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Opinions of Monday, 18 November 2013

Columnist: Ata, Kofi

Has single spine become NDC’s albatross?

In 2010, the NDC government of the late Prof John Atta-Mills began the implementation of a new salary structure for public sector workers. The “Single Spine Salary Structure” (SSSS), replaced the then Ghana Universal Salary Structure (GUSS), which was considered complicated and unfair. The SSSS was to be implemented over five years (2010 to 2014). Soon after the implementation began, ministers and NDC communicators or propagandists were boasting that their government has doubled or tripled public sector salaries. In fact, that was one of the government’s main achievements and a major campaign tool for the 2012 presidential election. Strangely, soon after the elections, these same people (from the President to his ministers) have changed their tune and crying foul that SSSS is strangling the economy. In this article, I want to discuss the short sightedness of the NDC government regarding the implementation of the SSSS.

The objectives of the SSSS was to address salary disparities, distortions and restore equity in the pay structure by placing all public sector employees on a vertical structure and ensure that jobs of equal value range receive the same pay range in order to minimize industrial relation tensions in Ghana. A task that in my view was almost impossible to achieve since it appeared to be too rigid a structure. SSSS had twenty five pay levels compared with the twenty-two under GUSS. This alone should have warned the government that SSSS was after all, not that single but complex, relative to the old GUSS.

According to World Bank’s Policy Research Working Paper 5150 entitled “Estimated Fiscal Costs of Implementing Ghana’s Single Spine Pay Reform”, in 2008, the public sector wage bill (estimated to be between Ghc1.7 and 1.9 billion) consumed about 57 percent of total government revenue. Three years into the implementation, Ghanaians are being told that the wage bill has risen to Ghc9 billion in 2012 and soon to reach Ghc11 billion by December 2013. According to the government, the public sector wage bill constitutes over 70 percent of government total revenue (see “Ghana's wage bill to increase to Ghc11 billion, Ghanaweb, October 18, 2013). The government figures represent an increase of between 429 percent and 479 percent by the end of 2013 (based on 2008 figures).

Ghana has a population of about 25 million and total public sector workforce of about 600,000 representing 2.4 percent of the total population. How could a country spend 70 percent of her total annual revenue on the wages of just 2.4 percent of the population, though a reasonable proportion of the 2.4 percent are in critical areas such as health and education? Is this not madness? How did Ghana end up in this mess?

I suppose no one has any idea how the government might have got its figures woefully wrong. For example, each of the SSSS 25 pay levels has three salary points of minimum, medium and maximum. The lowest pay level has a minimum monthly salary of Ghc900 to a maximum of Ghc1,190 and the top pay level with a minimum mo nthly salary of Ghc19,000 to Ghc21,400. From these, one would have expected that the government would have worked out how many of the 600,000 public sector workforce would be put on each of the 25 pay levels and at what point, during the five year implementation period; and estimated the total cost for each year.

The next task was for the government to have asked and answered the questions: how will these be paid for? That is, from what sources (affordability) or has the state got the capacity to generate sufficient revenue to pay considering all projected annual costs and expected total revenue for each of the four years? Such forecasts would have also answered the question of sustainability, short, medium and long terms.

It is obvious from what the President and his ministers are now saying that, this simple due diligence was not carried out or if undertaken, their numbers did not add up. One would not have needed a Mathematical or Economic wizard to have made reliable projections. I also suspect that in a country where records are unreliable and with a public sector labour force bloated by ghost names, the numbers would have been impossible to accurately estimate but at least, some of the current challenges would not have be a surprise to government as Ghanaians are being made to believe.

Though the SSSS is supposedly single, in reality, it bears no resemblance to the word single in whatever shape or form. This is because SSSS did not incorporate other remunerations paid to certain categories of public sector workers such allowances, commissions and market premiums that were to be negotiated separately by each group of professionals. This meant that the government at the time of implementation could not tell how much the SSSS would cost the state. No doubt the inability of the government and labour unions to agree on the levels of allowances, commissions and the market premiums which have been the source of industrial unrests in Ghana since the implementation of the SSSS.

