The vote for change in Ghana’s election 2016: a popular verdict on the economy

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The vote for change in Ghana’s election 2016: a popular verdict on the economy

Addressing some Ghanaians on February 4, 2016 in the Eastern Region of Ghana, the incumbent President, Mr. John Dramani Mahama told the people:

 “… cannot have jobs when you don’t have social infrastructure, so we have spent these last four years [2012-2016] to bring […] social infrastructure back to scratch. So when I win the second term, then, we will start putting money in your pockets.”

Indeed, as the President was speaking on this occasion, little did he know, that his much anticipated second term will be too late to address the peoples’ dire need for ‘jobs’ and ‘cash’ in their pockets.

For the first time in the history of Ghana’s fourth republic, John Mahama is the first Ghanaian President to have served for only one term. He is also the first incumbent President to have lost an election. Certainly, this raises curious questions! But if you ask me, I strongly believe that this dramatic vote for change on the December 7 elections passes as a verdict by the electorate on the economic performance of the John Mahama-led administration. Mr. Mahama’s prioritised infrastructural development did not simply meet the peoples’ aspirations for ‘jobs’ and ‘cash’ in their pockets.

What is obvious was that the change was led by an army of disgruntled young people, the working class, as well as the poor ordinary men and women, whose combined economic realities over the last four years under John Mahama can be summed up in massive unemployment, prolong energy crises, biting corporate taxes and utility tariffs; and a dysfunctional health insurance system as well as pockets of crises in the micro-finance sector. These collectively conspired with high perceptions of public sector corruption to create enough convenience for the wind of change to blow.

The West African state has a population of approximately 25 million; with a voter population of close to 15.8 million. The December 7, 2016 poll was the seventh successive democratic election, after the return to civilian rule in 1992. It is important to note that the fourth republican constitution of Ghana, which came into force in 1992, prescribes a maximum of two terms for the President, with four years per term. This implies a total of 8 years limit for the President.

Since 1992, political power has been alternating between two main political parties, the incumbent National Democratic Congress (NDC) led by John Mahama and the newly elected New Patriotic Party (NPP) led by Nana Akuffo Addo. The NDC was in power from 1992 to 2000, the NPP succeeded from 2001 to 2008, after which power reverted to the NDC from 2009 to 2016. In December 2016 power shifted back to the NPP, when its candidate Nana Addo for the first time in the fourth republic defeated a sitting President with a landslide victory of 53.85% against 44.40% for John Mahama. These results did not include 4 constituencies, where collation had not completed at the time of declaring the results on December 9. However, the Chair of the Electoral Commission, Madam Charlotte Osei said, the combined votes from those four remaining constituencies will not have any material effect on the outcome. In Ghana, a candidate is elected president upon obtaining a minimum of fifty percent plus one vote (50% +1 vote) of the total valid votes cast.

It will be recalled that the President John Mahama assumed power in July 2012, after the demise of President John Atta Mills, under whom he served as Vice President. On December 7, 2012, John Mahama went into elections against Nana Akuffo Addo and was finally declared winner after almost 8 months of protracted litigation at the Supreme Court of Ghana.

After assuming power in January 2013, the John Mahama-led administration started to confront a number of economic challenges, namely, a ballooning public sector wage bill arising from the introduction of the single-spine salary structure in 2010, budget deficit and mounting public debt as well as a gradual slowdown in economic growth and limited job creation. Pressured spending during the December 2012 elections worsened the deficit situation.  Also, total national debt which stood at 42.3% of Gross Domestic Product (GDP) in January 2013 increased to 49.44% of GDP as at August 2013; and by the end of 2015, it stood at GHc100 billion (US$23million) representing 72% of GDP.

The government started to adopt several measures aimed at ensuring fiscal consolidation, but as Mr. Min Zhu, the Deputy Managing Director of the IMF rightly put it “policy slippages, exogenous shocks and rising interest cost have undermined these efforts.” Consequently, in early 2013, the government was left with no option but to jump from the frying pan to fire. It went for a three-year Extended Credit Facility (ECF) from the International Monetary Fund (IMF) to the tune of US$918 million, which was approved in April 2013. With this facility, the government came under immense pressure to implement the so called ‘home-grown’ austerity measures endorsed by the IMF. Among them included increasing domestic revenue mobilisation, withdrawal of subsides on essential items like petroleum products and utilities, allow private sector participation in electricity supply and to reduce budget deficit by cutting down  public spending and revenue leakages, particularly the public sector wage bill, which as at 2013 consumed about 70% of the national revenue.

The EFC is released in tranches and the release of subsequent ones is contingent upon satisfactory progress being made in achieving the above measures. However, efforts by the John Mahama-led administration to religiously implement those measures did not only create more economic hardships, but at various points brought government into confrontation with students, workers, businessmen and the leadership of organised labour.

Firstly, to increase domestic revenue mobilisation, existing taxes were increased and new ones slapped on almost everything including petroleum products and financial services. In 2013, parliament also approved the government’s request to tax items like cutlasses, outboard motors, book binding machines, fishing nets and condoms, among others at the point of entry under the Special Import Levy Bill. These led to agitations and a three-day strike by various traders’ unions, lamenting that the numerous taxes and tariffs are crippling their businesses.

