Download economic development under imf bail

2015 GHANA INSTITUTE OF MANAGEMENT ANNUAL NATIONAL
MANAGEMENT CONFERENCE AND PUBLIC LECTURE
TOPIC: ‘ECONOMIC DEVELOPMENT UNDER IMF BAIL-OUT
THE ROLE OF THE PROFESSIONAL MANAGER’
BY:
PROF. KWAME BOASIAKO OMANE-ANTWI
PRESIDENT, THE INSTITUTE OF CHARTERED ACCOUNTANTS,
GHANA (ICAG)
ON 9TH JULY 2015 @ GNAT HALL - ACCRA
Salutations!
Introduction
For me, it is indeed heart-warming to share with you, my thoughts on this thorny topic,
which I have termed the “IMF Bailout Saga” and what we can and should do as professional
managers to help our dear country, Ghana, to overcome the perennial challenges of
economic downturn in our life as an independent country for the last 58 years to date.
Ladies and Gentlemen, permit me to begin by defining in-depth who a professional manager
is before turning my attention to the bailout saga and the role we can and should play as
professional managers.
Definition of profession
The first thing to discuss is, I believe, what is meant by a ‘profession’. Definition is a boring
subject, but some discussion of what is deemed a profession is, is quite essential to the subject
of our discourse. This is particularly so because in this instances, a strict definition is
impossible, considering the array of professionals in the world today.
In the age of Trollope’s novels, the professions par excellence were, the Church, Law,
Medicine, and the Officer grades in the armed forces. But this is not merely unacceptable
today; even if it were right, it would in fact be misleading. The growth in the number of
professions shows it to be untrue. Professions today are more numerous than they have ever
been in the past, and their services more than ever essential to the good of the public.
The newer and more marginal professions often announce elaborate codes of ethics, or set up
‘paper organisations’ on a national level long before an institutional or any technical base are
formed. The tactical or strategic situations of an occupation, old or new, may demand an
authority to certify the actual level of development of the technique, training or level of
association required. Indeed, in a culture such as ours, many occupations will be tempted to
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try everything at once or go in for anything opportunity and expediency may dictate. The
“professionalization” of labour management and commerce is largely of this kind.
Hallmarks of professionalism
Professions could be defined by the possession of certain traits, notably independent, ethical
or technical standard of performance and collegiate control of such attributes.
The hallmarks of professionalism are autonomous expertise and the service ideal. These two
criteria do in fact embrace all of the attributes of professionalism. For instance, with regard
to autonomous expertise, an occupation wishing to exercise professional authority must find a
technical basis for it, assert an exclusive jurisdiction, link both skill and jurisdiction to
standards of training, and convince the public that its services are uniquely trustworthy, and
the service ideal. But the criteria of “technical” may not be enough. The craftsman typically
goes to trade school, has an apprenticeship, forms an occupational association to regulate
entry to the trade, and gets legal sanction for the training to confirm that the practitioners
conform to a set of moral norms that characterize the established profession. These norms
dictate not only that the practitioner does technically competent, high quality work, but that
he adheres to a service ideal – devotion to the client’s interests more than personal or
commercial profit should guide decisions when the two criteria are in conflict.
Professions, in fact, have an aura of mystery surrounding them, a set of tacit assumptions
which separate the profession from the more general occupational milieu but which are
difficult for the layman to appreciate and understand.
A professional manager enjoys the monopoly of privilege on the grounds of the professional’s
superior qualities of independence, integrity, and of service in the interest of the public. The
relationship of these characteristics to ethical behaviour is central to much of the criticisms
leveled against the professions since the Independence of Ghana nearly 58 years ago.
The charges of all professional groups are onerous and subsist in the responsible and selfdirected application of specialized expertise to matters of significance in the conduct of
human affairs. Professions are relied upon to mediate pressures in a manner that protects and
enhances the public interest. Qualification to undertake this role must come from an
occupational group’s specialist expertise and demonstrated commitment to apply it
responsibly (West, 2003).
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A profession is described as an occupation that properly involves a liberal education or its
equivalent and mental, rather than manual, labour. The liberal education anticipated is one
that imbued the young person with such values as righteousness, wisdom, and sense of
justice. Nineteenth century concepts of professionalism stressed the probity, dignity, honour,
and gentlemanly instincts of the practitioner. The duality of a special kind of occupation and
the affirmation or promise was considered to be implicit in the notion of a profession.
Covenant to Serve the Public
A professional has an explicit covenant to serve the public interest in situations where there
are considerable economic incentives to adhere to self-interest (Peace, 2006). This covenant
is a relationship premised on the interactions of people entrusting and accepting
entrustment. The covenant relationship is a binding, enduring relationship of mutual loyalty
that aspires to the common good. This covenant is undertaken between the profession and
society for most compelling reasons – reasons which have been increasingly compelling with
the passage of time and the corresponding exponential expansion of our economic society,
and the complexity of our corporate enterprises. It is to assure the effective functioning of
capitalism with its corporate complexities as the catalyst, which demands an effective system
of corporate governance, transparency, and accountability (the art and science of professional
management) and it is to oversee such a process that the covenant was entered into by
society with our profession.
