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Speech Delivered by:

Dr. Mahamudu Bawumia

At the:


JANUARY 10-12, 2014


Mr. Chairman, NPP USA Executives Executives of the various NPP USA chapters Members of NPP-USA Distinguished invited guests Fellow Kukrudites

Good evening to you all. I know that we all agree that there is no free lunch but did not realize that it applied to dinners as well. The price of having this dinner is for me to share a few thoughts with you and your price is to listen to what it is I have to say. Mini

Tonight I will deal with a topic that is on the minds of most Ghanaians today:

Sane? Wula? Ad3n?. Why are we still in first gear after five years of NDC governance? Let us make no mistake about it, the NDC is now in its 6 th year of government and let us not allow them to hoodwink us into thinking this is their first year. Ghanaians are finding it difficult to understand why five years after voting for the better Ghana agenda:

Parents are having a hard time with school fees. A large number cant pay Workers salaries are in large arrears The DACF, GETFUND and NHIS are in arrears Hospital fees have just been increased by 200% The cedi is falling like a brick against the major currencies Families and firms are struggling with high utility bills Borrowers (individuals and firms) are struggling with high interest rates. Very recently someone obtained a one year loan backed by security at 38% from a major financial institution,

Contractors are not being paid Importers are facing high import tariffs

Youth unemployment is high most students people who have finished their studies cannot find a job Workers have been told to expect a wage freeze The Free maternal care, school feeding and national health insurance programs to protect the poor and vulnerable inherited by the NDC government are having major challenges.

The cost of doing business has increased Business confidence has declined Teacher trainee allowances have been stopped Allowances for Nursing and Midwifery trainees have been stopped Dumsor Dumsor is apparently not over Credit Rating Agencies such as Moodys and Standard snd Poors have downgraded Ghanas sovereign credit rating from B+ to B with a negative outlook. How can Ghanas credit outlook when it was a HIPC economy be better than when it is now an oil producing middle income economy?

Mr. Chairman, quite simply, Ghanaians are suffering. What is baffling to me and most Ghanaians is that this NDC government is the first government in the history of Ghana to have access to oil revenues and has also had access to more financial resources in terms of tax and non-tax revenues as well as borrowing more than any other government in Ghanas history. Yet, it is finding it difficult to pay its bills. This why Ghanaians are asking Mini Sane? Wula? Ad3n?. What is worrying is that we are being told that this is only first gear! If this is just first gear, then as they say in my neck of the woods, we don die finish!

But what happened? Were we not told by the NDC government that they had chalked unprecedented achievements just a few years ago? Why have those unprecedented achievements suddenly vanished or gone up in smoke? In the case of this fire, we do not need US fire experts to understand why after 5 years, the claim of unprecedented achievements has gone up in smoke. It has gone up in smoke because it was never

real in the first place. As I said a few years ago, propaganda and economic management should be kept far apart. They dont mix and if you mix them you will soon be exposed.

Mr. Chairman, this five year old NDC government inherited an economy growing at 8.4% without the benefit of oil production. With crude oil coming on stream, the economy grew by some 15% in 2011 as a result of oil production. The non-oil sectors of the economy, in particular agriculture, industry and services are still growing slower than they did in 2008. In 2012, real GDP growth was 7.9 percent (including oil). It is clear therefore that notwithstanding the production of oil, the non-oil sectors are experiencing declining growth. There is a noticeable slowdown in economic activity and both business and consumer confidence have weakened. At the end of 2012, Ghanas budget deficit was a gargantuan GH8.7 billion, amounting to 12.0% of GDP using the rebased GDP numbers. This is the highest recorded budget deficit in Ghanas history. From Nkrumah through Acheampong, Rawlings and Kufuor, no government has incurred this level of budget deficit. The crux of the problem is that government spending in 2012 increased astronomically to 34.5% of GDP even though government revenues amounted to 16.1% of GDP (a gap of over 100%) for the year. The government abandoned all fiscal discipline in an attempt to win the 2012 elections. Gifts of cars, 4x4 vehicles to chiefs and opinion leaders, laptops, tractors, money etc. were extended to buy votes: For the teachers and nursing trainees whose allowances have been stopped, we now know that it was their allowances that were being chopped nyafu nyafu during the election campaign. For workers whose wages are in arrears and are being threatened with a freeze, we now know that it was their wages that this NDC government was chopping nyafu nyafu during the election campaign.

