This Selected Issues paper reviews public service reform in Ghana. The paper highlights that a range of public service reform initiatives have been undertaken in Ghana since the early 1980s. The public service in Ghana is composed of centrally managed agencies, ministries, subvented agencies, district assemblies, and state enterprises. The civil service, which covers the centrally managed agencies, ministries, and local government, accounts for only about 20 percent of total public sector employment as a result of the spin-off in the 1980s of the internal revenue, customs, education, and health services as subvented agencies.

Abstract

This Selected Issues paper reviews public service reform in Ghana. The paper highlights that a range of public service reform initiatives have been undertaken in Ghana since the early 1980s. The public service in Ghana is composed of centrally managed agencies, ministries, subvented agencies, district assemblies, and state enterprises. The civil service, which covers the centrally managed agencies, ministries, and local government, accounts for only about 20 percent of total public sector employment as a result of the spin-off in the 1980s of the internal revenue, customs, education, and health services as subvented agencies.

I. Ghana: Public Service Reform1

A. Introduction

1. A range of public service reform initiatives have been undertaken in Ghana since the early 1980s. However, they were introduced and implemented in an ad hoc manner, and have fallen short of intended outcomes. In order to make the public sector more cost effective and supportive of the private sector, the government launched the National Institutional Reform Program (NIRP) in late 1994. The NIRP intends to achieve these objectives through better coordination of the government’s reform programs, particularly those aimed at (a) making the public sector more compact and efficient; (b) enhancing the compensation structure to enhance motivation, skills, and good governance; and (c) establishing monitorable indicators of progress and a timetable to complete the reforms.

2. The National Oversight Committee (NOC), a 20-member executive board with private sector participation, was established to oversee the work of the NIRP secretariat. Its authority was substantially enhanced in mid-1997 with the appointment of the Vice President of Ghana as Chairman.

B. Overview of Public Service Reform

3. The public service in Ghana is composed of centrally managed agencies, ministries, subvented agencies, district assemblies, and state enterprises (Table 1). The civil service, which covers the centrally managed agencies, ministries, and local government, accounts for only about twenty percent of total public sector employment as a result of the spin-off in the 1980s of the internal revenue, customs, education, and health services as subvented agencies.

Table 1.

Ghana: Overview of the Public Service

(As of end-1997)

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Source: National Institutional Renewal Program, Public Sector Reinvention and Modernisation Strategy, December 1997.

Of which teachers: 180,000.

Not part of the central government budget.

4. During the period 1987-1994, public service reforms were introduced on a piecemeal basis. A lack of control over hirings and wages levels, notably at subvented agencies and state enterprises, resulted in an increasing government wage bill and wide disparity in wages among the various services. Nonetheless, job inspections and management reviews resulted in the reduction of the number of civil servants in central government from about 140,000 in 1987 to 90,000 in 1994; approximately 7,000 layoffs were due to the removal of “ghost” workers. Laid-off personnel received a redeployment package that was partly financed by the World Bank. In 1997, Ghana’s wage bill was 5.4 percent of GDP, close to the unweighted average for 18 selected African countries, with the number of civil servants at about 84,000 in central government and almost 123,000 including local government. The ratio of the number of employees in the civil service and subvented agencies to total population was the second highest in the sample (Table 2).

Table 2.

Comparative Civil Service Ratios

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Sources: IMF, African Department, “Civil Service Data by Country”; and IMF, African Department, “World Economic Trends in Africa.”

1 = highest.

5. The initiatives under the scope of the NIRP can be summarized as follows:

6. Civil Service Performance Improvement Program (CSPIP). This program was launched by the Office of the Head of Civil Service in March 1995, covering 190 organizations with about 81,000 staff.2 It addresses issues of motivation and performance, focussing on divisional and individual performance improvement plans, consolidation of the computerization process, and manpower ceilings. Feedback from managers resulted in the identification of 16 common problem areas in the civil service, and discussion groups have been set up to help solve these issues. The program is scheduled to run until 2006; as of mid-1998, 125 agencies had passed the problem identification stage.

7. Public service wage reform. In 1996, the Public Services Commission, with assistance from Price Waterhouse, began a review of the salary structure of the public service with the aim of resolving the long-standing issue of wage disparities. The review has three main objectives: eliminating ad hoc approaches to income administration in the short-term; establishing a remuneration policy implementation plan in the medium term, mainly based on a comprehensive exercise of job classification; and developing a sustainable structure for the long term in line with Ghana’s Vision 2020 report on the Coordinated Program of Economic and Social Development Policies.