Code of Ethics
A profession’s code of ethics is perhaps its most visible and explicit enunciation of its
professional norms. A code embodies the collective conscience of a profession and it is
testimony to the group’s recognition of its moral dimension. A code of ethics is generally
accepted as one of the criteria which, if present, indicates professional status. A code of ethics
has formalized ‘the moral principles’ that should be followed by members of the
organisation. The existence of a written code of ethics is not in itself of any great
significance. Members of a professional group may adhere to a code even if it is only implied,
and there is little difficulty for an occupational group to write a code of ethics which is not
adhered to. The process by which the ethical code is enforced, if indeed it is enforced, is a
guide to whether the code strengthens the claim of the occupational group to professional
status. Enforcement is by means of the professional culture.
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Management as a profession
Management has long been a profession, requiring experience and expertise that is to be
underpinned by systematic knowledge. Business schools have developed because of this, but
today’s particular need is for knowledge to be widely diffused.
Managers with different specialist skills have to understand one another and require a wide
range of knowledge, if the implementation of their skills is to be effective within the broader
context in which they have to be applied. Both aspects have become essential in a world
which, as we all know, is changing rapidly in practically all aspects of business.
The challenges for today’s managers have never been greater or more complex and dynamic.
Today’s organisations are undergoing a period of unprecedented transformation in response
to rapid changes in the competitive global environment. Vertical structures of the past are
tilting into more horizontal organisations. Hierarchies are being interlaced with teams.
Business process re-engineering has moved across functions to remold the entire
organisation.
My brothers and sisters, good management is the art of making problems so interesting and
their solutions so constructive that everyone wants to get to work and deal with them. This
is what is called ‘enlightened management leadership’.
Enlightened Leadership Challenges
Enlightened leadership is spiritual if we understand spirituality not as some kind of religious
dogma or ideology, but as the domain of awareness where we experience values like truth,
goodness, beauty, love, and compassion, and also intuition, creativity, insight, integrity, and
focused attention. Sadly, this is where we as managers of the economy of Ghana, have caused
the mess we find ourselves in the country today. We have failed as professional managers.
In Ghana today, the system offers temptations to behave unethically by favouring the
interests of client management over those of the public interest. This end up compromising
the integrity and effectiveness of the professional who is so important to the society.“If
societal values are deteriorating, maintaining high ethical standards in any profession for
socio-economic development grows increasingly difficult. Many will undoubtedly ask: if
everyone else is cheating, then how can an ethical person possibly succeed? The answer
depends on the definition of success” (Smith, 2003).
Complexities and volatilities in commercial activity, incentives and propensities for secrecy
and obfuscation, conflicting interests among affected parties, and the severity of the
consequences of misjudgments conspire to ensure that the lot of a professional is not an easy
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one. The temptation to fail is greater than ever and much more dangerous in our current
democratic dispensation in Ghana.
Economic Development and IMF Bail-out
My brothers and sisters, permit me at this point to discuss the economic development
conundrum under the International Monetary Fund (IMF) bail-out.
The IMF is one of the Bretton Woods institutions. It is a specialized agency (has its own
charter, governing structure, and finances) of the United Nations that provides policy advice
and financing to countries in economic difficulties and also help developing countries
achieve macroeconomic stability. Through its economic surveillance, the IMF has become
the foremost institution that multinationals and donors fall on to ascertain information with
regards to socio-economic performance of a country.
Ghana’s romance with the IMF dates back to 1966. Since then, one Ghana government after
another has entered into separate but similar forms of loan arrangements with the IMF.
IMF Lending Instruments
The IMF facilities and lending instruments are as depicted in Table 1 below.
Table 1: IMF facilities and lending instruments
Facility
Exogenous
Shocks
Facility
(ESF)
Flexible
Credit Line
(FCL)
Poverty
Reduction
and Growth
Facility
(PRGF)
Purpose
Provides financial assistance to low-income countries facing exogenous shocks. It is available to
countries eligible for the Poverty Reduction and Growth Facility (PRGF) but that do not have a PRGF
program in place. Financing terms are equivalent to a PRGF arrangement. The ESF has a Rapid
Access Component (RAC) – which in principle does not have conditionality attached – and a High
Access Component. The ESF can be used concurrently with a Policy support Instrument (PSI),
Emergency Post Conflict Assistance (EPCA), Staff Monitored Programs (SMPs) or, in rare cases, an
off-track PRGF. This facility was reformed in September 2008.
New credit line introduced in 2009 for countries with very strong fundamentals, policies, and track
records of policy implementation. The FCL is intended for crisis prevention purposes. FCL
arrangements would be approved for countries meeting pre-set qualification criteria. Disbursements
under the FCL would not be phased or conditioned to policy understandings as is the case under a
traditional Fund-supported program.
The IMF's main instrument for financial assistance to low-income countries. It was introduced in
1999. Currently, 78 low-income countries are eligible for PRGF assistance. Eligibility is based
principally on the IMF's assessment of a country's per capita income, drawing on the cutoff point for
eligibility to World Bank concessional lending (currently 2007 per capita gross national income of
$1,095). Loans under the PRGF carry an annual interest rate of 0.5 percent, with repayments made
semiannually, beginning 5.5 years and ending 10 years after the disbursement. Concessional lending
under the PRGF is administered through the PRGF-ESF and PRGF-HIPC Trusts.
