IMANI?s Critique of the President?s Address

0

We were generally impressed by the tone and style of the President?s 2012
State of the Nation?s Address.
The content was also clear, crisp and straight to the point. The President
was sober, succinct and restrained in his enthusiasm. As an organisation
that has clashed with the Presidency in the past for painting
over-optimistic pictures of the state of the nation and of his political
program, we found the sobriety and composure heartening and assuring.
While the specific things His Excellency said are important in their own
right, it is even more critical to treat the address as an opportunity to
direct attention to the importance of rigorous and coordinated
policymaking in this country.
We will therefore be critiquing the President?s speech with a focus on
calling attention to the need to revise national thinking about some of
the most important issues confronting our development. We do not aim to
pass comments on those sections of the address that do not immediately
raise new policy issues.
THE ECONOMY
The Macro-Economy
The President understandably placed the ?macro-economy? at the very top of
his address. Some very significant macroeconomic successes have been
realised under his watch.
He mentioned the growth rate, provisionally pegged at 14%, as clear
evidence of effective economic management. Even discounting the direct
contribution of the roughly $2 billion worth of petroleum produced in the
year under review (7% of GDP), and the indirect contributions to GDP as a
result of the onset of the oil economy (pass-through effects on real
estate, employment, infrastructure etc.), the resultant growth rate would
still cross the historically impressive 6% mark.
On the subject of inflation, he had enough reason to pat his government on
the back. The current official rate of about 8.7% places the indicator at
a historical low.
Some commentators have expressed a concern that the low inflation rate
currently being witnessed has been purchased too exorbitantly.
This is however debatable seeing as the ?purchase price? usually mentioned
in this connection is ?low government spending?. The truth in actual fact
is that government expenditure has been rising steadily and considerably
over the last 3 years.
For instance, total expenditure was nearly 30% higher in real terms in
2011 than in 2010. Despite low growth in capital expenditure, this was
more than made up for in high recurrent expenditure.
It cannot be emphasised enough how important it is for any government to
maintain low and steady inflation.
Inflation is the cost of holding money. In that sense, it penalises savers
and investors in most monetary projects (i.e. the situation is more
ambiguous in the case of certain capital projects). High or erratic
inflation makes it next to impossible for investors to plan effectively
for the medium to long-term. It also renders government orchestration of
various factors such as interest rates highly difficult. During cyclical
economic downturns, this difficulty can actually lead to serial
miscalculations, therefore deepening the crisis (instead of accelerating
growth, as some non-orthodox economists sometimes argue).
It is true that inflation is poorly measured in Ghana. This is easily
evident in the weakness of the data collection system of the Statistical
Service. There are also weaknesses in the prevailing methodology that are
yet to be improved.
All these notwithstanding, the truth is that these same weak tools of
measurement have been in use for a long time, so that while they may be
less than useful in gauging the absolute magnitude of inflation, they are
nonetheless a consistent gauge of the ?trends? from year to year.
Hence, while we may not be able to say with absolute confidence that the
general level of prices rose, for example, by an average of 8.7% in the
year ending February 2012, we can say, with a reasonable degree of
certainty, that the level of inflation given as, say, 10.5% in the year
ending February 2011 is higher than the one quoted for February 2012.
Consistent interpretation.
The monetary authorities are certainly to be praised for assuring the
market of their dedication to their self-declared goals and targets.
Investors need this kind of predictability to plan effectively.
The concern we have is that the use of the Consumer Price Index (CPI) as
the cardinal measure of inflation in this country, while orthodox and
understandable, has led to a neglect of another important measure of
inflation, the Producer Price Index (PPI). Whereas in many countries, the
close coupling of the two indices renders any fuss over their different
focusses pedantic, in Ghana they have diverged seriously, to the extent
where the PPI measure is about twice that of the CPI.
Seeing as the PPI is the measure of inflation as perceived by producers
and others operating at the wholesale level of the economy, and
considering that it is untempered by imported disinflation (the rise of
China as a global source of cheap manufactures has a sobering effect on
inflation levels in countries like Ghana), its significance should not be
underestimated. It may yet be one of our best gauges of the
competitiveness of our industrial sector. Its stubborn ?highness? is thus
worrying.
With respect to the issue of ?foreign direct investment (FDI)?, on the
other hand, we have to dissociate ourselves from the conclusions reached
by His Excellency regarding the figure of $7 billion-plus quoted as the
dollar value of GIPC (Ghana Investment Promotion Council) ? registered
projects in 2011.
We are so inclined because the debatable policy conclusions drawn from the
situation, as painted by the President, underline the importance of
ensuring factual accuracy.
When disaggregated, we discover that the roughly $7.7 billion purported to
be the value of registered projects include such abandoned and
semi-abandoned projects as STX and the so-called Asanteman Hong
development scheme. At any rate these projects have not commenced within
the period under review. Therefore only 28% of the headline figure quoted
is really relevant ($2.2 billion thereabouts).
Given our less than favourable view of disbursements of FDI based on our
recent reviews, we will argue that only 14% (roughly $1 billion) of
registered projects deserve any serious attention. In fact, we would argue
that the surest and most comforting measurement of FDI performance in this
context is the total value of registered transfers, which in the period
under review amounted to roughly $213 million (less than 3% of the
headline figure quoted in the President?s speech).
The right policy conclusion should therefore be that it is crucial to
strengthen our investment agencies and improve the investment climate to
ensure that more investor pledges are converted to actual transfers.

