After emphatically rejecting the IMF as a source of relief from Ghana’s escalating economic woes, the Ghanaian government stunned observers with its abrupt announcement of a U-turn.

It is not just that the Ghanaian authorities were disinterested in an IMF solution, they invested significant amounts of political capital undermining its suitability. They accused the Opposition party of having gone to the IMF in 2015 solely because of “mismanagement”. Today, government spokespersons delight in speculating about the big bucks about to flow from the IMF’s gilded funnels. And the even bigger bucks the IMF imprimatur would unlock in the more lavish capital markets.

Ghana has currently borrowed up to 182.5% of its quota from the IMF. Its room for additional borrowing in normal circumstances is thus about 250% of its quota. But it wouldn’t normally be allowed to borrow more than 145% of its quota at one go under the ECF/EFF/SBA arrangements that it has been eligible for throughout its history with the Fund. In dollar terms, it means that Ghana would ordinarily expect not to be allowed to borrow more than $1.45 billion at any one moment.

Ghana’s eligibility for $1.45 billion (or even more at the discretion of the IMF Board) compared to the $918 million received in 2015 is due to the doubling of the country’s IMF quota since then as a result of an expanded economy. The Ghanaian authorities have hinted at an interest in securing even more because in 2015 the country obtained 180% (instead of 145%) of its quota. The same quota multiple as was used in 2015 will entitle Ghana to some $1.926 billion of IMF money.

As my remarks below will attest these are significant sums in Ghana’s current conditions. But just a short while ago, some Ghanaian pundits and ruling party affiliates were calling such amounts, “peanuts”.

It would have been obvious to the government and the ruling party that embracing the same IMF that they had spent months associating with gloom, doom, shame and insignificance would seriously shake the confidence of even their most ardent supporters in their own grasp of economic policy. So why then did they do it?

The official explanation trotted out by many leading party chiefs and government officials is that up to the time a series of emergency cabinet discussions and meetings took place in late June, no decision had been taken whatsoever to abandon the hardline stance against the IMF in favour of “homegrown” fiscal consolidation policies (such as the 20% “across the board” cut in expenditures) and novel revenue measures (such as the e-Levy).

The Information Minister, in a number of press engagements, told the public that it was during a review of revenue numbers, especially in relation to the underperforming e-Levy, in late June that the IMF decision crystalised. Never mind that for months every serious analyst in Ghana had been branding the e-Levy targets as unrealistic.

In fact, up to a few days until the announcement was made, the government’s posture was that a decision was yet to be taken, with everything hinging on a review of revenue data still flowing in.

A careful analysis of the facts and developments following the downgrade of Ghana’s sovereign ratings in 2021 would show however that this picture of a climactic decision based on sudden and overwhelming data is inaccurate.

As early as late April 2022, the country’s economic managers had become aware that the only serious door still open was the IMF one. The continued downplaying of the IMF, hyping of the e-Levy and trumpeting of a “homegrown” fiscal remediation plan were all in hopes of a miracle. They were spectacles not in service to any carefully laid out policy-based strategies but rather in the forlorn hope of influencing the narrative about Ghana and hopefully triggering some kind of bonanza from some impressionable quarters. IMF inevitability merely prevailed in the end.

The above conclusion stems from an analysis of various factors. Including an evaluation presented below of the only “serious” documents the government has been able to present to Parliament as the fruits of a momentous struggle since September 2021 to access the international loan/capital markets. Let us examine the two documents in turn.

Afreximbank Facility

The pan-African development bank, Afreximbank, announced its “Ukraine Crisis Adjustment Trade Financing Programme for Africa” (UKAFPA) in early April after its board approved the facility on March 31st, 2022. Ethiopia, Nigeria and Ghana were among the earliest countries to express interest and commence engagement.

Given the typical sources of Afreximbank’s funds for these types of facilities, it was obvious from the start that facility managers would seek to align the UKAFPA’s credit and risk management with the yardsticks of the big multilaterals, particularly the IMF and the World Bank.

It is not surprising then that the Ghana – UKAFPA agreement laid before Parliament on 8th June 2022 is replete with caveats indicating clearly that without an IMF deal, consummation is literally impossible. Recall that this was weeks before the official IMF U-turn announcement.

Because the agreement is merely a letter of intent outlining the broad “heads of agreement” on the basis of which an actual agreement could be signed in future for Afreximbank to then attempt to raise “between $500 million and $750 million” for Ghana, it is instructive that the IMF elements are some of the most emphatic terms in the document.

