2012 BUDGET – high growth or go slow?

As Dr. Nduom reacts on budget

Today, the Minister of Finance & Economic Planning Dr. Kwabena Duffuor presented the last budget of the 4 year term of office of the President John E. Atta-Mills Administration.

Last year the budget that was presented to Parliament had the theme, “Stimulating Growth for development and Job Creation”. The 2011 budget promised the people of Ghana that government was going to ensure growth in all sectors of the economy.

Business men and women, service providers, farmers and all others stake holders in the economy were thus given assurance of government’s commitment to growth. However, given the robust promise of action, the facts on the ground point to the lack of delivery – indeed, the growth achieved cannot be deemed to be the type to touch the lives of ordinary people who form the majority of our population.

Ghana has been marked as the fasted growing economy in the year that is soon to end. We must ask ourselves “growth for whom?” It is clear that the sectors of high growth, mining, construction and natural resources do not employ many people – the owners who take the profit and utilise the revenues are foreign based.

On the other hand, the sectors that employ many Ghanaians, agriculture, manufacturing in particular are experiencing lower than expected growth even when the expected results were low to begin with. It is as a result of negative growth (-11%) in the in the Hotels and Restaurants area that the Mills NDC Administration has finally admitted that removing tax incentives in the critical tourism sector this past year was the wrong thing to do.

The truth of the matter is that the people of Ghana have still not experienced the growth in real terms in their own pockets, in terms of jobs and in their quality of life. Graduate unemployment is high making people feel insecure in the country. Government’s policies have not been geared to supporting has continued to neglect local industries and entrepreneurs in the award of contracts for major state projects. In 2011, the Mills Administration failed to apply the stimulus the domestic required for job creation.

This year the theme chosen is “Infrastructural Development for Accelerated Growth and Job Creation”. In my view, given this year’s experience and the Finance Minister’s own admission that inflation targeting, the fear of a high payroll cost and stabilisation remain key policy objectives, the only way to characterise the 2012 budget is that Ghanaians are in for a “Go Slow” economy.

Yes there will be high growth compared to the global economy, but it will not be because the Government of Ghana led by President Atta-Mills has in store a considered program to use the state’s purchasing power to stimulate the domestic economy. Indeed, the following expectations that I documented prior to the reading of the budget remain questions unanswered:

1. The 2012 budget will have to demonstrate how government will support acceleration in the local economy. It is our expectation that the Finance Minister together with all state stakeholders will demonstrate the proper use of the state’s purchasing power for the benefit of the average Ghanaian. It is our expectation that the state will support local farmers, industries in the rural areas, and Ghanaian entrepreneurs with tax incentives in order to boost the ability of such local industries to perform well and stay in the competition for consumers.

2. Secondly, it will be very prudent of the part of government to start investing in the productive sectors of the economy now. For so long a time, the Government of Ghana has been engaged in borrowing to invest in ventures that do not provide returns and productivity to the state. This is leaving the state with huge debts which is not good for the economic health of the nation.

3. The 2012 budget must make provisions to reverse the abandonment of some major projects which was started by previous governments. Such projects include the affordable housing projects and other major road networks in the country.

4. The government should demonstrate through the budget how it will specifically redeem the promises made to the people of the Western Region. We do not want to use the Nigerian Delta state situation happen in Ghana.

5. It’s been almost two years when sod was cut for commencement of the STX Korea affordable housing project, yet little has been seen of it. Government will do us a good if much more is put in this budget to get the work started.

6. There has been much said about the Three Billion Dollar Chinese loan. The argument should not be on whether or not the loan should be taken. It is the use of such funds that matters to us. Government should tell us clearly where and how these funds are going to be used or allocated. Resources must be pushed into the productive sectors of the economy to improve business and industrialisation in the Country.

7. The idea that informed the initiation of the National Identification system. It is one important foundation building project that should not be neglected at all by anyone. With its full implementation, there is going to be tremendous discipline in the Ghanaian society. We therefore expect the 2012 budget to tell us how government is going to ensure that full attention is given to the project to ensure its successful completion.

8. Government has had it very tough managing the single spine salary Structure and this has been evident in the industrial strike by medical doctors that claimed many lives in Ghana just a few weeks ago. We want to urge the government to give detailed attention to SSSS since it has the potential of motivating workers to do their best.

9. Finally, the New Three Tier pension scheme is a good thing that has come to help the Ghanaian work force and as a result ensure the existence of long term capital for local businesses. It is very important that the 2012 budget provides funds for the participation of government workers in the new scheme while it gives sufficient resources to the Pension Regulatory Authority to be effective in its supervisory duties.

10. As 2012 is an election year, it is important that the Electoral Commission is given all the resources it needs with early disbursement to ensure uninterrupted work that will lend credibility to the parliamentary and presidential elections.

Dr. Papa Kwesi Nduom
November 16, 2011

(For the avoidance of doubt, please note that these are my personal views and not that of the Convention People’s Party)