Ghana’s Securities and Exchange Commission (SEC) has introduced new levies that could inadvertently increase the nation’s reliance on Treasury bills. Adjei “AJ” Boateng, Chief Investment Officer at Blackstar Advisors, warns these sharply higher regulatory charges may encourage investors to abandon professionally managed funds. This shift could deepen Ghana’s dependence on short-term government debt.
Mr. Boateng highlighted the scale and speed of the SEC’s new levy increases. He stated that a 400% increase across the board would be problematic for any service without sufficient consultation. These higher costs risk raising the price of formal investment at a critical time. Ghana’s capital market remains relatively shallow, and investors are increasingly sensitive to fees.
This development fits into a broader trend of Ghana’s investment market becoming heavily reliant on government securities. Mr. Boateng noted that Ghana has effectively become a “Treasury bill sort of market” over the last three years. This means fixed-income securities significantly influence investor behaviour and portfolio construction. The new levies could exacerbate this existing structural imbalance.
“I think 400% increase across board will be problematic for any sort of service that’s being provided for an industry without very little consultation,” Mr. Boateng said. He made these remarks during a NorvanReports Economic Governance Platform discussion. The debate focused on whether the SEC is regulating or overcharging the market.
The immediate implication is a potential exodus of funds from collective investment schemes. Investors now face a stark choice: pay management, custody, administrative, and regulatory charges for managed funds, or purchase Treasury bills directly. If managed products do not offer enough additional return to justify the higher costs, investors will likely choose the simpler, cheaper option. This could weaken the economics of collective investment schemes, which are vital for providing diversified portfolios to households.
The warning becomes more critical when Treasury yields are falling. Fixed charges consume a larger proportion of an investor’s return as gross income declines. When yields are high, additional charges seem small. However, as yields compress, investors become more sensitive to every deduction from their gross return. This sensitivity could lead more sophisticated investors to bypass fund managers entirely.
Mr. Boateng emphasized that Ghana’s collective investment industry is too small to ignore this behavioural risk. He observed that the government has raised more money than the entire size of the collective investment scheme in auctions every three weeks over the past two and a half to three years. This comparison underscores a deeper structural problem within Ghana’s financial system. Government borrowing already competes strongly with private investment products for domestic savings.
If regulatory policy makes managed investment products relatively more expensive, it will reinforce the concentration of savings in short-term government debt. This outcome would hinder capital flow towards corporate securities, equities, and other productive assets. While acknowledging the SEC’s legitimate revenue challenges, the current approach risks unintended negative consequences for market development. Policymakers must carefully balance regulatory funding needs with the imperative to foster a deep and diversified capital market in Ghana.