Financial transparency is the singular most important factor required by capital markets to instill confidence, stimulate participation and drive growth from all classes of investors, Philip Southwell, Partner at Chapel Hill Denham and Chairman of the Nigeria Infrastructure Debt Fund (NIDF), has said
According to him, the capital market has a broader scope than providing access to debt and equity.
This is as a result of its unique position in driving development as it has a relatively high degree of influence in terms of governance, enforcement, liquidity and developing the investor base.
But all these hinge upon the degree of financial openness and accountability, as the market rises and falls to the extent that it is transparent.
Speaking on the subject of ‘Developing Our Capital Markets for Sustainable Economic Growth’ at a webinar organised by Chapel Hill Denham, he highlighted three areas that investors – foreign and local, institutional and retail – consider non-negotiable.
These areas include detailed and timely financial reports; minimal related-party transactions but more importantly, full-disclosure whenever they occur and thirdly, visibly stated guidelines for and enforcement of investor interests. “If these three things can be achieved, there’ll be much greater appetite for the local markets and that is critical in providing support for liquidity, he stated.
As an example of the need for timely and accurate financial reporting he juxtaposed the time of reporting the 2019 financial numbers of the top 20 stocks listed on the GSE against that global firms such as J.P Morgan and Blackrock and highlighted how even the most timely reports for companies listed on the Ghanaian bourse trailed these significantly larger companies by an appreciable length of time.
“Of the top listed companies, Republic Bank and MTN were the first out of the block to report their figures for 2019, on the 23rd and 24th of February respectively; we’re talking seven weeks into the new calendar year.
“In contrast we see two well-known brand names – JP Morgan and BlackRock Inc. JP Morgan beat BlackRock to a lot of financial reporting by one day. And even there, where they operate in 103 countries globally in probably 50 different currencies and have a huge number of staff, they are able to report their 2019 numbers on the 14th of January.
BlackRock, with US$4.5 trillion dollars’ worth of assets under management, were able to do this on the 15th of Jan. That’s two weeks into the new year and five weeks ahead of the swiftest companies on the GSE,” he revealed.
Whilst Mr. Southwell acknowledged that the circumstances under which firms in Ghana, and by extension Africa, operate are different from what the aforementioned global brands face and he doesn’t expect local firms to outdo them more established firms, they represent the gold-standard and what companies on the GSE must aspire to, to drive growth in the market.