In order to create a much deeper, more liquid corporate bond market in Ghana, State-owned Enterprises (SOEs), particularly those under the control of the Ministry of Finance and the Social Security National Insurance Trust (SSNIT), must as a matter of urgency, initiate measures to begin listing debt and equity on the local currency on the market.
This, according to Partner of Chapel Hill Denham and Chairman of the Nigeria Infrastructure Debt Fund (NIDF), Philip Southwell, would result in a much stronger corporate yield curve than what is currently recorded and consequently drive overall growth of the Market.
“I wouldn’t suggest that all those companies should be privatized and equity sought on the Ghana Stock Exchange; that is not the proposal I have. I know that one or two of these institutions are listed already. But I do think virtually every organization under the control of Ministry of Finance and SSNIT should probably be asked to list local currency debt on the Exchange,” he said at a webinar organized in Accra with the theme: ‘Developing our Capital Markets for Sustainable Economic Growth’.
He added: “The listing process requires a fair amount of disclosure of the underlying financials of these companies and also commits those companies to ongoing transparency on a quarter-by-quarter, half-year by half-year and twelve-month by twelve-month basis. And that discipline that the capital market imposes is ultimately good for businesses at every level.”
Citing data which showed that the local debt market currently holds approximately $17.8 billion worth of domestic currency treasuries and about $1.6 billion worth of corporate bonds as well as highlighting the one-dimensional, plain-vanilla allocation of assets by pension funds in Ghana, vis-à-vis pension funds in Organisation for Economic Co-operation and Development (OECD) countries, he suggested that more needs to be done to move the market, especially in terms of diversification.
“There are many routes that can be used to create diversification like collective investment schemes but we must begin to look beyond these. Investors are becoming more increasingly savvy but also sensitive. Many investors are looking for themes that they have an attachment to beyond financial returns.
“We have noticed many investors are beginning to look for investments with themes such as Environmental, Social and Governance (ESG), Green Investments, robotics and also faith-based investment schemes, all of which can be delivered from a market stand point,” he said.