Policy
Support
Instrument
(PSI)
Introduced in October 2005, this facility provides IMF advice to low-income countries without
financial assistance. The PSI signal to donors, multilateral development banks, and markets the
Fund's endorsement of a member's policies.
Stand-By
Arrangement
(SBA)
The bulk of Fund assistance is provided through SBAs. Intended to provide financial assistance to
address short-term balance of payments problems. The length of a SBA is typically 12–24 months,
and repayment is due within 3¼-5 years of disbursement. SBAs may be provided on a precautionary
basis—where countries choose not to draw upon approved amounts but retain the option to do so if
conditions deteriorate—both within the normal access limits and in cases of exceptional access. Non5
concessional loans are provided mainly through Stand-By Arrangements (SBA) and the Flexible
Credit Line (FCL) for members with very strong policies and policy frameworks, Except for the PRGF
and the ESF, all facilities are subject to the IMF’s market-related interest rate, known as the “rate of
charge,” and large loans carry a surcharge. The rate of charge is based on the SDR interest rate,
which is revised weekly to take account of changes in short-term interest rates in major international
money markets.
Source: IMF website, www.imf.org
Ghana and the IMF Romance
I stand to be corrected, but IMF conditions and advice at times of crisis attached to the
lending instruments described in Table 1 always center on the following, among others:
(i)
Push for wage bill freezes or cuts
(ii)
Spending cuts
(iii) Reduction of fiscal deficits
(iv) Prompting governments to pass on food and fuel rises to their citizens
(v)
No flexibility to defer debt payments
(vi) Structural reforms such as raising utility tariffs, tax reforms aimed at strengthening
indirect taxation, financial and energy sector privatization, or trade liberalization.
Some analysts consider the policies of the IMF as a necessary evil rather than a preferred
strategy, but majority finds Ghana’s relationship with the Fund as akin to a bad marriage.
Others criticize IMF-supported programmes in Ghana as ineffective, unjustifiably restrictive
of government spending, and unreasonably interruptive of much needed expansions,
especially to the education and health labour force. Ghana’s u-turn to the IMF in 2014/2015
has thus raised numerous questions, given the concerns about the impact of IMF
conditionality on the Ghanaian economy.
The big question, to quote a renowned Ghanaian economist is “…whether the IMF bailout
would provide the anchor necessary to propel Ghana’s economy on a path of sustained
growth and prosperity. That $940 million is not a lot of money over three years (an average
of about $313 million per year). That the government issued a US$1 billion sovereign bond in
2013 and that was not sufficient. The government issued another US$1 billion in 2014 and
that also was not sufficient. So, what difference would US$313 million a year make?”
(Mohamudu Bawumia, 2015).
Ladies and gentlemen, Robert J. Barro, a renowned Professor of Economics at Harvard
University and a Senior Fellow of the Hoover Institution opined in 1998 that: “… the IMF
doesn’t put out fires, it starts them”. He cited bailouts in Brazil, Mexico, Russia, and Korea.
He stated that bailouts increase “moral hazard” by rewarding and encouraging bad policies
by governments and that the IMF might consider changing its name to the IMH. (The
Institute for Moral Hazard).
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Critical Review of IMF Bail-out
Ladies and gentlemen, I will endeavor to present an insightful, pernicious, and food-forthought issues surrounding the Ghana - IMF saga because Ghanaians are seeking genuine
answers to the economic problems of Ghana and that we want to put the economy first. It
reminds me of Korean governance model and ideology which is: “… as a country, let us seek
economic empowerment first before politics and culture”.
Economic freedom will accord us political freedom, enhanced cultural life, and wellbeing.
Maxwell Anderson said: “… when a government takes over a people’s economic life, it
becomes absolute, and when it has become absolute it destroys the art, the minds, the
liberties, and the meaning of the people it governs.” This is exactly the sad situation we find
ourselves as the citizenry of this country flowing from successive government’s (since the
days of the CPP) mismanagement of the economy of Ghana.
The prevalent habit of running to IMF is contrary to Nkrumah’s popular ideology that “…
the black man is capable of managing his own affairs’’. We are always tightening our belts,
since, as Eric Fromm puts it: “… if you want a big brother (IMF) you get all that comes with
it”.
The economic woes of Ghana over the years could be largely self-inflicted and therefore
home-grown diseases.
Ghana’s problems are truly home-grown and the majority of the solutions lies in Ghana. Let
me list a few of such homegrown diseases:
(i)
Negative value-for-money audit findings of the people on the national payroll
(ii)
Need to cut down on the government wage bill
(iii)
Downsizing in government (political appointees conundrum)
(iv)
The Monetary Policy Committee’s inability to find lasting remedy to the depreciation
of the cedi and the fast erosion/running out of the national reserves
(v)
Budget deficits resulting from ill-conceived spending spree
(vi)
Wastage, corruption and mismanagement (the irresponsible behaviour challenges)
The cure to these ills in the economic management of this country is simply to ensure sanity
in our fiscal management. The principles of discipline and responsible behaviour are not
rocket science that requires international support or intervention.
