Wednesday, August 20, 2014

Should Government Continue to Subsidise Fuel?


Kofi Buah, Energy Minister

Crude oil is an internationally traded commodity with prices determined by external forces of demand and supply. Governments of many developing countries attempt to cushion the effects of crude oil price fluctuations on their citizens particularly the poor by instituting social intervention measures common among which is the subsidisation of refined products.

A petroleum or fuel price subsidy is usually the variance between the reference price and the actual (selling) price of the product. Depending on the petroleum import/export position of the country, the reference price would usually be the world market price plus the transport cost to border (import price) or world price minus transport cost to border (export price) or the marginal cost of domestic production.

The actual or selling price refers to the ex-pump prices at which various products are sold to final consumers. The total amount of subsidies paid by government is estimated by a summation of the product of unit subsidy and total units consumed per product for all subsidised products. This essay seeks to evaluate the feasibility of continued subsidisation of fuel prices by the government of Ghana. Should fuel subsidies be removed?

Advocates of fuel subsidies cite several reasons in favour of the continuous application of subsidies predominantly in less developed economies. Key among these is the objective of curtailing the adverse consequences of fuel price hikes on poor households and promotion of social equity.

Research has revealed that although a significantly lower percentage of subsidies benefit the poor, withdrawal of subsidies in Ghana has witnessed a decline in real income for the poorest 20% of consumers by as much as 9.1%, the highest among five countries studied (Coady et al. 2006). It has also been argued that since evidence shows fuel price increases are followed by rising prices of most products and services, subsidies could be used to reduce inflationary pressures.

Fuel subsidy reforms have also been observed to encourage poor households to switch to fuel wood thereby depleting forests and other natural resources. Although not usually explicitly stated in the discourse on fuel subsidies, the avoidance of labour agitations and political unpopularity often underline the reluctance of governments to remove fuel subsidies. Many more reasons than outlined in support of subsidies make it more expedient for government to withdraw subsidies. The effectiveness of other social intervention policies relative to fuel subsidies, achieving fuel consumption efficiency, reducing government spending, mitigating the impact of climate change are some arguments in support of subsidy reforms.

A number of studies have proven that other mechanisms of achieving social equity are more effective (Coady et al. 2006; Bacon and Kojima 2006; Beaton and Lontoh 2010; Sumedh 2011). Alternatives that have been identified include cash transfers, coupons, smart cards, vouchers, removal or reduction of fees and charges on social services such as health, education and transport. Beaton and Lontoh (2010) for example observed significant successes with the implementation of cash transfer scheme in Indonesia in 2005.

In Ghana, the removal of subsidies has a potential to drive transfers aimed at improving the Community Health Improvement Services (CHIPS) and other healthcare services for the poor, „Capitation Grants and elimination of fees for government basic and secondary schools and mass transport systems. Such programmes have been proven to cover significantly larger proportions of the poor population in developing countries in comparison with fuel subsidies. Evidence from five countries including Ghana has suggested that between 75% and 85% of the total benefits from fuel subsidies accrue to the richest 60% of the population.

Ghanaians queuing to buy fuel
A separate simulation conducted for Ghana indicated that 65% of transfers would benefit the poorest 40% of households compared to a corresponding 40% for kerosene subsidies (IMF 2006; Coady et al. 2006). For such alternative programs to achieve significant success, however, they need to be underpinned by effective planning, organization and monitoring mechanisms and prevent leakage of benefits to non-targeted groups.

Removal of fuel subsidies have also been regarded as a means of attaining consumption efficiency. In cases where tax on products such as gasoline and diesel have been used to cross-subsidise other products like LPG and Kerosene, it has often resulted in inefficient substitution of kerosene to adulterate diesel and gasoline. Empirical studies have also revealed that households become less efficient in using subsidised petroleum products (Coady et al. 2006).

Smuggling of subsidised products to neighbouring countries where prices are relatively higher has tended to defeat the objectives of subsidies. Under extreme circumstances, subsidies have led to acute shortage of petroleum products as a result of the inability of government to reimburse Bulk Distribution Companies (BDCs) as recently witnessed in Ghana in June 2014. Such inefficiencies and buying of subsidised products for unintended purposes can be avoided through the elimination of subsidies. High subsidies divert government spending away from more productive and potentially more beneficial sectors. This has consistently resulted in substantial budget deficits which could have been financed by relatively effective petroleum taxes as demand for petroleum products is inelastic. Subsidies have imposed a major drain on Ghana’s economy as Tema Oil Refinery (TOR) debt reached 7% of GDP in 2002 whiles throughout 2004, 2.2 % of the country’s GDP was spent subsidising fuel in the run-up to the general elections (Laan et al. 2010).

