The Ghana Stock Exchange: An avenue for raising capital and prosperity for all
Finance textbooks will tell you that the stock market is for raising money and efficient price discovery.
These and many other standard reasons offered in the texts are valid, but that is only part of the story.
Increasing the number of listed enterprises on the Ghana Stock Exchange (GSE) can provide valuable benefits to the corporate Ghana and the society at large, even if not all need to raise capital.
The GSE has existed for 33 years, and this number is almost equivalent to the number of listed companies. This situation must change.
Many reasons have been cited for the GSE's limited listings and inactivity over the past two decades. I have heard, "The general public is not interested in buying shares".
Some say our "market is shallow; it lacks depth, and there is no liquidity". Of course, it's not deep if only a few listings exist. Another reason: "There is over-reliance on foreign investors as we don't have a local investor base".
Is that the reality today? We have a vibrant pension fund industry. In the past, it was said that "the stock market is risky; government bonds offer higher returns and are safer."
Indeed. I hope the current events have shattered that reason. We must refrain from inventing new reasons to save us from doing the work necessary to create a vibrant market that serves our society.
Despite the slow progress, some significant events and activity on the market demonstrate that we can do better. MTN, a multinational with no Government of Ghana shareholding, was successfully listed in Sept 2018.
It was not the wish or benevolence of the company and its shareholders that led to the listing. The National Communications Authority, the regulator and representative of the people overseeing the society's telecom infrastructure in Ghana, made it happen. It's been almost five years since MTN was listed.
What has prevented other regulatory bodies from taking a cue from this example? Is it not the same nation, same people, same aspiration, one GSE?
In Singapore, Lee Kuan Yew understood that creating a vibrant stock market was critical to social reengineering.
In 1978, the government formed the Singapore Bus Service (SBS), listed it on the stock exchange and allowed pension contributors to use up to $5,000 of the pension contributions to buy shares of SBS.
The government "wanted to have the widest share ownership so that profits would go back to the workers, the regular users of public transport. There would also be less incentive to demand cheaper bus fares and government subsidies for public transport".
Singapore's case exemplifies how society can use the market to create a meaningful social change that transforms enterprise activity. I share three main reasons why we must list all public interest companies and others on the GSE.
1. Impact on innovation and income distribution:
Without a stock market or a meaningful system of equity participation in the enterprise, our society becomes highly capitalistic, leading to a "winner takes all" scenario. Labour gets their wages, and the shareholders take the profits.
There is no opportunity for any employee to participate in the wealth creation process that they are part of.
This "winner takes all" system affects societal welfare, wealth creation and stability. No matter how labour tries, labour has no opportunity to participate in the prosperity she supports to create in society beyond her wages.
This results in workers remaining in poverty while shareholders gain from their hard work. Such a "winner takes all" system creates a lack of loyalty, and labour will not take risks for an enterprise where they don't share in the profits.
In a country where most big corporates are foreign-owned, Ghanaians have become labourers on the land while business owners repatriate profits. If what I am attempting to communicate still needs clarification, imagine this.
In another community with a vibrant stock market, every investor, regardless of income, can participate in wealth creation and experience the same percentage gain in wealth if they buy the same stock.
In our situation, labour has limited opportunity to save and invest beyond buying government bills. When the government goes broke, we risk losing workers' savings. A thriving stock market enables broader access to wealth creation.
2. Impact on learning, research and enterprise development:
The transparency of the stock markets offers a critical window for learning about enterprise and enterprise development. Business financials and strategies are made public—the general public benefits from this information for learning and research purposes.
The ongoing research on business performance using stock market data has led to Nobel prize-winning ideas for running businesses.
Without public market activity and data, there is no academic or informed discussion of corporate strategies or actions that inspire the next generation of young entrepreneurs. Instead, we have names of entrepreneurs without any clear idea about the scope of their business activity.
Going public and sharing information through ongoing listing will provide opportunities for learning and inspiration to many young entrepreneurs.
3. Impact on public oversight and regulation:
Companies' financial performance and strategies must be not only be shared with regulators. Allowing regulated and public-interest companies to escape the discipline and scrutiny of financial markets does not serve society's interest.
We lose the scrutiny of professional analysts and academics analysing public interest companies and playing an informal oversight role.
It is incredibly costly for any individual to collect the data needed for any meaningful analytical work if public interest companies do not publish financial and nonfinancial information regularly.
The mind and eyes of the regulator become the only tools overseeing corporate activity.
We must tap into the wisdom of other equally qualified professionals on the market. Several market professionals who pay close attention to corporate activity had uncovered corporate wrongdoings before regulators became aware of them.
Exposing companies to capital market discipline is proven to be supportive of corporate development.
We must urgently increase the listings on GSE to at least 200 companies as soon as possible to realise the above benefits from our stock market. The stock market is not only for raising capital; it is for social reengineering. MTN is a clear example. Let's use it to build our society.
…..be of good cheer!
The writer is a Leadership Development Facilitator, Executive Coach and Strategy Consultant, Founder of the CEO Accelerator Program, and Chief Learning Strategist at TEMPLE Advisory.
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