The large-scale asymmetries and pathologies in Ghana’s economic and public administrative
structure: e.g. malfunctioning domestic market, which, among other things, fuels inflation;
increases in the wage bill out-pacing productivity gains; growing fiscal deficit and sky-high
debt-to-GDP ratios; outstanding levels of corruption and waste; minimal investment in
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infrastructure; and downward trend in tax revenue receipts are some of the causative factors
bringing us down as a nation. This is throwing us into the arms of IMF for bailout. This is a
shame, and it is high time we became disciplined and responsible in the socio-economic
management of our nation.
Economy on Path to Recovery
The Finance Minister, Mr. Seth Terkper, has expressed optimism that the country’s economy
is heading for recovery. Making a presentation on “The State of the Economy and its
Outlook” in Accra recently, he indicated that the government is committed to addressing the
short-term challenges facing the economy in order to safeguard the bright prospects that lay
ahead.
By the discovery of more oil and gas fields and the coming on board of the country’s gas
processing plant. Mr. Terkper opined, the economy has very bright medium-term prospects,
supported by an expanded service sector. “Growth is expected to pick up over the mediumterm to 9.2 per cent in 2017, inflation will be reduced to 8.2 per cent by 2017 and fiscal and
current deficits will be reduced to 3.7 per cent and 4.9 per cent respectively in 2017. This
will result in a build-up of reserves to cover 4.2 months of goods and services,” he added.
Setbacks
The Finance Minister indicated that, in spite of the progress made in addressing the causes of
the fiscal slippage in 2012, the progress made in reducing the fiscal deficit had been slow on
account of a number of setbacks. He identified those setbacks as:
(i) The two-year long shortfall in gas supply and its implications for energy supply.
(ii) Output and commodity price shocks, including the decline in gold and cocoa prices,
which affected the government’s revenue performance.
Ghana, he said, had witnessed significant economic growth over the past decade, with real
GDP growth rising steadily from 3.7 per cent in 2000 to 11.5 per cent in 2011 before
decelerating to 4.0 per cent in 2014, mainly on account of energy challenges.
“Due to a combination of unfavourable global factors and domestic challenges, the economy
has come under severe stress since 2012, leading to double-digit fiscal and external current
account deficits,” he explained.
The fiscal slippage in 2012, he said, is mainly as a result of the higher wages and wage arrears
payments under the implementation of the Single Spine Salary Structure (SSSS) and a
shortfall in corporate income taxes from the petroleum sector as a result of the export of
lower barrels of crude oil that was projected.
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Other factors, Mr. Terkper added, were:
(i) the high interest rate cost burden arising from the steep rise in short-term domestic
interest rate,
(ii) shortfalls in grants from donors,
(iii) higher subsidies on utilities and petroleum, and
(iv) higher spending on goods and services, in contrast with a lower estimation of capital
expenditure.
Home-grown Policy
Mr. Terkper indicated that the government had, since 2013, been implementing a number of
measures, as well as a home-grown policy, to ensure macroeconomic stability and address the
causes of fiscal overruns in 2012. He indicated that given the government’s commitment to
fiscal consolidation, the 2015 budget outlined additional measures and reforms which formed
a significant part of the course of action under the programme with the International
Monetary Fund. “… these measures, in addition to earlier ones being implemented, are
expected to result in a significant reduction in the fiscal deficit to ensure debt sustainability
and macroeconomic stability,” he added.
Significant Growth
Recounting the progress made, Mr. Tekper opined that the wage bill as a rate of gross
domestic product (GDP) reduced from 8.9 per cent in 2012 to 8.7 per cent in 2013, 8.3 per
cent in 2014 and was expected to further decline to 7.7 per cent this year (2015). Similarly,
he added that the wage bill, including wage arrears cleared as a ratio to tax revenue, had
declined from 68.2 per cent in 2012 to 65.1 per cent in 2013, 52.1 per cent in 2014 and was
expected to decline further to 46.1 per cent in 2015.
He indicated that subsidies on petroleum prices and utility tariffs had been removed, while
corporate income tax from oil companies had significantly turned positive. “… the shortfall
in corporate income receipts in the petroleum sector has been reversed,” he said. He
observed with satisfaction that Ghana had attained a middle-income status and there was no
way we are going to slip out from that rank.
View Point of Industry Players
Meanwhile, industry players have questioned the basis for the Finance Minister concluding
that the first quarter of the year 2015 showed signs of an economy on the path to recovery.
Industry players were of the opinion that in an economy in which the government was not
spending, it was difficult to say that the fundamentals were working. They argue that if the
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government begins paying contractors, settling statutory obligations in full, paying
outstanding arrears to public sector workers, and honouring its debts to the banks, the
recovery will be fragile. According to them, revising the growth rate from 4.5 per cent
further down to 3.9 per cent is an indication of how difficult it would be for the government
to achieve its targets. They were also of the view that the real test for the government as far
as its expenditure controls were concerned would be seen in the last quarter of the year 2015,
when sitting governments begin to spend way beyond limits, for electoral gain.