Secondly, in order to cut down public spending and particularly the wage bill, the government in 2013 withdrew the allowance of GHc300 (US$70) usually paid to each trainee in teacher and nursing training colleges across the country. This was done under the pretext of increasing enrolment into these institutions and to upgrade them into tertiary status. Series of demonstrations at the student front to restore these allowances were unheeded.

As if that was not enough, the administration went ahead to freeze new recruitments into the public service. Hence, after completion, the fresh nurses and teachers could not be automatically absorbed into the public sector, as was the case previously. Several demonstrations and picketing at the premises of the Ministry of Health in Accra by some nurses to get them employed by government, yielded limited results.

While these teachers and nurses struggled to get themselves fixed, fresh graduates from the universities were also piling up. The World Bank in its latest report released in 2016 dubbed “The Landscape of Jobs in Ghana” revealed that about 48% percent of young people between 15-24 years in Ghana are jobless. This is in line with the 2012/2013 Ghana Living Standards Survey by the Ghana Statistical Service (GSS) which estimated that about 250,000 young men and women join the labour market every year and out of this only 2% are absorbed by the formal sector and the remaining 98% seek employment in the informal sector or remain unemployed. If these figures are anything to go by, then it implies that over the last four years, close to 980,000 of the cumulative number of about 1 million graduates would have been clinging to some vulnerable jobs in the informal sector or remained unemployed.

The freeze on fresh recruitments into the public sector meant that government could only replace existing vacancies created either through resignation, vacation of post, retirement or death. As a result, amidst pressure to get more vacancies, the government again set out to audit the public sector payroll, hunting for so called ‘ghost names’ to expunge.  This mainly targeted teachers, who constitute the largest chunk of the public sector workforce. Officers from the Bureau of National Investigation (BNI) were at some point dispatched to various districts to audit the personal details and certificates of all teachers, in an exercise which angered the teachers, as most of them considered it to be unfair harassment. In the end, even though some ghost names were identified, many innocent teachers, who were not ghost, got their names mistakenly deleted from the payroll.

Apart from these, other issues that have damaged the relations between workers and the NDC administration included the tug-of-war over the management of the workers’ ‘tier 2’ pension contributions as well as the lingering controversy over plans to list the main power distributing company in the country, the Electricity Company of Ghana (ECG) on the stock exchange market to allow for private investors to participate in the management of the company.

Another popular disaffection which might have worked against the NDC in the elections related to the management of the national health insurance system. Around mid 2015, government’s failure to pay service providers under the National Health Insurance Scheme (NHIS) of their claims worth about 420million (approximately US$100million) led many of them to withdraw their services. This created a very dysfunctional system which was no longer able to address the critical health needs of the poor. Many patients who visited health facilities with their NHIS cards were either turned away or given prescriptions to buy the drugs from outside.

In the private sector, there were massive layoffs by some manufacturing and service companies due to high production cost occasioned by inadequate power supply which resulted in power rationing by the ECG; high water and electricity tariffs, which had gone up by an average more than 100 percent in the last three years and interest rates on borrowing which was between 28 and 38 percent per annum as at the close of 2015. The Ghana Employers Association (GEA) revealed that more than 12,000 people lost their jobs between January and April 2015 alone, due to the rising production cost. Report by the Finder Newspaper on December 4, 2015 also indicated that, companies like Coca Cola Ghana Ltd., Cardbury Ghana Ltd., Mantrac Ghana, and Novotel Hotel as well as mining companies such as Newmont Ghana, AngloGold Ashanti and Goldfileds, laid off a total of close to 2000 workers between 2013 and 2015. The GEA insisted that the layoffs in the mining companies were not only due to the fall in the global prices of gold, but also, to the rising cost of power.  Aside withdrawing subsidies and slapping taxes on petroleum products, in mid 2015 government implemented full deregulation of petroleum prices; allowing market players to set the prices. This did not bring down the price of the products at the pumps as was anticipated; thus, making alternative sources of power generation expensive for manufacturing industries during times of power rationing. Several appeals by the GEA to the government and the ECG to exempt industries from the power rationing fell on deaf ears.

Again, unfortunately for the John Mahama-led government, in May 2015, the country was hit by one of the worst micro-finance crises in recent times. A company named DKM Micro Finance  operating mainly in the Brong Ahafo, Northern, Upper East and the Upper West regions of Ghana, swindled about 93,000 customers of their investments running close to Ghc540million (approximately US$129 million). Some affected customers reportedly lost their lives as a result. Pressure was therefore mounted on President Mahama by chiefs and religious leaders to intervene to retrieve those investments for the people.  Following some delay in the President’s response to this issue, conspiracy theorists began to speculate that the NDC government might have conspired with DKM to swindle those monies. These allegations were so damning that it compelled the President to coerce the Bank of Ghana (BoG) to cough out a bailout package for the victims. However, the amount offered to the first group of recipients by the BoG was so meagre that it further infuriated most customers, with some threatening to either abstain from the 2016 elections or vote against the NDC.

