GHANA GOVT TO WITHDRAW FINANCIAL SERVICES FROM AGENCIES..

The government is set to wean off eight
subvented agencies as part of plans to trim
down the wage bill, highly placed sources at the
Ministry of Finance (MoF) have told the
GRAPHIC BUSINESS.
The sources said the government was hoping to
save between GH¢20 million and GH¢25 million
when the policy goes live this year.
Implementation will be done in phases, spread
over three years.
According to the sources, a committee is
currently working on modalities for the weaning
off. It would include examining the financial
performance of the agencies in the last three
years and their medium term projections, to
ensure that the projections were achievable.
However, the Fair Wages and Salaries
Commission (FWSC) and the Ministry of Finance,
which are leading the implementation proces,
have declined to name agencies. But GRAPHIC
BUSINESS checks has revealed that the list will
certianly include the Ghana Water Company Ltd
and the Electricity Company of Ghana.
“It will be better we don’t mention the names
since we are not restricting ourselves to any
particular organisation per se, because we are
also in talks widely with other organisations who
are actually willing to be weaned off
government subvention,” the Chief Executive of
FWSC, Mr George Smith-Graham, explained.
The agencies are being guided off the national
budget to enable them to clean up their balance
sheets, which would enable them to source
commercial financing from the market, on the
strength of balance sheets.
The government is burnt on making the
autonomy of state agencies a standing policy
going forward. The move is also part of efforts
by the government to rationalise expenditure
and lesson the debt profile of the economy.
“This is the policy we are pursuing. If they need
to polish up those balance sheets to be able to go
to the market, the last thing you would want to
do is to create the impression that because they
have been on subvention they cannot succeed,” a
source at the MoF said.
“I believe that once we have the strategic plans,
action plans, or implementation plans, it should
be possible for us to ease whatever tension or
uneasiness that the agencies may have,” Mr
Smith-Graham said.
This could mark a departure from the past
where state agencies were weaned off
government subvention without being capitalised
or given startegic direction.
This time round, the MoF has given the
assurance that the affected agencies will be
capitalised properly to enable them to stand on
their feet.
In an earlier interview, Mr Smith-Graham,
explained though almost all the institutions were
ready to go off government subvention, it would
not be possible for all to comply from the
beginning of 2015.
“Some may need a year and some a maximum
of about two years to gradually get themselves
off government’s subvention. So we are working
as a team to ensure that we can get those which
want to go immediately to do so,” he stated.
According to Mr Smith-Graham, the exercise was
basically to ensure that organisations operated
more effectively and in a more business-like
manner in order to become sustainable and
profitable.
“The whole idea is to make sure that we have
some institutions that have the capacity to be on
their own when they are weaned off. It will also
help in reducing the burden on the government
with regard to wage bill, and even other capital
items that government still support those
organisations in terms of the budget,” he said.
He explained that the exercise would reduce
government’s expenditure since the agencies
would have to generate their own revenue and
become financially independent.
“Subvention to the agencies can only be burden
on government or not depending on how you look
at it. If you look at it in a way that the same
government would have to find the money to
pay it would come as revenue, but it would also
register as expenditure. But we prefer to do it
this way because it gives the true and accurate
expenditure of everything,” the MoF source
explained.
“We would expect that they would have a
strategic plan which would have a clearly stated
action and implementation plan,” Mr Smith-
Graham said.
As a first step, the committee would alert
government about the readiness of the agencies
and get experts to put together a strategic plan,
an action plan and implementation plan for the
agencies.
Under Labour Administration Programme, the
budget states that the FWSC developed an
instrument on the new Public Service-Wide
Performance Management System to facilitate
its implementation.
This enjoins employers to pay for work done
and compensate for increases in productivity of
employees. In line with Section 168(2) and (4)
of the Labour Act of 2003, Act 651, the
government will henceforth pay only for work
done.
This year, the Commission is expected to
establish a Public Service-Wide Performance
Management System with effective rewards and
sanction mechanisms that will ensure high
productivity in the public services.
The 2014 Budget stated that 12 subvented
agencies had been identified to be weaned-off
government subvention.
The budget proposed that measures and
modalities would be established to assist the
identified institutions to be weaned-off
government payroll. This exercise will continue in
the medium term until all such institutions are
weaned off.
Expenditure on Wages and Salaries between
January to September 2013 totalled GH¢5.88
billion, 5.5 per cent higher than the budget
target of GH¢5.57 billion and 19.4 per cent
higher than the outturn for the same period in
2012.
In addition, an amount of GH¢846.3 million was
spent on the clearance of wage arrears.
Expenditure on wages and salaries alone was
equivalent to 66.3 per cent of non-oil tax
revenue (excluding exemptions) and 62.3 per
cent of tax revenue (excluding exemptions).
Including the wage arrears paid during the
period, expenditure on wages was 75.8 per cent
of non-oil tax revenue (excluding exemptions)
and 71.3 per cent of tax revenue (excluding
exemptions).
For 2014 as a whole, wages and salaries,
including the provision made for the clearance
of wage arrears is projected at GH¢9.57 billion,
25.8 per cent higher than the 2013 estimate.
As of June, 2014, the Sub-Committee on Sub-
vented Agencies held preliminary meetings with
eight out of the 12 identified Sub-vented
Agencies to assess their capacities and readiness
to be weaned-off Government subvention. The
issues that are being considered include:
The need to amend laws that established the
institutions; Irregular review of fees, levies and
charges on the goods and services they provide,
which is preventing them from making sufficient
income/revenue, and the need to complete
ongoing projects before weaning them off.