8. Because the government felt that wage structure and job classification issues transcended the public sector, it opted to work in the context of a Tripartite Commission, which includes trade unions and employers. Following several meetings, the government issued a confidential report—the “Price Waterhouse Report”—in mid-1998 outlining its proposed strategies from 1999 onward. The stated guiding principle of the report was to put into place a uniform salary structure based on tasks instead of positions. This implies a salary alignment in the short term and a salary adjustment in the medium term. The government is aware that the salary structure must be consistent with its macroeconomic targets, notably as regards prices. The social partners will give their reactions by end-1998. In the meantime, the government has granted an across-the-board 20 percent salary increase as a relief allowance for price increases, instead of the standard annual adjustment of the salary structure.

9. Decentralization reform. The local government law of 1988 created the District Assemblies as a first step toward decentralization. The Constitution of 1992 introduced the District Assembly Common Fund (DACF) for development programs, which receives at least 5 percent of central government domestic tax revenue. The Village Infrastructure Project of the World Bank is to be channeled through the DACF. It was seen early on, however, that district administrations were weak, and efforts were begun to strengthen their expenditure allocation and project implementation capabilities. However, progress was slow, and in 1995 the long-standing practice of funding half of local government staff salaries through the central government budget was abandoned in favor of full central funding. This was done in order to obtain better control over hiring policies of the district assemblies. A Local Government Act is being presented to parliament, which will create the administrative and accounting framework for the 110 district authorities.

10. As the government withdraws from the direct provision of services—both through privatization and removal of entry barriers—it is redefining its role as principally regulation of these activities. In this context, the government has established the independent Public Utilities Regulatory Commission (PURC) to review pricing and standards in the electricity and water sectors; the Energy Commission to monitor pricing in the petroleum sector and issue licenses to independent power producers; and the National Communications Agency to oversee the telecommunications sector.

11. State-owned enterprise (SOE) reform. The state enterprise sector is supervised by the State Enterprise Commission (SEC). As such, it is responsible for implementing the SOE reform program, whose objectives are developing the capacity of the SEC to monitor and evaluate the performance of the SOEs, including by improving the data base; strengthening the operation of the SEC’s performance contract system; building capacity within the Ministry of Finance and the SEC to coordinate the implementation of the program and to manage the government’s portfolio of equity investments, loans, and guarantees; and preparing selected SOEs for divestiture as well as building capacity within the Divestiture Implementation Committee (DIC) to accelerate the divestiture program.

12. The institutional framework for the sector is centered on the performance contract system, started in 1989, which introduced the concept of corporate planning to managers. It was initially set up for 12 enterprises; by 1995 this had increased to 47. In 1997 the SEC decided that all SOEs had to adopt performance contracts. This has helped improve the financial performance of the sector, further supported by the Statutory Corporation Act of 1993 aimed at standardizing regulations for SOEs and developing diagnostic action plans. As a result, government subsidies have virtually ceased, and privatization has accelerated.

13. The corporate planning process covers 3-5 years on a rolling basis with annual targets. The achievements under the plan are reviewed by the SEC and the Ministry of Finance at the end of the year, and grades and incentive bonuses (if called for) are determined. In 1997, 15 percent of enterprises had received a top grade, 40 percent a middle grade, and the remainder an unsatisfactory grade—mainly because of shortfalls in profitability and governance. The process will be further tightened in 1999—including through a more rigorous application of sanctions such as dismissal of managers.

14. While important progress has been achieved, the reforms are now entering a new phase both in terms of significance of the enterprises to be tackled and the need to increase the transparency of the reform process. In May 1998, the government added economically significant state owned corporations to their divestiture list, including Ghana Airways, the Ghana Water and Sewerage Corporation, and all remaining state-owned banks. The list, which is posted on the DIC website, includes a provisional timetable. The government is committed to keeping the public informed, and will provide the number of bidders selected, the value of the transaction, as well as the DIC’s audited accounts.

15. Public Expenditure Reform. In 1997, the government embarked on a comprehensive improvement of its procedures for budgetary planning, implementation, and monitoring under the Public Financial Management Reform Program (PUFMARP). The program is supported by the World Bank and other donors. As a first step, the government designed a new budget and public expenditure management system (BPEMS), which is expected to be fully operational in 2000. It will improve budget preparation and implementation, streamline cash management, and strengthen accounting procedures.