For contractors who are not being paid, we now know that it was their monies that this NDC government was chopping nyafu nyafu during the election campaign

I could go on but the point is clear. The NDC has basically taken Ghanaians for a rough ride over the last five years. Like every government, they did not come into government with any money of their own so we must always remember that it is our money that they are chopping nyafu nyafu like that.

Mr. Chairman, the rate of growth of public debt after 5 years of this NDC government is a matter of concern. Ghanas total public debt has increased from GHC 9.5bn in 2008 to GHC43.9 billion as at August 2013 (an increase of 357% in less than 5 years)! Mr. Chairman, the NDC government has borrowed the equivalent of $20 billion in just the last five years! When I stated this a few weeks ago, the government tried to deny it but the facts speak for themselves. The increase in borrowing of GHC34.4 billion divided by the average exchange rate for the period 2008-2012 will give you some $20 billion borrowed during this period. This is more money borrowed than all governments put together between 1957-2008. If an additional $20 billion has been pumped into Ghanas economy over the last five years then why has the economy turned for the worse? Can you imagine the transformational effect if every region were given $2 billion for development projects.

With such large scale borrowing, government is crowding out the private sector which is unable to borrow to grow their business. A one year secured loan at one bank can be obtained today at an interest rate of as high as 38%! What sort of businesses can survive on interest rates of 38%?

With a high fiscal deficit, large current account deficit, large and rising debt stock, and lower business confidence, it is not surprising that the cedi is losing value rapidly against all the major currencies. At the end of 2008, the cedi exchange rate was

GH1.19/$. By December 2013, the exchange rate was some GH2.30/$. The cedi has lost some 50% of its value against the US dollar in the last five years in an era of NDCs supposed really unprecedented economic achievements. If you go to the forex bureau in Ghana today to buy a dollar, the rate is GH2.5/$. At this rate of depreciation, the cedi exchange rate could be at least GH3.0/$ by the end of 2014. This scale of exchange rate depreciation can only be the result of bad economic management. For a small open economy like Ghana, this trend is worrying and should be worrying. Our economy is highly import dependent and these massive depreciations in the currency end up piling more hardships on Ghanaians as the cost of living increases. The record is clear that when it comes to the exchange rate the NPP knows how to maintain relative exchange rate stability when compared to the NDC governments. Mr. Chairman, what is clear is that the problem that Ghanas economy is facing is not due to lack of resources. Additional oil, tax and borrowed resources have been significant. But as with individuals, it is not the amount of money you make that matters but how you manage the money and the policy framework in place. If you are given a lot of resources and you end up stealing or squandering the resources rather than productively utilizing them, very little will be achieved. After 5 years of this NDC government what is obvious is that they have become specialists in coming up with corrupt schemes to steal money from the people. This is why we have had the creation of schemes such as GYEEDA, SADA, SUBAH, WAYOME, WATERVILLE, ISOTOFON, AAL, etc. where the state has been defrauded of billions of Ghana cedis which could otherwise have been used for productive development expenditure. With this level of corruption, the economy will not move and it is not surprising that after inheriting a legacy of a much stronger economy, the government says it is still in first gear after five years! The NDC government is apparently blaming the election petition for the problems with the economy. This is actually laughable and a poor excuse. What is clear however, is that the election petition did not slow down the pace of corruption with GYEEDA, SUBAH, Akonfem, etc. which were in full gear as they have been over the last five years. This means that when the government wanted to get something done they actually did it without any hindrance from the election petition.

What is even mindboggling is the impunity with which this corruption is being perpetrated. It is as though the operators of these schemes have no regard and no fear of the consequences of their actions. And this lack of fear is quite understandable since unsurprisingly, we are seeing very little by way of prosecution of culprits. A few days days ago, the NDC through its General Secretary noted that the the problem is not one of corruption, but rather one of dishonesty! What really is the difference if I may ask? Reminds me of the argument in the Supreme Court during the election petition when the NDC General Secretary claimed that extra ballots in the ballot box is not over-voting but rather foreign material or ballot stuffing. Furthermore, the Government, contrary to its own guidelines on ethics, and with impunity, has also found it very convenient to redefine the meaning of conflict of interest in matters relating to the Merchant Bank saga. Is there one definition for conflict of interest in the rest of the world and different one for Ghana? How would we expect public officials to behave in similar situations? Will the government have the guts to call them to order? Unfortunately we have institutions like CHRAJ looking on while these fundamental principles of good governance are being bastardized by this NDC government.

