Only 4 out of 123 firms listed on the Jamaica Stock Exchange (JSE) have any relation to the construction sector, a fact that Dr. William Lawrence of Mona School of Business and Management (MSBM) believes is a major impediment to growth in the construction sector.
This translates to local construction firms leaving between $50 million to $500 million on the table by ignoring the JSE as a fundraising option.
Speaking at the recently held MSBM Round Table discussion held at the Jamaica Pegasus Hotel, Dr. Lawrence explained that recent research by his team at MSBM found that the cost of raising money from banks and private sources was one of the hindrances to growth in the construction sector. Further, taxation was another major hurdle that local contractors faced in the process of bringing projects to completion.
However, rather than complain about what the government and financial sector is not doing to help the construction industry, Dr. Lawrence urged industry leaders to look at what is already in place - the Junior Stock Market.
“Right now, there is not one construction firm on the Junior Market of the Jamaica Stock Exchange,” Dr. Lawrence informed the audience at the Pegasus Hotel.
In deciding to list the construction firm on the Junior Market, Dr. Lawrence outlined the immediate benefits to the industry. “First, the JSE represents low cost capital. Investors would be asked to take up between a minimum of $50 million to $500 million worth of the company's stock and this is a significant amount of capital that can be raised to boost the balance sheet of the local construction firm. Once you are listed on the JSE and take on investors, you don’t have to pay back the money, unlike a bank loan.” Second, companies listed on the JSE have immediate name recognition which helps in bidding on large construction projects. Third, Dr. Lawrence noted that there is a five-year tax waiver for companies who are listed on the JSE. “And yet, not a single construction firm has attempted to list since 2009 when the JSE introduced the Junior market.”
Dr. Lawrence made it clear. “We would like to suggest that more construction firms turn to the JSE to get their capital structure right.”
By: Dennise Williams, Financially Focused