8 February 2013

Africa: The Price of Big Government and Corruption in Africa - Lessons for Ghana After Oil Discovery

We are all familiar with the cases of the Nigerias, Equitorial Guineas, Angolas, Democratic Republic of Congos, Cameroons, Gabons and Zimbabwes, to name but a few, where in spite of the presence of vast amounts of natural-resource wealth, the masses of the people wallow in poverty. In fact, nature could not have been more generous to Africa for endowing the continent with vast natural-resource wealth ranging from minerals to oil and gas.

Ironically, however, the continent remains the poorest, as the wealth tends to benefit a few while the masses live in abject poverty--a kind of rich-poor paradox situation. Poverty abounds on the continent, with over half of the population subsisting on less than US$1 a day.

In addition to income poverty, Africa has some of the poorest of other social indicators, including life expectancy, endemic diseases, malnutrition, sanitation and illiteracy. Ribadu Nuhu[1] poignantly describes the plight of the African people in these words:

"As we go back to our comfortable beds tonight, we should think about the voiceless millions who may not even have beds at all, who go to sleep hungry, sick and uncertain about their future. For many, it's literally a matter of life and death."

The scale of Africa's natural resource wealth may be inferred from Africa Development Indicators, 2006, where the World Bank notes that between 2000 and 2010, $200 billion in oil revenue was expected to accrue to African governments.

It adds, however, that ironically, African countries tend to have higher poverty rates, greater income inequality, less spending on health care, higher prevalence of child malnutrition, and lower literacy and school enrollments than other countries at the same level of income.

The question is: why does the wealth of Africa fail to trickle down to the masses who suffer abject poverty in the midst of plenty? The rich-poor paradox in Africa is the result of two non-mutually exclusive factors: big government and corruption.

The Problems Of BIG Government And Corruption

A major factor responsible for the impoverishment of the African people is big government. A penchant for creating jobs for party members, relations, and friends leads to over-bloated "governments" across Africa. In the event, large numbers of people are employed and paid with state resources to do little work or to duplicate the work of others. In Africa, loyalty--to relations and cronies--is strong.

The extended family system extends the reach of family loyalty. This also extends to friends, since friends of your relations tend to be your friends as well. The network of family and friends thus becomes extensive. And that is where the problem of big government and corruption start.

When African politicians assume power, they see their first duty as extending favors to their relations. This is done through appointments to key positions, award of public contracts, or provision of other financial or material privileges.

The next circle of people to be favored is friends. This may include home-town buddies, school mates, or friends of relations. As is to be expected, the perpetration of corruption by Africa politicians often involves relations and friends.

The African traditional family and friendship loyalty bring so much pressure to bear on political leaders; pressures that they are often unable to resist. Next in line are party members and supporters, who are also appeased with jobs and other favors.

The traditional African family and friendship loyalty often manifests in the creation of jobs for the boys, which many times results in placing square pegs in round holes. This comes with considerable economic costs, since incompetence is rewarded at the expense of efficiency.

As Professor Adei[2] points out, this is akin to the "winner-takes-all concept," which, he argues, has the tendency of making politicians, upon assumption of office, to appoint old school mates and other cronies to positions, disregarding competence and merit. He regrets the unfortunate situation where old students from their former schools "suddenly become intelligent" when their school colleagues assume power.

Often, ministries and departments are created haphazardly without due regard for economy or efficiency. In per capita terms, African countries tend to have more ministries, ministers, and parliamentarians than other developing or developed countries.

The big size of "government" in Africa can be illustrated with examples from Ghana and the US. Ghana has a population of 24 million and the US, 350 million. In the next government, Ghana will most probably have over 25 ministries on current count. The US has 15 ministries/departments.

Assuming one minister and one deputy for each ministry plus 6 Ministers of State, Ghana's ministers' figure comes to 56, implying 2.33 ministers per 1 million people. The same assumption will yield 30 secretaries of state for the US, implying 0.08 secretaries of state per 1 million people.

On this count, Ghana's minister-population ratio is [29 times] that of the US. Who says that the more ministers you have the more efficient the government is? Having a leaner government may be more efficient given that you avoid duplicative practices and inter-personal rivalries that hold back progress.

When it comes to parliamentarians, Ghana has 275[3] , implying 11.5 parliamentarians per 1 million people. The US, on the other hand, has 538 representatives, implying 1.5 representatives per 1 million people. This means that Ghana's parliamentarian-population ratio is 7.6 times that of the US.

Ministers are, of course, very expensive people, as, in addition to their basic pay and allowances, they are often provided with free or subsidized housing, transport, security, utilities, medical care, etc.

Further, they enjoy generous retirement benefits. Then you add parliamentarians who also enjoy similar emoluments and benefits. The cost of taking care of the executive and legislature takes away vast amount of resources from ordinary people and impoverish them.