Mr. Chairman, while we point out the failure of this 5 year old NDC government in its second term of office, we have to know that criticism of the NDC record alone would not be sufficient to win us power. As we move towards 2016 our party must also put out our ideas and set out the clear differences between the NDC and the NPP with regards to our policies.

We have to remind Ghanaians that if the NPP were in power, free secondary school education which was promised by our party would have been a reality by now. When the NPP proposed the free secondary school education, the NDC opposed it in the same way that they opposed the NHIS. They said it was too expensive and we as a country did not have the money to finance the approximately GHC 1 billion annual cost. Yet, this same economy that had no money was able to spend GHC8.7 billion above its budget in 2012. This GHC 8.7 billion would have been sufficient to finance at least 7

continuous years of free secondary school education. It is ultimately a matter of priorities. If you prioritize the allocation of resources towards free quality secondary school education, you will get free quality secondary school education. If however as a government you choose to prioritize Akonfem, GYEEDA, SUBAH and judgement debts, then the attention and monies will go into Akonfem, GYEEDA, SUBAH and judgement debts. Our approach to education is therefore fundamentally different because of the importance we attach to it.

The issue of the scrapping of teacher and nursing training allowances is a reflection of the fact that the government does not attach the seriousness required to the health and education sectors. We know that GETFUND and the NHIS are in arrears and struggling under this government. The rationale for the scrapping of the teacher training allowances according to the government is to save money to allow for an increase in the number of trainees. If this is the logic, then why stop at teacher and nursing trainees, Why not scrap the allowances of all government workers so that you can enable the employment of more workers? Clearly, this rationale does not hold water, The allowances were paid because of the specialized nature of the teaching and nursing professions and the importance placed on the services of teachers and nurses throughout the country. As a HIPC country, Ghana could afford to pay the allowances of teachers and nurses. Why is it that as an oil producing country we are suddenly unable to?

As expounded in our 2012 manifesto, we also have very significant differences with the NDC with regards to the tax system. In response to the economic difficulties, government has resorted to increasing taxes, including until recently, imposing taxes on condoms and cutlasses. These higher taxes have served to increase the cost of doing business in Ghana compared with neighboring countries. A Minister of State in response to complaints from the business community about import duties is reported to have said that if they are not happy, they can import through Togo or other countries! This type of approach to dealing with the business environment is counterproductive

and demonstrates a lack of appreciation of the private sector. The fact is import duties in Ghana are too high and discourage production.

In the globally competitive world that we find ourselves today most countries that manufacture goods for export also import a significant proportion of its raw materials. These countries have come to understand that high import tariffs can increase their cost of production and make them uncompetitive globally and therefore to support higher production and exports, import tariffs are kept relatively low. Examples are:



SWITZERLAND Hong Kong New Zealand Australia Japan USA UAE Malaysia EU Canada Singapore Estonia

0 0 1 2 3 5 5 5 4 3 0 2

There is another group of countries with high import tariffs. Examples are :



Uganda Kenya Cameroon Nigeria South Africa Zimbabwe Sierra Leone Congo Chad CAR Djibouti Ghana

14 14 19 12 8 17 15 19 19 19 20 15

The rationale for high import duties in Ghana is primarily to raise revenue and not to support production. 22.5% of tax revenue in Ghana is from trade taxes. This compares to 2.69% for Brazil, 4.44% for China, 3.96% for South Africa and 1.25% for the USA.


COUNTRY Brazil China Japan Mexico South Africa USA Ghana Cameroon Kenya Mauritius Singapore

TRADE TAX/TAX REVENUE % 2.69 4.44 1.61 4.05 3.96 1.25 22.5 28.6 10.4 2.09 0.05

The high reliance on import duties for revenue by countries such as Ghana only serves to increase the cost of doing business and discourage production. The NPPs view as reflected in our 2012 manifesto is that tariff policy should be guided by lowering the cost of living and increasing production and productivity. Countries that have adopted this approach such as the UAE, Hong Kong, Singapore, Mauritius, Malaysia, and Indonesia (accompanied by other supporting policies) have seen increased manufactured exports. This is why we committed in 2012 to abolishing or significantly reducing import tariffs. We do not see any reason why spare parts and other equipment used in production that are imported into the country because they are not manufactured in the country should attract any import duty. This should expand the productivity in places such as Suame Magazine and other mechanic facilities across the country as well as reduce the cost of maintaining and safety of vehicles. Ghana can become a manufacturing power house in the sub-region if we go this route and along with other supportive policies.

