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Opinions of Wednesday, 16 October 2013

Columnist: Abdul-Yekin, Ali Abdul

Politics of affordability

Give a child a responsibility requiring the employment of wisdom, and he turns it into a child's play. The lives of the 24 million citizens of Ghana is nothing more than mere politics to our Honourable Minister of Finance and Allied Institutions, Fifi Kwetey. "Politics of Affordability is Dangerous?" Why not? The person condemning Ghanaians to paying more than necessary for petrol, can afford to pay more. It is affordable to him. Here is this person chastising others of "Politics of affordability". What would have been the position of this man if he was not one of those who can afford the increase?

"Ghanaians should be ready to swallow the bitter pills...." The Gospel according to Prophet Fifi! Demn it!! Fifi Kwetey and his family are swallowing their fair share of the bitter pills and the holy man is asking Ghanaians to join him. A government official who is getting everything he and his family enjoy officially paid by the tax payer, is telling us to tight our belt and swallow more of the bitter pills. They were given the opportunity to make history of changing the lives of a people that are already bad and, all they could do is to sell out the people into slaves. I struggle to understand the infatuation with which a democratically elected MP of Ketu South, Hon. Fifi Kwetey champions the increase in fuel price by his defence of subsidy removal. Like the majority of Ghanaian electorates, Ketu Souths is a community where the majority of the electorates lives far bellow the poverty line.

The removal of the petroleum subsidy by the state means an increase in the burden on the citizens.

The result of what Fifi Kwete is advocating for is increase in the price of fuel. This means Ghanaians as individuals, should bear directly the weight of the fuel than the state is doing on their behalf. The removal of subsidy means increase in the price the citizens of Ghana shall be paying for the product, leading to increase in the general cost of living. Fifi Kwetey and his rich colleagues are very rich and can easily buy their petrol despite the increase, at whatever price. In fact, the deregulation of the product means, Fifi Kwetey and his privileged colleagues are those to be selling the petrol to Ghanaians, than the government of Ghana.

The picture however is different with the experience of the Ghanaian populace. The poor are going to be hit hard by the removal of the petrol subsidy as the government will be relieving itself from bearing the heavier burden. The government is removing itself from its primary responsibility of protecting Ghanaians against powerful rogues. Who is stronger? Is the Ghanaian now stronger than the state of Ghana in dealing with a heavier and complex issue like fuel? The big question is, how does the government finance the petroleum subsidy? The government finance the petroleum subsidy by collecting tax from all Ghanaians in other areas, particularly the rich. The government then use this money to import the petrol in bulk from the source, meaning the government enjoy economic of scale by bulk purchase. The amount of money at the disposal of government also allow it, on behalf of Ghanaians, to cut out the middle men as well as cushion the people from the extremes of the market forces.

The tax collected by the government from all Ghanaians means, the poor enjoy at the expense of the rich as the rich pay more on tax while the poor pay less or nothing. The size of the government revenue from tax allow the state to also process the crude, by setting up establishments like our Tema Oil Refinery (TOR), to generate other petrol chemical products to off set most of the cost. This again allow the state to make such other products to be available to Ghanaians free of charge or at reduced prices.

The government involvement in the provision of petrol to Ghanaians means it can determine the local price of the product in ensuring that Ghanaians are not internally, exploited. The final concerns on these issue are, what does subsidy means and why subsidy by the state?

A subsidy is any allowance in terms of provision of goods and services, the state make available to citizens that would not have been the case, if such provision were freely determined by the market forces. A subsidy situation can arise when the cost of production is more than the amount the consumer is paying, with the difference born by the state. The difference in this case, is the subsidy. Please, bear in mind that the money being paid as subsidy is not the president's money. the money belong to the state as tax.