EDUCATION

Basic Education
It is commendable that the Administration has made it a keystone
educational policy to eliminate ?schools under trees? in Ghana. That
government has committed public funds to the elimination of as much as 40%
of all schools under trees demonstrates a devotion to its professed social
democratic ideals that is commendable.
We are however worried about some of the social interventions in the
educational sector, and in particular about how these interventions are
being converted into distorting indicators of good performance on policy
delivery.
The fact that 60% of all school pupils qualify today to receive free
school uniforms casts strong doubts on the official belief that the
poverty rate is 28%. The only other alternative explanation, unthinkable
in its implications, is that poverty has risen terribly over the last few
years.
Our attitude is to evaluate some of the other interventions such as the
?school feeding? and ?free exercise books? policies in the same light. An
increase in the number of beneficiaries can never be taken as an absolute
measure of progress or success. In fact, critically speaking, the converse
should be true.
Another distortion worth mentioning is the one occasioned by the
?capitation grant?, which is geared to pegging the amount of government
contribution to schools to the raw level of enrolment. There is evidence
that this is leading to the inflation of enrolment figures by unscrupulous
school administrators.
Furthermore, the system offers no performance incentive. For instance, it
is not tied to BECE pass rates or to retention/graduation rates.
In general, there is a tendency to focus on quantitative inputs and to
neglect qualitative outputs across the spectrum of social interventions.
Second-Cycle Education
We are encouraged by government?s focus on making secondary education
accessible to all students by 2016. Universal education is something to
push for in our developing nation. But ?universal? education means
?affordable? education and *not* ?free? education.
Given that the perennial challenge of our education system has been the
lack of resources (against the backdrop of an overstretched budget in
which the allocation to education amounts to roughly 25% of ALL government
expenditure), it is completely sensible to insist that those who can pay
for secondary education continues to do so. In fact, it is important that
they contribute as much as is reasonable to attract more resources to the
sector. Otherwise, quality may suffer.
However, we are not clear on why the resources currently allotted to
LESDEP, NYEP and the National Apprenticeship Project are not being
reassigned to improve the vocational and technical content of polytechnic
education (including distant and mature students? training), given the
dire need of these institutions and the fact that they already have the
structures to absorb such funds and contribute to the vision of youth
employment in a more coherent manner.
Science, Communication Technology and Innovation
The Administration deserves commendation for supporting the NCA and its
partners to successfully execute the Number Portability Program.
We however have concerns about the level of transparency surrounding the
digital migration program and will urge the relevant authorities to
increase public education and transparency. Some of the technology choice
issues are non-trivial, and we are aware of a few difficulties in similar
implementations in East Africa.
We applaud the government?s efforts to promote computer literacy by
widening access to ICTs. The distribution of laptops to about 1% of the
student population is a step in the right direction. We are however
unhappy about the lack of emphasis on digital educational content to give
full meaning to the provision of computers. We believe greater openness
should bring more entrepreneurial providers and corporate partners on
board, lessening the current over-reliance on one company, to ensure a
more holistic computer literacy program.

