We have taken note of the alternative costing of the NPP Free NHS policy

produced by the Center for National Affairs (CNA).

http://edition.myjoyonline.com/pages/news/201203/83411.php

This is a very welcome development, since it heralds a new era of

competitive policy-based political debate in this country.

In the specific case of the CNA?s intervention in the SHS debate, however,

there are simply too many gaps in their analysis to allow for its use as

an effective tool in interpreting the financial impact of the proposed

fee-free SHS policy.

We however welcome their suggestion to use primary Ministry of Education

data and the results of the Ghana Living Standards Survey ? round 5.

Indeed, we have overcome our earlier concern about the Ministry?s dataset

not being up to date by using careful projections. This has enabled us to

follow an identical approach to the CNA?s, and also provided further

corroboration of our earlier analysis. We are now proceeding to publish

the results.

We had chosen to use JHS enrolment data in our earlier analysis because

the treatment is smoother that way. The critical impact of the policy is

derived from its objective of ensuring seamless ?transmission? from JHS to

SHS. In that light it makes sense to focus on that level and to ?stretch

out? the average per capita costs to accommodate the analysis. That

notwithstanding, the approach used by the CNA, provided the shortfalls in

their methodology are remedied, should lead to outcomes similar to those

produced by the original IMANI approach.

We will now proceed to identify some of the most worrying gaps in the CNA

analysis.

1. CNA claims that according to GLSS data the amount spent by households

on each secondary student is $148. This is odd since the actual average

amount indicated on page 124 of that document is GHC244. This figure is

converted to $148 by the CNA, wrongly.

The CNA should have used 2008 constant dollar rates rather than the early

2012 dollar-cedi conversion rates that they used. Had they done so, the

figure would have come to: $256. Indeed, the GSS data dates back to 2005,

so a truly robust treatment would have projected to 2011 in Ghana Cedis

before commencing the dollar conversion. Again, the final sum would have

been more than twice what the CNA claims.

2. The CNA assumes that the total cost of catering for the expanded intake

of students is limited to Government?s absorption of household

expenditure. They do not account for the fact that for each new student

beyond fixed enrolment, the existing costs ALREADY borne by the government

has to be considered as ?additional? when evaluating how much more new

students would cost the nation. Page 135 of the 2008 Preliminary

Educational Sector Performance Report provides the 2008 per capita costs

over a period of 5 years. Using the same rate of growth over that period

to project current government expenditure (usually called ?subvention?)

yields an average expenditure of more than $840. This gap in the analysis

alone, sadly, completely derails the CNA?s conclusions.

3. The notion that over the next two years the Ghanaian economy will

double (from about GHS45billion to more than GHS92billion) cannot be based

on any realistic projection of current growth trends. At best a 25%

expansion in GDP (as opposed to the CNA?s 100%) can be expected. Any

expanded oil revenues will be based on current planned investments in the

oil resource (i.e. we need to pre-invest in oil infrastructure for fresh

output to come on board) giving us a clear view today of what oil revenues

are likely to be over the life of a prospective NPP government, should

they win the 2012 general elections.

These grievous gaps, unfortunately, makes the CNA?s figures untenable in

the current debate.

Below, we have proceeded to use the same methodology and data sources as

they did (but only after closing the critical gaps in their analysis).

ENROLMENT ISSUES

Because there is no headcount of Secondary High School (SHS) or even

Junior High School (JHS) students this year or the year before, the

analysis has to be based on projections from the available data. The

Ministry of Education (then Ministry of Science, Education, Sports &

Science ? MOESS) published the now widely referenced, ?Preliminary

Education Sector Performance Report (PESPR)? in June 2008.

In that report the Ministry provided the following enrolment figures at SHS:

2003/2004 ? 328,426

2007/2008 ? 454,681

These data points suggest a compound growth rate of 38% over 5 years. 5

years is a good time span to average out year to year fluctuations.

Using the same growth rate trends, it is safe to assume that current

enrolment, in 2012, is about:

2011/2012 ? 630,000

It is important to note that while this data includes figures for private

SHS students, it does not include information on the technical,

agricultural and vocational (TAV) sectors, where data is weakest (the 2008

PESPR report provides an estimate of about 70,000 ?trainees? in public TAV

institutions, but the sector is treated in such a peculiar fashion that it

is perhaps best to leave it out of this analysis.)