IMF Conditionality
Mockingly, and interesting enough, the main pillars of the 2015 IMF programme are:
(i)
The sizeable and front-loaded fiscal adjustment to restore debt sustainability,
focusing on containing expenditures through wage restraint and limited net hiring
as well as on measures to mobilize additional revenue.
(ii)
Structural reforms to strengthen public finances and fiscal discipline by improving
budget transparency, cleaning up and controlling the payroll, right-sizing the civil
service, and improving revenue collection.
(iii)
Restoring the effectiveness of the inflation factor and targeting the economic
framework to help bring inflation back into single digit territory; and
(iv)
Preserving the financial sector stability.
Under the current bail-out programme, the IMF is hopeful that inflation will reduce in 2015;
growth is expected to rebound in the following years. Non-oil GDP growth would decrease
further to 2.3 per cent in 2015 before picking up in the following years, reaching 5.5 per cent
in by 2017.
On the fiscal side, the programme seeks to expand revenue collection, restrain the wage bill
and other primary expenditures, while making space for priority spending and for clearing
all domestic arrears.
Despite the lower-projected oil revenue, the program aims at turning the primary balance
from a deficit of 3.7 per cent in 2014 into a surplus of 0.9 per cent of GDP in 2015 and 3.2 per
cent of GDP in 2017.
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Ghana and IMF Bail-out Encounters
Will the bail-out anchor, knowing that Ghana has in the past flirted with IMF on a number
of occasions as chronicled below:
(i)
IMF and CPP government romance in (1960-66)
(ii)
Ghana’s encounter with the IMF (1966-72) extending through PP government led
by Dr. K.A. Busia in1969.
(iii)
Ghana’s encounter again with the IMF (1983-2006) initiated by the PNDC and
NDC for the Economic Recovery Programme (1983-86) followed by the Structural
Adjustment Programme and the PAMSCAD (Programme of Action to Mitigate
the Social Cost of Adjustment).
(iv)
Ghana’s enrollment in IMF/World Bank’s Heavily Indebted Poor Countries’
Initiative (HIPC) of NPP (2001-2007) – The John Agyekum initiative.
(v)
IMF loan to Ghana in 2009 in the amount of US$602 million to support its
stabilization programme in IMF’s Extended Credit Facility to support Poverty
Reduction and Growth Trust. The Professor Attah Mills era of borrowing to
support Public Financial Management (PFM) initiative.
(vi)
2015 IMF marriage with Ghana for Extended Credit Facility of about US $918
million. The John Mahama economic distress containment programme.
Ironically, in the five encounters with IMF till 2009, Ghana’s economy after ‘recovery’
went into a comma again barely on average of three years after the end of the
intervention, particularly after national elections. The nose dive as always diagnosed,
revealed the same symptoms of ill health:
(i)
Budget deficit balloons
(ii)
Inflation rises sharply
(iii)
Overall balance of payment records a deficit
(iv)
The cedi falls in the face of exchange rate volatility
(v)
Revenue collection experiences severe downturn
(vi)
Corruption, waste, and fiscal indiscipline show their ugly heads
Considering the above facts, I believe I will not be wrong to say, without any magic of crystal
balling, that may-be after 2017, Ghana is likely to suffer the old-age unending illness of
economic distress and cry for the IMF again.
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The Cure and the Pills
Ladies and gentlemen, I believe that the cure for our sickness as a country, which is the
cardinal starting point of the home-grown solutions, is discipline and responsible behavior of
government in tackling the following remedial issues as a matter of national crusade:
(i)
Fiscal adjustment effort under the PFM reform framework – restore budget
credibility and transparency.
(ii)
Payroll clean-up and enhancement of wage bill control - fight the ghost name
saga.
(iii)
Civil service reform aimed at increasing productivity and rationalization of the
size of the civil service and the wage bill ratio to revenue to a manageable
percentage of 35 per cent which is a benchmark of sound public payroll
management.
(iv)
Restructuring Statutory Funds by reviewing their administrative and legal
framework guiding their operations with the aim of enhancing transparency and
accountability in the national budget.
(v)
Improving Revenue Collection and Tax Administration.
(vi)
Natural resource management – paying critical attention to the Petroleum
Revenues Management Framework.
(vii)
The Bank of Ghana (BOG) must be independent, hence a need for a new look at
the operations of BOG to significantly strengthen its functional autonomy,
governance, and ability to respond to banking sector crisis and to take measures to
strengthen the financial sector framework.
Application Letter for IMF Support
I am hopeful that, Ghana’s economy will not go into coma again if we discipline ourselves as
contained in the application letter (Letter of Intent) dated: Accra, March 20, 2015 sent to the
Managing Director of the IMF for the Extended Credit Facility covering the period of 201517 – the 6th romance with IMF in our 58 years of independence signed jointly by Mr. Seth
Terkper (Minister of Finance) and Dr. Henry Akpenamawu Kofi Wampah (Governor of
Bank of Ghana), and I quote:
“The government of Ghana hereby request approval of a three-year arrangement under the
Extended Credit Facility (ECF) covering the period of 2015 - 2017, in an amount of SDR
664.20 million (180 percent of Ghana’s quota) to support its economic reform programme.
