The Ghana Alternative Exchange (GAX), a capital market targetting small and medium enterprises, is billed to see more corporate bond listings later this year as two other indigenous firms await the go-ahead to list more than GH¢350million bonds, which will add to the two listed local-currency-denominated debt issues.

Director General of the Securities and Exchange Commission (SEC), Dr. Adu Anane Antwi, disclosed that that home financier, Ghana Home Loans and Edendale Properties, a real estate developer, are both waiting approval from SEC to raise GH¢300million and GH¢50million respectively.

The GAX has so far seen a mixture of two trading equities -- Samba Foods and Meridian Marshalls Holding -- and two corporate bonds, Izwe Loans and AFB Ghana, at a time when the main bourse, Ghana Stock Exchange, is finding it difficult to issue corporate bonds and get companies to list.

Also, HORDS Limited is undertaking its initial public offering while Intravenous Infusions is working to launch its IPO.

The first activity was by Izwe Loans Limited, a financial institution that listed a GH¢80million medium-term note programme last year. Currently, four notes totalling GH¢38.6million that offer an alternative premium over Government of Ghana securities have been listed.

The second was by AFB Ghana, a pay-day lender that plans to raise GH¢100million but has already raised GH¢38million. The issue received a long-term ‘investment grade’ rating of ‘BBB’ from Global Credit Rating

(GCR) and was over-subscribed by 30 percent.
Speaking at the official listing of the AFB bonds, Dr. Antwi stressed the importance of SMEs to the economy as they constitute more than one-third of economic activities in the country.

“SMEs are key in the production of goods and services, and employment-creation in the country. The sector contributes significantly to the GDP and provides about 85 percent of manufacturing employment,” he said.

But he added that despite their crucial importance, the SMEs continue to receive limited short-term financing at high cost from banks to sustain their long-term growth; hence, the creation of the GAX to provide a platform for SMEs to access long-term capital at a relatively lower cost.

“Companies that list on the GAX enjoy other benefits -- like mandatory underwriting of the minimum offer by the sponsor and access to the GAX-SME Listing Support Funds, which is a revolving fund to support the cost of raising capital and deferment of up-front fees. They also do not pay fees for approval of their offer documents by the SEC,” he added.

He advised AFB and all corporations in the country to ensure the practice of good corporate governance in their organisations.

“It has been observed that the fight for global capital starts with good corporate governance. Providers of capital to corporations increasingly rely on the corporate governance of the corporations they invest in, or lend to, to provide them with actual accountability and responsibility. It is therefore critical that corporations practice sound corporate governance.”

Arnold Parker, Managing Director of AFB Ghana, stated that about a year ago AFB set for itself the goal of stabilising its balance sheet and eliminating foreign exchange risks. “We were bleeding heavily from depreciation of the Ghana cedi and our prospects for survival seemed bleak as foreign exchange losses eroded significant portions of our net worth,” he said.

He added that he is confident, nonetheless, that the GSE offers an avenue for AFB Ghana to expand and list corporate bonds in order to salvage the company’s fortunes.

Mr. Parker stated that the first tranche of the bond, which will predominantly be used to pay off US$ debt owed to offshore counterparties, also celebrates the momentous success in achieving the company’s aims and efforts to remain a sustainable business.

“It also humbles us in a way that makes us realise that our journey to greatness as a company has only just begun. AFB’s aspiration to be a trailblazer for financial inclusion in Africa inspires us to constantly seek new, innovative ways of reaching our customers. This is a great company to invest in,” he added.

Deputy Finance Minister Mona Helen K. Quartey, in a speech read on her behalf, said the success of this bond issue and its oversubscription indeed confirms the high level of investors’ appetite for participating in Ghana’s capital market.

“This is an indication of a resounding vote of confidence for AFB Ghana and portends prospects for the financial sector and the economy as a whole,” she said.

Mrs. Quartey noted that listing AFB’s bonds on the GAX is another significant step toward transformation of the country’s financial sector, and another landmark event in corporate bond development. “I am confident that this platform will become the benchmark for SMEs in Ghana and the sub-region.”

She added that the success of AFB Ghana in raising capital from the bond market demonstrates SMEs have capacity that can be harnessed to deepen and broaden the capital market. She urged all SMEs to follow the steps of AFB in raising capital from the market.