ALTERNATIVE INVESTMENTS

Are you skeptical about investing on the Ghana Stock Exchange because of capital losses and small dividends? GSE Listed stocks like Cocoa Processing Company (CPC), Transaction Solution (TRANSOL), Clydestone Ghana Ltd (CLYD), Ecobank Transnational Incorporated (ETI), Golden Web (GWEB) have over the period remain less profitable to their shareholders as they return peanut dividends and capital losses to their shareholders. Most shareholders have regretted investing in such shares and often become hostile to the staffs that attend to them. All these can be avoided if investors consider the option of venturing into alternative investments.

Do You Want To Be A Cube Of Sugar In A River Or A Cube Of Sugar In A Cup Of Tea?

Do you want to be a cube of sugar in a river or a cube of sugar in a cup of tea? Do you want your taste to be felt? Do you want to have a real feel of what ownership is in a company? What does ownership mean to you? If ownership means providing capital for running a business and taking calculated risk towards the achievement of the business goals, then consider alternative investment. In theory, shareholders are the real owners of the business but in practice, do they really have a feel of ownership? (What happens during Annual General Meeting). Being a part owner, your voice has to be heard but that is not the case of investors whose shares are not many (minority shareholders), you end up being a cube of sugar in an river, you would be dissolved by so much water and you will lose your relevance. For instance with all your investment, the percentage of your ownership is little and insignificant compared to that of institutional investors. Mostly in the annual report, they give a list of top twenty shareholders, most of which are institutional investors.

Board Room Issues

There have been instances where minority shareholders of some listed companies on the GSE were intimidated by the decision of majority shareholders. These issues range from their decision to delist from the GSE with reasons that minority shareholders deem flimsy. Some shareholders alleged that their rights as shareholders are disregarded by management and Board of Directors. Consider the cases of CAL Bank, Accra Brewery Ltd and CFAO who are listed companies on the GSE.

CAL Bank: In 2009, there were issues with the corporate governance of Cal Bank. One majority shareholder wanted his voice to be heard, so he tried buying more shares of the company in order to get a good percentage to achieve his aim of making his voice heard. The resultant effect of this action was the artificial rise in the price of CAL Bank shares over that period. Thanks to GSE and SEC for their intervention. He also who demanded the removal of the Managing Director (MD) of the bank because the MD and his management had allegedly shown disregard for the rights of shareholders http://www.modernghana.com/news/168034/1/cal-bank-saga-afare-donkor-gets-support.html you can read the full story here. What if you have no extra money to buy more shares in order to get majority stake? How would you be heard?

Accra Brewery Limited (ABL): ABL tried delisting from the Ghana Stock Exchange. This decision was mainly influenced by SABMiller (majority shareholder with over 60% stake in the company). The majority shareholders of ABL (SABMiller) decided to delist from the GSE because SABMiller want to recapitalize to in order to be competitive. If a listed company wants more capital to remain competitive, there are many other options available like rights issue to its existing shareholders in the proportion of their shareholding but this was not the case. Mr. Joseph Abeka Biney, a minority shareholder, who was not in favour of the decision made known his disapproval but could do nothing. He further lamented benefits such as capital gains, dividend, bonus and right issues that accrue to shareholders would not be due them when the company gets delisted. http://www.ghananewsagency.org/details/Economics/Accra-Brewery-ready-to-delist-from-the-Stock-Exchange/?ci=3&ai=20122

CFAO Ghana: in my opinion, I would say shareholder of this company did not benefit from their investment in CFAO Ghana since they never paid them dividends and there were no capital gains either, no right or bonus issue. But finally, after getting shareholders money to expand their business and made enough return from Ghana the majority shareholders decided to delist. I know you will agree with me this is not fair. The CFAO group holds majority shares in CFAO Ghana and the suddenly decided to delist from the Ghana Stock Exchange. Read full story by clicking this link, http://www.ibrokerghana.com/news-and-market-information/press-releases/15-press-release-content/344-de-listing-of-cfao-from-the-gse.html since they were majority shareholders, they had their way.

