Stock Exchange Needs More Local Investors

Ghanaian investors are showing less interest in patronising the Ghana Stock Exchange (GSE) despite the fact that stocks provide the most flexible and rewarding means of investing.

An analysis of the profile of listed stocks at the exchange shows that out of the 21 quoted companies, 12 have between 60%-90% foreign-share-holding whiles the rest have between 1%-24% foreign participation. Those that have very high foreign-share-holding on the GSE include pharmaceutical manufacturer Paterson Zochonis (PZ) 90%, detergent manufacturer Unilever Ghana Limited 79%, British American Tobacco (BAT) 73%, and Guinness Ghana Limited (GGL) 70%.

The listed companies that have a less diluted portfolio in terms of local participation include Metaloplastica Ghana Limited (MGL) and Ghana Commercial Bank, who have 1% and 4% foreign ownership respectively. Although the ownership structure of the gold giant, Ashanti Goldfields Company (AGC) is not available, empirical evidence suggests that the greater part of its shares belong to foreigners with the government having the golden share that gives it the greatest control during decision making.

Most of the companies with high foreign participation top in the league table of capitalisation. Among them are AGC and the Standard Chartered Bank (SCB) with a capitalisation of ?2 trillion and ?348 billion respectively while the SSB Bank and Unilever are in the margin of ?157 billion and ?94 billion respectively.

Five of the companies that have high foreign ownership have foreign origin. They are Fan Milk owned by the Danes, Guinness Ghana Limited (GGL), Mobil Oil Ghana Limited (MOGL), SCB and Unilever. The high incidence of foreign participation in stock trading rather than local participation paints the bigger picture of the lack of confidence by Ghanaian investors in the business of buying and selling of shares. It is probable that most Ghanaian business people are not ready to take the risk to invest on the GSE or are not much acquainted with the operations in the market and the opportunities it offers.

Some analysts suggest that the low response by local investors may probably be due to the traditional ownership of business that allows a family to keep a business from one generation to another. Most people in the country will want to have influence over the business they have established and any attempt to form partnerships is regarded as a threat to their wealth. Mergers and acquisitions have become taboo words in the local business landscape except for a few businesses with international exposure who understand business growth in a global context.

Although it is cheaper and more convenient to raise long-term capital from the stock market, many local businesses are reluctant to take advantage of the opportunity because the owners feel they will lose control over their enterprise. Stock trading is relatively new in Ghana, having been introduced in 1991. The bad performance of the economy in recent times negatively affected the growth of the GSE.

Perhaps local investors have to take a cue from the successes achieved by some of their counterparts in Europe and beyond who made their money by investing in shares. Some private shareholders that are listed in the Forbes magazine as the richest people accumulated their wealth through the buying and selling of shares. Whereas Microsoft's Bill Gates and media mogul Rupert Murdoch became billionaires by building their own businesses producing goods and services, other billionaires in Europe including George Soros, Warren Buffet and Ron Brierley made their wealth through stock trading and this should ginger Ghanaian investors.

In Europe, you find wealth spread much deeper in society because many people invest part of their savings in stocks. Stock analysts believe that it will not be long when the emerging class of businesses people in Ghana will appreciate the benefits of investing in stocks. If that happens then Ghanaian businesses will have access to more long-term capital at a cheap rate to expand their operations.

The high level of foreign participation in the GSE only helps foreign investors to repatriate their profits to the detriment of industry and the country. The GSE needs to reverse the situation by intensifying its education of the business community about how the stock market works.