Timing, readiness for initial public offers (IPOs) of state-owned enterprises.

Gregory H. Kwarten, Atlanta GA, USA
June 14, 2024

D uring Ghana's annual ‟Policy and Governance Forum” held in Accra, in March in 2021, the government announced a raft of measures aimed at improving the performance of public companies and parastatals or (state-owned companies-SOEs). This was not the first time authorities were targeting SOEs with reform ideas. In the 1980s, reforms revolved around privatization under the purview of the International Monetary Fund and the World Bank. From the year 2000 onwards, Ghana turned to public-private partnership (PPP) and joint-ventures with private sectors. Since 2017, the government has divested and or sold under-performing SOEs, partly via a listing on the Ghana Stock Exchange.

In 2021, the government announced that State Interests and Governance Authority (SIGA) was collaborating with the Ghana Stock Exchange (GSE) to seek ‟ access to long-term capital and improved corporate governance practices‟. The authorities did not present a time frame but indicated that the process will involve a listing selected SOEs on any of the GSE¹.

Experience with listing

The State of Ghana has experience in the listing of SOEs. It holds a majority stake in at least three major companies on the GSE. They are the Ghana Oil Company Limited (GOIL), State Insurance Corporation (SIC) and Ghana Commercial Bank Ltd. Also, through a cross-holding with the central bank of Ghana (Bank of Ghana), the State has a majority stake in the Agricultural Development Bank Plc.

Readiness for listing

The last public listing on the GSE was on Monday, May 13, 2024 when Atlantic Lithium, also listed on the London Stock Exchange, became a member of the GSE. Prior to Atlantic Lithim, the GSE has recorded no listing since 2018 when pan-African telecom companies MTN that made a debut on the GSE in 2018. Despite the time lapse, authorities in Ghana have been upbeat about the prospect of listing SOEs. The GSE is receptive and has set its sight on SOEs by highlighting its engagement with SIGA³.

The government tasked an interagency platform, including the Ministry of Public Enterprises, SIGA⁴, and the GSE to evaluate the readiness of SOEs for listing. On February 14th, 2023, without naming them, task force disclosed that ten SOEs meet listing requirements. This disclosure came during the SIGA annual stakeholder meeting in Kwahu Abetifi (Eastern region)⁵.

Risks

SEOs are important in the Ghanaian economy. According to Edward Boateng, Director General of the SIGA, SOEs control 50 percent of the State assets. Despite this importance, they only contributed 10 percent to the GDP in 2022⁶. The government wants this contribution to reach 30 percent of the GDP over the next decade.

In fact, a significant number of SOEs suffer from chronic underperformance. According to the International Monetary Fund (IMF), SOEs are a drain on the country's resources. They represent a direct source of fiscal cost to the central government and are a major source of fiscal risks. SOEs also represent a potential source of undisclosed debt or contingent liabilities⁷.

In 2021, the SIGA published its annual state ownership report covering 175 state entities. According to this report, SOEs posted a modest recovery in 2020 with a 24.30 percent increase in the aggregate revenue and growth of 15.10 percent in assets (from 2019). However, SOEs have recorded losses in three successive years, including 2019 US$335 million (GH₵5.16 billion), 2020 US$179.5 million (GH₵2.61 billion) and US$119.7 million (GH₵1.74 billion) in 2021. Debt is a key reason for their chronic under-performance. In 2021, SOEs had amassed debt worth US$9.5 billion (GHS135.88 billion). An improvement in performance will send a positive signal to investors before any hypothetical listing.

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