Becoming the Cube Of Sugar In The Glass Of Water Instead Of A Cube Of Sugar In A River

There are several other investment channels you put your resources into apart form shares or bonds that comes with higher return on investment, quite an amount of risk (depending on the agreement signed) and a better level of control. If you lost a chunk of your money through the activities of the stock market, why not try the following alternative investments, such as buying an existing business (smaller companies that have shares on the Over the Counter), Angel investment and other forms of equity investment.

Buying a Business

Click this link to read more on buying a business. It is one of the articles I published http://www.ghanaweb.com/GhanaHomePage/NewsArchive/artikel.php?ID=201267

Angel Investment: An Angel Investor is someone who provides capital for start-ups or new businesses with prospects in exchange for a percentage of ownership. They do so by reviewing business plans of startups and give seed money with the condition that is favorable to them. Since most angel investors are experienced businessmen, they opt to groom these new businesses and direct management towards achieving set goals. The term angel investor started from the Silicon Valley in California. This concept was introduced to help develop businesses through the help of few rich people. The silicon value is the home of the world’s top notch information and technology software development companies like Google, Apple, Ebay, facebook, AMD, Apple Inc, Intel, Oracle, Yahoo, Sun System amongst others. It contributes about 40% to the GDP of the United States of America. Why can’t net-worthed African investors try this model to help young and enterprising people with viable ideas, invest in them and reap both monetary benefits while getting the opportunity to take part in decision making, an opportunity you may never have investing in shares.

Private equity investment: there are private equity firms who pull funds from net worth individuals and form funds with it. You must enter into an agreement with them on your on return on investment. With this you would worry less on capital market fluctuations. Examples of such firms in Ghana are Fidelity Capital Partners, Grofin Capital, Oasis Capital Ghana and so on. Grofin Capital supports Small and Medium Enterprises (SME) by providing more than just finance to help them grow their businesses. Grofin is a South African Company with a branch in Ghana, Nigeria and Kenya. If you have some money and want to support SME’s in Ghana and Africa, you can take your money there, and negotiate for a good rate. By so doing, you are helping SMEs and still making some good returns. Fidelity Capital Partners Limited was established in February 1997 and commenced business in November 1999 as a venture capital and private equity funds Management Company and corporate finance advisory services provider. They have diversified shareholders that include their management team, local and international private investors and development finance institutions (DFIs). Oasis Capital Ghana is also a private equity and venture capital fund management firm that provides capital to entrepreneurial businesses in West Africa.

Protecting your investment interest in alternative investment

You need a legal team: once you decide to be an angel investor, you need a legal team that will give you a professional advice on all agreements you sign. If you think you cannot pay for one, then look for a family friend who is a legal practitioner to cross check all agreements and tell you the legal implication of that. But if you think it is expensive to get one, then be ready for bigger mistakes that will cause you more money that losses made on the GSE.

Investment advisory: No matter your experience in doing business, you cannot understate the role of financial advisors in any huge and major financial undertaking. You need financial valuers who would use both financial and non financial data to determine whether or not it is a viable business to invest in. They would use industry data, macro and micro economic data as well to arrive at their decision and recommendation to you.

Do restructuring if the need arises as a qualification for your investment. Money is hard to come by. So if you are going to investment your hard earned money in someone’s business, they you should set your control parameters in place. Restructure the business so that cash would not leak through any unlawful means. You have to jealously protect it in order to maximize returns. The caution here is don’t over do it, give some reasonable room to the entrepreneur to explore and grow the business.

