Ghana Stock Exchange to establish parallel market for companies

BY: Enoch Darfah Frimpong

In its quest to offer more companies the opportunity to use the capital market in Ghana to raise funds for expansion, the Ghana Stock Exchange (GSE) is to establish a parallel market which will be exclusively focused on businesses with potential for growth.

To be christined the Ghana Alternative Market (GAX), the new market will accommodate companies at various stages of their development, including start-ups and existing enterprises, both small and medium.

Briefing journalists in Accra, Mr Ekow Afedzi, Deputy Managing Director of the GSE, said the move had come about as a result of the struggles many companies in the country went through in raising funds.

Many companies in the country have had to remain at their growth stages for many years because of lack of funds to expand.

The banks, which are there to assist, have also become prohibitive sources because of the astronomical interest rates they charge companies in need.

Another challenge for the companies has to do with the reluctance of the banks to lend long term, a situation which compels desperate companies to risk taking short term loans for long term projects.

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The result, in many instances, has been failure and being riddled with huge debt, most of such companies caught in this scenario are forced to fold up prematurely.

When that happens, many people, most of whom may be highly skilled, are retrenched, a situation which tends to aggravate the already disturbing unemployment situation in the country.

Explaining the structure of the GAX, he said "Listing on this market will afford companies the opportunity for securing long term capital, broaden their investor base and provide liquidity for their shareholders and investors."

"In addition to the above objects for listing, companies may enjoy other incentives including:  pre Initial Public Offer (IPO) financing; underwriting; access to a revolving fund to support the cost of raising capital and deferment of up-front fees", he added.

About its governance structure, he said, GAX would have an autonomous five member committee with oversight responsibility over its activities.

Mr Afedzi said the composition of "this committee shall be one small and medium scale entrepreneur, two representatives from the GSE Council, one from Venture Capital and one representative who is an investment advisor," adding that "This committee shall report to the GSE Council and as such shall  be a sub-committee of the Council."

Mr Afedzi said companies to be accommodated on the GA would have to meet some basic conditions.

He said the issuer would have to be a public limited liability company duly incorporated under the Companies Act, 1963 (Act 179).

Mr Afedzi said The GAX Committee would be responsible for recommending approval for listing on the new market to the GSE Council.

"The GAX shall generally process applications and deliver listing decisions within 15 business days of the submission of all the information and supporting documentation requested by the GAX,' he said.

Mr Afedzi said companies interested were required to have a stated capital of which the minimum would be GH¢250,000 at the time of listing, adding that "The stated capital for rural banks on the other hand would be as required by the Bank of  Ghana."

To do a public float, he said, the company should have a minimum of 25 per cent of the total number of issued shares and the "the minimum number of public shareholders shall be 20.

Again, he noted that a company must have operated for at least one year and had published or filed accounts in accordance with the Companies Act, 1963 (Act 179) for at least the latest financial year.

Some analysts have hailed the move by the GSE, describing it as innovative and a way to halt the incessant financial draught of companies in the country.

The Director-General of the Securities and Exchange Commission (SEC), Mr Adu Anane Antwi, also praised the GSE for what he described as innovative and a proactive way to entice more companies to use the GSE as a source to raise capital for expansion.

Story by Charles Benoni Okine