The managers of the Ghana Stock Exchange (GSE) have been commended by some financial and investment analysts for the decision to suspending some companies that failed to comply with the rules of the stock market.
According to them, the move will improve the efficiency of the local bourse and attract more investors.
The GSE, recently suspended five companies for failure to comply with some regulations. It has since cleared two of the suspended companies, Clydestone (Ghana) Limited (CLYD) and Transaction Solutions Limited (TRANSOL), after they had corrected their anomalies.
The other three still on suspension are African Champion Industry Limited (ACI), Pioneer Kitchenware Limited as well as Golden Web Limited.
Commenting on the development, the General Manager for IFS Capital Management Limited, Manfred Bressey was also hopeful that the stock will continue its positive growth at least towards the end of the year.
“The performance of the companies that are on the stock in the first quarter and second quarter gave an indication that something good is happening in the stock market, so people are investing in it”.
He added, “You don’t have stock markets dipping consistently for four years so there’s some intuition that the year will be good and it’s a year with a new government, with renewed hope and also the energy crisis that used to hit companies is over so all these combinations of factors can inform an experienced banker that this year is likely to go well”.
Mr. Bressey further attributed the relatively stable nature of the stock market for its good performance as compared to other investments.
“If the fixed income or money market is going to go down, theoretically people will go looking for other sources of investment , so the treasury bill which was 22% has come down to 12 %, so people who do not want to keep their money there begin to look for other opportunities to go into”.
The GSE has also suspended trading in the shares of cocoa grinder, the Cocoa Processing Company Limited (CPC), with effect from Wednesday, August 30.
A statement from the exchange announcing the suspension said, CPC failed to meet “continuing listing obligations in spite of several promptings.”
“The obligations are failure to submit financial reports and failure to conduct Annual General Meeting,” it said.
It explained that the suspension of trading in CPC will be in force until September 13, “which is the deadline for the company to rectify the anomalies.”
“Failure to do so will attract further sanctions as per the GSE Listing Rules,” it said.
The suspension of CPC from trading now brings to four the number of companies that have temporarily been denied the opportunity to trade shares on the exchange.
Although a blow, the suspension comes months after unionised staff of the ailing cocoa processor requested that the company be delisted from the Stock Exchange to pave the way for increased investments in it.
Given that CPC’s publicly traded status makes it illegal for the government to bail it out of its current financial challenges, the staff said the company’s fortunes will remain in the negative until its status was reversed.
The CPC, which listed on the market on February 14, 2003, has had a number of challenges over the past decade, including lack of adequate capitalisation, after suffering heavily from the energy crisis, leading to mass resignation.
These challenges led to the shutdown of two of its processing plants, reducing the company to operating at a 20percent capacity. Despite its foray into the large Nigerian market, the CPC is still struggling to stay afloat and is badly in need of capital.
The last financial statement released by the company was an unaudited one, covering year ending March 31, 2017, which, according to the bourse, is not up to date.
“The suspension of trading in CPC will be in force until September 13, 2017, which is the deadline for the company to rectify the anomalies. Failure to do so will attract further sanctions as per the GSE Listing Rules,” the bourse added in the statement.
The company’s last AGM, the 2014 edition, came off on Wednesday, June 17, 2015 at 10:00 am at the Accra International Conference Centre.
In the “unaudited” financial statement for the year ending March 31, 2017, the company posted a loss from operations of GH¢4.1million, an increase from the GH¢3.4million recorded in March, 2016. Its turnover shrunk from GH¢7.1million in March, 2017, to GH¢5.8million in March, 2016.
This resulted in a loss before tax of GH¢6million, as against GH¢5.4million in 2016.
Its total assets shrunk from 130million in March 2016 to GH¢123million in March, 2017.
The company, in a recent report, stated that it is in need of at least, US$300million to repay debt and to buy beans upfront to feed the 64,500tonnes plant.
“It’s all because of our weak financial situation…the fact that we are not able to provide the necessary guarantees to buy our own beans,” Frank Asante, Managing Director of the company, told Reuters.
Mr. Asante explained that the company owed about US$122million, including US$100million in unpaid beans supplied by COCOBOD, whiles needing a working capital of around US$200million mainly to restock beans that will cover at least a three-month cycle.
Owned, largely, by COCOBOD, SSNIT and the government, CPC’s minority shareholders have long been calling for capital injection.
At the 2013 edition of the company’s AGM, President of the Shareholders Association, Sas George, said: “We are in this country and foreign investors will come and buy our own cocoa beans and use our machines to process it, yet our company cannot do the same. This is unacceptable and I’m challenging our majority shareholders to act now.”
Meanwhile, as the current government is seeking to double local processing of cocoa to 50 percent of its average yearly output of around 800,000, the CPC could well be on its way to a turnaround.
Also, the AfDB willing to provide US$1.2billion to finance plans by Ivory Coast and Ghana to process more of their cocoa, under a joint initiative to guarantee stable revenues from the commodities, the CPC, should be the biggest beneficiary in Ghana.
-Adnan Adams Mohammed