Right from the outset, it is made clear that the agreement entitles Ghana to no assurance of money being raised. Any such raise would be subject to a future agreement following satisfactory due diligence, no deterioration in Ghana’s financial circumstances, and, most important for our discussion here, the receipt of satisfactory documentation.

Regarding the documentary prerequisites, the Agreement anticipates receipt of the government’s Letter of Intent to the IMF within 30 days of submission. Some of the “conditions precedent” give strong hint of the expectation of facility disbursement to align with some kind of multilateral supervision and control regime.

Extract from Ghana – UKAFPA Letter of Intent

A careful analysis of the Afreximbank Letter of Intent submitted for ratification to the Ghanaian Parliament therefore allows no other conclusion except the following:

A. The government had only the most tentative prospect of borrowing internationally in dollars to shore up reserves and, by implication, the local currency (the Cedi). The Letter of Intent had a long list of prerequisites and conditions precedent before a formal agreement could even be reached. Thereafter, everything was dependent on the success of Afreximbank actually being successful in placing the deal. It would be months before any money might arrive at the Bank of Ghana. The impression created in recent weeks of Ghana having viable alternatives to both the Eurobonds market and the IMF in meeting its dollar needs was thus simple acts of image laundering. The only deals in hand were tentative, early-stage, prospects.

B. Even these tentative deals were, carefully analysed, significantly premised on government of Ghana returning to the IMF and observing a supervised fiscal consolidation program.

C. There was no prospect of funds being released in lumpsum as the country has become accustomed with Eurobond placements. The money, if it ever comes, will go to specified projects and will be released based on the satisfactory progress of those projects.

Extract from the “representations” section of the Afreximbank Agreement

These terms are generally mirrored in the second agreement (also a tentative letter of intent) laid before Parliament outlining broad terms of engagement between the government of Ghana and three banks: Standard Chartered, Standard Bank and Rand Merchant Bank.

Syndicated Loan

The fact that after starting off with a target of $750 million the government eventually had to settle for a $250 million facility, of which only $205 million would actually be disbursed (the rest being swallowed by costs) is itself quite telling.

So dim were the lenders’ view about Ghana’s finances that they demanded insurance. But so serious was the credit risk from the lenders’ point of view that the insurance and reinsurance structuring became protracted, eventually leading to a reduction of the loan amount from $750 million to $250 million.

Here too, the prospective financiers were demanding that government secures ratification of the Mandate Letter in Parliament and meet an extensive list of conditions precedent. Any future facility agreement would also need to be brought to Parliament before the three banks would have the full comfort to raise the $250 million and start disbursing the actual loan amount of $205 million. The funds in this case also will go to specified bankable projects (not to general budgetary support). Once again, it would be months before Ghana sees any money.

Extract from the Syndicated Loan Mandate Letter

The costs of these deals, because of the strict and comprehensive insurance requirement (a sign of how wary the lenders were about Ghana’s finances) added significant cost margins beyond the interest rate. A crude summary is that to borrow just $250 million, Ghana had to be willing to sacrifice $45 million in guarantee costs. This is a country that barely a year ago raised $3 billion at one go with only the bare covenants that apply to all borrowers in the Eurobond market.

Ghana’s Short-Run Crunch

Given the tentative nature of the only loan agreements the government has been able to muster so far and present to Parliament, and notwithstanding reports of officials scouring all over the globe looking for deals, it is pretty clear that hopes of getting significant dollar credit injections into the Ghanaian economy before the end of the year are fading rapidly. The government had to beat a fast retreat to the IMF merely to preserve even these tenuous prospects. That fact raises serious challenges as the IMF process is not much faster than the Afreximbank or the syndicated lending arrangements.

Readers would recall that the last time Ghana did an IMF deal, the process was initiated in August 2014. It was not until April 3rd 2015 that the Board of the IMF finally gave approval. As some analysts have sought to point out, the economic conditions prevailing in 2015 were not as complicated as they are today. Below we reproduce in full the macroeconomic landscape summary table compiled by the IMF around the time of that facility’s approval.

Debt Sustainability Analysis for Ghana performed in 2015

The most important figures to take careful note of are the 2014 and 2015 debt service to revenue ratios. In short, how much of the country’s income was being spent then in paying interest and retiring principal? Versus now. In 2015, less than 35% of revenue went to debt servicing. In 2014, when the approach to the IMF commenced, the figure was just a little above 32%. Today, that number significantly exceeds 60%. In a first quarter of 2022, interest payments alone totaled $1.3 billion (10.6 billion GHS). Properly accounting for amortisation by accommodating the worsening inflation and exchange rate dynamics, would have meant nearly 70% of the 16.7 billion GHS ($2.1 billion) of revenue collected over the period going into debt servicing.

