The Ghana Stock Exchange (GSE) has recorded its longest-ever drought without an Initial Public Offering (IPO) on its main board, as the country’s worst economic crisis in decades continues to weigh on the market.

The GSE has gone five straight years without an IPO – the sleepiest stretch since 1991 when trading commenced. Before this 5-year period, the farthest the local bourse had travelled without any IPO was three years.

MTN Ghana’s IPO in 2018 was the last the market saw. The telco offered a 35 percent stake for US$750million but failed to meet its target. It sold about 15 percent at US$238.5million, which nonetheless was highest in the market’s history.

Attracting new firms onto the GSE has been a struggle for more than a decade, with only four companies listing on the main market in that timeframe – Mega African Capital Limited, Agricultural Development Bank (ADB), MTN and most recently Asante Gold in mid-2022. The gold producer was listed by introduction – an easier alternative that allows firms to go public by selling existing shares instead of offering new ones.

Six companies were also listed on the Ghana Alternative Market (GAX) – a parallel board with lower listing requirements targetting small-sized enterprises with prospects to raise capital – within the period. The stocks have largely remained stationary.

The drought has surprised key market players who had expected a buoyant run as Ken Ofori-Atta – a known market-advocate whose company, Databank, facilitated many successful IPOs – became the finance minister. But that is yet to happen. The market has seen mixed performance since emerging as Africa’s best performer in 2018, with the COVID-19 pandemic compounding its challenges.

Stock markets globally have been shaken since 2021 as central banks deployed aggressive interest rate hikes to tame soaring inflation, resulting in declining equity valuations.

Ghana’s inflation remained above the Bank of Ghana’s 10 percent upper target for 15 straight months, hitting 54.1 percent in December 2022 before showing signs of easing. September 2023’s reading stood at 38.1 percent, according to the Ghana Statistical Service.

Efforts to tackle price pressures pushed the central bank’s key lending rate up by 16.5 percent over the last two years, further tightening financial conditions and stifling growth. The local currency has lost more than half its value over the past 18 months, as the fixed-income market witnessed its sharpest sell-offs on record.

Amid the uncertainty, government has made efforts to restructure the country’s total public debt – estimated at US$50-billion – in order to seal a US$3billion bailout deal with the International Monetary Fund. The domestic phase of the debt restructuring resulted in steep losses for local bondholders, which further dampened investor confidence.

But even before the economic crunch, equities were already struggling to restore their actual worth for a while. The situation scared firms away, as any attempt to launch an IPO amid the turbulence could result in down rounds – or raising money at declining valuations; a situation new entrants would want to avoid.

“People are scared to make investments following the losses incurred in debt treatment, and some even have their funds locked up. The conditions are not ripe for an IPO because of the high uncertainty,” said Dr. Daniel Seddoh, a former Chief Executive-National Pensions Regulatory Authority.

But Courage Boti, Lead Researcher at Accra-based GCB Capital Limited, said other factors – such as the continuous listing requirements and increased transparency and regulatory scrutiny that comes with listing – discourage some firms with prospects from going public.

“Most local businesses are not comfortable with these continuous listing requirements and increased transparency that comes with it for various reasons, despite it being the standard practice. This posturing, together with cultural factors and sentimental reasons, partly account for the limited activity in Ghana’s primary market,” he said.

Listing SOEs on GSE

Government has often hinted at listing some viable state-owned enterprises on the GSE, giving hope for increased activity on the market.

During an interview in September 2022, Public Enterprise Minister Joseph Cudjoe revealed that three SOEs had met the regulatory requirement, and would go public by end of the year.

“We have settled on three to start with. The Ghana Reinsurance Company, Tema Development Corporation and GIHOC Distilleries Company. They will get to raise capital and expand while making the market more exciting,” the minister said.

More than a year later, the firms have not been listed – with varying excuses and new timelines being churned out in the local media. Market watchers believe that optimism could pick up once some SOEs get listed, but lingering economic concerns and investor losses from the debt restructuring have set the stage for a quieter 2024.