Page 10 - 4th_edition
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mainly  due  to  the  challenging  operating
                                                                                 environment  for  listed  companies  as  well
                                                                                 as the attractive alternative offered by yields
                                                                                 on the fixed income market which also
        GHANA’S ECONOMY                                                          fueled capital flight from equities to fixed
                                                                                 income investments.
                                                                                 Despite the short term losses on the GSE
        Faces a Tricky Test in 2016 with Fiscal Adjustments                      in 2015, Ghana’s alternative market for
        to Contain External and Election related Headwinds                       SMEs (the GAX) recorded active investor
                                                                                 participation as Databank Brokerage
                                                                                 Limited (Ghana’s  Gold award winning
                                                                                 Broker-Dealer Company) was pivotal in
                                             weaknesses in the Eurozone and China’s
        LOOKING BACK ON 2015:                economy) and the erratic electricity supply   providing advisory services, resulting in the
        A TALE OF TWO HALVES                 also constrained economic activity and   listing of viable SMEs on the market. Some
                                             undermined business confidence during   of the viable SMEs that successfully raised
        Ghana commenced 2015 with optimism   2015. As a result, real GDP growth rate   capital and listed on the GAX (despite the
                                                                                 challenging macroeconomic environment)
        that a “nightmarish” experience in 2014   slowed down from 4.3% in Q1-2015 to   included: IZWE Loans Ghana Limited (first
        had been consigned to the archives of   3.9% in Q2-2015 with manufacturing as
        history as investors anticipated an early   well as mining & quarrying subsectors   ever bond listing on the GAX), Edendale
        take-off of the 3-year IMF program, the   estimated to contract by 2% and 3.8%   Properties (bond listing), Mega Africa
        negotiations of which was a protracted   respectively for 2015.          Capital (equity listing) and Intravenous
                                                                                 Infusions Limited (equity listing).
        one. Fair to state that investor optimism
        was anchored on relief from the past   Investor  sentiments  however  improved   Given  the  developing  nature  of  Ghana’s
        with hope for the future as the 3-year   (but  remained  fragile)  during  the  2HY-
        IMF program is expected to correct   2015 following the IMF’s two (2) positive   financial market, the establishment of
        Ghana’s fiscal and external imbalances as   reviews of Ghana’s performance (thus far   the Ghana Alternative Exchange (GAX)
                                                                                 would provide an alternative to traditional
        well as restore investor confidence and   under the 3-year program) and the renewed   bank financing for SMEs who constitute a
        macroeconomic stability.             interventions by the Bank of Ghana
                                             which virtually quashed speculations. The   significant portion of Ghana’s economy.
        Investor optimism however cooled-off as   return of some stability to Ghana’s FX
        the delay in commencement  of the IMF   market during the 2HY-2015 was mainly   LOOKING AHEAD TO 2016: HOW
        program (which eventually            influenced by: the substantial FX inflows   THE RISKS ARE PROJECTED TO
        took-off in Apr-2015) resulted in growing   from USD-denominated debt transactions   PLAY OUT
        apprehension, exacerbated by thedeclining   ($1 billion Eurobond and $1.8 billion
        price of key export commodities which   COCOBOD facility in Oct-2015), the   Investors ended 2015 with clear indications
        worsened Ghana’s external position.  continued support from donor partners   of what to expect from the government in
        Consequently, the seasonal depreciation   (~$500 million), extension of the auction   2016 as regards the fiscal and monetary
        pressures associated with the first half   of Ghana’s 2-Year Treasury note to foreign   regime, government’s financing strategy,
        of the year was compounded by speculative   investors (in order to sustain FX inflows)   power supply and general economic
        activities which resulted in a sharper-than   and the continued tightening of both fiscal   activity.
        expected pace of Cedi depreciation (26.2%   and monetary regimes.
        against the USD as at HY-2015).      Ghana’s main stock market (the GSE)   OUTLOOK FOR FISCAL POLICY
        The resultant pass-through effect to   also experienced the pinch of the
        inflation also pushed Ghana’s consumer   macroeconomic challenges in 2015 as   Ghana’s  2016  budget  signals  the
        price inflation  to  a  6-year  high  (17.9%  in   the equities market shed some weight   government’s commitment to the ongoing
        July 2015) prompting a monetary tightening   to close the year in negative territory   fiscal adjustments under the IMF program
        cycle by the Bank of Ghana with a 500bps   (about -12% return in 2015). The market’s   despite perceived spending risks related to
        cumulative hike in the monetary policy   underwhelming  performance  was  the upcoming elections in Dec-2016. The
        rate to 26% by end of 2015. The continued
        tightening of the monetary regime coupled
        with government’s aggressive borrowing
        on the shorter-end of the market exerted
        sustained upward pressure on short term

        The worsening external sector (resulting
        from the declining commodity prices and

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