Dr. Kwabena DuffuorMinister of Finance, Ghana

Mr. Ishmael Yamson, Chairman of the Economic Advisory Council of the Government of Ghana

George Smith Graham, CEO of Fair Wages and Salaries Commission

Over the last few years, the Ghana Government has maintained a judicious fiscal discipline by cutting down on spending while maintaining a fairly healthy economy. But with the presidential and general elections just a year away, the fate of President John Dramani Mahama and his administration will be largely determined by the public’s perception of his ability to deliver on his electoral promises.

One of such promises was to comprehensively reform the pay structure of workers in the public sector. The implementation of this new pay policy – the Single Spine Salary Structure (SSSS) – started in July 2010 and currently, all government employees have been migrated onto the SSSS; yet, problems abound.

The introduction of the new pay policy has escalated the government’s wage bill from about GH¢2 billion to almost GH¢7 billion. The Chairman of the Economic Advisory Council of Government, Ishmael Yamson says this poses a threat to government’s quest to maintain fiscal stability.
Though election years have been known to be characterised by high government expenditure, Mr. Yamson is of the view that Ghanaians should refrain from demanding too much from the present and future governments since fiscal responsibility should be part of the country’s culture. Speaking at the just ended Consultative Group meeting with the Country’s Development Partners, Mr. Yamson said politicians have not done well by playing politics with the country’s economy. He also advised Ghanaians to change their attitude towards politics.

The Deputy Finance Minister, Fifi Kwetey, has attributed the sudden rise in government’s spending on public sector wages to high demands from Organized Labor.

The wage bill for public sector workers has surged from GH¢2 billion to almost GH¢7 billion after government introduced the Single Spine Pay Policy (SSPP). The Finance Minister, Dr. Kwabena Duffour, recently admitted that this could erode gains made over the years.

Last month, the Finance Ministry justified the need for an extra GH¢2.6 billion to be approved by Parliament this year to pay additional wages as a result of single spine salary agitations and arrears.

In the formulation of Ghana’s public sector reform strategy, it was acknowledged that the public services were the critical weak link in the delivery of Government’s development agenda. Indeed, since the early 1970s, there have been commissions to review civil service pay. In 1997, the government of Ghana decided to address gaping disparities that had emerged between the pay of civil servants and those in the wider public sector.
A nationwide job evaluation exercise was undertaken and a new grading and salary structure was developed to create equity.

Despite these efforts, the Ghana Universal Salary Structure was only marginally successful, as most public sector institutions did not convert to the new system. Between 1999 and 2006, the few institutions that did so were considered consistently disadvantaged as a result of reestablished pay and grade disparities. In 2006, the Kufuor administration addressed these problems, hence the SSSS. But analysts say the aim to merge and rationalise the different public sector salary structures into one will throw government’s prudent spending policy out of gear.

The migration of public sector workers onto the Single Spine Salary Structure (SSSS) has so far cost the State GH¢6 billion. The amount covers payment of enhanced salaries on the unitary scale to public sector workers, as well as arrears from the date of implementation in January 2010. The amount represents a 71.7 per cent increase in the GH¢4.3 billion government wage bill for the previous year. The Chief Executive of the Fair Wages and Salaries Commission (FWSC), Mr. George Smith-Graham, when contacted, said the huge wage bill had to trigger all social partners into thinking about ways to improve labour productivity to support it.

Effect of too much fiscal prudence on the economy

Economic experts have often cautioned the government over too much fiscal prudence as this could lead to a contraction in the economy. But Deputy Finance Minister, Seth Terkper, says as much as government is aware of this, it believes that any hikes in expenditure to stimulate growth must be supported by a sustainable means of financing.

“What we need is to ensure a balance between projects and revenue in order that whatever we will embark on is not stopped mid-stream to create future difficulties of unpaid monies to contractors as is currently the trend,” he said.

Terpker further notes that government is also looking at innovative ways to increase domestic resource mobilisation and increase social spending while keeping within its means to achieve the real GDP growth rate targets.

The Governor of the Bank of Ghana, Kwasi Bekoe Amissah-Arthur, had also intimated that the public sector wage bill posed a major risk to the national budget. The potential sources of risks to budgets presented to Parliament were recognised as the management and settlement of payment of arrears, the pace of settlement of wage arrears and the inflexibility of the expenditure programme. Last year, the Minister of Finance and Economic Planning Kwabena Duffuor reechoed the challenges of SSSS.

He said: “The Single Spine Salary Structure is a real challenge for the economy. It is indeed a legacy that we inherited and in as much as we are determined and committed to its implementation, we must manage it in such a way that it would not undermine the economy.”

The Head of the IMF Mission to Ghana, Peter Allum, warned that the cost of the reform may rise further if the so-called “pay relativities” - the differential between various pay grades - were to increase in line with trade union demands. The IMF had earlier cautioned Ghana's debt position, arguing that the country’s debt position could be unsustainable despite the onset of oil production in light of the new salary scheme's implementation, set to be fully in place by 2013.

Implementation of SSSS and matters arising

Members of the Ghana Police Service were the first to be migrated onto the SSSS and when the first payments hit their bank accounts in July 2011, the Inspector General of Police, Paul Tawiah Quaye, hailed the new payment scheme. Personnel of the service have been astounded by their July salaries,” he declared.

But the high expectations of bigger wage packets among other sectors were often dashed because of continued disparities. This trend reached its climax when doctors laid down their tools on October 7, 2011. According to the Ghana Medical Association, there were distortions in the SSSS' grading structures.

The President and the Deputy General Secretary of the Association, Dr. Emmanuel Adom Winful and Dr. Frank Serebour respectively, released a joint statement announcing the start of a nationwide strike action. This also raised concerns about the Fair Wages and Salaries Commission's willingness to resolve the problem.

“Looking at the stance of the Fair Wages and Salaries Commission, it appears unlikely that any attempt is being made to address our concerns,” they said. After an acrimonious 19-day standoff, the National Labour Commission (NLC) was forced to step in to arbitrate.

It has also become clear that SSSS requires a huge budgetary outlay. This could threaten macroeconomic stability unless renewed efforts are made to enhance domestic resource mobilisation.

Economists have advised Ghana to adopt a sustainable debt management strategy to avoid a post-HIPC (Highly Indebted Poor Countries) debt overhang.