Ghanaian authorities work to attract sustainable flows of capital to the country's stock exchange


As Ghana enters an election year in 2020, sector stabilisation and reform are key focuses within the capital markets arena. While the regulator is taking steps to shore up market confidence in the short term in light of recent banking and asset management reforms, the long-term ambition of exchange authorities is to introduce new products and services that will attract the capital flows necessary for a deeper and more sustainable market.

Market Progress

Although limited capital markets activity, including the issuance of Treasury bills, began in Ghana soon after the country gained its independence, due to political turbulence it was not until 1989 that the government established a committee to take control of the long-delayed stock market project. The Ghana Stock Exchange (GSE) opened its doors on November 12, 1990, beginning with 11 equity listings and one commemorative bond. The exchange rapidly developed from a largely manual system, in which traders posted orders on whiteboards, to a fully automated trading platform with clearing, settlement and depository functions provided by the Central Securities Depository, a subsidiary of the Bank of Ghana (BoG) and the GSE.

Infrastructure improvements allowed for a diversification of product offerings, enabling the GSE to progress from a single-product platform to eventually offering trading in equities, corporate bonds, government bonds, foreign currency swaps, assetbacked securities and exchange-traded funds (ETFs). This wide array of products and services places the GSE in the upper tier of African capital markets in terms of product availability.

In December 2017 Ghana was ranked seventh out of 17 markets in the inaugural Africa Financial Markets Index, which was created by the Official Monetary and Financial Institutions Forum, an independent think tank, and Barclays Africa to rate the maturity, openness and accessibility of financial markets across the continent. By 2019, however, the nation had slipped to 13th place in the index, a reminder that Ghana is competing with rapidly developing markets in the region for much-needed capital flows. Regulatory reform is therefore a priority for exchange authorities, as is the continued development of exchange infrastructure.

Following international best practices, the GSE has for some years been preparing for its demutualisation, a process that will see the exchange’s ownership structure change from a non-profit, member-based organisation into a profit-making corporation. In the summer of 2019 the GSE announced that it expected to complete the demutualisation process by the end of the year.


Ghana’s principal exchange is the GSE, which as of the first quarter of 2019 had 33 companies listed on its main board, according to the Central Securities Depository – three fewer than the previous year. In terms of market capitalisation, the GSE is dominated by the mining and petroleum sectors, which accounted for 52.5% of the total in 2018. The financial sector is the second-biggest component of the exchange, contributing some 23.85% to total market capitalisation, followed by ICT (15.88%), food and beverages (2.71%), and distribution (2.66%). The capital structure of the GSE is also concentrated in terms of listings. In 2018 the top-five companies accounted for just over 78% of market capitalisation: Tullow Oil, which contributed 26.83% to the total; AngloGold Ashanti (24.80%); MTN Ghana (15.88%); Ecobank (6.30%); and Standard Chartered Bank Ghana (4.62%).

Since 2013 the GSE has operated the Ghana Alternative Market (GAX), a platform for small and medium-sized businesses seeking to raise capital. In order to attract smaller companies, the GAX’s listing rules are less demanding in areas such the minimum capital and float requirements, and the availability of recorded profits. Listing and application fees have been waived completely, with GAX-listed companies only paying an annual fee of GHS2000 ($387).

As is the case with other secondary boards, however, the exchange authorities face a significant challenge in populating it. Despite a recruitment drive intended to boost the number of GAX listings from four in 2018 to 50 by 2020, as of 2019 there were five listings on the alternative market. Nevertheless, promotional efforts are being carried out, and in the second half of 2019 the GAX reported that five more firms had commenced the listing process, and a number of others had written to declare their intention to list.

Debt Instruments

Since 2015 the GSE has also featured the Ghana Fixed-Income Market (GFIM), a specialised platform for the trading of debt securities. Prior to its creation, the debt arena was dominated by over-the-counter trades carried out by a small number of banks transacting mostly in government bonds. The arrival of the GFIM added a platform for secondary trading in debt instruments, and heightened the level of formalisation and accessibility of the country’s debt market. The GFIM is at an early stage of development, and government debt still forms the vast majority of listings. Of the total outstanding debt as of May 2019, nearly 80% was issuances by the government. The state-owned Ghana Cocoa Board and the BoG were the next biggest issuers, with 7.84% and 5.23%, respectively.

