CONTEXT FOR REFORM
Ghana has gone a long way and making strides in growth and development. It has achieved good marks on macroeconomic stability and sovereign-credit ratings, which should be good foundation for major economic take off. However more needs to be done to conquer the perennial exchange rate and inflation problems
Independent Central Bank
i) Fixed term for governor
ii) Bank oversight of monetary policy and financial stability ( new UK proposal)
iii) Inflation-targeting mandate and responsibility ( as in UK)
i) Banks to be encouraged to separate wholesale and retail activities and prevented from running auxiliary financial services such as brokerages, insurance etc. This services should be provided by non-banking institutions.
ii) Strict and clear regulation of microcredit sector including higher capital requirements and strong oversight and supervision to prevent malpractices (e.g. pyramid schemes), which could be detrimental to the economy given its wide spread use
iii) Encourage mobile money payment use (e.g. M-pesa in Kenya) with sound and flexible regulatory framework to prevent money laundering and other financial malpractices
iv) Establishment of office of financial ombudsman to check financial practices and protect consumers
Pragmatic and proactive industrial policy which attract, encourages and support medium and small scale industries and promote national industrial champions – not at the expense of efficiency and competition.
i) National investment & development banks (ADB & NIB) to channel competitive loans to industries. Brazil’s national development (BNDES) plan gives loans with interest of less than half the market rates and also provide seed money to support innovations for target sectors including biotechnology, pharmaceuticals and information technology.
ii) Encouragement of National Champions, with mix economy of ownership. Brazil has national champions like Petrobas, Embraer, France has Champions like EDF and Aerospace, America has the auto industry, banks et al, which it bailed out handsomely. France has established a national strategic agency to support and promote enterprise. These encourage other industries to innovate and also become ‘‘national champions”.
Making State Enterprises Efficient & Effective
i) State enterprises that are strategic and cannot be wholly divested (E.g. utility companies) will be turned into national champions through a menu of enshrined operating principles including autonomous and competent management, cost recovery financing model, economic pricing models with built in discounts for the poor, and partial privatisation to encourage civil society scrutiny and involvement.
ii) A good example is Cambodia (of all places) national water utility authority, which has received numerous global accolades. In the 1990’s it’s employees were demoralised, only 13 percent of connections had water meters, collection rate was below 50 percent, illegal connections were widespread, unaccounted for water was 72 percent, employees were installing illegal connections at $1,000 per connection, had century-old pipes and poor distribution network and only about a quarter of the population received piped water. It has now achieved 100 percent coverage with reliable water 24-hours-a-day, non-revenue water has decreased from 72 to 6 percent, bill collection is at 99.9 percent and the poor are given extra privileges such as subsidised tariffs, connection and instalment fees.
iii) Electricity company should be able to operate 24/7 supply to households and businesses by 2017 ( propel economy and satisfy growing household demand) –
iv) Feasibility studies conducted and commission appointed to consider efficient, safe, effective way of power generation for the country
v) Water company should be able operate 24/7 supply by 2016 to all urban households – Same for the Community Water & Sanitation Authority (follow Cambodia example) experience
vi) Effective sanitation policy with devolved responsibilities to regional and district assemblies. This should be part of our health care policy – disease prevention and wellness prevention tool.
Making the Economy Competitive
Too many Ghanaian businesses (the big ones included) are either or uncompetitive outside the formal economy
i) Create strong corporate governance framework and practices: public companies and corporation boards held accountable and scrutinised for activities of their corporations (part of contract of appointment). Private sector (public companies) governance to be scrutinised and enforced by the Stock Exchange and Shareholders. Public sector governance and accountability to be scrutinised and enforced by the Office of the President (Strategy & Delivery unit), Audit Commission, Auditor and Accountant General’s Departments, and the public (through the annual performance reports – see governance & democratic delivery policy)
ii) Establishment of fair trading and consumer right body to uphold better customer services and quality products.
iii) Open up and encourage competition: open up all sectors to competition. Establish competition authority to curb uncompetitive practices and far trading body to uphold consumer rights and limit shoddy services.
