Ghana – and Africa generally – has excellent growth prospects, thinks Charles Adu Boahen. In particular, here’s what the former government minister and experienced investment banker thinks could be in store for Ghana’s financial markets.
As a public servant, Charles Adu Boahen’s record speaks for itself. According to the World Bank, before he arrived at the Ministry of Finance, Ghana’s GDP from 2013 to 2016 only rose from $47.04 billion to $51.07 billion. But in Charles Adu Boahen’s time in office, it shot up to $66.15 billion in the same timeframe.
Charles Adu Boahen leans on his investment banking experience to forecast Ghana’s potential growth
As an investment banker, he managed JP Morgan’s sub-Saharan African operations. He did Corporate Finance and M&A for Salomon Smith Barney, covering the Energy and Chemicals Sectors, and identified African investment opportunities for a Washington, DC-based private equity firm. On returning to Ghana in 2007, he built a successful boutique investment bank and real estate development company.
From his years of experience and analysis of the current situation in Ghana – and in Africa more broadly – Charles Adu Boahen sees growth potential in some distinct financial markets.
The first area in which Charles Adu Boahen thinks there are excellent growth prospects in Ghana is in residential real estate and the securitization of real estate investment opportunities. Charles Adu Boahen has a long track history of managing investments in the area. Just after moving back to Ghana from South Africa in 2007, he enjoyed success in the redevelopment of Johannesburg, and he then did the same thing in his home country.
“I was struck by how the downtown Johannesburg area had been decimated post-apartheid. And so even though it had really sound infrastructure, the town had literally been deserted, a lot of the big corporates and the mid-tier executives had all moved up north into the northern suburbs,” said Charles Adu Boahen. “I identified a lot of very structurally sound buildings, especially on the residential side in the downtown area, which were going for bargain prices because many of the tenants had relocated up north to Sandton and surrounding suburbs.”
Charles Adu Boahen learns lessons from real estate development
The real estate investments proved profitable.
“We ended up buying 3 apartment buildings comprising of over 120 apartments, which today are worth maybe ten times what we bought them for,” said Charles Adu Boahen.
After several government initiatives and economic growth in Ghana, Charles Adu Boahen believed the same thing was possible in his country.
“When I moved back to Ghana, my friend in Nigeria who had passed on the Johannesburg deal called me up and said, ‘I really like that opportunity you showed me, but what do you think about us doing something like that in Ghana?’” said Charles Adu Boahen. “I said, “Actually, you’re very right because I can see that the Ghanaian market has just now come in online.’”
In fact, around that time, the government had just passed a new law that provided real estate investors with a five-year tax break. The law had created a flurry of activity.
“For the first time, you saw many private sector developers and developments coming up,” said Charles Adu Boahen.
The group’s first project was 50 apartments, which cost over $10 million. Then we moved on to the next project, and the rest is history.
Charles Adu Boahen explains why financing has been a problem in the past
But while the real estate markets were doing well, the financing of deals was a real issue for investors. Of his first South African deal, Charles Adu Boahen said: “I struggled to get a mortgage to do it, because I had to get a loan from the banks to finance it. So I had to mortgage my house to raise the funding and reach out to a couple of friends to chip in.”
Even today, most of the financing you get for real estate development deals has to be denominated in US dollars.
“So there’s a mismatch there, which has led to some defaults,” said Charles Adu Boahen. “What we haven’t done well in Ghana is that we haven’t really developed the mortgage market fully, nor do we have REITS (real estate investment trust) and so forth. So it’s tough for investors to exit.”
Yet therein lies an immense opportunity for financial markets to develop, said Charles Adu Boahen.
“Elsewhere you have real estate investment trusts (REITs) and so forth that provide funding,” said Charles Adu Boahen. “We also don’t have a very deep insurance market that provides long-term real estate financing like you see in South Africa. So those are still some issues that are holding back the real estate market’s ability to reach its full potential.”
Charles Adu Boahen identified key financial products that could be poised for growth
Charles Adu Boahen believes that even though these qualities – the lack of REITS, a robust mortgage market, and a sophisticated insurance market – hamper real estate investors and developers in Ghana, he believes that it is these very areas of the financial markets that could take off quickly, once they are implemented in the country.
“The insurance market itself just needs to develop, and that is more about the private sector driving that. But there certainly is an opportunity on the mortgage side and on the REIT side of the real estate, the financing side of the real estate business,” said Charles Adu Boahen.
And Charles Adu Boahen sees it happening sometime in his country’s future. It just takes entrepreneurial initiative and the right regulatory framework from the country’s government.
“We only set up our capital markets – our stock exchange – in the early ’90s. We only set up a bond market in the late 2000s. And so, really, that side of finance had been late in development in Ghana,” said Charles Adu Boahen.
But things can happen quickly in Ghana.
When he was in government, Charles Adu Boahen oversaw the most successful euro bond offerings that the country has ever seen. On average, the government increased GDP growth from about 2-3% when it came into power, to about 8% between 2017 and 2020 when COVID-19 hit.
Given the right conditions, who says REITS, mortgages, and insurance can’t develop quickly in Ghana?