Who benefits from share certificate dematerialisation?

BY: Maxwell Adombila Akalaare

Eighty-year-old Sas George is an avid investor and serial shareholder in Ghana. His debut in holding equities in firms was on October 7, 1971. This was 18 years before the Ghana Stock Exchange (GSE) was established to facilitate the issuance and trading in shares, bonds and other securities in the country.

On that fateful day, which Mr George reminisces with nostalgia, he joined a handful of individuals and institutional investors to buy the shares of Standard Chartered Bank Ghana Limited.

As evidence of his purchase and ownership of those stocks, he was given a share certificate -- an A4-sized paper that Mr George had to keep and treasure with fond memories even to date.

In the years that followed, Mr George expanded his shareholding footprints in the equity market, buying stocks from one company to another while downsizing and/or increasing his holdings in companies that he already owned stakes in.

For every new transaction, a new share certificate was issued, either as an addition or a replacement to the old ones. 

However, as his shareholding began to increase, much to his delight, owning and keeping the certificates soon became a headache. 

The increasing number of the certificates required that he found bigger drawers and safer places to store and protect them from being defaced, lost or damaged, he told the GRAPHIC BUSINESS on October 1.

While the coming on board of the GSE in 1989 and other capital market value-chain institutions helped to ease the burdens of share trading, the challenge of keeping the certificates persisted, much to the dislike of all shareholders, including George.

"In those days, you had to pack so many certificates in your drawers. Assuming you bought 10 or 20 shares, it meant that you had to pack all those certificates, else it becomes difficult when you want to sell them", Mr George, who is now the President of the Association of Shareholders, said in an interview.

Although he never lost any of his certificates, he remembered colleagues complaining about losing theirs, for which he normally advised them to see their brokers.

Those who were lucky got theirs back after going through the necessary formalities, a procedure share certificate dematerialisation will later help to remove.

Phasing out of certificates 

Until 1997, government securities such as bonds and treasury bills – collectively called debt – were traded through certificates, similar to what happened with shares. 

As a result, buyers of these securities were issued certificates as evidence of their ownership.

The coming on board of electronic issuance in 1997, however, helped to phase out hard paper certificates in the debt market.

In the case of equities, however, hard copy certificates remained until 2008, when the emergence of the Central Securities Depository Ghana Limited (CSD) led to their phasing out.

The move was in line with measures by capital market stakeholders and the CSD in particular to replace manual transactions with electronic ones and help create a seamless platform that promotes convenience and timeliness.

Since then, owners and buyers of equities and debt instruments in the country have said goodbye to paper certificates and welcomed electronic forms of keeping their details. 

This conversion of certificates into electronic format, termed share certificate dematerialisation, has inured to the benefit of shareholders and the capital market in general, George, who is 40 years old in the shareholding business, said.

"The electronic format is the best for us because we do not need to be running up and down with certificates like we used to do," he said.

The CSD, which now holds the electronic data of shareholders, is ISO 27001-2013 certified for information security, giving it the required international credibility and safety assurance to host sensitive information such as investor details. 

The depository also has a backup site that serves as a safety net for business continuity in the event of an eventuality.

Shares converted 

Over the past eight years that the CSD, which is at the forefront of this evolution, resorted to dematerialisation, millions of certificates have been converted.

As of December last year, 87.6 per cent of total shares issued and listed on the Accra bourse had been converted to electronic forms. This meant that of the 10.23 million shares issued in the equity market, nearly nine million had been dematerialised.

In July this year, when the volume of shares issued on the GSE increased to about 10.7 million, the total number of shares dematerialised rose to 9.3 million, representing 87.2 per cent.

The figure comprised shares issued on the GSE, the Ghana Alternative Market (GAX) and preference shares.

The July report of the CSD further showed that all issued shares of Tullow Oil, Hords Ltd and Meridian-Marshalls Holdings Limited had been converted to electronic formats while over 97 per cent of shares issued by HFC Bank, Ayrton Drug and Ecobank Ghana had been converted.


The Chief Executive Officer of CSD, Mr Stephen K. Tetteh, who has been a strong advocate of the dematerialisation, explained that electronic transactions  benefited the shareholders, financial institutions and the capital market in general.

"With the paper certificate, someone can clone your certificate and use or sell it, but that cannot happen with electronic ownership.

"For the financial institutions, borrowers can pledge their electronic shares to the bank and that saves them the problem of holding certificates in their vaults or strong rooms and monitoring; now, the CSD will monitor everything for you," he said.

“Also, unlike before, the CSD now has the legal right to move securities that have pledged against a loan to the lender, removing the hurdle of banks resorting to courts to recover their funds.

"Now, all they (lenders) have to do is contact the CSD and we will just go through our foreclosure procedures and pass the securities to you," he said.

While the benefits are enormous, mention must be made that safety and security are the watch words here.

With millions of investor information and sensitive data at its disposal, it is advisable that the CSD does not rest on its oars but invests in latest technology to help ensure that those information are accurately protected and preserved.

This way, Ghana's credentials as an investment destination will be enhanced, more investments will come and the operations of capital market participants such as stockbrokers and analysts.

This will help in job creation, business growth and overall economic growth.