The Ghana Stock Exchange (GSE) wants government to offer more tax incentives to lure companies to list on the local bourse.
Chair of the GSE’s governing council, Albert Essien, told the B&FT in an interview that companies must be incentivised to list. “We want to see the Exchange play a catalytic role in economic development of the country. Government must give incentives to companies that want to list. Tax breaks could be good; not total tax breaks but a period of tax breaks will do good, for example, if you list, you don’t pay taxes for a year or two,” he said.
The stock market already enjoys a couple of tax incentives put in place to attract companies and corporations including multinationals to list.
These include a reduction in the corporate tax from 25percent to 22percent for the first three years of listing and the recent removal of tax on capital gains–a tax that eroded investors’ returns by 15 percent.
Despite all these incentives, Mr. Essien is of the view that more could be done to attract companies onto the market to drive up activity and deepen liquidity.
“It can go further as an incentive to those who come. Despite the removal of capital gains tax, there is no limit to encouraging companies to list on the exchange,” he said.
So far the local bourse has less than 50 listed companies with no representation from the telecommunication sector, though it has some of the largest companies in the economy.
Out of the 41 listed companies, only 13, representing 31.7percent are multinational in nature, with another five locally listed ones that have majority foreign interest or stake. The rest of the 23, representing 56.1percent are local firms.
Since the introduction of the Ghana Alternative Exchange (GAX) a couple of years ago, targeted at Small and Medium Enterprises (SMEs), only five companies from education, manufacturing, and healthcare have listed.
After two years of consistent negative growth, the stock market has taken a positive turn and investors are shifting their focus from declining returns on government bills and bonds to the equities market.
The GSE Composite Index, which tracks all listed companies, has so far seen a 31.30percent growth while the GSE Financial Index, which tracks the stocks of financial stocks, has also seen a 33.80percent growth, spurred by the return to profitability of banks.
Diversification of SOEs
Some market players have called on the government to act quickly to deepen liquidity on the market by getting the State Owned Enterprises (SOEs) earmarked for diversification to list on the bourse.
“We would want to encourage government to divest the SOEs via the exchange. It will send a positive signal to others in the private sector and will also give pension funds and other funds the appetite to also come onto the exchange to diversify their portfolio. We want to see the exchange play a catalytic role in the development of the country.”
The celebrated banker and former CEO of Ecobank Transnational Incorporated, added that with the growing optimism and excitement in the environment, this is the perfect time for government to act on its promise of making the capital market the fulcrum of economic growth.