Very disturbing: Ghana spends 70% of its revenue on payroll

the Ghanaian currency

The news that Ghana is spending 70% of its revenue on payroll, an economic arrangement associated with Liberia, Kenya, Greece, etc., is disturbing.

PricewaterhouseCooper (PWC), a reputable Certified Public Accounting Firm, stated in its analysis of the 2014 budget that if Ghana is to become prosperous, stakeholders can’t continue to spend 70% of its revenue on payroll.

Isn’t the financial mismanagement troubling? On the other hand, is the report of rosy economic performance by Ghana an inducement to lure Ghana to borrow more money?

World Bank reported that Ghana, with a population of 25.6 million, is one of the freest market economic countries in Africa. It has a minuscule unemployment rate of 4.5%.

Also, the Bank of Ghana reported on March 10, 2005 that Ghana’s privatization of the Ashanti Goldfield, Ghana Telecom, Social Security Bank, and Harbors Authority benefited Ghana’s economy: improved productivity of the privatized entities, employment shot up by 59% within the privatized entities, increase in technology transfer, increase in the remittance of taxes and dividends to government’s coffer.

Another good news about Ghana is contained in the 2015 Report of the National Educational Reform of the United Nations Educational, Scientific and Cultural Organization (UNESCO). “Ghana has made significant progress in students’ enrollment, reaching the Millennium Development Goals of Universal Primary Education.”

However, another educational report, while in agreement with Ghana’s enrollment achievement report by UNESCO, stated that Ghanaian students are not learning. In Ghana, for example, 89 percent of 15-year-old-Ghanian students did fail to pass a simple math test compared to 64 percent of Brazilians and 24 percent of Americans, according to the 2012 Standard Test of the Organization for Economic Cooperation and Development.

Why should one care about education? This is because “…an educated population is a critical precondition for broadly shared prosperity-an essential tool for,” for Ghana to manage its diamonds, bauxite, and gold? Ghana is Africa’s second-biggest gold producer after South Africa.

Are more Ghanaians failing because of the effect of the 12.5 million slaves traded through the Trans-Atlantic slave trade? But why were Africans conquered by a Caucasian race in the first place? Was it because the Black race is inferior to Caucasian race? Is it because of inferior character that is making it likely for African bureaucrats to spend 70% of their revenue on payroll?

There is no scientific evidence to support the myth that one race is inferior to another, says Mr. Jared Diamond. Mr. Diamond stated, in his book called “Guns, Germs and Steel: The Fates of Human Societies,” that “…head starts and local conditions…” are partly responsible for human history.

Or, if climatic conditions were responsible for the advancement of Caucasians, as argued by Dr. Ali Mazuri, then American Indians should be prosperous since they are the original inhabitants of North America before Caucasians arrived.

Better yet, how come Marori of New Zealand are not only prosperous than the Moriori of Chathams, but they also enslaved the Morori years ago. The Marori and Morori, living 500 miles apart, are both descendants of the Polynesian people.

So, if “…head starts and local conditions,” and not inferiority, are the components for substandard budgeting and mismanaging resources, what is the way forward for Ghana? But before we attempt to address such a question, let us visit the 2012 and 2013 Ghanaian Budgetary numbers.

Debt: Ghana’s $7 billion debt was cancelled in 2005 as one of the nineteen countries that benefited from the Highly indebted Poor Countries (HIPC) debt program, according to Mr. Tim Jones (www.jubileedebt.org.uk/blog). Now, Ghana’s public debt at the end of September 30 was $19.2 billion and $23.5 billion in 2012 and 2013 respectively.

Ghanaian currency in million (GHc)

Deficit financing: Amount borrowed to make up for the shortfall in revenue. In 2014, for example, Ghana’s Total expenditure and arrears clearance was GHc 34,972 million versus Ghc 26,001million in revenue, requiring government to borrow GHc 8,970.8 million.

Money borrowed to make up for the shortfall in revenue in 2012 and 2013 was about the same as in 2014.

Taxes on Goods and Services and International Trade: Revenue collected from consumers, including the unemployed population was 42.73% (GHc 11,112 million of the total revenue of GHc 26,001 million) of total revenue.

Interest Expense: Ghana’s interest expense was GHc 6,513 million, representing 17.7% of Ghana’s total expenditure of GHc 34,972 million.

Capital Expenditure : Sadly, Cedi 5,967 million representing investment in capital expenditure was less than allotment for interest expense or deficit financing.

Poor countries borrowing money and, or collecting a significant portion of government revenue from citizens to finance excessive budgetary items, as is with the case of excessive payroll today, is not new. In the past, poor countries became bankrupt because they did borrow huge money to finance gigantic projects.

Certainly, investors, including the World Bank, seeking profits, will always search for new ways in order to lure countries into borrowing more loans. That is part of the reason why investors do not support candidates who embrace anti-poverty programs.

How should countries counter the tactics of anti-people’s investors? One of the democratic practices that might help to disarm anti-people’s investors from undermining anti-poverty candidates is to promote and propagate policies and programs over individual candidates.

More so, a country should discourage recommendations such as the following from the Bank of Ghana: “…to seek maximum input from investors at legislation preparation stage; seeking significant input from business before laws and regulations are adopted; and limit the scope of suspicion and cause of dispute.

All programs, including those programs from investors should be deliberated. As Mr. Diamond said, it is only through community interactions that performance is improved.

Source: J. Yanqui Zaza

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