CHAPTER 2: BACKGROUND

2.1 INTRODUCTION

Given the fact that new democracies, such as Ghana, are more susceptible to weak governance, adequate financing of and expenditure on governance institutions is critical. Meeting the challenges of governance and consolidation of democracy thus requires that government strengthen key institutions of governance.

Efforts to improve the effectiveness and efficiency of service delivery and to reform service delivery institutions are important for at least three reasons. First, the quality and timely provision of basic public goods and services are essential to securing the economic and social fundamentals of sustained economic growth, as well as the general well being of the citizenry. Second, effective and efficient service delivery is crucial for good governance, as it sets the framework for interaction between the State and the citizenry. The legitimacy of the State depends in part on how well service delivery institutions meet the demands of citizens. Third, effective and efficient delivery of social services is crucial to facilitating increased investment in human capital, as well as improving the well-being of households.

Evidence from developing countries shows that laying an appropriate foundation for an effective public sector requires that reforms focus on three essential building blocks:

1. A strong central capacity for formulating and co-coordinating policy;
2. Efficient and effective delivery systems; and
3. A motivated and capable staff.

The capacity to attract, retain and adequately motivate Article 71 Office Holders and build the requisite human resources capabilities is a prerequisite to facilitate improved service delivery and strategic output.

As the Committee noted in its earlier Report, many of the problems associated with the poor quality of public goods and services are related to the low level of remuneration and lack of an appropriate incentive regime. As pay and incentive problems have persisted for a long period of time, they have given rise to demotivation, low work performance and low commitment to public service among public servants, reinforcing the low capacity in service delivery institutions.

The Salary levels recommended by the Committee under Phase 1 was an attempt to rationalise the remuneration structure of Article 71 Office Holders by making it more transparent, improving the relationship between pay and workload, and reducing the dependence on allowances in the total compensation package.
Under Phase 2 of the assignment, the Committee reviewed Facilities and Privileges available to Article 71 Office Holders and recommends improvements that will impact or create conditions for good governance. It is important that Article 71 institutions are strengthened institutionally and financially to enable them to play their mandated roles more effectively and efficiently in the context of good governance. Specific Facilities and Privileges that were reviewed by the Committee are the following:
• Housing Accommodation
• Office Accommodation
• Staff Support
• Catering Services at Parliament
• Medical Services
o Medical Emergency Rooms/Clinic
o Health (Keep-fit) Facilities
• Personal and Accident Insurance Coverage
• Personal Security
• International Travel for Official Business
• Maternity / Paternity Leave
• Special facilities for Article 71 Office Holders who are physically challenged
• Strengthening links with Constituencies
• Holiday arrangements for the President, Vice President, Chief Justice and Speaker of Parliament
• Office at home for the President and Vice President.
• Transportation for the President and Vice President upon leaving office
• Common Room for relaxation by MPs at Parliament
• Facilities and Privileges for Ex-Presidents and Ex-Vice Presidents
• Retiring Benefits and Award Packages

The aforementioned specific Facilities and Privileges, for the purposes of this Report, have been grouped under the following main categories:

• Housing Accommodation;
• Office Accommodation;
• Staff Support;
• Medical and Dental Services; and
• Retiring Benefits.

2.2 COMMITTEE’S MANDATE

While the Committee’s mandate was outlined in the Phase 1 Report, it is important that it is repeated in this Report for ease of reference. Under the provisions of Article 71 of the 1992 Constitution, the President is mandated to establish a Committee whose remit is to determine and make recommendations for the emoluments of Office Holders stipulated in Article 71 (1) and Article 71 (2) of the 1992 Constitution. The Committee is to be made up of not more than five Members appointed by the President, acting in accordance with the advice of the Council of State.

In October 2004, His Excellency, the President of the Republic of Ghana, John Agyekum Kufuor, acting in accordance with that mandate, established the Presidential Committee on Emoluments (Chinery-Hesse Committee) to review, determine and make recommendations on the Emoluments of Constitutional Office Holders as further described in Article 71 of the 1992 Constitution. The President named as the Chairperson of the Committee, Mrs. Mary Chinery-Hesse, a former Deputy Director-General of the International Labour Organization (ILO). Other Members of the Committee are Messrs. Fred Oware, Financial Consultant, and Alhassan Andani, Managing Director of Stanbic Bank.

