Risk and opportunities from Ghana’s audit service report unfold
This is a challenging moment for public financial management in Ghana. At end-2020, the budget deficit was an estimated 11.7% of GDP, according to the Ministry of Finance. The target for this year is 9.5% of GDP but revenue performance thus far has not met objectives. In this context, government spending and governance standards are under increasing scrutiny from within and without the administration. A recently released audit service audit service report on state-owned enterprises (SOEs) activities from 2017-2020 suggests this attention is in the right place. It alleges substantial undocumented business being undertaken and procurement processes being ignored, or at the very least serious misalignment between central government and agencies. Investigations, sanctions, and prosecutions could follow but face political obstacles
Significance – Blind spots and state losses
Ghana’s SOEs contribute around 27% of the country’s GDP according to the finance minister, Ken Ofori Atta in a recent speech when he said that the sector has a net worth of around GHS 110 billion (USD 18.2 billion)[1]. However, they have been receiving increasing (and increasingly negative) attention from central government and more widely over the past months. Ofori Atta announced recently that 47 SOEs had submitted no financial reports to the Ministry of Finance over the past 6 years and that only 14 of 129 in total had met their quarterly reporting requirements. They were said to have lost GHS 584 million (USD 97 million) in 2019 and in 2020, 19 entities alone lost some GHS 1.6 billion (USD 265 million) though this was heavily impacted by the Covid-19 pandemic.
Many of the charges against SOEs in the released report come in the form of ‘irregularities’ that amount to GHS 12.85 billion (USD 2.1 billion), primarily outstanding debts and loans worth GHS 10 billion (USD 1.6 billion) in 2020[2]. The remainder include queried transactions, some of which have been disputed by named parties. For example, the Ghana National Petroleum Corporation (GNPC) has claimed that the Audit Service erred in flagging five international contracts worth almost USD 35 million for being undertaken without parliamentary approval (a breach of procurement law) – claiming that the quoted article in the constitution that refers to “government” business does not necessarily relate to SOEs. Other major entities such as the Electricity Company of Ghana (ECG) have been cited for importing electricity meters that have still not been used five years later. Private sector companies are also in the crosshairs, and have pushed back. Zoomlion is a waste management company that executes numerous government contracts and is cited more than once for having been paid monies for no work done. However, they have denied any wrongdoing, calling the report misleading, compiled without them having been consulted[3].
Meanwhile, the public sector cast of characters has changed significantly:
Daniel Yaw Domelevo was auditor general when the report was compiled in 2020 but was forced into retirement in February of this year[4], just days before the Audit Service was due to present evidence against the then Senior Minister in a legal tussle that was eventually dismissed.
Finance Minister Ken Ofori Atta was widely quoted in local press censuring governance standards at the SOEs in July 2021 – particularly their failure to submit annual financial statements as required by law.
In August 2021, some 7 months after his second term inauguration, President Nana Addo Dankwa Akufo-Addo’s reshuffled senior leadership at many of the SOEs. Consequently, the highlighted failings predate the reconstitution of the boards of most SOEs.
New SOE board chairs include ruling party faithful, alongside several from outside the political fold e.g., (a) well-known journalist Kwame Sefa Kayi who now sits on the board of the National Petroleum Association, and (b) BBC journalist and former education minister (under president Kuffuor) Elizabeth Ohene as f Social Security and National Insurance Trust (SSNIT) board chair[5].
This sequence of events caused a dent in the confidence about and within implementing agencies. To quote one source describing sentiment within the Audit Service following Domelevo’s removal, “it feels as though we don’t have that moral backing any more to investigate certain things or certain people or that, if we do, it won’t go anywhere.” Publication of the December 2020 Audit report may help. Of the new auditor general, the president has said “the acting auditor-general has demonstrated sufficient quality and independence of view. For instance, he is responsible for some things that are unheard of. In our history, the 12 statutory reports that have to be compiled and placed before Parliament in the year of Parliament, this is the first time it has ever been done. Even the most touted Auditor General before him never managed to do it and this one has done it.”
Outlook – Potential for improvement
The 612-page report will continue to provide insight on governance at Ghana’s SOEs Meanwhile, the response of individual SOEs highlights risks emanating from contrasting views among government agencies on law, contracts and procedure. See: Anatomy of a project gone wrong: Ghana’s Saglemi Housing Project.
Looking forward, there could be investigations and/or attempts to recoup lost monies from government officials. For example, by the newly appointed special prosecutor, Kissi Agyebeng. The country missed its revenue target for the first half of the year by 13%, according to Ofori Atta. Rectifying the purported irregularities could make a meaningful to revenue.
However, further action would require counter normative action from the Minister of Justice and Attorney General Godfred, Dame – i.e., to prosecute and sanction first term SOE appointees, often political allies, in the second term of the same administration.
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[1] https://www.ghanabusinessnews.com/2021/07/28/ghanas-soes-estimated-at-gh%C2%A2110b-finance-minister/
[2] https://ghaudit.org/web/wp-content/uploads/Reports/2020/Audit-Service_2020-PUBLIC-BOARDS_17_06_21.pdf
[3] https://www.modernghana.com/news/1098304/zoomlion-challenges-auditor-generals-2020-report.html
[4] He was forced to take accumulated leave initially in August 2020 before his retirement in February.
[5] SSNIT itself was said to have lost GHS 70.8 million (USD 11.7 million) to bad investments.
*Photo credit: Cedi, Snappy Goat.
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