Ms Abena Amoah, the Deputy Managing Director of the Ghana Stock Exchange (GSE), has disclosed that the Exchange is pushing for the listing of some 36 new corporate bonds issuers on the Ghana Fixed Income Market (GFIM) in the next five years.
According to the Deputy MD, the move will make available long-term funding to the private sector. She averred that the Accra bourse will have at least six new issuers this year, 2022, because the market is still at early stage.
“For the corporate bonds, we are looking at five to six new issuers every year for the next five years. But there are few things that must be in place for a corporate debt market to grow.
“This market was set up in 2015 and is still relatively in its infant stages; and like many bond markets that are developing, it starts with government securities. We currently have about 11 issuers on the debt market (which has raised about GHC12.61billion in debt).”
Abena Amoah
Ms Abena Amoah noted that the corporate bond market is nascent, with a very limited number and type of issuers of 11 listed bonds, with the total amount outstanding being GHC11.93billion as of January 2022, which is small compared to the outstanding government of Ghana bonds at GHC150billion.
This limited number of corporate bonds, coupled with the small size of the amount raised, she explained, provides little scope for secondary trading. Nonetheless, “this market is projected to grow significantly in the coming years.”
Non-bank Financial Institutions Dominate Corporate Bond
The Deputy Managing Director stated that corporate bonds are currently dominated by non-bank financial institutions with maturities ranging from 3 to 10 years and a government-sponsored special purpose vehicle (SPV), ESLA Plc. In the case of ESLA Plc, she indicated that there has been about GHC8.7billion issued, representing 73% of the outstanding issuance as of January 2022.
Largely, among the reasons for lack of issuer interest in corporate bonds, she cited the unwillingness of private issuers to meet the high demands attached to listing such as: transparency and transaction costs, as well as limited flexibility in public debt markets relative to bank loans.
However, the deputy MD mentioned that the key challenge of the private sector is access to long-term and affordable capital.
“Many of the private sectors have maxed-out of their bank loans, which are expensive and short-term, and do not afford them to do the long-term projects such as the acquisition of new equipment among others.
“Today, we have the private pension funds which have about GHC10 billion looking for investment opportunities in listed equities or listed corporate bonds. We are working in partnership with our stockbrokers to get those companies ready which have the right governing structure, right business plan, and gain access to this GHC10billion to create jobs and grow the economy.”
Abena Amoah
Ms Abena Amoah opined that institutional investors such as pension funds, collective investment schemes and insurance companies are growing but have few investment options in capital market products. She explained that since current tradable options are limited to government debt, a few corporate bonds and a few equity listings are in the capital market.
Highlighting some work being done in the corporate debt space, Ms Amoah indicated that “There are some businesses we are working with to see if they can come to the market for investors to give them working capital through corporate debt instrument”.
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