Thursday, February 19, 2015

Banjul Stock Exchange? First things first

Abdoulie "Bax" Touray , the CEO of Sahel Invest has revealed in a Standard newspaper interview that The Gambia will soon establish a Stock Exchange which is fine and dandy provided that there are sufficient multi-national firms already doing business in The Gambia and who have limited access in the international equity market to continue growing their business.

Mr. Touray cites two obvious candidates that fit the above description i.e. Standard Chartered and Trust Bank, the first an expatriate Bank and the second which became a local Bank after the initial Ghanaian majority shareholders were forced by the regime to divest.  Now Social Security is the single biggest shareholder.

He further suggests that these two business entities cannot raise funds locally for lack of an equity market that would have otherwise provided the necessary funds for business expansion.  Instead, they raise funds through the Ghana and London Stock Exchanges in the case of Trust and Standard respectively.

While agreeing with my friend and former colleague that the availability of an equity market will challenge the country's economy to growth and development, the absence of regional-class (not to mention world-class) firms in The Gambia to make it work should be, in our view, the first preoccupation of the regime.  In order to attract more businesses, a conducive environment must be created by government that will attract business.

The problem facing the private sector is essentially two-fold (i) fleeing businesses to Senegal and neighboring countries and (ii) limited access to credit for those that cannot escape the excruciating tax burden and extortionist tendencies displayed by the security forces against businesses. 

To entice the brave ones who stayed to hang on a while longer, and those that fled to return, the regime must demonstrate to the International Monetary Fund, the World Bank and the donor community in general that henceforth it will be a responsible and prudent manager of public resources, something this regime has been unable to do for the last decade. 

It is only through these steps that the private sector will start showing live and growth to attract regional, world-class companies that can make a Stock Market a viable option. Anything short of the above will not attract sufficient and viable firms to make it work. 

The record of some African Stock Exchanges, especially in Rwanda, Swaziland and Mozambique where the general lack of transparent enforcement of property rights which is linked to the judiciary.  We all know the state of the Gambian judiciary which is not only inefficient but lacks the corporate dispute resolution capacity, an essential component of a successful Stock Exchange.