Even worse, the rollover risks of domestic debt have considerably worsened because of the pace at which international investors who not too long ago used to hold nearly 40% of Ghana domestic debt (in 2017) are fast exiting.

Per some projections, foreign holdings of Ghanaian domestic government debt will slump below 10%, having already fallen to around 16% by the end of 2021. When non-resident investors refuse to reinvest their proceeds from prior cycles of investment back into government securities, they typically buy forex and repatriate their money out instead of diverting it into other local investment options. The result is mounting pressure on the Cedi and the risk of government defaults (due to the collapse of the assumption that government won’t have to redeem so much maturing securities at the same time).

These factors, coupled with serious opacity about the true scale of the hidden subsidies and government liabilities in the energy sector, and to some extent the financial sector, have elevated the perception of risks around the government’s finances. Most analysts feel that the situation is even worse than the dire macroeconomic indicators (nearly 30% inflation and a near 30% year-to-date devaluation of the local currency) suggest.

In these circumstances, it could even take the IMF longer to align with government on both a thorough diagnosis of the problem as well as the most effective set of solutions than it did in 2015.

Especially when in previous episodes of this same tango, the government simply refused to follow through with the agreed prescriptions and merely exploited the IMF program to improve its attractiveness to less rigorous lenders and then proceeded to binge heavily on expensive debt. Fearing that the very integrity of the IMF’s programs is at stake, one can only imagine the IMF spending more time trying to design smarter strictures around the government’s capacity to abuse the program. And we are not even factoring into the mix the unresolved issue of whether IMF bailout packages require Parliamentary approval. In 2015, NDC said they didn’t, NPP insisted, quite strenuously, that they did.

So if in relatively less complicated circumstances, it took the government 8 months to clinch a deal in 2014, one would be foolhardy to assume that the economy’s short-run cashflow problems are fixable by a quick IMF program. As we have reminded readers in previous comments, some African countries, like Zambia, have been waiting for an IMF deal for years now.

The current rollover challenges facing the government therefore require a massive and sincere spending review to cut non-critical spending in order to conserve resources to avert a default before a carefully designed debt restructuring of some sort commences next year. Any disorderly strings of defaults in any category of liabilities would only slow down the process of IMF engagement and reduce the overall utility of a program, as indeed we have seen in Pakistan.

The consistent consigning of the IMF engagement to “balance of payments” support in recent days however underestimates the broader structural issues involved in coming to a consensus on what need to be done. Ghana’s balance of payments situation is complicated by the fact that it is no longer driven primarily by trade. In fact, there is an ongoing imports collapse in the economy due to very high effective tariffs and a slowdown in broader demand. An artificial trade surplus has thus been manifesting for quite some time now.

Ghana’s collapsing imports. Source: World Bank

The current account imbalances confronting the nation are interlinked with persistent fiscal deficits and they both have their roots in three areas other than trade: massive debt servicing costs that can only be addressed by debt restructuring, a large public sector wage bill that can only be tackled through a fundamental redesign of the inchoate welfare state, and structural waste in procurement and capital expenditure born out of political patronage.

The only real room to make a short-to-medium term difference to the country’s dire fiscal plight is in moving aggressively on the third source of the current problem: patronage-driven spending waste. Doing so requires a sincere and independent spending review of recurrent expenditure and planned capital projects heavily tainted by political patronage.

Whether it is the abominable abuse of public funds at the Electoral Commission, the continued pouring of money down the drain through schemes like Kelni GVG or the so-called Smart Workplace project, these leakages are entirely within the control of the political class and frankly, should they go, no one else would miss them.

However, to the extent that politically connected people see benefits in them, they cannot be tackled by routine austerity measures nor is the IMF, in its current incarnation, in light of the collapse of the Washington Consensus, best placed to drive through wide-ranging good governance reforms. Yet, only a genuine commitment by the government to finally confront the structural waste problems will compel it to engage truly independent third parties to conduct the kind of spending review that will take the knife to the pork-barrel mess that procurement and capital project financing have become in Ghana.

Researchers like Malick Sy and Adela Mcmurray have identified variants of this “good governance enforcement gap” as a contributory factor to their “spiral of doom” analysis of IMF programs that fail to prevent countries from becoming addicted to bailouts.

