...Despite High Yields
Over the past several years, the world's highest yielding stock market has been in Ghana, where returns have been growing at a double-digit rate every month. Still, foreign and even domestic investors are staying away from the market in droves

Guinness beer sold in Ghana is stronger than the one made in Ireland. And as a listed stock, Guinness Ghana was a star performer on the Accra stock exchange last year, rising almost 440 percent.

Other stocks hadn't fared so badly either, and the index rose 300 percent since 2002.

At Ghana's stock market - just one room on the fifth floor of an office building in Accra - the bell sounds and trading is off.

Only 20 companies are trading on the Accra stock market, although the number is changing as new companies seek to be listed. They are mostly banks and mining companies.

There are no computers in the trading room. Traders just time stamp a card to enter their bids. The volume is minuscule, measuring in hundreds of thousands of dollars a day.

The exchange is open three days a week - Monday, Wednesday and Friday - and only from nine to noon.

The stock market was set up in 1990 to help the government implement its privatization program. Ghanaian investors have started flocking to the exchange only recently and foreign investors are notably absent.

"What is happening on the market is not really foreign investors that are buying the stocks, it's local participation," explained Stockbroker Leonard Gikunoo. "Indigenization has taken root now and a lot of Ghanaian investors have seen a lot of potential in our market and they are channeling their funds into our market."

The government has been advertising heavily on radio and television to encourage Ghanaians to invest in the stock market, rather than buy lottery tickets or bet on sports.

Fund management analyst, Frank Nana Yaw Aning from the group Databank, says the government's fiscal discipline is also helping to drive stock prices up.

"One of the very positive developments in the Ghanaian economy is fiscal discipline where the government is maintaining complete control in its expenditures, judging their revenues that are coming in, and that has had a very good impact on the economy as a whole: interest rates and general prices in the economy," he explained.

This is a presidential election year in Ghana, and, ordinarily, the government would be spending lavishly in such year to impress voters. But not so this year, and the stock market is rewarding the government's prudence.

U.S. based analyst Carl Adams from the company, e-standards-forum, says Ghana, a large producer of gold, timber and cocoa, has also benefited from higher prices of commodities.

Mr. Adams, however, gives credit to the government for creating an investor-friendly environment in Ghana.

"Ghana itself as a country has continued to embrace more liberalizing policies, regulations and institutional building as a country which benefits investors, it favors investors and in the context of Africa it looks pretty gosh-awful good," he said.

Ghana has roughly twice the per capita output of the poorer countries in West Africa, but remains heavily dependent on international financial and technical assistance.

In 2002, Ghana opted for debt relief under the international Heavily Indebted Poor Country Program, under which, in exchange for debt forgiveness, it is obligated to set tight monetary and fiscal policies, accelerated privatization, and improvement of social services.

Despite the Accra stock exchange's double-digit growth, Bruno Dupont, a French analyst based in South Africa, says foreign investors have been staying away.

"It seems to me that African markets have been performing extremely well in these past years so it should improve, it should attract more and more investors from overseas," said Mr. Dupont. "But the other problems are also the volumes, if you look at the market caps in Africa they're nowhere near any of the major stock exchanges in the world, even the developing world."

Mr. Dupont says internally there are also limits to stock market expansion because there is so little capital in Africa to invest in stocks.

Foreign investors, he says, often look at Africa as a whole, and when they hear of conflicts, say in the Democratic Republic of Congo or Ivory Coast, they shy away from investing in Ghana.

Tarred with such a broad brush, Ghana has a way to go before it will be seen as a good place to invest in.