GHANA: The Threat of Decay*

- *An IMANI Pre-Election Report*

*November 2012*

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*Part One: Background*

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Whoever wins the Ghanaian Presidential Elections of 7th December 2012 will be confronted when they wake up on 8th January with a country where virtually all the urgently needed major reforms appear stuck in a ditch.

*Over the last 5 years, this country has seen the most dramatic and frightening slow-down in the reform effort over the last three decades.*

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What do we mean by ‘reforms’ and ‘reform effort’?

You have probably heard the phrase ‘Guggisberg Economy’ too many times already. But it remains a blunt and relevant way of describing where we are, starting from the notion that for 100 years the structure of our economy has not really changed.

Ghana remains too susceptible to price cycles of specific raw materials on the international economy. To diversify the economy away from this over-dependence on a few commodities and still provide jobs beyond the imports-fueled informal retail and services sector, we will need to see growth in overall national capacity.

The government spends nearly all the money it collects on paying wages of its employees, and has little left to invest in building this capacity. But its employees also include doctors, teachers, nurses and sanitation workers, of which more not less is needed.

So how is the government going to pay for all these workers when already their wages are making it impossible for it to invest in the facilities they need to build their capacity?

So for example, for many years we had a department of public works with full-time employees but little or no money to fix anything really. We had a department of parks and gardens that couldn’t even afford to manage a seed bank.

Today, we still have hospitals where the lifts don’t work and universities in which water don’t flow through the taps.

The workers insist however that not only are there no facilities to enable them train properly and do their work effectively, but also that the wages they receive are disgracefully low and, with inflation and exchange rate losses taken into account, declining in real terms.

The government tried to address some of these challenges by coming up with a concept called ‘single spine’, which was supposed to ensure that there is fairness in the way wages are paid for work in the public sector. But how far can fairness go when the real issue is that the majority feel the wages are way too low, and that the available facilities for training and work are abysmal? It is like spreading misery equally about.

To improve on the way it does its business, government of Ghana has tried to ‘decentralise’ its functions. The idea is to reduce the cost of management, enhance accountability, and thereby ensure more resources go into the investments that matter, rather than continue to splash it all on government workers managed from Accra.

But what have been created – the district assemblies – to carry out this decentralisation is much too weak. District assemblies have limited means of raising their own money because the notion of a local income tax is fanciful in a situation where even at central government level taxing a sprawling informal sector has proved easier on paper than in reality.

Because the district assemblies don’t raise their own money, electing their heads won’t make much of a difference as the central government will still hold the purse-strings and call the shots. But being appointed by the government as they now are, the only real motivation these district assembly bosses have in their work is to keep the local party bosses happy so they can remain at post.

The lack of effective local capacity means essential services like health and education are run from Accra by the government. This has made it extremely difficult to inject the right level of resources into them and insist on accountability since, as we have already said, government is already overburdened with paying the workers and lacks motivated managers to supervise performance on the ground.

With the essential services workers seen as part of the national bureaucracy rather than as members of dynamic professions, management is always going to be a complicated affair anyway.

Consequently our hospitals have become death-traps and our schools laboratories where ignorance is concocted and administered to our young people.

Because the schools and hospitals are so bad, lifting the poor from poverty is several times more difficult. The poor attend weak basic schools where due to poor teaching they are unable to progress to the best middle schools.

Malnutrition and childhood disease, poor hygiene and low stimulation in the environment, all ensure that even the little education available in middle school sieve through them without leaving much residue. Higher education is simply out of the question for these wretched of our society.

The most ambitious of the poor end up at vocational and technical institutes (including polytechnics) to participate in a cycle of mediocrity in/mediocrity out, thereby depressing the social standing of vocational and technical sciences in the country.

Meanwhile, the growth of ICT has completely transformed the technical and vocational disciplines across the world.

Automechanics is no longer what it used to be because of electronics. Carpentry and masonry, metal fabrication and ceramics, and a myriad other crafts, are not what they used to be because of AutoCAD and emerging design technologies.

But the teachers in the technical institutes themselves are not ICT-proficient. How are they supposed to inject ICTs into technical training? The end-result is the lack of an industrial workforce for the secondary portion of the economy.

The hollowing out of the small and medium-scale manufacturing sector, and the near collapse of the agro-processing industrial base in Ghana, are testimony to the ongoing extinction of light manufacturing in this country.

