share ownership, we are moving to the 21st century with the Internet and we need to have the law to enable us to do that. Share ownership will not be based on share-certificates, we need the law to enable us to do that. The human capacity should be moved up to a level where it becomes easily comparable to what the foreign investor is more used to. We have a website and e-mail facilities. Trading statistics are reported on Reuters and we want to move further to having our information or data on the stock market in real time, and then we want to develop more products. We have equities but that should not be enough, we have 3 bonds denominated in dollars but we want to encourage the development of things like futures. Recently, there was a meeting on a proposed Ghana Future Market. That project will seek to create a futures market in stocks, selected commodities as well as currencies. We have a whole host of anticipated measures to increase the range of financial products on our market and these have to be linked with the capacity development of humans involved whether they are the issuers, intermediaries, or the technologists. They need to understand what we are doing so that they can support us when we are advocating reforms.
What kind of time span have you got for these new products to be introduced given the technology?
We are on what I call the teleological march – i.e. a march towards perfection and that time, therefore, does not end. Even, the US and British markets which have been there all these centuries are talking about improving things. But we have a strategic plan against which we measure our progress or pace and what we are saying is that by next year, our automated CSD project would have been completed.
| You have entered into a memorandum of understanding with the Johannesburg and Nigerian Stock Exchanges. Could you give us the details?
With Nigeria, we are talking about taking steps towards a regional integration of our stock markets to complement what the French speaking West African States have done. When we come together we will be a bigger market than all the 7 French speaking West African nations and Guinea Bissau put together because Nigeria alone has a population of about 108 million and we have 18million. And then we believe that eventually the 2 of us, (French West African market and EnglishWest African Regional stock market) can come together, have what our political leaders have always intended under the ECOWAS and be economically integrated. And all the sub-Regions can come to together forming the African Economic Union of 2034 that has been spoken about.
How does this economic integration complement Ghana’s program to become the Gateway to West Africa?
We could not have talked about a better fit. If our Gateway is from the Tema Port to Paga then we don’t need a big gateway for that. But if it is a gateway from Tema or the airport to a very vast territory then it becomes most worthwhile. I think therefore there is a perfect fit between Ghana Gateway project as it is designed and is being implemented and this vision of joining forces within our borders so that we shall have bigger room, bigger things to see, many more things to do, viable markets that will enhance business.
Do you not think that Nigeria with its huge market might steal away the idea of being the Gateway?
Gateway will not come about by what you call yourself or do not call yourself. It will come about as a result of the realities of the situation. We are in a competitive situation even without anything called the Gateway and therefore the outsider will always recognize quality and make use of it. There is a coincidence of interest judging from the way we are both talking. Remember also the basis of the main document for African integration was crafted in Lagos and so there is no reason why we cannot integrate. Nigeria has been the prime mover and I anticipate that integration will come, Gateway or no Gateway.
For the last 2 years there have been several delegations from the US to visit the Ghana Stock Exchange, including the American Bar Association and even more recently Rev. Jesse Jackson during the African African-American Summit. How have these visits encouraged US investments in Ghana and in the Stock Exchange?
I think that not only their visits but the statistics show clearly that the larger bulk of our investments through the Exchange have come from North America where the institutional investors are. We are hoping that before long, we can strike some relationship with NASDAQ for example, appointing market makers in the US and developing institutional links. We want our technology to talk with their technology and I will be traveling soon to the US to the manufacturers and users of stock market technology to familiarize myself along with other officials from other African stock exchanges about the developments and possibilities in that field.
What are the regulations for foreign investors who want to invest in the Ghana Stock Exchange?
We have a liberalized regime. A general prior approval has already been given for a non-resident investor to hold up to 10% of any listed equity. So you do not need any other approval if you are non-resident investor; there are no additional procedural nor other requirements. Just see your broker and get the money into the system. The good news is that this 10% limit per one investor does not apply to Ashanti Gold (AGC). In other words, a foreign non-resident investor can own in theory even 100% of AGC. Secondly, all the non-resident investors’ holdings in one company should not exceed 74%. (The 26% is to cater for the nationalistic and balance of payment considerations.) But, again, this limit does not apply to Ashanti Goldfields. We guarantee full repatriability- on the initial principal, the proceeds and any balance that is left on the initial principal brought into the country. All the foregoing are for a non-resident, non-Ghanaian portfolio investor. For a foreigner resident in the country and a non-resident Ghanaian, there is no limit.
Do you not think that these regulations should be altered to encourage more foreigners?
We should remove this regulation on the non-resident. It is feared that this limitation sometimes works to the detriment of the Ghanaian that we want to protect.
With all the investments that you are putting into the GSE, technology-wise, product- wise and with all the developments that you hope to see, where do you see the GSE within the Vision 2020?
Our vision is to complement the government’s vision, and in the process, we at the GSE want to be relevant, effective and efficient. We want to see the quality of life improved; better educational facilities, better infrastructure, a more expanded horizon in the economic field, more businesses springing up. The stock market by definition is a market for long term capital. We could not make this economy grow with 90-day treasury bills, no one ever did that. We need long term capital and therefore we see for the stock exchange a very big role in the scheme of things in Vision 2020; we see ourselves prominently placed to handle the divestitures if given the chance. And increasingly we see that opportunity being given to us, to play that role, to make an impact, to aid in national development. We are optimistic. There might be challenges in the short-term but the long-term promises to be good.
As you know Forbes Magazine reaches more than 4 million readers, mostly businessmen. What is your final message to them?
The markets as we know right now are rising and falling but the track record of our Stock Exchange is well known. Now that the share prices have dipped a bit it is the time to come and invest so that when bull run starts again, the investor will also benefit. All investors are encouraged to buy listed stocks and bonds to ride with us to greater prosperity in the years ahead.
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© World INvestment NEws, 1999.
This is the electronic edition of the special country report on Ghana published in Forbes
December 13th 1999 Issue.
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GHANA
