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Business News of Wednesday, 26 November 2003

Source: Benjamin Konadu Arthur (heritage)

13 years of Ghana Stock Exchange

LAST week November 12 was the 13th Milestone in the relatively significant life of the Ghana Stock Exchange (GSE). It has come a long way, in moving the fortunes of not only the national economy, but the finances of the 26 listed equities.

The modest story of the GSE story started in February 1989, or before as some may insist, when a 10-member National Committee was set up under the Chairmanship of Dr George K. Agama, then governor of the Bank of Ghana to establish the Ghana Stock Exchange.

The Committee then went ahead to consolidate all the previous work connected to the Stock Exchange Project and worked modalities towards the actual establishment of the Exchange which came to fruition in July 1989, but received full authorization under the Stock Exchange Act of 1971 (Act 384) in October 1990 with trading commencing on November 12, 1990.

After more than a decade of operations, the Exchange has carved for itself a prominent niche in the financial market by providing the leadership in the development of Ghana’s capital market and serving as a pivot for long term capital mobilization.

From this point, the Exchange has progressively strengthened its facilities for business and government to raise long-term capital as well as providing an avenue for investors obtain liquidity. The last 13 years has seen rapid growth of the securities industry, as well as facilitated the development of the capital market.

Well put, for the government, the Exchange has been the source of divesting state holdings in companies and enterprises, which require support in the form of capital or expertise.


The GSE it must be noted, was set up to provide a platform for the purchase and sale of bonds, stocks, shares and other securities of every kind and for the investment of money.

It is also to control the granting of quotations on the securities market in respect of bonds, shares and other securities of any company, corporation, government, municipality, local authority or other body corporate.

It was also set up to cooperate with associations of stockbrokers and stock Exchanges in other countries and to obtain and make available to members information and facilities likely to be useful to them or their clients.


It is in no doubt that the Exchange has been most impressive and has so much credit at home and abroad. It has received most coverage most of the world’s media interested in global financial news.

Index performance wise, the GSE has acquitted itself so well that it emerged the 6th best performing emerging stock market posting a modest 116 per cent as early as in 1993. A similar feat was chalked a year later coming up again as the best performing stock market among all the emerging markets with an appreciation of 124.34 per cent in its index.

Indeed, with deteriorating economic conditions on the crest of high inflation and interest rates from 1995 to 1999, the Exchange could not perform as well with a less then impressive performance of 6.3 per cent in 1995, a slight improvement to 13.82, 42 per cent in 1997 and 69 per cent in 1998.

There was a drop in 1999 signifying the bad patch ever recorded at the Exchange with a loss of –15 per cent, due mainly to the adverse environment that prevailed during the period.

The story has changed since 2000 with growth postings rose to 16.55 per cent though dropping to 11.42 per cent in 2001.

The story since then has been nothing but sweet. The Index has grown considerably to 45.96 in 2002. In 2003 the GSE All Share Index over January to November 12,2003 has increased to 112.336 and Stock Exchange officials in Accra say the trend is most likely to be sustained for the rest of the year, especially with the positive third quarter financial results of listed companies in the light of the current favourable economic climate.

Market capitalization totalled 11,122.92 billion cedis representing a year to date change of 77.89 per cent representing operations from January to October.

Volumes traded since November 1990 far amount to 695.74 million shares valued at 1004,29 billion cedis amidst a bullish market atmosphere especially in 2003.


The GSE as stated started with just 11 equities but has risen from 22 in 2000 to 26, the latest one being Clydestone, a home grown IT company on the Provisional List. The total listed equities is set to rise to 27 when Benso Oil Palm Plantation gets on board.

The return of a new enlarged company name yet to be known, but likely to be Ashanti-Anglogold would be a completely new ball game catapulting the GSE to new heights.

The recent listings of The Trust Bank of The Gambia which, put 30 million ordinary shares with par value, Cocoa Processing Company and Sam Woode Limited have also added new impetus to the GSE as a major means of raising long term capital and way of placing young, struggling but potentially vibrant entities in a good stead for expansion.

The take over transaction in SSB Bank Limited is the largest in the industry so far, a feat undertaken by Societe General, a giant in the industry.

The introduction of the Government of Ghana Index Linked Bonds is a welcomed thing, which according to experts is a certain means of government’s ability to raise long-term capital without creating imbalances in the economic system. Currently there are 24 GGILBS on the market.

It is very significant to look at the gains if one invests in shares on the Exchange as against Treasury Bills vis-?-vis inflation rate. Many investors will tell you that even though it was not so smooth from the beginning, things have improved significantly from a –7.95 per cent compared to an inflation rate of 10.26 in 1991 to 45.96 per cent as with an inflation of 15.20 in 2002.

As at November 12 this year, the change in index to date as against inflation was fixed at 111.96 per cent with an inflation of 26.80 per cent.


The GSE since February this year has modified albeit on experimental basis its clearing and settlement systems with trading activities settled in three days after the transaction, ie. T+3 instead of the previous five days.

The recent decision by the Central Bank to operate a Clearing Settlement and Depository system is a new development, which, will help the Exchange concentrate on trading activities.

Mr Kofi Yamoah, Managing Director of the GSE who has been with the Exchange since its Kingsway days, said the GSE’s performance over the last 13 years, has been “like travelling on a very difficult terrain.”

“Indeed very difficult terrain,” adding that, “there were times when financial sustainability was really a big question with no answers.”

He said, “we are certainly almost there and we will continue to serve that national assignment to grow SME’s, just like the multi-nationals, because they are the building blocks of a buoyant economy.”

Mr Yamoah said the way forward for the Exchange is to increase listings, improve efficiency and transparency, attract more government divestitures and fully automate.

He was optimistic about the performance of the Exchange this year which has outperformed all other Exchanges in Africa following the relative stability in interest rates, exchange and inflation rates in this last quarter.

Brokers, shareholders and industry analysts who spoke to this reporter were very optimistic about the future of the GSE, especially those who have been with it a little over the last decade.

The brokers, shareholders and industry analysts were sure that no matter the difficulties the Exchange faces, it has great potential and is a better option than the others on the market.

Personally I think that the Exchange has been most significant in trying to change the face of industry in Ghana and with significant support and push (not with little push) because that is what it needs to move forward.

In advanced countries, Stock Exchanges are a reflection of the movement of the economies and a barometer for accessing how well they rate with others.

It is most regrettable that anyone will want to deride the Exchange at this time. Indeed, like any human institution, there are bound to be problems. But can you imagine people you expect to know better, clinging to very wiered thoughts and beliefs in how trading has gone on, some to the extent of bringing the very existence of the Exchange into disrepute?

How do you feel and see the stories put forward by the world media on the NASDAQ, New York Stock Exchange, London Stock Exchange, Johannesburg Stock Exchange and the Egyptian Stock Exchanges? No doubt, it increases the international standard of these countries and any reason why we, with such a modest but highly performing Exchange cannot push it forward. After all, is it not said that encouragement must be given to the man who is doing well?