Financing national infrastructure - Economist Calls For Radical Change

…Says Energy must be No. 1 Priority

By J. Ato Kobbie, Managing Editor

Ghanaian International Economist, Dr. Nii Moi Thompson, has called for an expedited action on passing the Municipal Finance Authority Bill, which has been languishing in the policy maze over the years, as part of a broader Strategy for Financing National Development (SFND).
“It is one tool that can relieve central government of much of the infrastructure financing pressures it is currently facing, while at the same time building the capacity of local governments to finance local economic and social development,” he argued about the Authority.
A former Deputy Minister of Finance and Economic Planning, Professor George Gyan-Baffour had told a workshop for Parliamentarians, Economists and Development Partners at Agona Swedru in the Central Region on February 16, 2008 that the Bill would be passed into law by June, to become operational in November of that same year.
He had told the participants that the proposed authority and Local Government Finance Bill would provide comprehensive laws to guide Metropolitan, Municipal and District Assemblies (MMDAs) in raising private capital and other resources.
This, he said would empower them to move away from the over-reliance on central government transfers to undertake productive infrastructural development and provide appropriate services efficiently.
The Deputy Minister had noted that the passage of the bills into law would complement the Municipal Finance and Management Initiative (MFMI) to help develop investor confidence and comfort in MMDAs.
The laws, Dr. Gyan-Baffour observed, would facilitate investment in municipal bonds and credits, pension funds, and credit enhancement assistance, credit assessment and rating systems.
Dr. Nii Moi Thompson, who was sharing his thoughts on the 2012 Budget Statement, which was presented to Parliament on November, 16, 2011 with The Business Analyst, said:
“The various initiatives - tax rates, composite budgeting and the Public Private Partnership - are all good but we need a broader Strategy for Financing National Development (SFND).”
He said this will include identification and assessment of national and local sources; public and private sources; domestic and international sources, and mechanisms for tapping into them in an effective and sustainable way.
According to him, the term “infrastructure” can mean many things under different circumstances and therefore needs to be clarified and refined to ensure that it does in fact contribute to economic growth - and by extension, job and income growth.
"Within the broad rubric of "infrastructure", we need to prioritize, giving energy (affordable, reliable and accessible energy), pride of place because it is the most catalytic, in terms of unleashing potential growth,” he advised.
“Energy for all, means, for instance, that in addition to big companies that often can afford generators (even though at a cost-disadvantage), many of the small and house-hold enterprises that constitute the bulk of the Ghanaian economy - the hair-dressing salon, barbering shop, drinking spot, tailoring shop, etc) - will have a more steady flow of income and hence growth,” he elaborated.
Growth & Services
He cautioned however, that it does not automatically follow that increased investments in infrastructure will lead to growth, but there is a mediating factor, which is the services from that infrastructure.
“We have to consciously ensure that the services from the physical infrastructure from those investments are in fact of the highest order and that they do in fact facilitate growth,” he advocated
“Consider all the nice modern street lights at Tetteh Quarshie. They represent infrastructure investment. The actual services (i.e., lighting) that they offer (or don't offer), however, is a different matter altogether. They stand in perpetual darkness when they should be providing light,” he regretted.
He cited as another example, the new dual carriage roads cropping up around the country, which are being turned into lorry parks and washing bays and markets. Here too, he said the value of services is less than what it optimally should be.
Works on many national infrastructure projects have stalled at various times due to the inability of Government to meet funding requirements, leaving them in states that inconvenience motorists and residents.
Stalled projects
Notable projects that have suffered from unsustainable funding are those referred to as the ‘gang of four’ - the Tetteh-Quarshie Interchange-Adenta and the Achimota-Ofankor roads in Accra, the Nsawam By-pass, and the Sofoline Interchange in Kumasi.
In November 2006, when former President John Kufuor performed the ceremony for the commencement of reconstruction of the Achimota-Ofankor section of the Accra-Nsawam road, the 5.7-kilometre stretch, which involves the construction of a three-lane dual carriageway with three interchanges and service lanes, the 400.4billion cedi project was scheduled to be completed in 36 months.
Again, when the former president cut the sod for the reconstruction of a 4.6 kilometre three-lane dual carriageway with two interchanges at the University of Ghana and the Kwabenya Atomic Junction, the construction of two pedestrian sub-ways and installation of streetlights, the project was scheduled to be completed within 30 months.
Also, in 2007, Mr. Kufuor cut the sod for work to commence on the Sofoline project, which involves the widening of the road from the Komfo Anokye Teaching Hospital (KATH) to Abuakwa, the construction of an interchange at the hospital roundabout and Sofoline, as well as the construction of five underpass bridges along the road.
Until Government recently secured a $400 million World Bank facility to continue with their execution, it was unclear whether they would ever be completed.
E-mail: j.atokobbie@yahoo.com Credit: The Business Analyst.
A print version of this story was first published in The Business Analyst of Wednesday, December 14 – Tuesday, 20, December 2011.