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Opinions of Thursday, 15 May 2014

Columnist: Ata, Kofi

Is it National or NDC Economic Forum?

By Kofi Ata, Cambridge, UK

The brouhaha on the ongoing National Economic Forum (NEF) at Akosombo has raised the ugly question of whether it is truly national, particularly, without the participation of the main opposition party, NPP. In this article, I will submit my proposals on arresting the current economic mess and improving Ghana’s economy in the short term for consideration since some of were not in a position to attend the NEF. Before, I do so permit me to make some observations on the boycott by NPP.

In their press conference to inform Ghanaians why the NPP will not participate in the NEF, the NPP Chairman gave three main reasons. First, the invitation to them came too late for them to prepare for such an important national assignment. I am not sure when the Mahama government decided to hold the NEF. Irrespective of when, what stopped the government from giving prior notice to all the political parties? Was it deliberate that the invitation letter to NPP was signed on May 2, 2014 but was hand delivered on May 9, 2014 (a clear week)? Was NPP the only political party to receive the invitation on May 2, 2014? If yes, then why and if not, then why are the other parties not complaining or boycotting?

The second reason was that the government had already agreed with IMF to implement a medium term programme to redress the current economic difficulties. My question is, were the NPP speculating on this matter or they had confirmation from the IMF that the government had agreed to implement the alleged medium term policy? Can NPP challenge President Mahama denial that no such policy has been agreed with the IMF or was this used as a perfect excuse to boycott the forum?

Finally, that NPP were not provided with any documentation on what was to be discussed at the forum though the party did not indicate if any other participants had advance copy of any documents for discussion. Since there were no indications that any other participants had been provided with advance documentation, NPP’s case on this is weak.

In my own view, the NPP believe they are the only party with brilliants Economists and economic policies that are capable of turning Ghana into an economic paradise. For that reason they would not share their ideas with the government of their main opponent for them to turn the economy around and take credit for and potentially be rewarded by the electorate for a third consecutive term. Such attitude could hurt the party as some voters could regard the boycott as selfish and unpatriotic, though I share their concerns that the government could have done better with the way the invitation was handled.

In his welcoming address at the opening of the forum President Mahama among others said that the three persistent challenges facing the economy were:(a) the rising debt levels and the associated burden of servicing them; (b) the disproportionate amount of government revenue that goes into the payment of salaries and benefits of public sector workers and pensioners; and (c) the resultant high budget deficits.

I will therefore capture my proposals along the lines of the three persistent difficulties. Your Excellency, to reduce the rising debt levels and the associated cost of debt servicing, I propose that loans should be invested in the most productive sectors of the economy, including infrastructure development programmes. Second, foreign companies that undertake projects from such loans must be compelled to use local labour and local materials where possible so that part of the loans is maintained and circulated in the Ghanaian economy. The current situation of Chinese companies using Chinese labour to deliver infrastructure projects with Chinese loans, and materials leads to the money coming into Ghana through the government and repatriated back to China through the Chinese company, labour and materials. This is partly one of the causes of the liquidity problems in Ghana.

Third, your government should renegotiate some of the adverse terms and conditions of the foreign loans, including the Chinese loan, particularly the payment of interest on the full loan instead of the actual portion released by the Chinese to Ghana. In other words, instead of payable on the go, it should be payable consumable. This is important because the loan is huge and paying interest on the whole is a burden on Ghana’s fragile economy and detrimental to Ghana. Again, the delay in the release of the loan to Ghana by the Chinese, which has also caused delay in meeting projects targets and increased project delivery cost to Ghana. This is unacceptable and not what is expected of a friendly partner like China.

Finally, the government should borrow when it is absolutely necessary. I appreciate that most, if not all governments borrow. However, in the case of Ghana, those who negotiate the loans do not do a good job. The terms and conditions of the loans are often unfavourable to Ghana. For this reason, your government should put together a team of experts to advise on future loan negotiations to secure favourable terms for the country.

Regarding the huge public sector wage bill, Your Excellency, your government has been talking about identifying and removing the tens if not hundreds of thousands of ghost workers within the public sector but to date nothing has been done. Your government still talks about plans to deal with ghost workers and each hour, day, week and month that passes without action by government, the state loses millions by way of salary and other payment to ghost workers and ghost pensioners. Please deal with this evil as a matter of urgency and punishe all the beneficiaries of such murderous act.

Ghana has had retrenchment under the PNDC’s Structural Adjustment Policy, downsizing and now rightsizing. It does not matter whatever you call it. It’s the same, the reduction of the total public sector workforce through redundancies. This is very necessary because Ghana’s public sector is overstaffed and woefully inefficient. However, before any action on reducing the numbers, remove all the ghost names from the payroll first, otherwise the rightsizing would be an exercise in futility. Be bold and show leadership on this matter.

The next task should for the teachers and nurses who have not been paid for months and years after their appointment. Your Excellency, I am sure you are aware that there are syndicates within the education and health ministries on one side and the Controller and Accountant General Department on the other from national to district who are benefiting from the delay in the payment of salaries for teachers and nurses. A Taskforce should be set up to investigate the delays and indentify all those involved, prosecuted, dismissed and made to refund all the illegal money they have taken from teachers and nurses.

Your Excellency, the government must revisit the Single Spine Salary Structure because the implementation was poor. How can a government implement such an important policy without properly costing it, finding out how it would be paid for before implementing it? Again, the government appears not to have known the total number of public sector workforce prior to implementing the policy. There is the urgency for the government to know the total number of public sector workers and pensioners who are on SSS, otherwise, the state is pouring money down the drain. Your Excellency, please do not forget to also rightsize or downsize the number idle hands at the presidency and under the Executive.

