Ghana Stock Exchange

The Ghana Stock Exchange (GSE) was incorporated in July 1989 with trading commencing in 1990. It currently has around 20 listed companies and 2 corporate bonds. All types of securities can be listed. Criteria for listing include capital adequacy, profitability, spread of shares, years of existence and management efficiency.

Since its inception, the GSE’s performance has varied considerably. All listings are included in the main index, the GSE All-Share Index. In 1993, the GSE was the 6th best index performing emerging stock market, with a capital appreciation of 116%. In 1994 it was the best index performing stock market among all the emerging markets, gaining 124.3% in its index level. 1995’s index growth was a disappointing 6.3%, partly because of high inflation and interest rates. Growth of the Index for 1997 was 42%, and at the end of 1998 it was 868.35 (See 1998 Review for more information).

The manufacturing and brewing sectors dominate the exchange. A distant third is the banking sector while other listed companies fall into the insurance, mining and oil sectors. Most of the listed companies on the GSE are Ghanaian but there are some multinationals.

Although non resident investors can deal in securities listed on the exchange without obtaining prior exchange control permission, there are some restrictions on portfolio investors not resident in Ghana. The current limits on all types of non-resident investor holdings (be they institutional or individual) are as follows: a single investor (i.e. one who is not a Ghanaian and who lives outside the country) is allowed to hold up to 10% of every equity. Secondly, for every equity, foreign investors may hold up to a cumulative total of 74% (in special circumstances, this limit may be waived).The limits also exclude trade in Ashanti Goldfields shares.

There is a 10% withholding tax on dividend income for all investors. Capital gains on securities listed on the exchange will remain exempt from tax until November 2000. The exemption of capital gains applies to all investors on the Exchange. There are no exchange control regulations on the remittance of original investment capital, capital gains, dividends, interest payments, returns and other related earnings.

Potential changes at the exchange include the introduction of automated trading and the listing of some of the state banks. The Bank of Ghana plans the development of mutual funds, unit trusts and municipal bonds later. These changes are aimed at making the exchange more relevant, more efficient and more effective. The Exchange was also involved in the preparation of the draft law on collective investment vehicles.

Trading in ordinary shares and corporate bonds takes place three times a week on Mondays, Wednesdays and Fridays between 10h00 and 12h00 local time. Trading in Ashanti Goldfields shares also takes place over-the-counter after GSE trading hours, with these trades being reported to the GSE at the next trading session.

Trading on the floor of the GSE takes place under the call-over system. Delivery and Settlement is centralised, but not yet automated, with a settlement period of T + 5 days. A minimum of C850 is charged on trade values under C10,000. For trades greater than C50,000 a declining rate from 2.5% to 1% (as the trade value increases) is applied.

There are around 13 stockbroking firms (Licensed Dealing Members, or LDMs) who are licensed to deal on the Exchange, all of whom serve non-residents. There are also forty-one associate members.

LDM status is open to companies incorporated in Ghana under the Companies Code, 1963 (Act 179) and partnerships incorporated under the Incorporated Private Partnership Act, 1962 (Act 152).There is no fixed capital requirement for LDM’s but their stated capital is expected to be at least C100. The firm must be licensed by the Securities Regulatory Commission and must be in possession of a Certificate of Specification before commencing operations. LDM’s must also be approved by the Exchange.

The GSE is governed by a Council with representation from Licensed Dealing Members (LDMs), listed companies, banks, insurance companies, the money market and the general public.

1. A foreign investor should first contact a local broker such as SDC Brokerage Services Ltd, which deals on behalf of a number of Fund Managers and would be able to recommend a reputable bank for custodian services.
2. Brokerage Commission on Shares purchased is as follows:
   

   Value Traded (¢)	Commission	Cumulative Commission
   First 10,000	¢850 flat
   10,001-30,000	¢900 flat
   30,001-50,000	¢1,500 flat
   50,001-500,000	2.5%	¢12,750 maximum
   500,001-1,000,000	2.05%	¢22,750 maximum
   1,000,001-5,000,000	1.75%	¢92,750 maximum
   5,000,001-10,000,000	1.50%	¢167,750 maximum
   over 10,000,000	1.00%

   e.g.
   On a trade of ¢145,000, the commission would be:
   [(1,500 + 95,000*2.5%)] = ¢3,875

   On a trade of ¢17,000,000, the commission would be:
   [(167,750+(¢7m*1%)] = ¢237,750

3. Any non-resident portfolio investor has Exchange Control permission to deal in securities listed on the GSE without any prior approval. No further permission to invest in securities is required from any other body or authority. However, any one external resident portfolio investor (whether individual or institutional) can hold only up to 10% of any security approved for listing on the Exchange. In addition, the total holdings of all external residents in one listed security shall not exceed 74%. The limit mentioned does not apply to shares of Ashanti Goldfields Company Ltd (AGC).There is free and full foreign exchange remittance for the original capital plus all capital gains, dividend, returns and other related earnings.
4. Capital gains on listed securities on the GSE are tax exempt until 12 November 2000. A withholding tax of 10% is charged on all dividend income of investors.