The two sets of Office Holders stipulated under Article 71 are as follows:

• Article 71 (1) relates to the Speaker and Deputy Speakers and Members of Parliament, the Chief Justice and other Justices of the Superior Court of Judicature, the Auditor-General, the District Assemblies Common Fund Administrator and Chairman, Deputy or Vice Chairman, Commissioners and Deputy or Vice Commissioners and other Members of specified Constitutional bodies.

• Article 71 (2) relates to the President and Vice President, Ministers of State and Deputy Ministers and the Chairman and other Members of the Council of State.

The 1992 Constitution also stipulates that the Emoluments of the Office Holders described in Article 71 (1) shall be determined by the President, acting in accordance with the advice of the Council of State. While the emoluments of the Office Holders described in Article 71 (2) shall be determined by Parliament.

It is clear that the intention of Article 71 of the Constitution is to provide a separate Emoluments policy and structure for the Article 71 Office Holders. As was done under Phase 1 of this remit, this Phase 2 adhered to the principle of separate treatment for Article 71 Office Holders, as enshrined in the 1992 Constitution.

2.3 METHODOLOGY

Determining the appropriate level of emoluments for Article 71 Office Holders is a complex undertaking. The heavy responsibilities and expectations that the public places on these Office Holders and the intense scrutiny they are subjected to exerts enormous pressure on them.

Given the challenging nature of the Committee’s work, it was considered necessary to determine a systematic approach which would enable the Committee to acquire the information required and data to facilitate its work.

The Committee’s work was driven by the concept of good governance and strengthening of Article 71 institutions. The concept of good governance emerged from discussions on development issues during the late 1980s, when The World Bank highlighted poor governance as a major obstacle to development in developing countries. The United Nations Development Programme (UNDP) defines governance as, “exercise of economic, political and administrative authority to manage a country’s affairs at all levels. It comprises the mechanisms, processes and institutions, through which citizens and groups articulate their interest, exercise their legal rights, meet their obligations and mediate their differences.”

As mentioned earlier, the main principles guiding the Committee’s approach to this assignment are: 1) Protecting the dignity of high public office even beyond retirement of the Office Holder; 2) Recognising that the concept of good governance is an essential requirement for sustainable development of a country; 3) Ensuring that salaries, allowances, Facilities and Privileges are not varied to their disadvantage, as required by the 1992 Constitution; 4) Acknowledging the pivotal role that these Office Holders play in managing the Country thereby making it possible to appreciate and enjoy real democracy; and 5) Taking into account the current and projected resources of the Country. To this end, the Committee undertook the following:

• Reviewed Reports, in order to provide new insights and direction for addressing the constraints of the earlier studies, if any;
• Reviewed all previous or existing written submissions received from the Article 71 Office Holders;
• Searched the Internet and contacted foreign missions to obtain information on the practices of several countries regarding Facilities and Privileges provided to similar Office Holders;
• Developed a questionnaire to elicit additional information from stakeholders;
• Analyzed information received from stakeholders;
• Undertook further consultation with stakeholders on the interim progress report;
• Tested the economic (budget) and political reality of the proposed recommendations;
• Developed mechanisms for facilitating national acceptance for the proposed recommendations; and
• Developed a framework for periodic review and monitoring of Facilities and Privileges.
 

2.4 GOOD GOVERNANCE

Good governance, as a concept, has eight major characteristics, which are:
1. Participatory,
2. Consensus oriented,
3. Accountable,
4. Transparent,
5. Responsive,
6. Effective and efficient,
7. Equitable and inclusive, and
8. Follows the rule of law.

Good governance ensures that corruption is minimized, the views of minorities are taken into account and that the voices of the most vulnerable in society are heard in decision-making. It is also responsive to the present and future needs of society.

Participation

Participation by both men and women is a cornerstone of good governance. Participation could be either direct or indirect, through legitimate intermediate institutions or representatives. It is important to point out that representative democracy does not necessarily mean that the concerns of the most vulnerable in society would be taken into consideration in decision making; participation needs to be informed and organized. This means freedom of association and expression on the one hand and an organized civil society on the other hand.

Consensus Oriented

There are several factors and many points of view within a given society. Good governance requires mediation of the different interests in society to reach a broad consensus on what is in the best interest of the community as a whole, and how best this can be achieved. It also requires a broad and long-term perspective on what is needed for sustainable human development and how to achieve the goals of such development. This can only result from an understanding of the historical, cultural and social contexts of a given society or community.

