Accra - Ghanaian companies needing cash are caught in a dilemma.
Faced with borrowing costs at a 13-year high, companies, including the local unit of Diageo and Ghana Oil are turning to the stock market to raise record amounts of capital as they try to reduce debt. They could hardly have chosen a worse time.
The West African nation’s benchmark stock index is in a bear market, having fallen to a three-year low as a plunge in oil prices and power shortages weigh on economic growth. That makes the share sales a bargain for investors - and a welcome injection of cash for the stock market - but a raw deal for the sellers, according to African Alliance Securities.
“Ideally, I wouldn’t want to raise capital in this kind of environment,” Derrick Mensah, a senior analyst at African Alliance, which rates Ghana Oil “accumulate,” said.
"If it weren’t for the interest rates, they probably wouldn’t need to raise capital at this point. It makes it difficult.”
Pushed to cut borrowing
Guinness Ghana Breweries, a unit of Diageo and Ghana Oil together have sold 353 million cedis ($90 million) in rights issues, while UT Bank and the Ghanaian unit of Societe Generale SA are planning to raise at least 241 million cedis ($61m).
That would be the most in a year since the Ghana Stock Exchange started operating in 1990. The bourse, West Africa’s second-biggest, has 35 listed companies and a market capitalisation of 50.6 billion cedis ($13m), according to data compiled by Bloomberg.
Ghana’s central bank raised its policy rate four times to 26% last year as the currency slumped by more than a third against the dollar in the first half. With rates at their highest since July 2003, companies are pushed to cut borrowing and look for cheaper funds.
The Bank of Ghana will make its next rate decision on July 18.