Interview: Daniel Ogbarmey Tetteh
Which strategies have strengthened the attractiveness of Ghana’s capital markets?
DANIEL OGBARMEY TETTEH: Coordination between stakeholders is key to making Ghana an attractive destination for both domestic and international investors. This includes consolidating regulatory frameworks, diversifying investment options, improving investor education, building robust market infrastructure, promoting strong corporate governance, enhancing financial inclusion and deploying technologies.
To this end, the SEC launched the Capital Market Master Plan 2020-29 (CMMP) to develop a deep, efficient, diversified and well-regulated market with a full range of products. The CMMP is anchored on four strategic pillars: improving the diversity of investment products and the liquidity of the securities market; increasing the investor base; strengthening infrastructure; and improving regulation, enforcement and market confidence. The framework provides a comprehensive blueprint for developing Ghana into an attractive destination for investment.
How have recent macroeconomic indicators impacted the securities industry?
TETTEH: In 2022 the securities industry faced challenges due to the country’s macroeconomic conditions, leading to a retrenchment across equities and debt markets. The risk-off environment, steep depreciation of the cedi, high inflation, sovereign and selected bank downgrades, and interest rate hikes adversely affected stocks. The fixed income market also faced challenges, with a spike in bond yields due to central bank policy and liquidity issues. These factors impacted investor sentiment and led to significant draw-downs in the fixed income market.
The funds management industry showed resilience in 2022, with total funds under management increasing by 10% to GHS48.8bn ($4.4bn) due to robust growth of the pensions and discretionary/ non-discretionary funds segments. However, collective investment schemes (CIS) experienced a 19% decline in the second half of the year, with funds under management amounting to GHS6bn ($544.8m). This decline was due to the implementation of the SEC’s directive on fair value through other valuation methods and interest rate developments in the money market, which fuelled the appetite for money market bills compared to CIS investments.
In the third quarter of 2023 the equities market experienced a 30% yield and a 66% year-on-year expansion, reaching GHS56m ($5.1m) in trading values. Total funds under management rose to GHS62.6bn ($5.7bn) in the third quarter of 2023. However, this trend was offset by mark-to-market value adjustments, resulting in a decline in value from GHS47.4bn ($4.3bn) to GHS46.5bn ($4.2bn) over the same period.
What has been done to enhance investor protections and boost confidence in the sector?
TETTEH: Numerous regulatory reforms are being implemented to protect investors and boost market confidence. For example, stricter licensing framework has been established, emphasising “fit and proper” requirements for market participants. This ensures that licensed entities have the necessary qualifications and integrity to operate, safeguarding investor interests. Additionally, the guidelines on business conduct improve firms’ governance framework, ensuring greater transparency and accountability.
Investment guidelines have also been issued to protect investors from potential pitfalls and enforce disclosure mandates. Moreover, the launch of a colour-coding scheme and a centralised data centre is expected to facilitate access to comprehensive information to enable informed investment decisions. Lastly, the SEC is establishing an investor protection fund to provide retail investors with increased protection against potential financial losses or market risks.
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