16. Accompanying the BPEMS is the medium-term expenditure framework (MTEF), designed to merge sectoral policy decisions with budget constraints. The sectoral policies are calibrated on a rolling 3-year macroeconomic and budgetary framework. Activities, such as primary education for one child or rehabilitating a mile of feeder road, are costed to determine what policy targets can be achieved within a ministry’s overall budget ceiling. The government’s aim is to have the MTEF fully operational for 2000. In preparation, the government has issued guidelines for the 1999 budget that include a macroeconomic framework consistent with the Policy Framework Paper (PFP) and budget guidelines for each entity over the next three years consistent with available resources.

C. The Public Sector Reinvention and Modernization Strategy (PUSERMOS)

17. When the NIRP was created, information was collected on the various public sector agencies based on a common review instrument, the Self-Appraisal Instrument (SAI). By the end of 1996, 250 institutions had been analyzed, and the information was used for a national workshop organized in May 1997. The workshop focused on coordination of reforms and development of human resources and was chaired by the Vice President, who had recently been appointed Chairman of the NOC. It developed a strategy for the next ten years covering the broad spectrum of public sector reforms, entitled the Public Sector Reinvention and Modernization Strategy (PUSERMOS). This strategy was approved by the Cabinet on December 18, 1997, and the NIRP was instructed to begin a pilot phase that would be completed no later than end-1999.

18. PUSERMOS seeks to clearly delineate functions of all components of the public sector, achieve efficient management and execution of these functions, attain effective delivery of services, and instill good governance. In addition to redefining and clarifying the national policy process through a Policy Management Group at the Office of the President, the PUSERMOS stresses reforms in two public service sectors: subvented and central management agencies. These reforms are to be implemented over the next ten years and would allow a significant decentralization of the government’s activities. At the end of the period, the civil service is to comprise no more than 2,500 staff, down from 84,000 presently. The restructured subvented agencies and local government institutions will absorb most of the staff moving from the civil service. Thus, the main focus of the strategy is not downsizing but reallocating functions within the public service. Nonetheless, severance costs are expected and the government will consider these in drafting each year’s budget. The World Bank is supporting this reform effort through financial and technical assistance, guided by the conditions established under the Economic Reform Support Operation (ERSO). It encompasses assistance for the pilot project and preparation of a fully costed three-year reform program.

19. Subvented agencies employ over 70 percent of the civilian public service and include the education and health services, Highways Authority, universities, and a myriad of smaller agencies. They have been classified into four categories, viz., those that will be: (1) wholly subvented; (2) partially subvented; (3) wholly commercialized; and (4) closed down (Table 58). The NIRP’s pilot phase covers at least 7 agencies in the first two categories, 5 in the third category, and 5 in the fourth category. Environmental studies, the legal framework, and procedures for closing down or commercializing subvented agencies are to be completed by end-1998. At that time, the Cabinet is expected to approve the specific subvented agencies for this phase.

20. The central management agencies (CMAs) will be reformed in a two-phase approach.3 The first phase will target the Ministry of Finance and Public Service Commission, that is, the very bodies carrying out the reforms. Putting a more coherent and transparent regulatory environment in place for them is therefore a prerequisite for launching the reforms. The initial activities will include a functional analysis of personnel management, budget and financial planning and implementation, and policy development; developing recommendations for streamlining functions among the CMAs; consensus building through focus group discussions; and costing and planning the reforms. This is complemented by work already underway to reform budget planning and management (PUFMARP), and improve Cabinet decision making.

D. Conclusion

21. Successful implementation of the PUSERMOS will be crucial to attaining the financial targets under the ESAF and World Bank programs. Ghana’s government machinery will greatly benefit from modernization, both by making it more efficient and giving it the desired transparency. Specifically, without the reforms aimed at containing public expenditure, Ghana will be hard pressed to achieve the domestic primary surpluses that will allow it to “crowd in” the private sector and thus, through increased private sector activity, accelerate growth. Similarly, streamlining the subvented agencies will be crucial to instilling a sense of managerial responsibility in government operations. Thus, the size of the public sector and the time frame for the reforms need to be kept under constant review for the government to be able to actively support Ghana’s development.

1

Prepared by Joachim Harnack and Anthony Pellechio.

2

These organizations encompass 22 ministries, including the Office of the President, 48 departments and agencies, 10 regional coordinating councils, and 110 district assemblies. Subvented agencies and state-owned enterprises (SOEs) were not covered under CSPIP.

3

The 14 CMAs include the Office of the President; the Cabinet; the National Development and Planning Commission (NDPC); the Office of the Head of the Civil Service; the Ministry of Finance; and the Public Service Commission.