JOB CREATION
We were disappointed in our expectation that His Excellency would use the
opportunity to announce measures being put in place to fund the
Statistical Service and other partners to begin the very critical task of
gathering and publishing regular employment, and by default, unemployment
statistics.
AGRICULTURE
Crop Farming
Government has been consistent in focussing on crop farming, and we
applaud the results Mr. President announced in connection with a bumper
harvest of various crops for the preceding year. Here too better
statistics would be useful. To boost the credibility of such numbers, it
would be helpful for critical organisations, such as the Food Security
Network, to be involved in the collection and dissemination of such
figures.
Cocoa
We have a longstanding interest in the cocoa industry in this country.
We were glad to hear about government?s success in near-doubling the
output of cocoa production over the last 3 years, and about the
significant expansion in rural household incomes represented by that
expansion, as well as the higher pass-through of higher world market
prices to farmers.
We were disappointed to note the seeming lack of attention to the supply
chain needs of local cocoa processors. This is particularly poignant when
one considers the pricing dynamics of cocoa on international markets. This
is one of the most supply-side driven commodity pricing situations in the
world.
Very soon, we shall hit the ?diminishing returns? point in our expansion
program as prices on the world market begin to fall owing to wider and
higher production in producing regions. Only an accelerated processing
program can stabilise the local pricing regime in a context of
persistently high production for increasingly saturated global markets.
On a related note, we are happy to observe the current focus on shea
processing in the North of Ghana and tuna processing in the South.
ENERGY
The Power Sector
Government?s focus on expanding electricity generation capacity is
commendable given the obvious link to the country?s industrial policy.
It is however important for ?generation capacity? not to be confused with
?power output?.
The current challenge in Ghana is increasingly also one of ?underutilised
capacity?. We are currently not benefitting from the full complement of
potential (theoretical) output of our power plants due to a combination of
fuel feedstock sourcing challenges, user tariffs and maintenance problems.
Therefore, the ongoing focus on nearly doubling the generation capacity
over the five years to 2013 needs to be complemented by a range of
policies aimed at enhancing utilisation through realistic tariff,
feedstock and capital maintenance management.
Rural Electrification
In a similar way, whilst acknowledging the important contribution of
electricity to quality of life factors, it would be important to harmonise
rural electrification and power output expansion, all the time keeping
industrial policy in mind so that longterm production is not sacrificed
for short-term consumption.
HEALTH
National Health Insurance Scheme (NHIS)
Though the President understandably touted the Administration?s reported
successes in expanding utilisation of the National Health Insurance
Scheme, experts continue to wonder about the quoted figure of ?over
17.5million? users as at December 2011.
There is a growing consensus amongst some public health experts that the
measurement methodologies may be flawed. Government would do well to
institute an inquiry into this matter.
We were also disappointed in our expectation that the President would
announce measures being taken to rationalise premium payments at the top
of Ghana?s socio-economic strata in order to draw more resources into the
fast-sinking program.
We are delighted, however, that the Administration appears to have
de-prioritised the so-called ?one-time premium policy?.
Conclusion
Given the wildly differing views that have been expressed in the wake of
the President?s address, pointing to vastly divergent expectations among
the population, a case may be made for standardising the address through
convention to enhance critical study and debate, because of better
anticipation.
We modestly propose the draft template below to spur debate on this idea.

THE STATE OF :

1. Health

2. Education

3. Infrastructure

4. Employment

5. Business environment

6. Economic indicators

a. Inflation

b. Unemployment

c. Port Tariffs and taxes

i. Rates

ii. Collection and administration

7. Cocoa

8. Farming

9. Oil

10. Corruption

11. Governance

a. The judiciary

b. Executive

c. Legislature

12. THE PUBLIC SECTOR

IMANI Center for Policy & Education (and syndicated via:
www.Africanliberty.org)

View the original article here

Send your news stories to newsghana101@gmail.com Follow News Ghana on Google News

LEAVE A REPLY

Please enter your comment!
Please enter your name here