Revitalise State-Owned Enterprises before listing on the Ghana Stock Exchange
The call to list some of Ghana’s State-Owned Enterprises (SOEs) on the Ghana Stock Exchange (GSE) has been renewed by Business Leader and Brand Expert, Elorm K. Foli. This move aims to improve transparency and revive loss-making SOEs.
However, we caution that listing some of these entities in their current financially bleeding state will deter investors.
The Ghana Stock Market has experienced significant growth, with the GSE Composite Index recording a 40 per cent increase this year.
Despite this, some SOEs continue to struggle, relying heavily on government subventions to stay afloat.
The Graphic Business advocates a two-pronged approach that will ensure that the SOEs are fast-tracked to the local bourse through a combination of financial resources and the appointment of competent leaders to turn around the fortunes of SOEs.
Success stories such as Bulk Oil Storage and Transportation (BOST); Graphic Communications Group Limited and the National Lotteries Authority (NLA), among a few SOEs demonstrate that effective leadership coupled with a demonstrable profitability makes such SOEs listing on the secondary market attractive.
These companies’ profitability boosts investor confidence and showcases the potential of well-managed state entities to attract long-term capital for the growth of the economy.
Before listing, SOEs must be financially viable. Recapitalising with taxpayer funds without accountability will perpetuate financial challenges, hence the need for competent leadership and properly aligned governance structures that enhance transparency.
Every struggling SOE means unemployment and economic hardship for many. According to the Ghana Statistical Service, the country’s unemployment rate stands at 4.7 per cent, with youth unemployment being a significant concern.
A point to note is that the GSE also has stringent regulations requiring listing companies to meet specific criteria.
To attract patient capital, SOEs must demonstrate profitability and stability. This includes: financial performance, consistent profitability and positive cash flow as well as governance structures among other requirements.
The current state of some of the SOEs, however, paints a very gloomy picture of state solvency.
Listing SOEs on the bourse has the potential to attract investors and create a catalyst for economic development. The GSE has proved time and again that it has the potential to spur economic activities in the economy through investments.
To revitalise the local bourse, we recommend among other things appointing competent leaders to manage and ensure accountability and performance-based evaluations.
The Ghana Stock Market has potential for growth, but listing unviable SOEs will undermine investor confidence. The GSE’s market capitalisation stands at approximately GH¢64 billion, with 42 listed companies.
However, the market’s liquidity and depth can be improved by introducing profitable SOEs.
By prioritising revitalisation and accountability, Ghana can unlock the potential of its SOEs, attract investors and drive economic growth.
In conclusion, listing SOEs on the GSE requires careful consideration and strategic planning.
The government must address these challenges, only then can Ghana’s SOEs attract patient capital, improve economic stability and create employment opportunities.