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Ghana has achieved high economic growth over the past decade and made substantive strides
in reducing poverty. However, due to a combination of unfavorable global shocks and
unsustainable domestic imbalances, the economy has come under severe stress since 2012,
including double digits fiscal and external current account deficits. To address these
imbalances and safeguard the bright medium term prospects of the economy, the
government adopted its homegrown Economic and Financial Policies Program for the
Medium Term. Recognizing the need to catalyze the achievement of expected results, the
government requested Fund Support to go beyond the initial homegrown strategy to achieve
fiscal consolidation and debt sustainability. Government stands ready to take any additional
measures that may be necessary to that end.”
Heart Warming News – IMF Review Report, June 2015
“IMF has lauded government’s commitment to the Fund’s programme and has, as a result,
promised to release the second tranche of about 100 million dollars in August, 2015” – as
reported by The Ghanaian Times, July 1, 2015 edition.
This follows a two-week review of government’s performance under the three-year austerity
programme by an IMF team. The Team confirmed the following:
(i)
The programme is on track, with all performance criteria met except for the ceiling
on Central Bank financing to the government which technically missed by a small
margin.
(ii)
Government exhibited ambitious fiscal consolidation and structural reforms
programme in particular in addressing payroll irregularities, enhancing public
finance management and transparency, and liberalizing the oil distribution sector.
(iii) Government to do much more to further enhance tax administration and eliminate
tax exemptions to improve the revenue performance over the medium term.
(iv) The effort of government to address the electricity shortages, which have been
weighing on economic activity, by bringing new privately financed power plants in
the coming months. This will be critical to support a rebound in growth next year.
(v)
Inflation remains higher than expected on the back of a larger than projected
depreciation of the cedi and rising oil prices.
(vi) The economic growth in 2015 was expected to remain broadly around 3.5 per cent,
with low cocoa and gold production but increasing hydrocarbon production.
(vii) Fiscal consolidation was on track at the end of April, excluding the payment of
dividend by Bank of Ghana of about 0.4 per cent of GDP in March.
On the whole, the IMF team were full of praise for government’s commitment to the
programme.
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I am praying that professional managers of the economy will keep up the good work
“being confident of this, that he who began a good work will carry it on to completion
(political elections or no elections) until the day of Christ Jesus” (Philippians 1:6)
What Measures do we need?
For me, it is simply INTEGRITY AND DISCIPLINE – these two attributes are indeed the
hallmarks of socio-economic development. Responsible action to ensure fiscal discipline,
lower inflation, transparency, accountability, stopping budget over-runs, stem corruption
and value for money for government expenditure is the answer.
Remember the biblical word, “And Jesus went into the temple of God, and cast out all them
that sold and bought in the temple, and overthrew the tables of the money changers and the
seats of them that sold doves and said onto them it is written, My house shall be called the
house of prayer but you have made it a den of thieves.”
My brothers and sisters, we need men and women of integrity to govern us. We have
witnessed since independence the prophecy of W.E. Du Bois in our governance system, and I
quote, ‘’It is the growing custom to narrow control, concentrate power, disregard and
disfranchise the public; and assuming that certain powers by divine right of money-raising or
by sheer assumption, have the power to do as they think best without consulting the wisdom
of mankind.”
Governance is the business of all and not necessarily reserved for the politicians. In most
cases, the managers of the economy are much more corrupt than the politicians judging from
the gargantuan corruption cases and the exposé of Anas, the great underground investigator
in Ghana today on corruption in the institutions supposed to manage the economy.
What we need is not more rules – we are positively drowning in them – but a renewed
emphasis on the ethical values on which our profession is founded. That should be our role
and our cardinal promise to the people of Ghana.
Values Education
In a pluralistic society, not one but many expectations must be met. Therefore, resolution of
what is right to do produces a balance of obligations and satisfactions. Ideally, full satisfaction
of the expectations of all parties would constitute the most ethical behaviour. This is
impossible, for expectations are often contradictory and sometimes exceed social sanction
(Bartels, 1967).
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As professional managers, we should embrace the value systems as espoused by Socrates, and
I quote: “… regard your good name as the richest jewel you can possibly be possessed of – for
credit is like fire; when once you have kindled it you may easily preserve it, but if you once
extinguish it, you will find it an arduous task to rekindle again. The way to gain a good
reputation is to endeavour to be what you desire to appear.”
Climate of Extortion
As professional managers, we should be aware of when it is ethically correct to accept a
business gift and what is the moral difference between offering a bribe and bowing to
extortion.
Adams Smith once wrote that when people in the same line of business get together into
conversation, almost invariably it turns to ways of conspiring against the public. That may be
rather too sweeping a view to adopt, but what does appear generally true is that when
business people get together with ethicists, the conversation soon turns almost invariably to
the subject of bribery in business.
As professional managers, we must resist bribery and all forms of corruption. Our actions are
killing Ghana and fuelling the backward trend socio-economic of affairs in the country. The
June 3 disaster has been traced to poor planning, untimely action and engineering challenges.
Are the engineers and the planners not professional managers? Certainly, they are
professional managers! What about the unending litany of financial scandals! Can Chartered
Accountants completely absolve themselves from the blame and the dilemma? Are they not
professional managers? Certainly, they are professional managers!