The tertiary portion of the industrial sector can of course not stand without legs. Even in the area of pharmaceuticals, arguably one of the few bright spots in Ghanaian industry, there is little evidence of genuine depth. Not a single WHO-certified manufacturing facility is up and running in Ghana today.

Tertiary industry of course requires energy supply. We are unfortunately nowhere near the development of a rational electricity tariff policy, without which even further investments in installed capacity will not change the erratic supply situation in the country.

Having the power plants is one thing, fuelling, servicing, and maintaining them is another. Unless a discriminatory tariff policy is introduced to ensure that those who can afford to pay more do so, power plant operators cannot run at full capacity. A discriminatory tariff policy however requires a modern grid, yet we have no policy for attracting investment for grid optimisation. Having discovered that PPPs can help with the ‘generation’ side of things, we have neglected to create a robust framework for investment in other parts of the power system.

So, as we are sure is evident by now, our problems in this country are inter-dependent and inter-connected. It is actually one problem manifesting in different guises in different sectors: the CHAOS OF POLICY-ILLOGICALITY.

It is in search for relief from this chaos that reforms have been pursued since the early 50s to the present to re-orient the social and material economy and inject logic into the dysfunction. Otherwise, politicians pull in opposite directions, technocrats work at cross-purposes, and the population become estranged from the national purpose.

So when we said the ‘reform process’ has stalled, we meant reforms to re-set this country on a **logical course through policy coherence**. This is something we have been trying to do as a modern, contiguous, country for more than a century now.

We argue that the last 5 years has seen the deepest stagnation ever witnessed in this country, and we will elaborate by taking major elements of the reform process and analysing their progress. We have a chosen a 5-year timeframe because this is the unit most favoured in national planning cycles worldwide. We have also focussed on structural issues from a strategic perspective.

If on 8th January 2013, the reform process is not brought back on course Ghana will continue on this descent from policy chaos towards national decay.

*Part Two:*

*1. 1. **Industrial Policy*

Successive governments have given pride of place to the ‘integrated aluminium industrial complex’ plans that date to Ghana’s first republic.

The decisions over the last few years to engage strategic partners of either dubious intent or dubious capacity have severely crippled this goal. Following the haphazard sale of Ghana’s bauxite resources, and an arthritic revival of Valco on one potline, the entire policy has been dealt one blow after another. IMANI has recorded these affairs in great detail here:

http://www.modernghana.com/news/262638/1/imani-special-report-ghanas-integrated-aluminum-fe.html

The decision to establish a defence industrial holding structure was similarly poor, and has served to divert critical attention from the stalled divestiture process, by means of which some of the factories targeted by the defence holding entity, such as the shoe factory, were supposed to be transferred to the private sector.

The decision to implement a modular strategy for the development of the country’s gas resources has also led to complications in procurement, engineering and commissioning.

The further decision of completely outsourcing this integrated gas project to a foreign entity instead of pursuing local and international public-private partnerships, for the sheer reason of meeting unrealistic timelines, has robbed this country of a golden opportunity to develop a skills base, and vital linkages with the financial sector, for this critical new resource.

There is now evidence that the gas infrastructure project will have significant, perhaps permanent, shortcomings. The quantity of gas produced, the pricing and marketing framework, the timeframe of actual integration into the power grid, maintenance policy and a host of factors have come together in this severely challenged project to prevent the prospect of Ghana’s gas being used to power industry in the near term.

*2. 2. **Hydrocarbon Policy*

The discovery of significant oil and gas reserves in Ghana 5 years ago and the commencement of production 2 years ago promised to open up a new source of vital revenues for government of Ghana.

We have already touched on the gas matter, but only from the point of view of industry. From a financial services and wider economy point of view, the country’ oil and gas sector has in the last two years proved a depressing disappointment.

Weak regulatory oversight has led to massive cost-overruns and constrained the revenues generated by that sector. An incoherent local content strategy has failed to identify champions and seen niche areas like aviation, catering and logistics that were emerging to support the industry evaporate even before they could form. The oil companies continue to shift ancillary activity to the Ivory Coast, and investment is beginning to seep out of Ghana to countries on the West Coast considered more investor-friendly.

Bureaucratic inertia and lack of clarity and coherence on the policy-making front have led to severe delays in the updating of laws and regulations governing new exploration, leading to a massive damping down of enthusiasm on the part of greenfield investors and high-risk exploration financiers.

