Ekow Afedzie, the Managing Director of the Ghana Stock Exchange (GSE), has indicated that the country’s capital market is growing despite Ghanaians attitude to investment.
According to the MD, digitalisation of the economy undoubtedly contributes to the growth of the market as government institutions and the private sector have adopted remote work, “the hastened employment of technology has made financial tools more accessible”.
“Bonds are a safe investment; Ghanaian investors are typically risk averse, so the bond market has traditionally been a popular destination for local investors’ funds. However, we are seeing significant growth in activity and, therefore, liquidity – in our equity market. This was the case even during the pandemic, which shows that the market is resilient and performing well.
“These platforms have not only strengthened the economy, but contributed to the resilience of equity markets. Moreover, the Ghanaian public can invest directly on the exchange from their smartphones, and it is possible to reach brokers and investment managers via mobile channels.”Ekow Afedzie
Mr. Ekow Afedzie, on what can be done to increase the number of public offerings on the GSE and how smaller firms can utilise the markets to raise capital, noted that there have been no initial public offerings (IPOs) on the GSE since the start of the pandemic, but the exchange is making a concerted effort to attract such offerings in the coming months.
“Indeed, we expect to have IPOs in the near future, and regulators are exploring ways to encourage the general public to participate and invest in equity.”Ekow Afedzie
The Use of Pension Funds
The Managing Director averred that there’s the need to utilise pension funds as a source of long-term capital to unlock Ghana’s economic potential.
“There is incredible wealth that is currently locked away in pension funds, with regulations preventing them from being utilised in equity markets. Once that capital is unlocked, IPOs will become more attractive, driving demand. This, in turn, will increase the funding acquired by companies issuing IPOs.”Ekow Afedzie
Mr. Afedzie explained that there are two sides to developing capital markets namely, the supply side and the alternative market.
“On the supply side, we need big institutional investors with the funds that can meet the needs of companies seeking investment, and on the demand side we need to bring larger companies to market. The alternative market has been a key tool in helping smaller firms gain capital, yet the activity and interest level from investors is not where it could be.”Ekow Afedzie
While highlighting the performance of the GSE, Mr. Afedzie stated that the GSE was operational even after the outbreak of COVID-19.
“The GSE was able to maintain operations after the outbreak of COVID-19 largely because automated systems had already been implemented on the trading floor. As a result, brokers and other stakeholders were able to continue to participate in the capital market uninterrupted. Indeed, technology helped us overcome the challenges presented by the pandemic, enabling the exchange to have a seamless flow of activity without in-person interactions between employees and traders.”Ekow Afedzie
Mr. Ekow Afedzie noted that while the economic impact of the pandemic caused trading to slow, it recovered relatively quickly. He added that in 2015, the GSE started to provide additional information to investors on the variety of products available on the market, ranging from shares to medium- and long-term bonds.