In the area of ICT for example, the Government is imposing high import duties on internet equipment imported into the country. The Ghana Internet Service Providers

Association has recently appealed to the government to reduce the import duty to increase the penetration of internet services in the country. Under the NPPs policy this equipment would attract zero duty because we want to increase productivity. In this world of ICT domination, why would Ghana want to impose taxes such that access to the internet is very expensive? In Rwanda on the other hand, the government is providing free wireless internet service in Kigali. The rationale is clear. They are thinking production and global competitiveness and not immediately about revenue. The revenue will come later when the production takes place. I would also like to note that as a matter of strategy, China, which produces most of the worlds computers allows the import of computers into China duty free. They want to make sure they have access to the latest technology embodied in the computers. In Ghana on the other hand we are imposing duties on computers that makes computers very expensive for people. The NPP policy as stated in our 2012 manifesto was to remove the duties on computers and all ICT equipment. The revenue loss from trade taxes would be compensated by

increases in income, sales, and corporate taxes wth an increase in production.

It is my belief that we can become a Dubai or Singapore (who are pursuing these policies) in terms of production and development so that other people will want to come to spend Christmas in Ghana.

I must add that the issue of using taxes to incentivize production is not new. All governments appear to understand it especially when it comes to dealing with foreign investors. The recent STX housing agreement is very typical. Under this agreement STX was provided duty free imports for all its imports. Ghanaian real estate providers on the other hand do not get these concessions. How can it be that such concessions are good for the foreign investor but not for the domestic operator? We need a level playing field to enable domestic firms compete and grow. In this era of ICT, the government has even imposed taxes on international telephone calls. This means that while it would cost you 5 cents a minute to call Nigeria from the USA for example, a similar call to Ghana will cost at least 17 cents per minute. This decreases the competitiveness of Ghana globally as well as increases the cost of living in Ghana.

In the same vein we would disagree with the decision of this NDC government to impose taxes on private universities. University places are in short supply and we should rather be encouraging the setting up of more private universities with tax incentives to relieve the burden on government. It is not a coincidence that some 80% of universities in Ghana are private universities. The tax incentives were a major factor in facilitating the setting up of these universities.

Mr. Chairman, the reason why Ghana is relying so much on import duties for revenue is because the tax base for the economy is very narrow. It is narrow because the economy is highly informal. The informal nature of the economy is underpinned by :

The absence of a national identification system for all Ghanaians The absence of a property address system The predominance of the use of cash transactions rather than an electronic payments with over 80% of Ghanaians without access to Bank accounts

Addressing these issues is critical to formalizing Ghanas economy and expanding the tax base in the process and measures to deal with these problems have to be implemented as a matter of urgency in terms of policy sequencing. As far back as 2008, the National Identification Authority Act was passed into law. Unfortunately, after 5 years in government, not much is. How long does it take to issue a national ID card? It is clear that the NIA has not been provided the resources needed to execute its mandate as this exercise has not been a priority for this NDC government. For the NPP, this is a major priority and would have been completed in a year. Note that the EC issued biometric voter ID cards to some 15 million voters in just three months so why can the NIA not issue 23 million cards after 5 years?

