GSE managers go into action to lift bourse

VAT to institute tighter control measures

Accra (Greater Accra) 18 Jan. 2000

Many people who applauded the star performance of the Ghana Stock Exchange in 1998 may have been visibly disappointed at the plunge of the bourse last year.

The Bourse recorded nearly 70 per cent gain in cedi terms with a market capitalisation of 3,245.61 billion cedis as at December 1998. This made it one of the best emerging markets. However, the exchange's main market indicator, the GSE All-Share Index, ended 1999 in not too pleasant a state.

The change within 1999 was negative 15.22 per cent after bearish sentiments of low volumes weighed it down heavily for a good part of the year.

This means the yield on all holdings on the market could not make any capital gain but rather declined in value.

At the close of the year 1999, market capitalisation stood at 3,205.39 billion cedis for total outstanding shares of 1,026.72 million of 22 listed equities. The total amount raised at primary issues of all the equities together is 154.2 million cedis.

Indeed, the market had made steady progress since its establishment in November 1990 and the plunge could have taken people by surprise.

The Exchange recorded negative 7.95 points in 1991. This improved to negative 3.63 points in 1992 and leaped to 113.74 points in 1993 and 124.34 points in 1994.

There was a gain of only 6.33 points the following year and there was a higher gain of 13.82 and 41.85 points in 1996 and 1997 respectively.

The Ghana Stock Exchange was named the best performing stock market in Africa in 1998 when the change in the All-Share Index for the year closed at 69.69 per cent.

Then came the slump. The All-Share Index began the year at 869.93 points and closed on December 29 at 736.16 points, a drop of negative 15.22 per cent.

On record, the Exchange hit an all-time high of 1,201.08 points in May 1998 and an all-time low of 55.09 points in May 1991.

A number of reasons have been given for the negative turn of events in 1999, the poorest showing since its establishment in November 1990.

Mr Francis D. Tweneboa, General Manger of the Exchange, told the GNA that lack of automation in clearing, settlement and depository operations was a major contributory factor for the absence of foreign investors, who own the required capital to cushion the performance of the bourse.

He said activities on advanced markets are automated and this gives investors confidence in the efficiency of the market.

It also improves speed, saves time and removes the inconvenience of carrying certificates from one end to the other for clearing and settlement of shares sold.

Mr Tweneboa said the GSE would automate clearing and settlement operations for the delivery and payment of entitlements as from this year to enhance its performance.

Mr Tweneboa said other factors, such as foreign investors' mistrust of emerging markets, contributed to the steep decline of the market index.

Most foreign investors have had very bad experiences with emerging markets such as Brazil, Mexico, Russia and Asia, whose economies have gone through financial crisis in recent times.

"Our stock market is, as a result, experiencing the rippling effects of what happened to those markets, which have now made foreign investors emerging market phobia."

The cedi returns on foreign investments could also be another factor for the lack of interest in the market by foreigners.

According to the General Manager, foreigners invest in their currency and receive the returns in cedis, which has recently depreciated in value.

Apart from the low returns in cedis, the invested capital also depreciates compared to its equivalent in foreign currency and this does not serve as a good incentive for foreign investment on the Exchange.

Mr Tweneboa said another problem is the absence of collective investment schemes and lack of institutional investors.

"These schemes could mobilise the needed funds to activate the play of market forces for the growth of the market."

Mr Tweneboa said that as part of measures to improve the performance of the bourse, the Exchange would upgrade the trading system into a continuous one.

It would do this by extending the trading period from two hours to about six hours. Currently the Exchange trades from 1000 hours to 1200 hours.

He said training programmes would be organised to expand the horizon of the brokers some of who lack exposure. "We also intend to train and advise them in ways of building their capital base so that they can give both technical assistance and offer cheaper funds in the form of underwriting to the companies.

"We also aim at lobbying for a change in dividend policy of companies to increase dividend paid out to investors and advocate the abolishment of tax on dividend or that it be reduced from about 10 per cent to five per cent."

Mr Tweneboa noted that the tax on dividend does not make the playing field of the money market even.

Whereas those investors in Treasury Bills do not pay tax, those who invest on the stock exchange pay tax and this serves as a disincentive.

"If tax on dividend is abolished, investors' appetite for shares will be whetted and this can increase investments on the bourse."

The Exchange would in addition lobby for the introduction of private pension schemes and a change in prudential requirements of insurance companies so that they can also be listed on the Exchange.

Mr Tweneboa said these and other measures being considered would enhance the size of the market.

The following are the opening and closing prices of equities in cedis and percentage changes in the prices for 1999:

Opening closing percentage change

ABL 800 450 -46.12

AGC 18,000 18,700 +3.89

ALW 2,500 2,489 -0.44

BAT 400 469 +17.25

CFAO 50 38 -24

EIC 2,400 1,880 -21.67

FML 1,300 916 -16.73

GBL 2,050 1,450 -29.27

GCB 1,300 760 -41.54

GGL 820 950 +18.75

HFC 750 750 0.00

MGL 200 200 0.00

MLC 200 151 -24.40

MOGL 17,000 13,800 -18.82

PAF 400 300 -25.00

PZ 900 800 -11.11

SCB 24,000 19,000 -20.83

SPPC 251 150 -40.24

SSB 2,250 1,984 -11.82

UNIL 1,605 1,850 +15.63

UTC-E 125 125 +4.17

CMLT 420 420 +5.00

GRi../

Return to top

The Value Added Tax (VAT) Service is to institute tighter control measures to make the new tax regime more efficient, official of the VAT Service said in Accra on Tuesday.

As part of the measures, it has devised guidelines for tighter control of the lotto industry to ensure their compliance with the issuance of VAT invoices.

Under the guidelines, dealers will be expected to issue the government printed coupons as VAT invoices.

Speaking to the Ghana News Agency (GNA) in an interview, they said measures were being instituted to cover all sectors liable for the collection and payment of VAT.

A programme has been drawn up for the intensification of control verification visits to uncover undeclared and under-declared taxes.

The officials said another initiative would be the institution of measures for the expansion of the tax base.

This has become necessary after the review of key parameters of VAT such as the tax rate and the scope of exemptions designed for ease at the initial stage of implementation.

On the total revenue collected for last year, they said the Service exceeded its target of 700 billion cedis but gave no details. The target for the third quarter of 1999 was exceeded by 14 per cent.

The current VAT registered traders stands at more than 16,000. The initial target was 6,000.

The VAT Service has noted that VAT registered businesses, particularly in the hotel and restaurant industry, are selective in charging the tax. Many more also fail to issue the official VAT invoice.

They said as VAT enters its second year, the focus would be to consolidate the gains made so far.

The VAT Service would institute measures that would further improve compliance, particularly in specific areas of registration of eligible businesses, diligent and consistent collection of VAT by registered traders and promotion of efficiency and effectiveness in the administration of the tax.

The VAT Service said the structure of VAT revenue contribution of the distribution and service sectors falls below expectation. This calls for intensification of monitoring and surveillance by the Service to enhance compliance, particularly in the two areas.

A plan has been drawn up for the identification and compulsory registration of all non-registered companies.

Meanwhile, the Service has linked up with the Customs, Excise and Preventive Service (CEPS) and the pre-shipment inspection agencies for data on import that will facilitate the identification of such non-complaint importers.

Return to top