We need a change of mindset. The core competencies presented for professional managers
and supervisors emphasize not the value of capabilities such as oral and written
communication, strategic thinking, programme planning, and performance assessment,
managing change, problem solving and decision-making but also skills such as interpersonal
relationships, motivating others, managing conflicts, initiating collaborations, and team
building and attributes of character that professional leaders need; including a strong sense of
ethics and values.
Socio-Political Context and the Business Environment
Ghana must operate as a business – Ghana Incorporated - so that her ideology can receive
buy-in by professional managers. Ideology has enormous implications, both externally and
internally, for business. It means so much for managers in the management of the business –
in our case, Ghana Incorporated.
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There are important but subtle differences between beliefs, values, attributes, and ideologies.
Ideology is both utopian in that it is concerned with ultimate ends and prescriptive in that it
is concerned with the means to achieve those ends. Its appeal is spiritual and transcendental.
An ideology provides a meaning to life. There is an intimate relationship between
personality and ideology which operates in organisations as well as in politics and religion –
the more extreme the personality the more rigid the ideological framework.
Decision-making is often complicated by ideology – at an overt level one sees differences of
opinion about group direction but covertly the polarization can often be characterized as
differences among group members in deeply held, often unconscious, beliefs.
Ideology and personality can be as influential as culture in predicting these patterns. The
ideological tapestry in society provides the context of business – but understanding its effects
inside the organisation makes a practical difference for the working manager and the growth
of the organisation.
Ghana Incorporated should define its political and governance ideology vividly to help
professional managers to understand and put in their maximum best. Let us ask ourselves a
question as to whether the current two-term of office for the presidency is helping us to
grow. The answer, seemingly is a ‘No’ since, as a country, we continue to sink deeper in our
economic woes when the incumbent government galvanized by the President work for reelection.
Therefore, would it not be appropriate to have one-term presidency with longer years, say
seven (7). Certainly, the incumbent president would not be pre-occupied with ‘ways and
means’ strategies to seek re-election but instead, the person would be pursuing
developmental agenda to leave a legacy (a name in fact). What about the governance
ideology based on prosecuting political agenda on the lines of party manifesto – a public
declaration of policy and aims, especially one issued before an election by a political party?
These declarations are mere intentions, opinions, motives, and lacks, consensus, direction
and agreement of the good people of the nation (the citizenry). For me, it would be sound to
have a national long-term plan (say 30 years plus) that has the buy-in of the citizenry. The
political parties would then have the opportunity to roll-out short-term strategic plans to
prosecute the developmental agenda of the nation during their term of office. This situation
will provide our leader the golden opportunity to lead and to become dual agenda leaders
who manifest concern for wealth creation and economic growth as well as concern for the
well-being of society.
Ghana has a very long history and tradition of planning for national development. In fact,
Ghana was reputed to have completed the first development plan in the World, the
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Guggisberg Plan, in 1919. We have on the shelves, the very well crafted Ghana Vision 2020
planning document, yet our developmental agenda is woefully prosecuted by government
upon government, primarily because of over reliance on party manifestoes and ‘winner takes
all’ philosophy, and the compelling urge to seek re-elections. Hence, the making of
unpardonable macroeconomic mistakes that lead us to IMF bailouts saga. In fact, the ‘winner
takes all’ political appointment system is depriving our country of the opportunity to
maximize the effective use of her human resource capital.
Ladies and gentlemen, as a country, we need to innovate our governance system. As far as I
am concerned, innovative governance is simply the adoption of creative governance
practices to transform old or new governance models. Let us turn our attention as
professional managers to the following simple economic growth and sustainable
development model:
(i) As a nation, the Ministry of Agriculture can be tasked to inspect the country’s earth
(land) with the greatest care, and not to leave the agricultural possibilities of a single
corner or clod of earth unconsidered. Every useful form of plant under the sun should
be experimented with, to see whether it is adaptable to the country. By so doing, we
can grow various medicinal plants as well as exotic fruits; for example, those that have
higher export value to support our scarce foreign exchange. After all, there are homes
in Accra that have backyard gardens growing plantain, yam, cocoyam, and even grape
fruits. Agriculture should not be limited to selected lands in Ghana but should
encompass the whole breadth of the country.
(ii) All commodities found in our country, which cannot be used in their natural state,
should be worked up within the country, since the payment for manufacturing
generally exceeds the value of the raw material by two, three, ten, twenty, and even
hundred-fold. What do we see in Ghana since our independence 58 years ago? Export
of our natural resources in raw state to overseas for meager price. No value addition.
By now, Ghana should be boasting of sustained refineries in gold, diamond, crude oil,
etc., but alas! none to be proud of as a nation! No wonder, we cry for foreign exchange
because we are importing everything back to the country in its refined form at a cutthroat price thereby denying employment for thousands of our people. The new craze
is the shameful import of furniture – the so called China made grade ‘C’ furniture and
adorning our homes and offices with Chinese handy works. We trumpet Small and
Medium Enterprises (SMEs) as the engine of growth and yet, we do not have solid
strategic direction for the SMEs.
