Saturday, 17 March 2018

Private equity market underutilized in Ghana – industry player

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Adnan Adams Mohammed

The Investment Director at Injaro Investments, a private equity firm, Mirabelle Moreaux has noted that, there are prospects and pass along effect on an economy when the private equity investment is developed. However, the private equity market in Ghana is underdeveloped.

She said, currently, pension funds do not invest in private equity, although, the National Pension Regulatory Authority is now reviewing their regulations to allow them allocate up to 15% of pensions fund in private equity.

This is despite, a success story which transformed Agricare Limited, a Kumasi based poultry and fish feed manufacturing company, into a giant player in the animal feed industry and which currently has extended its distribution networks into Ivory Coast, Togo and Benin. But its sources of private equity funds are from overseas. 

She disclosed this at a workshop for financial journalists in Accra recently jointly organised by the USAID Financing Ghanaian Agriculture Project (USAID FinGAP) and the Institute of Financial and Economic Journalists (IFEJ).
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It was also discussed that, the Ghana Alternative Market (GAX), introduced about four years ago as a financial market for raising funds for small and medium enterprises (SMEs) has not attracted the needed number of listings as expected.

According to a consultant to the GAX, David Tetteh, the listing results are not encouraging as expected.

It currently has only four companies listed with about GHC15.83 million funds raised by the four companies.

The GAX is a parallel market operated by the Ghana Stock Exchange, which targets in particular SMEs with potential for growth. It was introduced to help deepen the financial market by encouraging more businesses, especially the SMEs to access funds easily and at a low cost and motivated with other number of incentives.

It accommodates companies at various stages of development – including start-ups and existing enterprises, both small and medium.

However, the GAX consultant advised the Ghanaian business public against the practice wherein companies only approach the capital market as a last resort when they are in financial crisis.

Although, the capital market has always been a fertile ground for businesses to attract sound financial investment, most Ghanaian businesses only think of listing on the capital market when they are going through financial challenges, he said.

Also, business owners do not want to share ownership of their businesses with others in order to attract more investment.

Mr Tetteh observed that, these are among a number of factors which have not helped the development and patronage of the GAX.

Speaking at the workshop for financial journalists, he urged business owners to open their doors for investments and expansion and as well reduce risk through risk sharing as one of the benefits of expanding ownership of businesses.

He explained that, companies interested in listing on GAX must, among other things, have stated capital of GH¢250,000 at the time of listing; and must have operated for a minimum of one year, as well as published accounts in accordance with the Companies Code 1963, (Act179).

He mentioned the SME listing support fund as one of the numerous incentives. “Companies listing on GAX can apply for funds under the GAX –SME listing support fund to pay fully or partly for the cost of advisory services. The SEC caps these fees at 5% of total capital raised.”

The Capital Market Consultant expressed optimism of changing the status quo through intensive public education about dynamics of the capital market and its benefits.

He added that the current ‘stable state’ of the economy has what it takes to spur growth of the capital market, saying: “We expect that by 2020 we should have 50 companies listed on the market”.

The workshop was aimed at broadening the horizons of journalists in agricultural reporting, and training them to sensitise the public on alternative financing sources for agro-based industries.

The one-day workshop was under the theme ‘Enhancing the capacity of Financial Journalists on the Capital Market’.

The Chief of Party-USAID FinGAP, Rick Dvorin, underscored the importance of agro-based leveraging of the capital market to enhance agricultural productivity.

He advised businesses to adhere to best managerial and administrative practices in order for them to attract investors.

The Managing Director of the Security and Exchange Commission, Rev Daniel Tetteh admonished the media to be circumspect in their reportage on businesses in the country. He said, the ethics of double cross checking of facts and giving fair representation to all parties must be adhered to by journalists in their reports, so as to avoid misrepresentation and misinformation which will have dire consequences on businesses.