Accountability

Accountability is a key requirement of good governance. Not only governmental institutions, but also the private sector and civil society organizations, must be accountable to the public and to their institutional stakeholders. Who is to be accountable and to whom, varies, depending on whether decisions or actions taken are internal or external to an organization or institution. In general, an organization or an institution is accountable to those who will be affected by its decisions or actions. Accountability cannot be enforced without transparency and the rule of law.

Transparency

Transparency means that decisions taken and their enforcement are done in a manner that follows established rules and regulations. It also means that information is freely available and directly accessible to those who will be affected by such decisions and their enforcement. It also means that enough information is provided and that it is provided in easily understandable forms and media.

Responsiveness

Good governance requires that institutions and processes attempt to serve all stakeholders within a reasonable timeframe.

Effectiveness and Efficiency

Good governance means that processes and institutions produce results that meet the needs of society while making the best use of resources at their disposal. The concept of efficiency in the context of good governance also covers the sustainable use of natural resources and the protection of the environment.

Equity and Inclusiveness

The well being of a society also depends on ensuring that all its members feel that they have a stake in its’ well being, and do not feel excluded from the mainstream of society. This requires that all groups, but particularly the most vulnerable, have opportunities to improve or maintain their well being.

Rule of Law

Good governance requires fair legal frameworks that are impartially enforced. It also requires the full protection of human rights, particularly those of minorities. Impartial enforcement of laws requires an independent judiciary and an impartial and incorruptible police force.

2.5 ECONOMIC OVERVIEW

In this Section, an attempt has been made to summarize Ghana’s economic performance in 2005 and projections for the future. This is necessary because the proposals and recommendations on the Facilities and Privileges have to be consistent with the current and projected resources of the Country.

According to a recent report by the World Bank on the economic performance of Ghana, the main driver of growth in 2005 appears to have been the increase in investment, both private and public, with road construction accounting for most of the projected 9 percent real increase in public investment. While private investment matched the increase in public investment, suggesting that private investment has been able to respond to the opportunities provided by the economic expansion, it appears that there is still scope for faster growth through an increase in investment. At Ghana’s current investment to GDP ratio, almost 30 percent, if the efficiency of investment were at levels comparable to other developing countries, the country could be growing at an additional 2 to 3 percentage points per year.

One of the factors that helped Ghana reduce the impact of higher crude oil prices on the national budget was the liberalization of domestic retail prices for petroleum products. Domestic retail prices for petroleum products were adjusted three times during the course of 2005.

Prudent fiscal management also contributed to ensuring macroeconomic stability, with central government expenditures being adjusted downwards at the last quarter of the year to compensate for an unexpected shortfall in revenues. Tax revenues collection undershot budget projections because of a shortfall in indirect taxes, primarily due to lower than projected revenues from taxes on imported products. Lower domestic debt service allowed, in turn, lower interest rates, contributing to maintaining expenditures within the budget ceiling, and exerting a moderating effect on inflation.

The exchange rate also had a moderating effect on inflation, with the Cedi depreciating by only 0.3 percent in nominal terms against the US Dollar, and the real effective exchange rate appreciating by around 19 percent. The behavior of the exchange rate, as well as the in-year fluctuations in international reserves at the Bank of Ghana, reflect the seasonality in the country’s exchange rate earnings, as most of the revenues from cocoa exports flow in the last quarter of the year.

Notwithstanding the need to tighten expenditures at the end of the year, fiscal management maintained its pro-poor orientation, with poverty related expenditures rising to 8.3 percent of GDP in 2005, up from 7.7 percent in 2004. The dominance of basic education and primary health care programmes also meant that wages and salaries continued accounting for a large fraction of overall spending. The share of wages and salaries in overall spending reached 55 percent, down slightly from 56 percent in 2004.

The increase in poverty-related expenditures to a large degree reflects a stronger poverty orientation of the Consolidated Fund, which saw its share of funding of poverty related expenditures rise to 61 percent, up from 58 percent in 2004. This increase in share of funding for poverty related expenditures through the Consolidated Fund is remarkable, because 2005 saw the emergence of new sources of funding for poverty-related expenditures, such as the National Health Insurance Fund and the social safety net provided by taxes on petroleum retail products.

The growth outlook for the future is positive, with the expansion of the domestic economy supported by the growth of exports and continued increases in public and private sector investment. Growth will be supported by new private sector investment in the mining sector, as well as continued public sector investment in the road, electric power, and water and sanitation sectors.

The Committee’s scrutiny of the economy shows that the current economic fundamentals are sound and that the economy will continue to grow at a good rate.....

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