By Ebenezer Chike Adjei NJOKU
The emergence of domestic credit rating agencies will serve as a key driver for the Ghana’s domestic debt market’s growth – particularly in the corporate sector, according to Augustine Simons, Head-Ghana Fixed Income Market (GFIM) at Ghana Stock Exchange (GSE).
Speaking at a recent Breakfast Seminar organised by pan-African credit rating agency Augusto & Co., Mr. Simons highlighted the potential impact of these agencies – citing their role in enhancing transparency, price discovery and risk assessment, which he described as “non-negotiable” in a market recovering from recent challenges.
“The domestic credit rating agencies have a unique advantage, in that they better understand the local dynamics and are able to provide more nuanced interpretation of different market determinants,” he said.
Currently, corporate issuances make up only about five percent of Ghana’s approximately US$21billion debt market; a stark contrast to South Africa’s robust market, which stood at over US$220billion as of June 2024. However, recent developments suggest a positive trend.
“The performance of recent corporate bond issuances is encouraging,” Mr. Simons noted.
This year, companies such as indigenous beverage manufacturer Kasapreko and savings and loans behemoth Letshego have raised debt on the GFIM which was oversubscribed – with rates better than the ‘risk-free’ 91-day Treasury Bill Rate.
‘This demonstrates growing investor confidence in our corporate debt market,” the GFIM head added.
To further strengthen the market, especially for corporate issuances, GSE is implementing new measures; including insisting that corporate entities seeking to issue commercial paper are duly rated, Mr. Simons said.
This requirement, along with sustainability guidelines from GSE and the Securities and Exchange Commission, aims to attract green investment funds – a market currently worth around US$25trillion globally. Currently, only about 0.02 percent, or US$5billion, of the vast pool of global green investment funds are invested in Africa…highlighting that the opportunity for growth is substantial.
On a similar tangent, Dr. Kwesi Eduafo Yankey – CEO-Dumakwae Investment Ltd. in his keynote remarks said a well-functioning domestic credit rating system could unlock new sources of capital for our businesses, as credit ratings provide an essential measure of relative credit risk and facilitate the efficient issuance and purchase of bonds and other debt instruments.
“It is therefore in our interest to advocate for and develop a transparent and contextually relevant credit rating culture,” he noted.
Yinka Adelekan, Group Managing Director-Augusto & Co., said with the market still nascent, standardisation and acceptance of domestic rating agencies will take some time; but she is confident the benefits already being recorded will accelerate the process.
Addressing potential concerns about the cost of ratings she stated: “We are committed to ensuring our pricing remains competitive. Our goal is to support market growth, not hinder companies seeking our services,” adding that this will not compromise independence or reliability.
On his part, Seyi Kumapayi, Executive Director-Africa Subsidiaries, Access Bank, explained how recent developments have shown that Africa is not insulated from global shocks.
He noted that owing to corporate entities being subjected to the ratings of their sovereigns, it would be better if local entities catalyse capital within Africa.
“Local companies, especially those with a presence in other jurisdictions, are sometimes unfairly treated due to the risk and rating of the sovereign where their headquarters are. With domestic rating agencies and a commitment to raising capital internally, companies can be better protected from some of these external shocks,” he said.