We hope to show later in our discussion that it does not really matter

which proportion of total student enrolment relates to the private sector

as opposed to the public sector. This is simply because we will be using

pre-calculated average expenditure per student, which already takes into

account the fact that the central government spends very, very, little on

students in private SHS schools.

In considering enrolment for the coming analysis, we shall be using the

transmission rates between JHS and SHS instead of gross and net enrolment

rates. The proposed NPP policy has as its core objective the extension of

?basic? education to cover SHS, and sees therefore a seamless

?transmission? of JHS students to SHS, in very much the same way that

Primary 6 pupils ?transmit? automatically to JHS today. We should, hence,

in our analysis be interested in:

1. The certain increase in the number of JHS students that shall enrol in

SHS in 2013/2014 should the NPP form the next government.

2. The fact that JHS enrolment itself is likely to expand further

considering the huge numbers of potential JHS enrolees who are currently

not in school. This shall feed into even higher enrolment at SHS in due

course.

With that in mind, we can now examine the JHS enrolment figures provided

in the PESPR report:

2003/2004 ? 986,111

2007/2008 ? 1,224,964

Using the same 5-year compound growth rate, we can project current total

enrolment at JHS, i.e. in the 2011/2012 academic year, as follows:

2011/2012 ? 1,525,000

Consequently, at the commencement of the 2013/2014 academic year, assuming

the same rate of transmission as primary-to-JHS (67%), the total number of

enrolled students in SHS1 shall expand from the current roughly 210,000 to

about 342,000.

[One can increase the total enrolment in SHS2 and SHS3 by the historical

trend of annual increases. Let?s however leave the figure static for

clarity of analysis.]

On the above assumption, it is estimated that upon the commencement of the

policy in 2013/2014, roughly 762,000 students shall be enrolled overall.

This is a very realistic projection.

We could however also, for future reference purposes, assume a more

conservative transmission rate, of 58%. That shall imply an SHS1 enrolment

level of 300,000 students upon the policy?s commencement, and an overall

SHS enrolment level of 720,000.

Based on identical projections, the realistic scenario suggests a total

SHS enrolment figure in year 4 of the NPP administration (year 3 in the

policy?s lifecycle) of 1.28 million.

Based on identical projections, the conservative scenario suggests a total

SHS enrolment figure in year 4 of the NPP Administration of 885,000. It is

important to point out that even ignoring the likely effects of the policy

current growth trends suggest that the SHS enrolment level in 2016/2017

shall be approximately 790,000.

COST ISSUES

For ease of analysis, we assume that in year one, all ?additional? costs

as a result of the policy shall arise because of the additional 90,000

students (in the conservative model) or 132,000 students (in the realistic

model). The other cost item, unexamined in this analysis, to keep in mind

is the ?cost of adjustment?. The cost of adjustment includes light capital

expenditure such as desks, learning materials (including text books),

public education, supervision, etc. but not heavy capital expenditure such

as classrooms, dormitories, dining halls, transport equipment, workshops

and laboratories etc.

THE ALMIGHTY EQUATION

To determine the additional (or combined marginal) cost due to new

students joining the secondary school system in year one, we employ an

elementary arithmetic relation:

Unit Current Govt Subvention (CGS) + Appropriated Household Expenditure

(AHE) = Public Sector Student Per Capita Expenditure (SPC)

That is simply to say that the cost of the current subsidy or subvention

per student at SHS plus the expenses currently borne by households but

transferrable to government in the wake of the policy equals the

additional cost per new student enrolled as a result of the policy.

Both the government?s average expenditure per student ? CGS ? and the

private expenditure per student ? AHE ? must be adjusted year by year for

inflation and currency depreciation costs in order to obtain the ?real?

amount in the future.

Based on historical trends, a conservative 15% compound annual growth rate

might suffice for direct analysis. We however chose to rely on implied

projections in this narrative, thus enabling us to relax this assumption.

Let us now examine one after the other the two inputs in the arithmetical

relation above.

CGS (Unit Current Government Subvention)

According to the Ministry of Education itself:

The Per capita (the Ministry distinguishes this from the ?unit? cost)

public sector expenditure ? the ?CGS?- in 2003 was GHS191.

By 2007 the corresponding figure was GHS523.