The importance and urgency of banking the unbanked is something that is clearly not appreciated by the NDC government. As well as formalizing the economy and moving

towards electronic payments, it holds the key to reducing interest rates sustainably with the support of disciplined fiscal policy. This is because banking the unbanked increases the supply of savings in the banking system. The importance of increasing the supply of savings in the financial system through making financial services available to the population has long been recognized by the developed economies. For example, by 1772, Scotland (a country one-third the size of Ghana) had established a nationwide banking system. By this time 31 banks were operating in Scotland with branches and agencies covering most of the country making Scotland the first country in the world to establish an almost nationwide system of branch banking. The Friendly Society Act was enacted in England in 1793 to encourage savings by the poor. The evolution of the banking system in many European countries saw the rapid spread of banks including savings banks and rural banks targeted at the poor. Today, in most developed economies, the at least 95% of the population has access to bank accounts. Wide access to financial services in the developed economies increased the supply of savings in their banking systems and reduced the cost of borrowing. Thankfully Ghana has in place the payment system infrastructure that can accomplish the goal of getting at least 80% of our population (including those in rural areas without electricity) banked. We have made the investment in the technology and it is working. Experience from other countries like Malaysia and Singapore in this area shows that unless the country is willing to wait at least another 200 years to get there, the transformation from cash to predominantly electronic payments requires the active

support and participation of government, the central bank and the private sector. The transition from cash to electronic payments is qualitatively similar to the transition from driving on the left to driving on the right hand side of the road in the 1970s. It didnt just happen. It had to be made to happen. For Ghana, thanks to the efforts of the Bank of Ghana and the banks, the infrastructure required for this transition is already in place and no new money has to be spent on that to make it happen. The NDC government has however adopted a very lukewarm attitude toward this project of transforming Ghanas payment system from a cash towards an electronic payments dominated

system. After 5 years in office, Ghana is no closer to achieving this goal, something that can be done in a couple of years with the necessary focus and support. No wonder we are still in first gear. With the availability of GPS technology, Ghana has the opportunity to implement a GPS based addressing system where every property can be uniquely identified. This, along with the street naming exercise, should take not more than a couple of years and would make property taxation as well as locating places very easy.

Mr. Chairman, one of the most important issues that has to be dealt with to facilitate rapid economic development in Ghana is the issue of the problem of land acquisition the absence of land titles for many of the properties people are actually living in. I am sure everyone here has their own nightmare story about trying to acquire land or build a house in Ghana. This problem means that the mortgage and housing market is very shallow and undeveloped. If you do not have title to a house or land then how do you sell it or mortgage it? For Ghana this means that the effective supply of land or housing to the market is limited relative to demand. Under these circumstances, you will find houses in Ghana selling for ridiculous amounts of money relative to say houses in the USA. You would probably be surprised to learn that %), from a survey of 103 countries, a comparison of Mortgage payments as a percentage of average Incomes places Ghana at the top with 577%, followed by Georgia (571%), Belarus (568%). And Cambodia (445%) . The countries with the lowest mortgage as a percentage of income include the United States (16.4%), Saudi Arabia (22.59%), South Africa (34.6%%), Germany (34.7%) and Canada (36.6%). In terms of house price to income ratio, Ghana is also in the top 10. Ghana also tops the list of 103 countries as the least affordable when the affordability index is used.

These numbers are worrying because the property market plays a very important role in the economy of any modern developed economy. From our Zongos like Nima, our inner cities like James Town to our well developed neighborhoods like East Legon, so many people do not have titles to land. Our people are sitting on very valuable property but without title to them. Finding a solution to this problem would jump start the mortgage

market in a big way. The Land Administration Project is underway and is crawling along. We need some out of the box and innovative approaches to resolving this. In the current circumstances, the investment in the housing markets is sub-optimal and therefore house prices would remain high. Solving this problem would increase the supply of houses by the private sector, empower the poor who would be able to borrow against the collateral of their houses, and result in a housing sector led boom in the economy and higher tax revenue for government.

Because of the constraint of time I will not go much further with policy differences between the NPP and NDC but suffice it to say that the difference is like night and day as were as the policies and ability to implement efficiently is concerned. The fact remains however that no matter how many good ideas we may have, they would be useless if we do not win power to be able to implement these ideas and policies for the benefit of our people. This is why the theme of this Congress is so apt. We need to stand united as a party if we are to secure victory in 2016 . When Ghanas ask Mini Sane? Wula? And Ad3n? our answer is simple. This 5 year old NDC government :

Has no vision Is mismanaging the economy is engulfed in corruption

No wonder that we are still in first gear. If the NPP had been in government for the last five years, following the solid foundation laid between 2001-2008, the economy would have been flying by now because we would have implemented major transformational policies and avoided the economic mismanagement and corruption that is going on now. No doubt about that.

Thank you very much for your attention,

God Bless You God Bless the NPP and


God Bless Ghana