If you are really poised for action, then try Buying a Business, Private Equity Investment and Angel Investment. These are the investment options available to everyone that can afford it. With these alternative investments, you have less to worry about capital losses, small dividend and intimidation by majority shareholders. Watch out for more detailed article on alternative investment in my next write up. For more information on the few private equity firms mentioned in this article, follow these links, http://www.oasiscapitalghana.com/, http://www.fidelitycapitalpartners.com/live/en/?pg=119 and http://www.grofin.com/AboutGroFinGroup/Offices/Ghana.aspx

You can direct all comments, suggestions and additions to skafuiteye@gmail.com,

©2011, Sophia Kafui Teye

Email: skteye@gmail.com.

Blog: www.skafuiteye.blogspot.com

YOU NEED A PRIVATE PORTFOLIO MANAGER

Managing your own investment is complex, time consuming and too technical to leave to chance. When you invest over a period of time, you create so much wealth to yourself that you possibly cannot track it. If they are shares, you have to track to see if dividends are paid to you or whether there are capital gains or losses.

Bonds may also mature and must be redeemed or the interest payments on the bond may be available. These are different classes of financial assets you can own that have different returns on investment patterns and there is a need to keep an up-to-date track of what is happening to your investment.

Portfolio is a collection of investments held by an individual or organization. Your collection of investment could be bank accounts, shares, bonds, collective investment schemes; treasury bills, real estates, derivatives and so on. Private Portfolio manager or an investment advisor can be a professional of a Licensed Dealing Member of the Ghana Stock Exchange (GSE).

It could be a particular staff in the Asset Management Department of a brokerage firm. This private portfolio manager will assume the responsibility of coordinating transactions involving all your investments.

Why you need a private portfolio manager

You may be too busy: in this time of increased unemployment, people have to keep more than one job to survive (those in the medical field call it locum), those in the business or finance professionals are also chasing after professional classes such as CIM, ICM, CIMA, ICA, CFA and ACCA. Workers become so exhausted after a tiring day and all they think of is to have supper, wash down and prepare for work the next day. Businessmen are often found chasing after contracts; family men and women also often get entangled with family and other social activities.

You may not understand the market: The capital market is a market where listed long term securities are traded. There are so many factors that affect the prices of stocks in the capital market. The value of your investment is the closing price of the stock multiplied by your shareholding. It is often easy to say the market is influenced by demand and supply forces but there are more to that.

You need a seasoned investment advisor who understands the capital market and can analyze trends and both financial and non-financial information that can affect your investment.

Identify your investment objective: Most often, people invest without carefully analyzing why they are investing. Your investment objective is the reason for you investing. It can be for capital accumulation, unforeseen contingencies, to buy an asset or money to execute project. Your investment advisor through the asking of probing questions can help you know your investment objective.

Rebalancing of portfolio: Depending on your investment objective, some classes of assets must be taken out and new ones added to meet your new objective or needs. Your investment objective must change when you are nearing retirement or when you have a family or when one objective is achieved.

For instance, if an investor is nearing retirement, there is the need to sell out risky stocks and stocks that do not bring the investor regular dividends or capital gains. The portfolio manager can add Treasury bills or cash and cash equivalent so that the investor does not lose a chunk of his/her investment to market fluctuations or risks. All these are aimed at the investor having a regular stream of income.

Help reduce portfolio risk: There are different classes of investments that also come with different risk profiles. Your investment advisor or portfolio manager would help you develop a portfolio that would be less risky based on your needs and investment time horizon. Certain classes of investment such as shares are risky.

The portfolio manager understands the market and performs regular analysis that can help detect risk and prevent losses.
The portfolio managers have the systems in place: The portfolio manager works for a Licensed Dealing Member of the Ghana Stock Exchange. These LDM’s are required by SEC and GSE to have systems in place to monitor the investments of their clients.

What should you consider when choosing one?

Is the company licensed?

The company must be licensed by the Securities and Exchange Commission and it should also be a Licensed Dealing Member of the Ghana Stock Exchange.