At the sovereign level Ghana has successfully approached global markets with its debt instruments. Ghana’s first eurobond was issued in 2007, and by the outset of 2018 it had completed $3.6m worth of international offerings and found buyers in the US, European and Asian markets. Ghana’s issuances in 2018 included the nation’s first 30-year offering, which enabled the government to lengthen the tenor of its debt profile and thereby reduce the cost of servicing it. Longer-tenor offerings have now become a regular feature of Ghana’s debt sales. The government’s eurobond sale in the first quarter of 2019 raised $3bn in three tranches of seven-year, 12-year and 31-year maturities. The issuance was six times oversubscribed, representing a vote of confidence in the economy on the part of international investors. However, the 20-year sovereign offering issued in August 2019 attracted GHS162.1m ($31.4m) of a targeted GHS450m ($87.2m), despite a yield of more than 20%. This could point to a declining appetite among investors for longer tenors.

The scale of Ghana’s future debt issuances is also likely to be tested by legislative constraints introduced by the government to ensure fiscal stability. These include a 2017 law that prevents governments from producing budgets with deficits of more than 5% of GDP, and the Fiscal Responsibility Act 2019, which creates a number of bodies mandated to monitor the performance of the government budget and ensure that it complies with fiscal rules.

New Platform

In November 2018 the Ghana Commodities Exchange (GCX) was launched, featuring a trading platform and a warehouse storage system linked via an electronic warehouse receipt system. The state-owned exchange began operations with trading in maize, and subsequently broadened its activity with palm oil trading. The GCX expects to introduce futures trading by 2021, which will allow it to bring on products that cannot be traded on a spot basis, including paddy rice, minerals, gold, petroleum and gas. The potential for farmers to use commodities stored in warehouses managed by the GCX as collateral is expected to provide a useful boost to the agriculture sector.

The long-term ambition of the GCX is to establish a regional, technology-driven platform by which merchants across West Africa can buy and sell commodities through devices as simple as smartphones. However, infrastructure hurdles remain. “The rationale is good, but more work has to be done. The main problem is that the necessary warehousing systems are not in place yet. Farmers producing goods in the north cannot get their produce to Accra as the logistics are not there,” Barnabas Attipoe, CEO of Africa Trust Capital, told OBG.

The GCX estimates that Ghana is currently able to meet just 20% of its warehousing needs – a shortfall the government is attempting to address through its One District, One Factory policy. A lack of high-quality silos for the storage of grains is of particular concern. Agricultural trade would also benefit from more widely available cleaning, drying, testing, sorting, grading and bagging equipment.

Market Performance

Since 2011 the GSE has published two indices, the GSE Composite Index and the GSE Financial Stocks Index, which form the principal means by which market performance is judged. Over recent years the exchange has displayed considerable volatility.

After a period of negligible growth, followed by modest contraction between 2013 and 2016, an improving macroeconomic scenario in the country resulted in a 52.73% gain for the main index in 2017. This carried through to the first half of 2018, which saw the main index grow by 11.62% year-on-year. However, in the second half of 2018 momentum waned, with the main index entering a downward trend that continued into 2019, as concerns regarding Ghana’s exit from a four-year IMF programme, the BoG’s banking sector clean-up and rising interest rates in the US impacted investor sentiment. In the first quarter of 2019 the main index sank by 14%, largely due to foreign investors exiting the market and a lack of demand from institutional investors. By November 2019 the exchange showed a one-year return of -18.58%, and had fallen from a peak of 3478 points in April 2018 to 2137 points.

Looking to the fixed-income market, the strong interest in the country’s sovereign debt from foreign investors was one of the positive trends of 2017. However, their appetite for cedi-denominated securities began to decline in 2018 alongside the global investment community’s growing risk-aversion to emerging markets. A sharp depreciation of the local currency in the first quarter of 2019 resulted in higher yields for medium- and longer-term instruments as investors priced in exchange rate risk. Although a subsequent recovery of the exchange rate reversed this trend, the weaker participation of non-resident investors since 2018 continues to exert an upward pressure on yields.

IPO Pipeline

The performance of the exchange since 2018 has slowed the flow of initial public offerings (IPOs) on the GSE. There were a total of 12 IPOs between 2007 and 2017, according to Accra-based FirstBanC Financial Services. In 2015 there were four IPOs, making it the busiest year in the period. The most recent IPO staged on the GSE was the December 2018 float of MTN Ghana, which offered a 35% stake to the public, valuing the local subsidiary of Africa’s largest mobile phone company at $2.2bn.

In 2018 Vodafone Ghana disclosed that it was preparing for a public offering, but in early 2019 announced that it was no longer planning to list on the GSE. Another possible source of IPO activity was banks seeking to raise capital to meet a new regulatory requirement (see Banking chapter); however, it failed to result in an uptick in IPOs, as private placements proved a more popular alternative.