Conclusions from the discussions: It is evident that fuel subsidies exert a huge burden on public expenditure but a greater chunk of the benefits accrue to high income groups, a situation which defeats the essence of subsidisation. Removal of petroleum subsidies would free the needed funds for social equity programmes in health, education and transport albeit proper planning, implementation and monitoring are essential prerequisites. These programmes not only capture large proportions of the poor at lesser costs but also address the inefficiencies associated with subsidisation and cross-subsidisation. An independent price-setting regime should replace fuel subsidies but as Laan et al. (2010) observed, this “can only be as robust as the political will behind it”.


Author: Gyeyir M. Denis 

Email: gdenismwin@hotmail.com
BA Economics/Entrepreneurship, MA Oil/Gas Management
 

CSOs Pessimistic About Successful Implementation Of Lap II



A group of Ghanaian Civil Society Organisations (CSOs) advocating for an appropriate land tenure system and rights for Ghana, are being pessimistic over the implementation of a Land Administration Project (LAP II) currently being rolled out in some selected districts in the Northern Region and parts of the country.

The Civil Society Coalition on Land (CICOL) has observed that, a back and forth posture adopted by some state agencies involved in the implementation of the project at the national level was hurting its overall objective, and urged them to go back to the drawing board or show some level of seriousness to justify the World Bank support.    

The Ghana Land Administration Project, with support from the World Bank and other partners, intends to improve efficiency and effectiveness in the land administration system in Ghana. It is the principal programme for implementing the National Land Policy of 1999, and it is a long term programme to be implemented over a period of 15-25 years. 

It is aimed at stimulating economic development, reduce poverty and promote social stability by improving security of land tenure, simplifying the processes for accessing land and making it fair, transparent and efficient, developing land market and fostering prudent land management.

LAP I started in 2005 to 2010 and LAP II started in 2011 and expected to end next year 2015. LAP II unlike LAP I, has four components and sub components/activities which include: Strengthening the policy, legal and regulatory framework for land administration; improving functions and business processes for service delivery; improving maps and spatial data for land administration; and human resource development and project management.

The Ministries of Lands and Natural Resources; Finance and Economic Planning; Environment, Science, Technology and Innovation; Justice; Trade and Industry; Food and Agriculture; and National House of Chiefs are the implementing agencies of the LAP II project at the national level. 

Akwasi Oppong Fosu, Minister of Land
Also, at the regional level, Town and Country Planning, Lands Commission, Administration of Stool Lands, Lands Evaluation, Land Title Registration and Survey Department among others are supposed to be the implementing bodies.
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But, at a day’s forum organised by the CICOL in Tamale, the Northern Regional capital, to keep its members abreast of developments related to the implementation of LAP II, participants wondered whether the various components of the project would be fully implemented by 2015. 

The participants cited land documentation and issuing of building permits as some of the critical issues the project seeks to address, but for more than two years since implementation, it still takes more than three months instead of a proposed one month for citizens to acquire building permits when the need arises.  

National Coordinator of CICOL Cecilia Bruce noted that, lack of commitment from the public, land owning groups, CSOs, media and state officials on land issues as well as low awareness by Regional Officers on implementation of LAP II was also affecting smooth implementation of the project. 

She, like many participants at the forum, urged the various implementing agencies to harness their expertise and strengths in order to make the project a success so that citizens will not continue to face so much difficulty when documenting their land or seeking for building permits.

Ms Bruce also called on parliament to expedite action on the passage of the Land Use Bill and other related Bills which are part of the objective of LAP II.

Thursday, August 14, 2014

Hajia Taimako –A True Definition Of Women Empowerment



Hajia Dr. Salamatu Taimako
She may be a complete illiterate in western education, but thanks to Islamic literacy which her far-sighted parents taught her at a very young age, Hajia Dr. Salamatu Ibrahim TAIMAKO is a force to reckon with in many spheres of life. 

Hajia Salamatu Taimako is an extraordinary, but extremely brilliant and intelligent Northern Ghanaian woman. Not to sound so exaggerative, she has the ability to achieve everything by simply relying on deep-seated indigenous knowledge sources to accomplish any dream.

Can you imagine a woman leading a male dominated field of traditional medical practice as President of the Herbal Practitioners Association of the three regions of the north –Upper West, Upper East and Northern? That is very rare in northern Ghana even in this 21st century when it comes to leadership positions being occupied by women.