The resultant budget deficit is a creation of your government’s incompetency, indiscipline and corruption. This self-inflicted budget deficit is the direct results of the payments of create, loot and share judgement debts such as Woyome, Isofoton and many others revealed at the Judgement Debt Commission hearings. The wanton dissipation of state resources by politicians, civil servants, lawyers and some unscrupulous Ghanaians through judgement debt enterprise must be brought to an end. The best way to end it is to identify all those who have been involved for decades, prosecute them and recover all such ill gotten wealth. They should be named and shamed because if they are allowed to go away with their booty, the looting will continue with vengeance.

The other major cause of the deficit is corruption and incompetency with the management of the national resources. Example of such corruption and incompetency are GYEEDA, SADA and SUBA. A lot has been said and written about GYEEDA and SADA so I will limit myself to SUBA.

Your Excellency, my understanding is that you have accepted the findings and recommendations of the Technical Committee set up to investigate the huge payments tax payers’ money to Subah Infosolutions. If this is true, then a great disservice has been done to Ghanaian tax payers. First, the fact that the Head of Ghana Revenue Authority (GRA) had the mandate to enter into and sign an agreement with a corporate body or an individual does not mean that the terms and conditions of that agreement are right and acceptable. To give 13 percent of additional tax revenue from telecom companies in Ghana to a private and foreign company for merely checking the accuracy of data from the telecom companies is extremely generous, if not Father Christmas come early. The reason being that it is an open secret that mobile and telephone usage in Ghana and Africa in general is on the increase because of increased economic activity. Therefore, with or without Subah Infosolutions tax revenue from the telecom companies would have gone up. It is therefore wrong to attribute all such increment to Subah Infosolutions and pay them 13 percent fees on the additional tax revenue. That is simply irresponsible and dereliction of duty by GRA.

Second, Subah Infosolutions were required to plug into the data source of the telecom companies to electronically determine the accuracy of the data provided by the telecom operators to GRA. This, I believe was the main plank of the contract and without it, all what Subah Infosolutions did was just checking the accuracy of data provided by the telecom operators to GRA as done previously. Did Ghana need a foreign company to cross check the accuracy of the data on CD ROMs? Should such cross checking be rewarded with 13 percent of additional tax revenues raised? It beggars belief and tantamount to madness, especially, at a time when the nation is experiencing serious budget deficit.

Your Excellency, the GRA contract with Subah Infosolutions though legal is inimical to Ghana’s economy and must not be allowed to continue in its current form. The terms and conditions must be renegotiated, especially when Subah Infosolutions were unable to deliver the main plant of the contract. The recommendation by the Technical Committee for a 1 percent reduction in the fess from 13 to 12 percent is misguided. The percentage should not be more than 5% and that is still generous.

The telecom industry in Ghana is a major source of tax revenue for the state and GRA cannot give 13 percent away just for the mere cross checking of data. Though this might have required initial capital investment by Subah Infosolutions, the operational cost is relatively lower. Ghana has a population of 24 million and giving a whopping 13 percent of a national source of income away to a small and most likely a single purpose vehicle established solely for this fraud on the state, leaving Ghana with 87 percent is criminal. Where on earth would this happen except in Ghana. Your Excellency, I strongly believe that there are more similar money making contracts between public sector organisations and the private sector that have not come to the public notice. The government must conduct an audit of exist contracts to end the leakages through renegotiation of the terms and conditions as a matter of urgency.

The next attack should the staff of the tax collection agencies, especially those at the ports. The state is losing too much through corruption by the staff of these agencies. A reasonable percentage of tax collection ends in their pockets as bribes or purely stolen through unofficial reductions negotiated by the workers. I once heard someone in Accra recount on Citi FM morning show, how he collected a laptop sent to him from the US at the post office. He was told that the duty was GHC250.00, which he managed to negotiate to GHC150.00. He was too excited about getting a laptop that he did not check the receipt he was issued with for the tax he paid, only to reach home and realised he was given receipt for only GHC7.00 instead of the GHC150.00 he paid. This meant GHC143.00 went to the employee instead of the state. To end such day light robbery of the state, all duties should be published, made easily accessible and payments computerised to reduce the theft.

The five year tax concessions for foreign investors, especially in the extractive industry which is regularly abused should be reviewed. Foreign investors and their Ghanaian collaborators enjoy five year tax free operations, repatriate all their profits and file for bankruptcy at the end of the five years only to form a new company to enjoy another five year tax concession. By this method they never pay taxes to the state despite huge profits.

Any foreign investor who benefits from the five year tax concession should be compelled to continue in business for at least, another five years after the end of the tax concession or pay taxes on the profits for the last five years. The law should also be changed to prohibit all Directors of bankrupt companies from being Directors of another company for at least five years. This will stop the tax concession abuse and for the state to benefit from tax revenues from the profit of such companies.

Just last week a UK court ruled that a scheme set up to support new musicians as tax avoidance scheme and ordered those involved to pay back nearly £20 million taxes to the state. There are similar schemes in Ghana operated by some foreign companies. Some subsidiary companies in Ghana use their profits against the losses of their parent companies outside Ghana. Others pay for the expenditures incurred by their parent company outside Ghana either as advice or specialist services to them. All such schemes and arrangements are tax avoiding schemes by foreign investors and the government must put together tax experts to audit the accounts of especially foreign companies to reduce tax avoidance and improve income from taxes.

The above measures would only work if there is discipline in Ghana, from the leadership to the ordinary citizen. State, private institutions and individuals must enforce the laws, rules and regulations and citizens must comply with the same. Without, efficient leadership and management of the scarce resources, no amount of tax bonanza would automatically improve the economy if corruption and waste such as GYEEDA, SADA and SUBAH continue to plague your government. Your Excellency, good luck

Kofi Ata, Cambridge, UK