The same lack of imagination and competence bedevils the mineral regime. The Minerals Commission and allied agencies have proved so ineffectual, despite claims of restructuring the prospecting and exploration system, that the illegal small-scale mining problem in Ghana has been deepened by an invasion of foreign plunderers.

The inability to decentralise the enforcement of mineral rights and holdings to the district level and the confusion inherent in the land control regime as it affects mineral rights management has made mining administration in this country a joke.

Several plans to site regional oil refineries in Ghana have stalled, and the Tema Oil Refinery (TOR) continues to chase one clumsy international loan after the other. Government’s absorption of operational debts ‘on behalf of’ the refinery has merely provided respite for the accumulation of more debt, delayed urgently needed restructuring, and done little to reduce the inefficiencies at the plant.

Perennial inability to supply products for the local market has now become the refinery’s hallmark. Very soon, there would be no economic case for local production anymore, especially as the TOR continues to haemorrhage talent and burn the confidence of suppliers, customers and partners.

Plans to deepen the petrochemical industrial complex in the last 3 years by establishing maritime trade in liquefied natural gas, produce methanol for industrial applications, produce fertiliser chemicals, build bulk storage complexes, and pipelines, amongst other transportation solutions, have all failed to receive clear-eyed, forceful, leadership from the government’s energy policy team.

*3. **Infrastructure, Housing & Energy Policy*

Railways, ports and regional road corridors form the nexus of the infrastructure policy in Ghana.

Not a single integrated railway deal has been shepherded to success over the last five years.

The Chinese CDB package has been managed so arthritically that more than 2 years after it was broached as the key infrastructure financing mechanism in Ghana disbursements have yet to begin.

Meanwhile, not a single large-scale residential real estate program has survived the test of reality in the last 5 years, with the result that the housing deficit has widened not closed.

Industrial estate projects in the Western Region, oil and gas terminals, major port rehabilitation exercises, mass housing developments, and cross-country rail projects litter ‘infrastructure blueprints’ with little hope of coordination and actual packaging for credible investment, not to talk about seeing the light of day. Shady investors have been given free rein to distort their role in these projects, making the projects less and less attractive to serious investors.

Poor bureaucratic coordination means that proposals in their hundreds from several serious players receive scant attention whilst poorly thought through agreements are rushed for rubber-stamping in parliament. (See: www.* imanighana*.com/wordpress/?p=337 ).

*4. **Public Sector Capacity*

The integrated payroll management system continues to totter. Despite the focus on eliminating ghost names through biometric enrollment report after report suggests that hiring outside regulations continue to burden and weaken the public workforce strategy.

Salaries are sometimes paid more than several months late, and the enrollment of new hires into the public workforce register and payroll can take upwards of a year in many documented cases.

Regression analysis indicates clearly that over the last year the inter-relationships between investment into payroll reforms (including the purchasing of expensive software) and actual improvements in management performance have worsened or stagnated.

The same challenge is evident in the management of public finances generally.

Reforms to implement a Treasury Single Account, to align departmental spending with the central budgeting process, to eliminate arrears in payments due government contractors, and to ensure that budget implementation tracking is steamrolled into all departmental processes have all stalled, and in the case of the latter actually worsened.

The same weaknesses that lead to poor budget implementation tracking also show up when the state has to spend borrowed monies from donors. Despite the growing spotlight on the issue, government’s ability to move donor projects even after money has been committed has shown remarkably little improvement, with more than a billion-dollars’ worth of projects stalled for nothing more than incompetence.

Departments continue to initiate projects and fail to align them with national budgeting priorities leading to abandoned projects all over Ghana.

Projects initiated by GETFund, DACF and other pools of government investment cash have particularly shown a worsening tendency to be mismanaged even prior to commissioning.

Rather than focus on actual departmental level service infrastructure, including digital archiving, analytics, inter-agency communication, automation, etc. the Ministry of Communications is instead voting a suspicious amount of money building brick-and-mortar datacenters when no capacity has so far been built in the more promising modern cloud and remote access architectures needed for an effective IT-driven government ecosystem.

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*5. **Education & Health*

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The National Health Insurance System (NHIS) has consistently failed to achieve any of its core strategic reform objectives. Premium mobilisation continues to fall as a percentage of resources available to the Insurance Authority (NHIA).