Meanwhile, Africa's natural resource wealth is applied by the ruling class for their exclusive benefit at the expense of the people. In many cases, the wealth is stashed away in private bank accounts in Switzerland and other Western countries.

From Nigeria to Congo DR to Angola to Equatorial Guinea to Gabon, vast oil endowments have led to corruption that has impoverished the populations. One can cite numerous examples of the scale of abuse of African resources for the gain of a privileged few.

Ribadu expresses serious concern about corruption in Africa, especially regarding the management of natural resource wealth, calling it the greatest challenge to progress on the continent. Commenting on the scale of misappropriation of Africa's natural resource wealth and aid resources, a former World Bank President, Paul Wolfowitz, also once remarked that some two million Africans die from AIDS-related illnesses each year, while nearly 3,000 African children die each day from malaria and nearly 40 million are not in school.

However, all this was happening despite $300 billion in international aid to Africa over a 20-year period. Ribadu, on the other hand, further argues that corruption has not only produced injustice and a chronic failure to effectively manage international support, but it has also led to the squandering of Africa's considerable human and natural resources. He adds that corruption kills far more effectively than AIDS, malaria or war.

A 2007 report by the United Nations Office of Drugs and Crime (UNODC) and the World Bank notes that cross-border flow of the global proceeds from corruption, tax evasion, and other criminal activities is estimated to be more than US$1 trillion annually. Some $20-$40 billion in assets acquired by corrupt leaders of poor countries, mostly in Africa, is being kept overseas.

The Solutions To BIG Government And Corruption

If Africa's wealth is to trickle down to the ordinary people and raise their standard of living, big government and entrenched corruption should be tackled head on. Big government, which sucks enormous resources at the top and leaves very little for the masses below, should be cut down to size. Most importantly, constitutional limits are needed for the number of ministries and ministers.

The current situation in Ghana, for example, where the Executive can create ministers and ministries at will is not ideal. This is not done in mature and progressive jurisdictions. It may also be necessary to revisit the constitutional provisions on creation of districts and constituencies, which is used arbitrarily to enlarge parliament for political expediency. Some limits need to be imposed here.

It is also important that a way is found to address the winner-takes-all syndrome in African politics. Again taking Ghana as an example, the Executive has the power to appoint every top public official, including Directors of Ministries, heads of departments, agencies, public corporations, and local-government executives.

In such a politically-polarized country, this practice does not only deprive the country of the services and talent of competent and capable personnel, but it also leads to unnecessary enlargement of the public sector and the associated bureaucracy. Here also, constitutional provisions are needed to address this canker.

On corruption specifically, there is a need for effective institutions to check public sector financial malpractices and institute steep penalties. The institutions must be independent of the executive in terms of appointments and working resources so that they can carry out their mandate effectively without fear or favor.

Here, we are talking about internal and external oversight bodies. The internal bodies should be in the mold of the United States Inspector-General system whereby an independent body is embedded in every state institution to monitor and audit the use of public resources. This system checks corruption right at the root before it flourishes.

The system of internal auditors and national auditor-generals in Ghana and other African countries is not effective in checking corruption. External oversight bodies like CHRAJ and EOCO in Ghana should be reformed and strengthened in the manner suggested above.

Further, parliaments must be up and doing in checking abuse of national resources. An effective vehicle for doing this would be a Parliamentary Budget Office (PBO), similar to the US Congressional Budget Office (CBO), to carry out independent checks on national budgets and the use of national resources.

The judicial system should also be reformed and strengthened to be able to adjudicate and institute strong penalties indiscriminatorily for corruption as a deterrent.

Declaration of assets by top public office holders prior to assuming office and on leaving office should be institutionalized to check unbridled amassing of wealth while they are in office. Public office must be for service and not personal enrichment.

The outflow of African wealth by corrupt leaders and governments can also be stemmed by establishing appropriate systems and reinforcing rules and procedures with strong oversight, including by parliament. Where relevant, the possibility of recovering flight capital and stolen assets should also be vigorously explored.

One vehicle that can be explored for this purpose is the Stolen Assets Recovery (STAR) initiative of the World Bank and the UNODC with the objective of helping countries recover their stolen assets.

The initiative assists countries to establish institutions that can detect and deter illegal flow of funds. It also works with the OECD countries in ratifying the Convention Against Corruption (CAC) and supports and monitors the use of recovered funds for development activities that directly benefit the people.

After its oil discovery, and addingd the country's other natural resources, including gold, diamonds, manganese, and bauxite, Ghana has the opportunity to use its wealth for the benefit of its people.

It, however, stands the danger of falling into the big government-cum-corruption trap which will only dissipate the wealth at the top at the expense of the masses at the bottom. Extreme vigilance from all, including parliament, CSOs, and the wider public, will be important in putting in place the necessary checks on executive discretionary powers and practices.

Dr Kwakye is a Senior Economist, Institute of Economic Affairs (IEA)

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