It is instructive to note however that these figures did not include

?personnel emolument?, essentially the cost of salaries paid out to

teachers and other public sector educational workers.

The combined growth rate in the CGS government expenditure over the

time-span under consideration is thus 273%.

It can be safely projected that the corresponding 2012 figure is GHS1,452,

which is in turn equivalent to $842 in 2012 prices. It is acceptable to

use this as the initial CGS figure for the 2013/2014 commencement year.

While this figure may come across as aggressive given other estimates

provided so far in this debate, it is important to note that it is derived

by sound principles from the Ministry?s own base data, and that it does

not even include personnel emolument costs.

The terminal CGS (government average expenditure per student in 2016/2017)

can be derived by projecting the 2008 figure at 2012 prices yielding

$1,220. It is interesting to point out that at 3% per annum the dollar

inflation rate is not completely negligible but for clarity of analysis we

will leave it static.

We now need to compute the AHE.

AHE (Average Household Expenditure)

We use the GLSS-5 data (notwithstanding the widely known concerns about

occasional granularity issues at district level).

The average secondary school expenditure per student per household is

provided in the September 2008 GLSS-5 report as follows: GHS244, which

corresponds to $256 (at 2006 dollar prices of 0.95 GHS).

If we were to follow the CNA?s lead and assume that government shall

assume 85% of the costs involved, then the adjusted AHE figure for this

analysis comes to $217. Given the breakdown of costs in the GLSS-5

however, there is no reason why government cannot choose to absorb the

entire cost if the policy is to boost enrolment. Since boarding students

outnumber day students, the transport component of the AHE build-up, the

one cost item easily discounted, is very small.

SPC (Total Policy-Related Cost Burden Per Student)

From an abundance of caution, we have decided to use the 2008 CGS level

throughout the remaining analysis, thus producing ultra-conservative

results.

In that light the cost per each new student is $1100 (CGS + AHE). In the

scenario where government chooses not to assume the full complement of

direct household costs the corresponding figure is: $935.

TOTAL POLICY-RELATED COST BURDEN ? CONSERVATIVE

In the ?conservative scenario?, this amounts to $134 million or $114

million, should government assume only partial responsibility for private

costs. Note however that this figure relates strictly to additional

enrolment ?following the introduction of the policy?. The government must

also absorb the household expenditure of those SHS1 students who ?would

were enrolling anyway?. This is an additional $54 million, bringing the

total cost to $184 million or $168 million in the conservative model.

In the ?realistic scenario?, this amounts to $154.5 million or $133

million plus $54 million, bringing the total cost to $208.5 million or

$187.5 million.

TOTAL POLICY-RELATED COST BURDEN ? REALISTIC

At this point, the analysis is more straightforward because we shall be

able to use total SHS enrolment to compute the total cost burden.

Based on assumptions already discussed, total JHS enrolment shall stand at

1.906 million students.

In the conservative model, total enrolment at SHS level shall come to 1.1

million. Total expenditure shall therefore come to $1.216 billion or

$1.0285 billion (in the scenario where government assumes partial

responsibility for private costs).

In the realistic scenario, total enrolment at SHS level shall stand at

1.277 million. Total expenditure shall therefore come to $1.404 billion or

$1.1934 billion.

The median projection is thus: $1.340 billion or $1.1115 billion.

ADDITIONAL NOTES

These calculations do not explicitly accommodate the policy?s adjustment

and administration costs, defined above to include learning materials,

furniture, public education etc. There has furthermore been no accounting

for capital expenditure such as buildings and transport equipment etc. No

personnel emolument or training costs are included in the CGS calculations

providing additional latitude for any downward adjustments due to error.

Because the data used for the CGS calculations are already averaged out,

there is no need for specific disaggregation of rural ? urban, private ?

public, or day ? boarding sub-data.

Clearly, the use of GLSS-5 and Ministry of Education data, and the narrow

focus on SHS intake analysis in no way revises the earlier estimates

downwards. If anything at all, the higher averages, due to higher

resolution data, merely exacerbate the cost implications of the fee-free

SHS policy.

In future commentary, we shall investigate the capital costs of

adjustment, before moving on to examine the cost-benefit matrices and

overall structural and other objective social and economic merits of the

proposed policy.

IMANI Center for Policy & Education (www.imanighana.org); syndicated by

AfricanLiberty.Org