Pay management fees: It costs the LDM some money to manage your investment to ensure you maximize returns. They use the internet at a cost, stationery etc. Besides, they have to make some profit in order to stay in business. For this reason, they must charge management fees. Adam Smith said “it is not for the benevolence of the brewer or the baker that we have dinner but for their own selfish interest.”

You have to consider how much return they are likely to make and how much is reasonable to pay them. Most of the Asset management firms have fixed charges; say 10% of the value of your investment and this can be reviewed annually. Try to personally investigate first before choosing one. The caution here is, don’t go for a private portfolio manager because they may charge you less, consider how much returns they make and other factors listed below.

Seasoned analysts: Investigate to know how good their analysts are and their ability to make good returns for their clients. You can also find out how abreast they are with world news, local news and business related news by giving them a “morning call” anytime you hear price sensitive news that might affect your investment.

If they are not aware of the obvious, then feel free to move your investment to another firm to manage for you. This is because price sensitive information is crucial to the return you make on your investment. You can further investigate to know how many of their staff are industry professional, how many of their analysts are licensed by SEC and go further to know if they are Authorised Dealing Officers of the GSE.

Their team should be made up of lawyers, financial analysts, insurance experts, business experts and with the requisite certification. With that you can be assured that your investment is safe and it is in good hands.

Good customer service: Find out if they contact their clients through telephone calls, SMS, email on how their investment is doing.

Are they responsive enough to client needs? Are their staffs dedicated to the satisfaction of their clients? How professional are they? It is always good to choose an asset management firm that has a good research department. Having a good research department is not enough; go further to find out how often they furnish their clients with information regarding the economy and their investment.
Author: Sophia Kafui Teye
Blog: www.skafuiteye.blogspot.com
skafuiteye@gmail.com

FINANCIAL LITERACY EDUCATION: LAVATORIES BADLY NEEDED

FINANCIAL LITERACY EDUCATION: LAVATORIES BADLY NEEDED

LAVATORIES BADLY NEEDED

Life is not complete for any human being till that being is able to have a feeling of living a dignified life. A healthy human being would eat and would need to expel out the waste in the system. In modern day life, human beings have devised very neat and clean ways of easing themselves and it is very nice and dignified that sometimes, one would even forget that human beings just life animals do expel excreta.

However, it is not every part of this world that every body enjoys use of the basic facilities that make life really dignified as modern human beings should.  In other parts of the world and in Northern Ghana, people living in rural communities hardly enjoy the use of these basic facilities. People in rural northern Ghana still practice the very old, outmoded, unacceptable, pure and raw of easing themselves, because they cannot afford the basic necessities of life and they have not been provided for them to even refuse to use.

All over, rural northern Ghanaian, one can easily see people, mature and young, men and women, boys and girls easing themselves in the opening, all because they have no better choice. They   have been subjecting themselves to crude and unacceptable ways of expelling the waste in exposed ways that something needs to be done to help solve these undignified practices.

As people do “own things” any where, the consequences are evident for all to see, feel and smell.

It is so disturbing during the dry season, when there are no shrubs, weeds and other plants to serve as covers or shield and it is so plain to see people even from faraway away distance easing themselves in the openings.

The indiscriminate ways of expelling human excreta among northern Ghanaian rural dwellers bring diseases that make people sick and some even die prematurely, yet solutions have been provided.

It is high time philanthropist, non-governmental organizations, (NGOs), the government came to the aid of these communities and the private companies should take up these as part of their corporate social responsibilities. It is greatly worth, more than could be imagined.

WHY ARE THE LAVATORIES NEEDED

·         Help make people lives dignified.

·         Help prevent and eradicate and reduce certain diseases and illnesses

·         People get a place to ease themselves

·         Men and women would have separate places for privacy

·         Constructing basic toilet facilities in rural northern Ghana is very cheap.

·         Cheap labour is available because of communal labour, once the natives know it is for them, they would volunteer.

·         Free land, the chiefs and elders of the communities would always donate land for good use.