In the midst of all these economic challenges, the Mahama-led administration could not equally clear itself of high profile cases and allegations of corruption in many state agencies. The prominent ones included the corruption at the Ghana Youth Employment and Entrepreneurial Developement Agency (GYEEDA; now Youth Employment Authority-YEA); the misapplication and wastage of about GHc300million (approximately US$72million)  at the Savana Accelerated Development Authority  (SADA), an agency that was established by the NDC government to help bridge the development gap between the north and the south; the stealing of Ghc86.9 million (approximately US$ 21 million) at the National Service Scheme (NSS) through the payment of ghost or non-existent national service personnel between September 2013 and July 2014; the payment of Ghc51 million (approximately US$12 million) to Mr. Alfred Agbeshi Woyomi, a businessman and alleged NDC financier for a contract with the state that never existed as well as the rampant sole-sourcing of contracts to political cronies at inflated prices.

In light of the ongoing challenges, it was pretty much easier for the NPP-led Nana Akuffo to reap political capital from the situation. Aside his key message of building a modern industrial economy, other key manifesto promises directly mirrored the frustrations of many Ghanaians. Among others, he promised to restore the nursing and teacher trainees’ allowances, introduce free-secondary education, create jobs by building one factory in each of the 216 districts in Ghana, build one dam in each village or community in the northern part of Ghana to facilitate year-round farming through irrigation, reduce corporate taxes from the current 25% to 20%, abolish Value Added Tax (VAT) on fee-based financial services,  reduce VAT from 17.5% to a flat rate of 3% for all small and medium scale industries; remove duties on the importation of raw materials and manufacturing equipment and to drastically reduce utility tariffs. He also assured the electorate of his readiness to fight corruption and restore integrity and trust into public sector governance. Last but not the least, he promised the over 93,000 DKM micro-finance victims that he will retrieve their investments for them when voted into power.

Despite that these promises really paid off on December 7, they could have serious implications for a Nana Addo-led administration. As a matter of fact, restoring the allowances of trainees in close to 60 health and teacher training institutions across the country, implementing free secondary education as well as building dams and factories in each community and district respectively, require a lot of financial capital. For the dams and factories in particular, a relatively longer period of time will be needed than most desperate electorates will have the patience to wait. This approach to job creation is quite similar to the John Mahama infrastructure-led approach, which normally takes longer time to yield results. Moreover, Nana Addo will inherit the so called ‘home-grown’ IMF conditionalities going into 2017 and might equally find it difficult to make fresh recruitments into the public service, in the face of a ballooning wage bill. Therefore, in the midst of the current structural and fiscal constraints facing the economy, it is unclear how all the above projects will be financed, particularly with a further promise on his part, to reduce taxes drastically; and also at a time that concessionary loans are hard to come by in the international financial markets.

Indeed, the Mahama-led administration did extremely well in the provision of social infrastructure over the last four years. Many roads, schools, hospitals as well as health and market centres were constructed and two airports upgraded into international standards. The revamping of the Komenda sugar factory, the construction of the ultra-modern Kwame Nkrumah Interchange (the so called Dubai) in Accra; the construction of a military hospital in Kumasi, the construction of many regional markets, the upgrading of the ridge hospital in Accra, and the upgrading of the Tamale and Kumasi Airports were some of his major achievements. Many of these projects were financed through massive borrowing, and the frequent fall back on the Eurobond market by the NDC administration to finance some of the maturing obligations is further worsening the debt situation.

Meanwhile, the fact that these infrastructures did not immediately bring sustainable jobs and cash was John Mahama’s major difficulty in dealing with the teaming unemployed youth. This is why, in less than a year to the 2016 elections, the administration took belated and desperate steps through the revamped Youth Employment Authority (YEA) to create jobs for some 100, 000 youth across the country. However, recruitments into various employment modules developed by the YEA unnecessarily delayed.

Equally disappointing was that  unemployed polytechnic and university graduates recruited by the authority under the Environmental Protection Officer (EPO) module were not only promised a paltry allowance of GHc250 (about US$59) per month, but also, the payment was not forthcoming. For those under the module in the three regions of northern Ghana, namely the Northern, Upper West, and the Upper East Regions, about half of them never received a dime before December 7, after they were given appointment letters in July 2016. Some of the lucky but angry employees who received their first payment got it on the eve of the December 7 elections, in what many considered to be mid-night bribery to help retain the Mahama-led NDC in government.

Therefore, critical observers of the above developments under the NDC administration would have realised that popular desire for change was obvious. But the economic situation that triggered the change is not an event, but a continuing challenge for subsequent governments. With similar challenges facing other African countries, the key lesson from this is that leaders across the continent need to find innovative and sustainable ways of addressing the twin-pressures of citizens’ short-term demands for ‘jobs’ and ‘cash’ and  the critical national long term need for social infrastructure, if they want to stay in power for their full terms.

Long live Ghana and her democracy!

Alhassan Ziblim

Executive Director

Centre for Development and Policy Advocacy (CEDEPA), Ghana.

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