The total number of active providers (as opposed to those on paper) is falling at a frightening rate. A comprehensive quality of care index does not exist making empirical measurements of the success of patients in obtaining treatment within the system virtually impossible.

Whilst the NHIA claims to be investing in efficiency systems, the adoption of ICT as a core driver of service delivery remains rudimentary.

The Authority has no systems to analyse disease burdens at a disaggregated level. Its ability to target its investments where it matters most, through a continuous monitoring of ground-level compliance with the essential medicines list, treatment guidelines etc. is virtually nil.

At present, the Authority operates more or less blind of the dynamics at the delivery point. With no co-payer or premium-rationalisation policy to incentivise and empower the patient to monitor treatment conditions, the Authority’s goal of enforcing ethics at the level of the health provider has remained a sad dream. All this as the insurance fund (NHIF) dips further and further into deficit.

The Ghana Education Reform Project implemented in late 2007 has now run for a full length of five years, but not without disruption. The change of government at the turn of 2009 saw the duration of the secondary education program reversed from 4 years to 3 years. Apart from this action no significant work has been done to review the trajectory of the reform and its impact on any of the key aspects of education identified by successive commissions: administration, content, human resources, coverage and socio-economic justice, to name a couple.

A good example of the policy-logic dysfunction in operation is the ongoing distribution of free computer hardware in the country without a corresponding effort to develop and disseminate even more vital software learning tools and content, including training software. Classroom and lab resourcing have seen no improvement.

The national broadband policy is revealed for the paper-husk it is when probed for its contribution to critical areas of national life such as education and health. The program to connect rural schools to the internet has moved at a snail pace for several years now, with little sign of progress.

ICT is far from being incorporated into the learning and teaching process in Ghana, all in contravention of the Anamuah-Mensah report, and yet free hardware is being distributed to pupils. The limitations of hardware and connectivity in developing youth capacity are clearly seen in the growing conversions of internet cafes across urban Ghana into sites of anti-social behaviour.

*6. **Agriculture*

The goal of agricultural reform in this country has been to prioritise agro-processing and food-security.

The ‘food security’ goal has not always been well-defined historically, particularly in terms of its connection with other parts of agricultural policy. Ghana has experienced only a few episodes of famine in its history because the growing trans-border trade in agricultural produce has ensured that supply buffers exist during periods of disruption.

Agro-processing on the other hand remains a clear and coherent emphasis of successive governments.

Sadly, attempts to spearhead agro-processing using some key crops such as cotton, cocoa, sheanut, tomato, soya and cowpea have largely floundered. Fish-processing has fared no better. Ghanaian fish and fruit processing plants are becoming permanently dependent on imports for their feedstock. In fact, Ghana’s largest fruit processor today imports the bulk of its fruits.

Meanwhile, fertiliser policy has failed to raise the use of fertiliser per acre by Ghanaian farmers. The voucher management system for fertiliser subsidies has failed due to poor coordination and management.

On the issue of irrigation, a core item in the agriculture reform program, the contract management and procurement system has been so weak that very few, coherent, useful projects have seen the light of day since a much publicised revamp of the irrigation authority concept in 2009.

*Part Three: Conclusion*

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The time and convenience of our readers prevent us from touching on all the key reform issues in this report. We have also referred to, rather than reproduced, the many policy prescriptions we have made to the several problems identified in this report in previous commentary. Subsequent commentary in the print and electronic press may allow us to fill some of the still remaining gaps.

There are areas such as law and justice; defence and national security; social security, employment, disability and pensions; sanitation and the built environment; sports and the creative arts; the natural environment; gender; youth; tourism; and diplomacy, that are so important in any scheme of things that their omission will obviously affect the effectiveness of our argument in certain respects.

However, we selected the areas above because we believed we could raise systemic points that cut across multiple sectors and provide a strong illustration of our central thesis: the interconnections across our problems as a country worsen and amplify the effects of **illogical policy-making** in key areas and accelerate our downward slide as a country.

Whoever takes up the mantle of leadership in Ghana on 7th January 2013 will have their work cut out for them.

*[As this report is intended for the mainstream press, the full bibliography of the sources and documents relied upon during its preparation is only available as an annex to the annotated version that appears on the IMANI site – www.imanighana.org/ Read more IMANI releases at www.AfricaLiberty.org]*