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(iii) Except for important considerations, no consumption should be allowed, in Ghana
under any circumstances, of commodities of which there is sufficient supply of
sustainable quality in the country. This is indeed an irony. We have our brown rice
which is so delicious and nutritious and yet, as a country, we have over one hundred
brands of imported rice in the country, to the detriment of our rice farmers, the scarce
foreign exchange, and the health of our children. The rice business is a big ‘mafia’
business controlled by foreigners with its attendant tax payment challenges for the
economy.
My brothers and sisters, the three points I have enumerated are adapted from 1684 Philip
Von Hornigk’s Nine (9) Points Agenda’ governance model for German Colonies, Austria in
particular. As old as the model is, and crude as it may be, it sets out homegrown solutions for
economic development. Our salvation and help is in the setting up of manufacturing
enterprises so as to enjoy manufacturing multiplier in taxes, employment, and foreign
exchange earnings. Value addition is the order of the day in all developed countries, and not
undertaking buying and selling! Buying and selling do not necessarily help the economy,
particularly in the use of our scarce foreign exchange.
I am convinced that the said model carries some lessons for us as a country to save foreign
exchange and to stem the exploding depreciation of the cedi. We need to act now as a
country. We do not have to wait as a nation to make the following type of unfortunate
statement made by Kenneth Kaunda, former President of Zambia: “… we are part of the
blame for our country’s impoverishment but this is the curse of being born with a copper
spoon in our mouths.” Is it a curse that we, as a country, among others have: gold, diamond,
bauxite, cocoa, timber, oil, fish, fertile land, sunshine and rain, rivers, and coastal lands? We
are very well endowed but we lack values (integrity and discipline) and leadership
(professional management). “Leadership is a combination of strategy and character. If you
must be without one, be without the strategy” (Gen. H. Norman Schwarzkopf). This
quotation is indeed the hallmark of the 21st century servant-leader who can survive the
turbulence we find ourselves in today. I call these disciplined people with integrity, the
dual–agenda leaders who manifest concern for socio-economic growth underpinned by
economic empowerment and well-being.
Helping to Grow the Country as Professional Managers
It is clear from the foregoing that as professional managers we have a role to play in the
socio-economic development of our country.
Professional managers must help organisations, including Ghana Incorporated, to adopt a
more enlightened approach to assessing and managing organisational performance and
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resources. Discipline and integrity are the fundamental premise that failure to exhibit same
will have increasing difficulty in coping with the challenges that developing countries face
and achieving the goals they set for themselves. On the other hand, discipline and in
responsible behaviour (integrity) will be the starting point to focus on what is really
important, to be able to manage resources in a sound manner using the 4 Es (economy,
efficiency, effectiveness and equity) principles.
This approach will ensure the ability to measure and control progress towards achieving set
goals. This will help create the capability for a performance – enhancing and continuousimprovement culture for our organisation to flourish – Ghana Incorporated, not being an
exception.
The Professional Managers as Leaders
The socio-economic development of our country rests on the shoulders of our leaders – the
professional managers. They see the creation of this development by way of enhancing and
improving the culture of our country, acting as a ‘DNA’ to help set the country alight.
The right time to identify and implement solutions to the myriad of challenges facing our
country today is now. As professional managers, we need to hone in our leadership skills of:
decisiveness, credibility, strong personality, courage, clear vision, focus, charisma and being
in the right place at the right time, exhibiting winning attitudes.
We have a role to play as professional managers in developing Ghana. We should lead by
example and take personal risks, provide a clear goal and direction for our people – the
citizenry. We should prosecute developmental plans with a simple, captivating, and well
communicated message. We should be unwavering in our focus. We should develop a
winning mentality. Above all, we should be prepared, as professional managers, to die for our
country just as Jesus Christ died for us all.
Conclusion
To conclude my presentation, I urge government (referring to you and me as government,
particularly the professional managers) to adhere to the simple principles of sound public
financial management system: fiscal discipline, a locative efficiency, and cost - effectiveness
(i.e. value for money).
The government in power (i.e. governing government) should create, issue, circulate, and
monitor all the currency and credit needed to satisfy the spending power of government and
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the buying power of consumers. The privilege of creating and issuing money is not only the
supreme prerogative of the government, but it is the government’s greatest opportunity. The
financing of all public enterprises and the conduct of the treasury will become matters of
practical administration. Money will then cease to be our master, and will then become
servant of humanity.
In unison, we, as professional managers, should pledge that after 2017, Ghana’s economy
should not go to coma again for us to run to IMF for restoration- No, and a big NO,
‘TOFIAKWA’ (God forbid) - Ghana must succeed and we can do so if we act as authentic
professional managers ready to serve our Nation. So help us God!
On a light note, I hope I have been able to earn my Fellowship from this delivery!
Thank you for your attention.
PROFESSOR KWAME BOASIAKO OMANE-ANTWI
PRESIDENT, THE INSTITUTE OF CHARTERED ACCOUNTANTS, GHANA
VICE RECTOR AND DEAN, PENTECOST UNIVERSITY COLLEGE GRADUATE SCHOOL
TEL. # 0244 320 448/0202011778
EMAIL: [email protected]
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