iv) Redesign tax framework and regulations to widen tax net to capture big informal sector and limit avoidance and evasion. Use tax framework to incentivise firms to transition to formal sector and expand. These informal and small scale firms may need advice and support effect this transition – Private Enterprise Foundation, Chamber of Commerce, Association of Industries and other relevant associations to be provided with consultants to advise and support their members on making the transition.
v) Tax incentives for medium and small scale firms to be time limited to avoid firms coasting and not expanding.
vi) Encourage competition & innovation: by attracting global firms and removing caps on business ownership
vii) Open up credit avenues: use national development banks to provide responsible and competitive loans, incentives (including tax breaks and persuasion) to other banks to lend to firms. Maintain mix of public and private retail banks but divest public ones gradually to encourage mix ownership. The economy should be formalised by making all wages and salaries made through banks. The public banks will be used to support government policy e.g. to formalise the economy. Make public venture capital fund more visible and accessible as in Denmark, Singapore).
viii) Infrastructure: create information technology hubs and parks to develop our emerging talents in information technology. UK, Russia and Kenya have all created such hubs. Hub will be autonomous from governmental control but supported with grants. India has introduced electronic registration for businesses, which has speed up registration and ease of doing business
i) Remove fuel subsidy to achieve full cost recovery on petrol. Current system subsidises the rich at the expense of the poor.
ii) Use savings from subsidy removal to reduce commuter pain index by bridging the gap between supply of and demand for public transport facilities. This will increase productivity on all spheres and buoys country’s competitiveness
i) Attract large-scale private investment in building and management of roads. Chile has effectively transformed its road network to world class standards through this approach. Transport – rail. Private investment will focus on motorways while government concentrate on urban, feeder and rural roads
ii) Attract private investment into building and managing railways. Railways extended to major trading routes to cut congestions and delays in deliveries. Priority given to Accra, Kumasi, Takoradi triangle. Later expanded northwards.
iii) Attract private investment into building and managing regional airports – starting with Kumasi, Takoradi and Tamale.
i) Entrepreneurs can create jobs and increase innovation. This is only possible through change in cultural attitudes, availability of physical and financial capital. Partner with Private Enterprise Foundation, Chamber of Commerce, Association of Industries to establish regional and district offices to provide advisory services and support to enterprises and prospective entrepreneurship.
ii) Attracting expatriates back – as done by Israel, China and India. Give dual citizens equal rights to occupy economic and political positions. UK members of parliament can be dual citizens, and Arnold Schwarzenegger and Madeline Albright were dual citizens.
iii) Government guarantees for loans and funding for well managed and visionary private firms, which follow sound and lawful practices.
i) Pension for informal sector – as being done by Thailand – encourage individual savings, funds for investment, and government for future government welfare savings
ii) Successful informal sector pension should have inbuilt flexibility to help switch or move pension savings between employments and location to encourage intake. Significant moves in the informal sector – both change of jobs and geographical moves
- Public- private partnership (with professionals associations and private sector) building schemes akin to SSNIT housing schemes for essential workers and those within the formal sector
- Promote ownership, including shared ownership schemes of these buildings through lower mortgage rates and partnership with professional associations such as GNAT, GMA, and TUC to support members to access shared/full ownership schemes
- Partnership with pension funds including SSNIT to participate or invest in the public – private housing scheme and mortgage finance agencies
- Partnership with traditional authorities to release for such schemes and regenerate their areas – developers get lands at cheaper prices to build affordable houses
- State housing company to be made responsible for ensuring developers adhere to quality standards for property development. Standards will be set for acceptable sizes of rooms, outer spaces, building material etc to ensure houses are habitable, meet family and cultural needs, and meet global health & safety standards.
Regional Trade Hub
- Attract investment both foreign and local and use Ghana as hub for trade & investment aka Singapore or Hong Kong to China & South East Asia
- Engage in extensive negotiation and trade deals with regional anglophone countries (Gambia, Sierra Leone, Nigeria, Liberia) to allow big and successful international firms to establish regional headquarters in Ghana and use Ghana as their trading hub in the region, without facing any barriers from regional partners. This will widen Ghana’s market size and make it more attractive to big global firms who want to enter Africa.
- Lobby for mini World Economic Forum summer Africa summit in Ghana (annual). With government contribution to initial cost and seek funding from other sources for subsequent events, as done by China (Shanghai) and others