She has so many titles to her name. She comes across to many of her peers and other people as an indigenous herbal doctor, environmentalist, traditional midwife, entrepreneur, philanthropist, horticulturist, counsellor, wildlife conservationist, teacher/mentor, role model and above all, a mother.

Born around 1936, Hajia Salamatu Taimako and her late husband Alhaji Ibrahim Taimako introduced some modernism into the preparation of various types of herbal medicines capable of treating ailments such as infertility in men and women, menstrual problems, cholera, hypertension, cough, scorpion bites and infant diseases. 

Speaking to Savannahnews, Alhaji Shamsudeen Ibrahim Taimako spokesperson to Hajia Salamatu Taimako, said with immense passion for women and children’s welfare, she has trained over one hundred traditional midwives (birth attendants) in recent years to augment the work of orthodox midwives in the country’s hospitals to ensure safe delivery. Up till date, she continues to provide refresher training for them. 

Alhaji Shamsudeen Taimako who is the fifth born of Hajia Salamatu Taimako, describes her mother as an accomplished environmentalist and wildlife conservationist who has made great contributions in the area of agro-forestry and sustainable agriculture. 

“She owns a 250 acre grafted mango plantation supported by EDAIF; a nursery of over 300,000 mango tree plants as well as teak and cashew plantations where she derives a living from. Besides, she offers training to schools, farmers, individuals and organisations that have the desire to establish tree nurseries and agro-forestry plantations”, he noted.

Having missed out in western education, Hajia Salamatu Taimako a decade ago, decided to establish a basic school. As Alhaji Shamsudeen Taimako explained, a senior high school was later added, and currently, the school which is known as Business College International also runs pre-tertiary WAEC programmes such as Diploma in Business Administration, Diploma in Accounting and Diploma in Office Management. Courses taught in the senior high school include Business, General Arts, Home Economics and Agricultural Science.

Alhaji Shamsudeen Taimako with labourers at Taimako nursery
Since 2003, nearly 60 students including orphans have received scholarships from the school till they completed and left to pursue other academic opportunities in other institutions of higher learning. Besides, the children of some 15 permanent staff and other 160-180 non-permanent staff who work on her plantations also enjoy scholarships. Hajia Salamatu Taimako has also allocated scholarship slots to some eminent traditional rulers in Tamale and they include the Chiefs of Tamale, Kanvilli, Gulkpegu, Dungu, Choggu and Banvim.   

According to Alhaji Shamsudeen Taimako, since the death of his father in 1976, Hajia Salamatu Taimako singlehandedly took care of him and his eight other siblings through school till they all completed. “Today, all of us are entrepreneurs. People think ‘we know so much’ but all the credit goes to our mother, Hajia Salamatu Taimako. She is disciplined, committed and a friend”, he stressed. 
 
Awards

With over sixty years in indigenous knowledge and herbal medical practice, Hajia Salamatu Taimako has seven awards under her belt, an achievement many northern women in contemporary times are yet to attain even with the support of responsible and truly supportive husbands. These awards include: Certificate of Honour in 1996 from the Ministry of Environment, Science and Technology for Best Environmental Practices; Certificate of Honour in 1998 from the Forestry Commission for her immense contribution to the re-afforestation programme of the Government of Ghana; and Certificate of Merit in 1999 for her contribution to sustainable agriculture; Certificate of Honour in 2000 from the Ghana Federation of Traditional Medicine Practitioners for her recognition and sustained contribution towards the development of traditional medicine in Ghana. 

The rest are: Certificate of Recognition in 2002 from the Ministry of Environment and Science for her outstanding contribution towards combating desertification in Ghana through her production of over ten thousand assorted tree seedlings; Honorary Doctorate Degree (Honoris Causa) in the Doctor of Science category in 2004 for her expertise in indigenous knowledge systems, for her contribution to traditional medical practice, agro-forestry and sustainable agriculture, for her devoted and selfless service to her community and humanity, especially the poor and deprived rural people, and for serving as a role model worthy of emulation by the Ghanaian woman; and Presidential Excellence award on herbal medicine and agro-forestry in 2006 by former President John Agyekum Kuffour.

Due to the wonderful things Hajia Salamatu Taimako is doing for her community in a quest to fight poverty, diseases, illiteracy and environmental degradation, a number of foreign diplomats have paid courtesy call on her in recent times. They include U.K Undersecretary of State Mr. Stephen O’Brien, Israeli Ambassador to Ghana Ms Sharon Bar-li and a high-powered delegation of Canadian Members of Parliament.