Gov’t Urged to Re-think Decision to Raid Heritage Fund

Free shs financing
…Gov’t Urged to Re-think Decision to Raid Heritage Fund

The Civil Society Platform on Oil and Gas (CSPOG), a group that has been at the fore front of ensuring the efficient management of the country’s hydrocarbon resources since the discovery of Jubilee, is urging government to abandon its decision to raid the oil and gas Heritage Fund for the purpose of financing its free Senior High School (SHS) programme.

According to the group, the current arrangement which sets aside only 9 percent of net petroleum revenues as a heritage for future generations is the result of intense negotiations and broad national consultations. It therefore considers it as an act in bad faith, if the achieved consensus is altered by any person(s) without recourse to the people of Ghana.

CSPOG points out that, the savings versus spending arrangements, the prohibition of collateralization of the petroleum funds, and the elaborate transparency provisions contained in the in Ghana’s Petroleum Revenue Management Act (PRMA) have received international acclaim and are often cited as best practice, and so care must be taken not to roll back the progress so far made.

It is indeed important for the government to recognize the fact that the establishment of the Heritage Fund moves Ghana away from the reckless practice of spending the entirety of the current year’s natural resource revenue in the next year’s budget, often paying for recurrent expenditure items.

“We have even sold our golden share in AngloGold Ashanti and used the proceeds to pay salary, and today we have nothing to show for it” said CSPOG’s chair, Dr Steve Manteaw.
CSPOG does not discount the importance of education in nation-building, and is in fact in full support of the free SHS policy, but beliefs this can be done without encumbering the small fund we are preserving for future generation. The group rejects the suggestion that the children of today are the future generation referred to in the PRMA, explaining that the future generation is the generation unborn, and who are unlikely to meet the country’s oil wealth by the time they are born. This according to CSPOG is the reason the law provides that when the oil is depleted the Stabilisation Fund and the Heritage Fund would be joined to form the Ghana Petroleum Wealth Fund. This will be invested and the returns, as may be determined by parliament would be spent through the budget for the benefit of successive generations.

CSPOG wishes to also point out that, at the current production levels and world market prices, the Heritage Fund is not likely to yield more than US$25 million a year, and so once the accumulated fund is exhausted in the first year of the free SHS programme, which will certainly be the case, the annual Heritage streams will be woefully in adequate in meeting the free SHS expenditure, raising serious questions about its sustainability.

Feasibility

CSPOG however believes in the feasibility of the free SHS programme, because even Uganda, whose economy is by far weaker than Ghana has been implementing the programme in the last decade, and Kenya has been implementing same for nine years now.

A simple comparison of some economic statistics between Uganda and Ghana will perhaps provide better anchor for CSPOG’s conviction that free SHS is implementable in Ghana.

In 2007, when Uganda introduced its free secondary education programme, the country’s GDP according to World Bank data, stood at US$12.293 billion. Ghana’s GDP in the year it is planning to introduce free SHS is US$37.54 billion, three folds the GDP of Uganda at the time it embarked on its programme.
Uganda’s population in 2007 was 29.9 million. Ghana’s population in the year of its introduction of the programme is 27.41 million. Uganda’s Gross National Income (GNI) per capita was a mere US$380 in 2007 when it introduced the programme, compared to Ghana’s US$1,480 at the time it is contemplating the introduction of the programme.

The most rational conclusion to draw from this comparison therefore, is that Ghana is economically much stronger to implement its free SHS programme today, than Uganda was when it did so in 2007.

A further comparison, using a common baseline data i.e. 2015, still shows Ghana in a stronger position economically to undertake such initiative. Uganda’s GDP in 2015 was US$27.529 billion, while Ghana’s was US$37.54 billion, a whooping US$10 billion difference. The Gross National per capita for Uganda in 2015 was US$700 while Ghana’s was more than double i.e. US$1,480.

Reasons for concern

In spite of CSPOG’s conviction that the policy is implementable it has reasons to be concern about the government’s approach.

First, it does not look like the government has a well rehearsed and properly costed implementation plan with clearly identified sources of funding.
Again, the rollout of the scheme risks abuse if adequate built-in safeguards are not put in place to prevent foreigners, especially from neighbouring countries from taking undue advantage of it, and through that, compounding the cost to be borne by the state.

Other reasons for concern arise out of lessons that can be drawn from the Ugandan experience, which indeed resonates with Ghana’s own experience at the basic school level. In Uganda, the impact of the decade old free secondary school programme has been mixed. On the positive side, more children from poor families are able to transition from the basic level of education to the secondary level. Enrollments have increased, and this has created increased demand for more teachers leading to job creation in the education sector. Further jobs have been created in the construction sector, as government developed more educational infrastructure to respond to the increases in enrollment.

On the negative side however, there has been a sharp decline in the quality of secondary education arising out of inadequate numbers of teachers required to teach the teeming student population, as well as insufficient teaching and learning materials. These are of course consequences that Ghana faced in the early years of the implementation of universal basic education and till date, not all of them have been effectively addressed.

Missing details

In Uganda, students who obtain set benchmark grades in each of the four primary school-leaving examinations are automatically allowed to proceed to study free in public schools and participating private schools. The government pays the schools an annual grant of up to $52 (Ugandan Shillings equivalent) per student, spread over three school terms. The amount covers fees and text books, while parents are made to provide uniforms, stationery and meals.
In the case of Ghana, it is not clear yet what the cut-off point would be for admission to the SHS or whether there will be a cut-off point at all. The impression one gets from the rhetoric is that we could end up with a wholesale transition of children from JHS to SHS. If that happens to be the case, then WASSSE will remain useful only for the purpose determining who gets selected to which school, and not as a decider on who gets to continue to SHS. That will then mean that greater numbers will have to be provided for in the budget.

It also appears that Ghana’s free secondary school programme will not cover students in private schools. If that is the case, then it is likely we will see a massive drift of students from private secondary schools to the public ones as facilities are expanded, ostensibly to also benefit from the scheme. This will serve as a disincentive to private sector participation in education delivery at the secondary level in the short to medium term, but in the long term, as overcrowding and inadequate teaching and learning materials cause quality to suffer, the private sector is likely to cash-in by providing a more quality education at that level, leading to the replication of the situation at the basic level, where private schools deliver better quality in terms of examination outcomes.

CSPOG’s Proposals for the free SHS Policy

1. Government should re-think the policy as currently conceived to make its implementation smooth and painless for the economy;

2. Ghana can avoid the pitfalls in its bid to give every Ghanaian child a fair chance in life, by finding ways to stagger the implementation into phases, to allow the expansion of facilities, recruitment of teachers, and procurement of teaching and learning materials to run in tandem with the expected enrolment boom;

3. The government should seize upon the public interest the issue has generated to convene a national dialogue on financing options for its free SHS programme. This will help procure the public’s buy-in into whatever financing option is settled on;

4. Government has an option within the law as it stands, to prioritise education in the ABFA expenditure framework, where much more financial resources can be leveraged than from the Heritage Fund;

5. In the medium to long term, government should be working to close all the financial leakages in the education sector. A research conducted by the Ghana National Education Campaign Coalition (GNECC) in the last decade indicated that about 25% of educational budget do not get to the intended beneficiaries or targets.

CSPOG wishes to caution the government and all Ghanaians alike, that the over-reliance on oil revenue, which presently constitutes a paltry 3 percent of total government revenue could lead to the country being afflicted by the dreaded Dutch disease. We must look more to taxes as the major financing mechanism for our development, and treat oil as a mere addition.
Signed

Dr Steve Manteaw
Chairman, CSPOG