Regulation & Strategy

Attracting more companies to the exchange remains a key priority for both the GSE management and the regulator. The country’s capital markets are supervised by the Securities and Exchange Commission (SEC), which commenced operations in 1998 with a mandate to promote the orderly growth and development of an efficient, fair and transparent securities market. In 2016 the introduction of a new securities industry act significantly enhanced the regulatory framework of an increasingly complex market, bringing into its ambit private equity companies, venture capital funds and credit ratings agencies. The SEC and the GSE have both worked to establish a liberal and open capital-raising platform over recent years. Since 2006 non-residents have been able to invest in the market without limits or prior approval, and 21 licensed stock brokerages have established systems for serving foreign clients. A further 10 institutions offer full custodial services to non-residents.

From a strategic point of view, the country’s capital markets stand at a crossroads. The implementation of the SEC’s five-year strategic plan for 2012-17 resulted in important advances, including guidelines for registration, licensing and professional service providers, as well as a framework for the implementation of risk-based supervision.

This period also saw the introduction of the country’s first and only ETF, which launched on the GSE in 2012. Absa Capital’s NewGold ETF – which was first listed on the Johannesburg Stock Exchange in 2004 and has secondary listings in Botswana, Nigeria, Mauritius and Namibia – tracks the rand price of gold and is underwritten by physical gold stored in secure depositories.

Additionally, the year 2018 marked 20 years since the establishment of the SEC. At a conference organised to celebrate the occasion, the exchange authorities and government ministers revealed plans for a series of new initiatives intended to enhance the country’s capital markets, including the development of a 10-year capital markets master plan, which will cover regulation and supervision; financial infrastructure and technology; tax exemptions on returns from collective investment schemes; real estate investment trusts (REITs); gains on the realisation of securities; enhancement of the corporate governance framework; and measures to increase confidence in the trading and payment system of Ghana’s new commodities exchange.

Draft guidelines for REITs were published by the SEC in 2018, and in late 2018 it reported that it was developing guidelines for a regulatory sandbox in which financial technology start-ups will be able to be tested for a limited duration in a controlled environment. Since its emergence in the UK in 2016, the sandbox concept has been used in both developed and emerging markets as a means to encourage innovation in domestic financial services as well as attract international expertise.

Asset Management

The SEC’s ambitions regarding market development, however, remain challenged by the drop in confidence in the domestic investment industry. The clean-up of banks and non-banking financial institutions has also triggered a run on asset management companies and fund managers. According to Bloomberg, by August 2019 some GHS9bn ($1.7bn) of investments were frozen in a suddenly illiquid funds arena, equal to about one-third of the total assets under management of Ghana’s private fund managers.

“Fund managers have been directly impacted by the liquidity crunch and diminished lack of trust in domestic financial sector companies,” Bernard Osei-Tutu, CEO of Dusk Capital, told OBG. “As a result, assets under management are down and it has become more difficult to find depositors.”

In late 2018 and early 2019 the SEC responded to speculation regarding the stability of the fund management industry by introducing guidelines concerning corporate governance, investment practices and financial resources aimed at ensuring asset management firms were properly capitalised and well governed. It also improved the level of information available to investors by listing on its website both the licensees that were compliant with regulatory requirements and those with pending complaints. After placing a number of companies under investigation for directing clients’ capital into illiquid assets, in November 2019 the SEC announced that it had revoked the licences of 53 fund managers, in addition to appointing an authorised agent to ascertain and validate the details of investors and their investments with the institutions. The Consolidated Bank Ghana, originally established by the government in August 2018 with the objective of handling the troubled assets of the banking sector (see Banking chapter), is authorised to receive evidence of investment, such as certificates and account statements, and the government has offered to pay out a capped amount to investors.


Restoring stability and confidence in the asset management segment will be a central focus of the regulator’s activities over the short to medium term. In the longer term, the authorities face the challenge of attracting sustainable flows of capital to the market. Diversifying the investment instruments available in the domestic market is one way officials can work to attract capital and boost exchange liquidity. The continent’s leading exchanges already offer a range of advanced products and services, such as currency futures and options, as well as climate-aligned bonds. The emergence of these new offerings in regional jurisdictions provides a potential road map for future development in the country.

Looking further ahead, Ghana’s positive economic outlook looks set to underpin an expansion in capital markets activity. The nation’s GDP growth rate is expected to average nearly 7% annually in 2020 and 2021, according to the World Bank. Although the oil sector is likely to be the primary growth driver during this period, the World Bank anticipates that the non-oil economy will expand by 6.5% per annum.

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The Report: Ghana 2020

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