The differences between the cost and the amount paid by the consumer can result from the efficiency of the state in the production process. Subsidy can also arise as a result of the state not adding its own portion of tax on the cost of the product. The only reason for the increase in the production cost of petrol to the Ghanaian at the moment, is not because the cost of the crude oil at source is far more than what the Ghanaian is already paying but, the increase in the cost is due to government inefficiencies, taxation and corruption. Another situation where subsidy can again arise is when the price of the product obtainable in other locations, are less than the amount the state is selling the product to her citizens. Most African countries are victims of subsidy removal on this basis. Most governments on the continent of Africa argue that their own citizens are not paying their fare share on the market rate of the product. They argue that the amount being paid by others in other countries are far more. They argue that most countries purchase the product from basically the same sources and must pay the same price for them. Such governments like those in the helm of affairs of Ghana, argue that if others are paying more, then their citizens should also be tightening up their belt. The subsidy in this case is not just the amount the government is adding to the product in tax but the amount the government will be making if it is charging its citizens the same amount obtainable elsewhere. I have heard people arguing that Ghanaians have to pay more because the price of petrol per litre in the UK is far less than the Ghanaian is paying. This kind of hollow argument is ignorantly employed by pigeon brain economists, even in oil producing nations like Ghana, employing international pricing standards or prices in the industrialised nation. Little do this people say about the income of an average person in the UK in relation to his counterpart in Ghana.

The Ghana government in particular feels the extra amount being lost due to the consumer price difference, is a waste on Ghanaians as such amount could be use by the government in other areas like sending state officials children to school abroad or going for medical treatment abroad. On this, the state feels if she increases domestic petrol price by removing the subsidy (i.e selling the product at a higher price as obtainable elsewhere) regardless to income disparities or the nation being an oil producers, less people will be buying the product due to the increase in price. The fall in demand of petroleum product means Ghana as a government will be consuming less petrol domestically. The state will then be ending up with some surplus of her international crude oil allocation which is then sold to those outside Ghana, who are willing to pay more.

Before the state of Ghana started producing oil, we were told that the burden on the Ghanaian will reduce when we start producing our own oil. We were actually enjoying our subsidy on fuel as citizens of Ghana without being oil producers. Now the oil is here. Our tax burden is not reducing but increasing daily. Cost of living are all increasing while our nation's support is shrinking further. Those in charge of our fate are getting fatter in size and in money.

We are suffering from instability in almost everything and increasing cost on electricity and water supply. Our president and ministers are telling us that next year, we shall again start producing gas and the problems will be reduced. If Mr. President is sincere with us, why then is he increasing the tariffs when he know fully well there will be more money to him from gas? Countries like Togo, Benin Republic, Niger, Mali and Senegal have for several years been economies without state subsidy on fuel. It is a common sighted to see people by the road side in Benin Republic selling petrol in all forms. Black marketing is a normal thing associated with the product. One hearing Fifi Kwetey sighting some African states without subsidy as a success story, is abhorring. Togo easily come to mind as a success story of subsidy to Fifi Kwetey. Togo or any of the West African state cannot claim anything over and above Ghana in terms of economic performance. Probably Fifi Kwetey should have been specific with his reference of success by our neighbours, on government removal of subsidy, as examples.

What subsidy removal on fuel in particular, does to an economy is to cause increase in prices of goods and services. Everything automatically goes up leading to hardship on the poor, creating unnecessary inflation in the short run. In the long run, everyone ends up a loser. My candid understanding of what President John Deamani Mahama want to do is, to absolutely remove the government of Ghana from the oil business all together, for the oil Shylocks to do as they please with Ghanaians. These Shylocks have got money and are very good lobbyists in buying corrupt individuals in political office. What we, the masses of Ghana have got, is our number as Ghanaians and the love of our nation. We shall not sit down to be sold away like goats. The president promised us relief in all our hardship when he become our president.

He told us he will carry our burdens over his broad shoulders as our head of state. He promised us milk and honey as our head of government business by getting us the best deal. He promised us the best protection, from local and international vampires as our commander in chief. Here is our president, honouring his words, as the gentleman that he is.

Kofi Ali Abdul-Yekin