·         It would be a great and a memorable contribution to that community’s development and improvement in the lives of the dwellers.

·         Society at large benefits and the impact is immeasurable

There are some particular villages in the Upper Eastern Region, near Bawku that really lack these facilities and need the support of individuals and organizations to help provide them with basic toilet facilities. These are Zaago Number 1 and Number 2, Gumyoko and Aporizua. These villages are about 15 minutes drive from Bawku, but the people go through hell and unacceptable ways of easing themselves, which needs to be stopped.

I entreat individuals, organizations to go to their aid. Directions could be given to whoever wants to help. I can direct them to see some chiefs and elders of these villages for further discussions.

© 2011, Godwin-Xavier Ayeebo

Email: gayeebo@gmail.com

Blog: www.g-xavierayeebo.blogspot.com

FINANCIAL LITERACY FOR ALL-PUBLIC PARTICIPATION

Check the link to buy a copy of my book and you will thank me later.

https://selar.com/9p1107?currency=USD

There are many types of investors such as outside investors, inside investors, sophisticated investors, qualified investors, ultimate investors and others.

These are not the same and the risks and rewards attached to them are not the same.

I believe that every entrepreneur’s aim is to have a very big organization in the long run.

Organizations get bigger when the shareholders and stakeholders increase.

One popular way of getting funds for expansion and growing bigger is to sell the shares of the company to the public on the stock exchange market. This is easy when the company is has a a known brand name and also if it is already listed on the Stock Exchange Market.

The ultimate investor is someone who establishes a company and walks through thick and thin to be able to have the company listed on the Stock Exchange Market. This is where the inventors (entrepreneurs) actually make the money. Those who buy the shares of this company are the outside investors. The original owners are or the inside investors, the founders.

Whether your company is small or big you can raise funds from the public depending on the country in which the company is situated.

I have learnt in my ACCA studies that in the UK, they have the Alternative Investment Market (AIM) for smaller companies that do not meet the requirements to be listed on the main Stock Exchange Market. These smaller companies can then raise funds publicly on this market.

I believe other countries should have or need to have similar markets for their young and upcoming companies.

Ghana needs one for its small and medium companies that are doing well and need funds to expand but do not qualify to raise funds on the main stock market.

As these companies expand and grow then, they can move to the main stock exchange.

Companies incur much more expenses like legal costs, costs on lead brokers, paper work, printing of prospectus and others to raise equity fund when trying to raise funds on the stock market and the demands for returns by equity shareholders are also more expensive than financing projects by internally generated funds and borrowing, but raising funds on stock market also has its own advantages.

At any given time, shares, bonds, debentures could be sold to the public when all stakeholders have been consulted and agreement reached.

I am more concerned with a company being set up and taken through the odds eventually to get listed on the stock exchange. I know that equity is more expensive compared to using internally generated funds and debt funding but ultimately my quest is that there will be wider shareholder base and I believe society at large benefits. New shareholders who have diverse expertise in various fields could come on board during Annual General Meetings, where they may share and or trade their expertise to help spearhead the company to an unexpected growth and expansion if given the chance.

Public offer also gives the original shareholders (founders) the opportunity to sell a percentage of their shareholdings, get money and still remain as shareholders.

Public offer is one of the means that enriches the founders of the company listed.

This might sound unpalatable to some entrepreneurs but the truth is that once you resolve to offload some of your shares to the public; you do not only do so with the sole aim of expanding your company but also to get some money for yourself. The opportunity cost of losing some percentage in your shareholdings does not only put money into the bank account of the company but also ultimately puts money into the bank account of the entrepreneur.

It is not normally simple to have a company listed on the stock exchange

It is tougher in some countries than others.

Around the year 2000, about thirteen big time companies collapsed in the USA; among them were Enron and WorldCom. The financial reports for most of these collapsed companies were ‘cooked’. The end result for the ‘cooked’ financial reports was that the companies that practiced bad accounting collapsed, and some of their ‘big’ men were put before court. Some were even jailed.

