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Business News of Wednesday, 21 October 2015

Source: B&FT

AfDB funds SMEs to list on GAX

Ghan Stock Exchange Ghan Stock Exchange

The African Development Bank (AfDB) is to support the listing of Small and Medium Scale Enterprises (SMEs) on the Ghana Alternative Exchange (GAX) with an interest-free funding of US$600,000 over a two-year period.

The amount, which is to be channeled to the Listing Support Fund established by the Ghana Stock Exchange (GSE) -- with assistance from the Venture Capital Trust Fund with seed money of GH?760,000 -- will facilitate the pre-listing processes for interested companies.

Mr. Kofi Yamoah, Managing Director of the GSE said: “AfDB decided about two years to join. All the paperwork is in place. Between October 2015 and April 2017 it is making available US$600,000.

“The idea is that it will come to the Listing Support Fund established by the Exchange and Venture Capital Trust Fund with GH?760,000. If any company comes seeking application to the GAX, it can tap into this fund to pay advisory services; these are essentially the financial valuation, legal advisory services, and sponsoring brokers so that they can prepare such companies to list. At the end of the day, the company repays the amount into the fund at no interest so that others can tap into it.”

The concept of the alternative market is to address complaints by SMEs about the stringent criteria which make it impossible to use the main stock market to raise equity for their businesses.

The GSE is targetting SMEs with a minimum stated capital of GH¢250,000 and which have been in operation for at least a year. It will also consider companies that have the potential to be profitable.
Ordinarily, a company should have been in operation for at least three years with a minimum stated capital of GH¢1million to qualify to list on the main exchange. And once listed, the entity is required to publish its financial statements quarterly.

For the new SME market, listed entities will be mandated to publish their statements half-yearly.

Mr. Yamoah said: “All of us realise that the effort must be concentrated on the SMEs. They have more ability to expand, grow, take on more numbers as far as employment is concerned and help the economy grow faster. The big ones are doing that work, but many of them have reached the plateau of employment and so forth.

“There are thousands of SMEs and it would be negligence of our duty not to help them come to the marketplace, and I am pleased that Intravenous was very determined to list on the GAX.

“We have had a number of collaborative workshops with the Association of Industries, and we know quite a number of their members are interested in bringing their companies to the market. They will only want to see success stories, and the listing of Intravenous Infusion Limited will help add to the success stories,” he said.

The first activity was by Izwe Loans Limited, a financial institution that listed a GH¢80million medium-term note programme last year. Currently, four notes totalling GH¢38.6million that offer an alternative premium over government of Ghana securities have been listed.

Samba Foods, a food processing company, launched a successful IPO to raise GH¢2.5million and commenced trading in May, 2015.

Parent company of Meridian Pre-University and Marshall University College, Meridian Marshall Holding, also launched a highly successful IPO and raised GH¢2.5million through the issuance of 25 million new ordinary shares at GH¢0.10 per share, and is expected to commence trading later this week.

Intravenous Infusions Limited (IIL), Ghana’s market leader in the supply of intravenous (IV) fluids, last week officially announced an initial public offering.

IIL is offering 150 million ordinary shares valued at GH?0.08 per share in an Initial Public Offering (IPO), which starts from October 14 and ends on November 25, 2015. The intention is to raise GH?12million.

Having begun operations in 1974, Intravenous Infusions Limited (IIL) is one of Ghana’s good-news stories. IIL is the oldest and most reliable indigenous IV fluids producer in Ghana and West Africa.

The Koforidua-based company currently supplies between 50-60% of IV fluids to hospitals and pharmacies nationwide, and exports approximately 10% of its products to neighboring countries such as Cote D’Ivoire, Burkina Faso and Togo.

Unlike many other companies struggling to find and grow clients, IIL operates in a niche area of the pharmaceutical industry that does not depend on the economy being up or down.

For IIL, its limitation is its ability to produce enough of its product to meet the ever-increasing demand.

Mr. Richard Okrah, Managing Director of Intravenous Infusions Limited, said while the company has the capacity to produce 4.5 million bags of IV fluids per year, the aging machines and manual processes have seen production fall over the last few years -- making it unable to meet demand from both local and neighbouring countries.

About 6.7 million bags of IV fluids were used in Ghana in 2014, and this is expected to grow by approximately 50% in the next five years.

“The launch of the IPO will give Intravenous Infusions the opportunity to consolidate its market leadership position in Ghana and further increase its footprint in the ECOWAS region,” Mr. Okrah said.

The expected injection of capital will allow IIL to complete installation of a new production plant to increase capacity from the current 4.5 million bags to 15 million bags of IV fluids per year.

IIL’s shares are available for GH?0.08 per share. The public can purchase shares from DataBank and Cal Brokers.