As much as $1.6 billion of investments in Ghana have been trapped and the nation’s regulator is stepping in to avoid it getting any bigger.
Twenty one fund managers have been banned from accepting new money as Ghana’s Securities and Exchange Commission looks into whether they violated rules by placing client cash into illiquid assets. Investors who sought to withdraw funds from the firms have found their money unavailable, tied up in unlisted bonds, direct private equity stakes and other deals with small- and medium-sized businesses.
“We’ve asked them not to take new investments,” Emmanuel Ashong-Katai, head of policy research at the Accra-based SEC said in an interview. “Because they are under pressure, if they take, they might give it to the old investors.”
The liquidity squeeze was inadvertently triggered when the central bank started a regulatory overhaul that reduced the number of lenders by a third. The clean up caused a run on deposits that spilled over into the 25 billion-cedis fund-management industry.
As much as 5 billion cedis are tied up in risky and illiquid investments, according to the SEC. Another 4 billion cedis is locked up in fixed-term investments with banks rescued during the clean up, savings and loans companies, and microlenders.
The SEC hasn’t yet released a list of all the fund managers it is investigating in a forensic audit that is due to be completed by the end of the year. An 11.2 billion-cedis bailout for lenders that were closed down and another of about 925 million cedis for microcredit companies whose licenses were revoked, is helping to release some funds locked up in those segments.
SEC rules forbid fund managers from directly underwriting corporate debt or taking straight private-equity positions, even though they can lend to businesses through reputable financial institutions and invest in a private-equity firm, which then acquires stakes in companies,