All hands on deck Ghana’s social pact on economic management

Ghana is gradually locking in its macroeconomic gains made in the past two years and beyond, as it develops a more participatory economy with the signing of the recent Memorandum of Understanding between the Government and Organised Labour.

The move is unprecedented in the country’s history.

A new public-private commitment in economic matters has set the tone for a new dawn. “No single entity is a repository of knowledge for tackling the problems that face society,” Ken Ofori-Atta, Ghana’s Minister for Finance said, at signing the ceremony.

The Ministry of Finance MoF, and the Ministry of Employment and Labour Relations signed the MoU with Organised Labour, represented by the Ghana Trades Unions Congress (TUC), and the Ghana Employers’ Association (GEA).

The tripartite agreement follows a new Fiscal Capping Law and a new Fiscal Council introduced to reset the clock in Ghana’s economic management systems.

Having expressed his devotion to inclusive management through a series of stakeholder budget consultations since taking office in 2017, this initiative by the Finance Minister perhaps aptly describes President Nana Akufo-Addo’s democratic philosophy and belief that social partnerships in economic management matter.

“Eti baako enko agyina (two heads are better than one),” the President said, last year, at the launch of the Committee for the Charter on Ghana Beyond Aid.

This rare collaboration with social partners is part of MoF’s new process of programme-based budget, which ensures that social partners are involved in the Ministry’s top-down decision-making processes.

Essentially, “TUC and GEA, Ghana’s two biggest unions, representing organised labour and millions of Ghanaians in the formal and informal sectors, will now be part of the many stages of budget formulation,” says Ignatius Baffour Ewuah, Minister for Employment and Labour Relations.

For the first time in the country’s history, Ghanaian employers and workers have been given a seat at the table in matters that affect their raison d’être. Until recently, MoF’s arrangements with Organised Labour had centred on wages and salaries. “This MoU, however, is mutually accountable and forms the basis for an engagement that has not been seen in Ghana before. It is a commitment that is reflected in the 2018 mid-year Budget Review,” says Baffour Awuah.

“This document is a significant milestone in this tripartite relationship, which is intended to shape a framework to establish dialogue between the public and private sectors”, says Daniel Acheampong, President of GEA. “It is the work of several months of consultations”.

Aside of plugging information asymmetries through this public-private sector cooperation, Acheampong insists the new approach establishes an integrated economic management system that is transparent, efficient and inclusive.

A High Political and Social Consciousness

But while the move to involve the two powerful stakeholders in the decision-making processes of the economy is being hailed as a brave one, Ofori-Atta sees differently. For him, the tripartite consensus speaks to a new era of “high political and social consciousness that is rooted in the urgency for harmony in industrial relations, especially following our recent exit from the 2015 IMF bailout (Extended Credit Facility) programme and our resolve to manage the economy effectively so we don’t go running back for another bailout”.

Acheampong points out that that, historically, whenever Ghana has gone to the IMF looking for bailouts, “governments have paid more attention to them than to organised labour. But our exit from the Extended Credit Facility [bailout] and this MoU provide us with an opportunity to renew our interaction with our international partners. It is an opportunity to work with them [IMF] through article 4, which views us as partners”.

IMF’s Country Director, Albert Touna-Mama, explains that under IMF’s Article 4, member countries agree to subject their economic and financial policies to the scrutiny of the international community.

“These are usually comprehensive annual consultations, and are also known as Article IV consultations, as they are required by Article IV of the IMF's Articles of Agreement” he says.

“During an Article IV Consultation, an IMF team of economists visits a country to discuss that country's economic and financial policies with government and central bank officials. IMF teams also often meet with parliamentarians and representatives of business, organised labour, and civil society,” says Touna-Mama.

Consensus Platforms

Anthony Yaw Baah, Secretary General of TUC does not mince his words about the impact of inclusive economic management. “This process will consolidate our macroeconomic gains and for us in organised labour, this means that austerity measures, which mostly result from IMF bailouts, will belong to the past.” This marks the 16th time Ghana has exited from an IMF bailout programme.

Baah’s logic is based on both research and experience, “where the private sector is involved in policy formulation”.

The introduction of similar platforms for consensus on socio-economic partnerships in Ireland and Barbados has contributed to remarkable economic experiences in the two countries. Social partnerships based on stakeholder consultations, coalitions and consensus building have led to positive changes in countries that were once marked by systemic failures.

One such example is Tunisia’s political quagmire following the 2011 Arab Spring, which saw the ouster of the country’s long-time dictator and was followed by an unusual politico-economic chaos. The troubled country found peace after the creation of the Quartet, a social partnership platform. The Quartet, which later won the 2015 Nobel Peace Price, included two of their biggest labour organisations — similar to Ghana’s TUC and GEA. Tunisia’s political machinery has since been described as one of the most impressive in the Arab world.

Germany, a highly developed economy, also thrives on the consensus principle, where representatives from government, business and trade organisations sit on a national board that focuses on vocational education and training. Germany’s consensus-specific indigenous vocational training framework has created that country’s now unbeatable industrial success.

Our Indigenous Corporate Systems

Unpacking the values of the Social Partnerships MoU, representatives of organised labour are emphatic about what they believe willdrive the modernisation and development of Ghana’s indigenous institutions. Rather than executing exogenous orders that tend to be cryptic, they say it is high time Ghana harnessed its indigenous systems and cultural understandings to achieve the country’s economic objectives.

“This is a failsafe system, where our input into policy will be from our own experiences and expertise from living and working in this country” says Baah.

Drawing on research outcomes and his own experiences, Baah says the decision to use indigenous systems to achieve socio-economic objectives will lead to “more sustainable economic outcomes, because our foundation will be built on a sense of cohesion and trust”.

Representatives of organised labour are categorical about sustaining macroeconomic stability. “It is critical because businesses depend on such environments to thrive, and managing it through consensus is the way to go if we are to see Ghana as a real corporate entity,” says Acheampong. “This will lead to the development of a corporate Ghana,” he maintains.

Ghana Beyond Aid: An inclusive Ghana

That the current “high political and social consciousness” in Ghana, as described by Ofori-Atta, translates into political will is unmistakable. “As we exited the IMF’s bailout programme, President Akufo-Addo said never again. So a number of actions are being pursued, like capping our focus and the creation of a fiscal advisory council.” Ofori-Atta says the character of “the MoU to formalise our social partnerships” is in line with the Ghana Beyond Aid agenda.

According to Ofori-Atta, Ghana Beyond Aid is explicit about “an Inclusive Ghana that provides access to decent jobs, and this partnership is especially underpinned by the urgency to develop Ghana’s human capital, as the country continues to see a significant rise in the number of young people entering the job market.”

Currently, 60 per cent (1.25 billion) of Africa’s population is under 25 years. By 2050, the under 25 population in Africa would have risen by 51 per cent, and the continent will represent a quarter of the world’s population. “So we believe that looking at new ways of doing things, to make the economy work, by providing a foundation for what we want to achieve in terms of human capital and development, will bring about change that will take Ghana beyond aid”.

Ofori-Atta says that inasmuch as economic gains have been registered, the current administration’s innovative approach to economic management is because “we are under no illusion whatsoever about the socio-economic challenges facing Ghana. We are hopeful that this structured and concerted approach will provide Ghana with a practical, sustainable solution.

This is in our effort to cement macroeconomic stability that translates into economic transformation, which ensures the future of jobs for all Ghanaians”.