Others were sacked and it was not likely they would get new jobs that soon.

Arthur Anderson which was one of the big five audit firms in the world was the main auditor of Enron also collapsed. When all the indemnities protecting an auditor are removed then the auditor has to face legal actions. If the auditor, whom one can say was just an outsider to check the records of Enron collapsed then what about the organization itself that got into those unacceptable practices?

So many issues came up in the financial world after the collapsed of Enron.

The United States of America realized the big loophole was in corporate governance enforcement. The USA therefore got a corporate governance act enacted. It came out with a law on corporate governance. The now famous Sarbanes Oxley ACT or SOX also known as Public Company Accounting Reform and Investor Protection Act (named after the two gentlemen,                (Sarbanes and Oxley) who spearheaded the act. Sox is a ruled based corporate governance law unlike in many countries where they are principles based that is really judgmental and not enforceable.

Sox also lays down the procedures and processes that have to be met before a company can be listed on the stock exchange in the USA.

So in the USA apart from the conditions of the Securities and Exchange Commission which is the governing body of the stock exchange market, the requirements of the Oxley Act must also be met fully before listing on the market is accepted.

Countries replicate laws; it has even become easier as we live in a global village.                                                                        

Who knows, next time it might be your country that wants to adopt corporate governance laws of the USA.

It’s even going to get much tougher in almost every country because of the recent pats CREDIT CRUNCH.

The Graphic Business wrote ‘‘the credit crunch is caused by the impact of sub-prime loans which some financial institutions, that is some banks in some advanced countries put in their statements of financial position (balance sheets) as if they were proper, strong financial assets. These are indeed not good loans but have been packaged as good financial instruments. These instruments do not really have credible book values and could not be turned into cash easily for the banks to use for trading. Eventually these financial instruments were exposed as worthless.’’ Those financial institutions that had these sub-prime loans as assets of their portfolio, then got into financial troubles. This had replicated thereby having multiplier effects on many organizations and affected individuals. Many people lost their jobs because the affected companies could not get the needed funds for smooth operations. Countries like the Iceland, USA were hard hit and that really affected the global market demand and supply in every commodity in almost every country under the sun.

From the underlying, it therefore means that any company seeking to be listed on the stock exchange will be scrutinized more than before. Entrepreneurs should then refrain from addressing their financial reports artificially. Investors depend heavily on the financial reports of organizations to make decisions. If the financial reports are misleading, then that would breach the trust between the preparers of the reports and the users. No proper business transactions can be established again in the future.

When your company (ies) is able to meet these requirements and get listed, the directors and managers need to treat the shareholders and all stakeholders with transparency, honesty, fairness, equitability and objectivity. The company should be directed and managed well so that share price could be appreciated and dividends paid frequently if that is the policy of the company and it’s the choice of shareholders. The interest of managers should match with that of shareholders.

All schemes put in place to reward managers for good performance should be instituted in such a way that management cannot manipulate these schemes to suit their own selfish interest to the detriment of the shareholders.

The Ghanaian Stock Exchange (GSE) is doing well and has been able to attract foreign big companies like Tullow Oil Plc, which is offering an initial public Offer (IPO) in Ghana, right now, the deadline for application for the shares is 4th July 2011. I learn Kosmos Energy will follow suit.

Dear enterprising entrepreneur, have your company (ies) listed on the stock exchange market in future.

©, 2011, Godwin-Xavier Ayeebo

Email: gayeebo@gmail.com

Blog: www.g-xavierayeebo.blogspot.com

FINANCIAL LITERACY EDUCATION: FINANCIAL LITERACY FOR ALL-COMPOUND INTEREST

FINANCIAL LITERACY EDUCATION: FINANCIAL LITERACY FOR ALL-COMPOUND INTEREST