You are here: HomeWallOpinionsArticles2013 07 26Article 280454

Opinions of Friday, 26 July 2013

Columnist: Agambila, Gheysika

Ghana’s Public Sector: A Case of Reverse Welfare

By Dr. Gheysika Agambila

Definition: public sector; Welfare

I am defining the public sector as those institutions that subsist on the Consolidated Fund. This will exclude SOEs. By “Welfare”, I mean a form of cash and non-cash assistance given to families and individuals of limited means, such as is done in the USA. In Britain, I understand this public assistance is called “dole”.

What’s The Problem?

Our public sector, consisting primarily of the Ministries, Departments and Agencies (MDAs) consumes more than 60% of our tax revenue. That is, we collect largely from the less-well-to-do and give it to the better-off. This is reverse welfare. In industrialized countries, taxes are collected from the better-off and some given to the less-well-off. The structure of our public expenditure is therefore not only immoral, it is inconsistent with any objective of national development. An economy that consumes more than it invests cannot be sustained in the long-run. In the long run, such an economy will develop a vicious cycle of downward spiraling poverty. Such an economy will crash when the poor, no longer able to tolerate the hardships, magnified by visible income inequality, rise up, led by political demagogues soon to metamorphose into demi-gods. And there is evidence of this: Ghana’s gini-coefficient (a measure of income inequality) has been growing.

If we love our nation and desire that it should exist long after we are gone, we must address the problem of this resource-gobbling Frankenstein. The public sector does not only gobble legitimately; it also consumes vast resources illegitimately through corruption. The public sector’s legitimate consumption of resources hobbles our attempts at investment to promote development. Being able to pay only salaries (Item one or personnel emoluments) means that investment can only be done by borrowing. The government borrows domestically by issuing short term debt instruments that pay on the average 20% interest. While such borrowing is a delight to local banks and those with significant disposable income, it crowds out the private sector and is a fundamental cause of the usurious interest rates that hobble our domestic industry. The interest rates on external non-concessionary debt are higher than this. As for the Suppliers’ Credit Agreements (SCAs), I am sure that the real interest rates are even higher. These SCAs are essentially sole-source procurements (STX Korea is Exhibit 1). And all who truly abhor corruption will treat such transactions as the last, not the first, resort. In an environment that encourages MDAs to borrow (Local governments to build markets, SADA to do what they do, the military to get armaments, the police to ride in air-conditioned 4x4s, Ministry of Transport to build a new international airport, Ministry of Agric to distribute tractors, etc), the day of reckoning is not far. The debt burden will weigh heavily on the Ghanaian poor whose tolerance has been taken for granted. Pope Francis is reported in the Ghana Catholic Standard to have said that corruption was worse than sin and that “personal and social collapse...nests inside corruption”. And a vast majority of our leaders are Christians who harbor hopes of going to heaven. They should do the right thing. It is said that a fish rots from the head. If we now have a culture of corruption, it is because our leaders (starting from our Presidents) have been the enablers. The buck stops with them. They can’t tell us that we should all fight corruption. Corruption is a ‘public good’ (in Public Finance jargon) which can be denied only by the state. Like most pure public goods, it is not in any one individual’s interest to deter it, even though it is in the collective good that it not be provided.

But what about the public sector, the bane of our development? The solution requires a meat cleaver, not a scalpel. A private company or a local government in the industrialized world in financial distress as we are, would have looked to the largest cost item and sought savings. First, there must be a freeze on all MDA hiring. Because of the poor economic performance and the concomitant high youth unemployment rate, there is pressure for public sector institutions to hire more people. Many such jobs are now for sale to the highest bidders. So you have Police men who can only speak Frafra; they can neither read nor write in Ghana’s official language, English. Thousands of NADMO employees twiddle their thumbs all day. Hundreds of Fire men and women have become fire gazers, not fighters. There are MDAs that must be scrapped, or significantly diminished. Let’s examine my favourite candidates for diminution or demolition. Works and Housing. This entity with its panoply of Assistant Directors, Directors, Regional Directors, etc each with subsidized state housing, cars and gargantuan opportunities for graft neither does any “works” nor “housing”. It is merely a contracting entity. If that is so, it does not need to be as big as it is. Ministry of Food and Agriculture: Similarly structured as its cousin above. I challenge you to find many farmers who have had direct contact with MoFA employees. Agricultural production is falling, but MoFA is growing. Most farmers will not miss MoFA if it is gone: cocoa farmers have Cocobod; cotton farmers have Cotton Development Board, etc.

Sports: Sports is a profitable business that ought to be contributing to the Consolidated Fund rather than feeding fat at the national trough like a hungry swine. Sports, properly developed, can keep our people happy, our youth busy, and our nation united and at peace. But the state pours so much unaccountable money into this rat hole that the thieves fight among themselves and expose themselves. This must stop. What is needed is a Sports Facility Authority to build, rent and manage these sports facilities (in all regional capitals and major districts) profitably. Such an Authority can gain much revenue from a small percentage of the future earnings of future stars (footballers and boxers, for example).

Foreign Affairs: Countries with vastly more resources than Ghana have fewer embassies and High Commissions than Ghana. The rich countries have embassies in Ghana because they have large commercial interests here. What commercial interests inform the size of Ghana foreign affairs Ministry? In some countries, our embassy building and housing for our diplomats are rented. The rule is, if you won’t stay for long, rent; if you’ll be around for a while buy. So what is a government doing renting chancelleries and diplomatic accommodation? In the long run, we will be better off taking a loan to buy or build such accommodation. Many of the diplomatic staff have their own drivers and cooks, to boot. Ghana can save money by having a single ambassador supervise several countries. Close some embassies and use the savings to “remove schools under trees.” The Police: We do not have enough police men. But we will not solve this police-deficit so long as we cling to the Colonial-era idea that police men should be kept in barracks. Has our survey of the world suggested that this is best practice? Policemen must stay within the community in their own accommodation. By the way, the people who serve us with integrity now want to take this to a new level: they have decided to constitute themselves into the accuser and the judge in a scam they have labeled “Spot Fine”. If there ever was a formula for police corruption this is it. Internal Control 101 tells you that those who impose charges should not collect the charges. If this Spot Fine thing is to work, the fines must consider international best practice, per capita income, and traffic courts in every District or city run by the Judiciary. This will be complemented by an information management system that can track offenders.

Information and Media Relations: You don’t need it. You have Presidential spokesmen. A Ministry of Information is a legacy of Soviet-style governance and Colonial-era WW II propaganda needs. So long as this Ministry is around, the Directors will continually convince their Ministers that there is money to be made by procuring ‘information vans’, an idea whose time has been long past. Gender etc Ministry: You don’t need it. Find other jobs for the girls. The recent budget has made it clear, even to the unsighted, that the principal cause of our deficit is public sector wages. The present spate of strikes and threats of strikes will not abate. Ghana’s public service, this hydra-headed medusa, must be tackled with ‘Odyssian’ courage, lest we perish.