Another factor that has contributed to SSSS’s total bill running-out-of-control is that Ghana has high allowances and commissions, especially, for senior public sector staff. These include provision of free accommodation, utility services, free transport fuelled and maintained at the expense of the state, as well as driver/s, etc. Some even have tax free salaries as was revealed at the Public Accounts Committee hearings (see “Exposed: Former Ghana Investment Promotion Center (GIPC) boss never paid tax”, Ghanaweb, October 18, 2013). These allowances and commissions also rise at a faster rate than actual basic salaries, are often tax free and the bulk of them go to senior staff of what is known as “Subvented Agencies” (SAs). These are public agencies who receive annual subvention from public finance such as VRA, GIPC and others whose Boards and management have the freedom to award to themselves fat salaries and allowances. Records indicate that in 2008, 82 percent of total allowances and commissions paid to public sector employees went to staff of SAs though they constituted only 19 percent of the overall public sector workforce; yet consumed 35 percent of total public sector wage bill.

The shocking aspect of the SSSS policy implementation is the lack of reciprocal contract of increased productivity between government and its workforce. Whilst ministers and party propagandists were boasting of doubling and tripling public sector wages, none is able to say that public sector productivity has gone up, let alone the percentage increment. In fact, my estimation is that productivity per head in the public sector has gone down because total public sector workforce has gone up, especially with the creation of more districts. In other words, workers have got more to do less.

It is no secret that the government implemented the SSSS without a clue on how much the policy would cost the state and how it would pay for it. In fact, the President admitted this in June when he addressed a seminar at Chatham House in London. In an answer to a question, the President said that the software used in implementing SSSS did not allow them to know the total cost of the policy. This was shocking, to say the least, if not negligent or abrogation of duty.

Another surprising aspect of SSSS is, did the ministers and party propagandists who were boasting and claiming credit for doubling and tripling public sector salaries know that the policy without a corresponding increase in productivity could fuel higher inflation as well as starve other sectors of the economy of critical investment? It's amazing that Ghana’s inflation has not spiralled out of control with such high public sector wage bill even if productivity remained constant. That could be the reason why some Economists do not trust the inflation figures, though other sectors of the economy (mining/oil) are doing well.

Form the above, it appears Ghana is led by a bunch of novices who boast of doubling and tripling public sector wages (instead of higher standards of living) in one year only to turn 180 degrees the following year to complain about the same policy. Do they think Ghana’s economy was a magician or money grows on trees? The SSSS is unsustainable in its current form and shape and it will eventually bankrupt Ghana, if it has not already done so. What is the alternative, if any?

I believe the President has started something but it’s cosmetic, too little, too late. The President’s directive to all ministers to pay their utility bills is in the right direction but on its own, it’s a drop in the ocean. It must immediately be extended to all other areas such as accommodation, transports etc and must include all public sector workers who receive such benefits (see “Mahama orders ministers, government officials to use prepaid meters”, Ghanaweb, October 17, 2013). The real answer lies in urgent reduction of the public sector workforce and the wage bill. Charity begins at home so the President must reduce the executive staff (both ministers and presidential staff) as well as the level of remunerations and allowances. The Legislature must follow the austerity measures with cuts in their salaries and allowances.

The civil service and other public bodies and agencies are overstaffed. First, the government must start with weeding out the ghost names and punish beneficiaries. This should be done in conjunction with a moratorium on all public sector recruitment. Those who retire, resign or are sacked must not be replaced through natural wastage. Though unemployment is high in Ghana, public sector redundancy should not be taken off the table. Pay reduction is also an option that should be considered. That should be done by freezing the annual cost of living increment until the wage is within manageable levels or the rate of annual increase must be drastically reduced. Last but not the least, government must as a matter of urgency reduce the leaks through bribery in tax revenue collection that go into the pockets of workers who are paid to collect and the public who are to pay the taxes .

It is not clear if the NDC government rushed into implementing the SSSS without doing their home work, did not understand the implications on state finances or they knew exactly what they doing, but chose to cut their noses to spite their faces for political expediency. Whether they were naive, careless, ignorant or damn incompetent, they inherited or adopted baby, nursed it into a toddler monster that is out of control and has become an albatross around the nation’s neck. The earlier this monster is tamed into manageable adulthood, the better. Otherwise, NDC’s mess will choke the economy with catastrophic consequences for Ghana. SSS was either badly designed or poorly implemented or both. What is indisputable is that it is unsustainable.