The Spiral of Doom emanating from failed bailouts. Source: Sy & Mcmurray (2016)

So, whilst it would seem that the government has already embarked on some austerity measures to achieve a similar outcome to waste reduction, there are serious concerns about the tendency to gut social assistance programs simply because, lacking vested political patrons, they are easy pickings.

For example, there are 3.5 million beneficiaries of the School Feeding Program. Each beneficiary costs the program 12.5 cents a day. There are 185 actual school days in the academic calendar. In short, a seamless School Feeding Program would cost the country just about $81 million a year. Given the full privatisation of the scheme, there are hardly any administrative costs. Yet, the initiative has been saddled with perennial complaints of underfunding for years. This, in a country where the government has very few qualms about throwing away more than $60 million worth of electoral equipment in perfect working condition just to start over again so that crony contracts can be awarded to preferred vendors in flagrant abuse of procurement laws.

Now that it is becoming apparent that neither the IMF nor private lenders will dish out easy money to Ghana between now and the end of the year, the bleak situation the country and its government find themselves in, as they confront the real prospect of technical insolvency in the next couple of months, has been cast in stark relief. Would this rude awakening provide the impetus for reform that previous IMF programs and half-hearted homegrown fiscal consolidation strategies have equally failed to generate?

Will the people rise up to the true measure of citizenship and demand an end to patronage-driven waste? And will the leaders respond?

News on Republic day (1st July 1960 was when Ghana ditched Queen Elizabeth II as Head of State) that Ghana is to return to the IMF for the 17th time in its history hit some nationalists and pan-Africanists very hard.

Members of the country’s ruling party who have bought wholesale into the government’s “Ghana Beyond Aid” mantra were also stunned.

For weeks, dark jokes about “Ghana Beyond Aid” transmuting into “Ghana Beyond Help” have been circulating in financial circles. The country’s vaunted “homegrown solutions” seemed incapable of stemming inflation or the slide in the national currency, the Cedi. No remedy seemed to be working.

Even the eLevy tax on digital financial services that the government burnt precious political goodwill foisting on a highly hostile public appeared to be performing at only 10% of expected yield.

The truth however is that many of the reactions to an IMF program are driven by notions of IMF behaviour that have long evolved. The IMF of today is not the IMF of the 1980s. If anything at all, it is the constant linking of IMF programs with abject economic management failure by the ruling party that has made going to the IMF such a doomsday scenario. A more nuanced analysis of modern IMF mechanics can be found in my previous essay.

In this brief follow-up essay, I outline seventeen (17) key points for this 17th attempt to salvage the Ghanaian economy through an IMF program.

  1. Ghana waited too long to go to the IMF

Because of this delay, the twin debt-and-protracted-deficit crisis has become structural. Ghana is thus likely to qualify only for medium-term programs such as the Extended Fund Facility (EFF) or Extended Credit Facility (ECF). Both medium-term facilities come with higher conditionality than short-term and standby arrangements. In better circumstances Ghana could have qualified for a Flexible Credit Line (FCL) or a Precautionary or Liquidity Line (PLL). Were the problem strictly due to short-term shocks such as the Ukraine War and/or COVID-19 as the government insists, the IMF could also have offered a Rapid Financing Instrument (RFI) or a Rapid Credit Facility (RCF). Due to reckless overconfidence however the fiscal situation has deteriorated to a point where only an EFF or ECF is likely to be available.

2. IMF doesn’t like basket cases

Like every Lender, the IMF had rather not be dealing with a basket case. Ghana has for three years now been pretending that it is taking reforms seriously and that it has strong policies to address the issues that took it to the IMF in 2015. Instead, it has done very little to address weak institutions, poor spending choices and low public revenue growth. The wage bill continues to grow by nearly 15% year on year despite lip service to containment. The country has masked these weaknesses with lavish borrowing from yield-hungry local and international lenders. Evidence shows that countries with structural debt-and-deficit problems face more protracted negotiations with the IMF than those dealing with simpler balance-of-payments challenges.

3. Ghana has to brace up for the DSSI+ (Debt Service Suspension Initiative & its successors)

Between May 2020 and December 2021, the Bretton Woods institutions led a G20 process to offer temporary debt relief to countries struggling with their debt service load. Additionally, countries that qualified for the DSSI (it required a preliminary IMF program) were entitled to receive further support. 43 countries, many with far less onerous debt burdens than Ghana, benefitted from $5.7 billion in relief. Mysteriously, the Finance Ministry refused to allow Ghana to participate citing likely interference with the country’s commercial borrowing plans. Now that the DSSI window has closed, the government will be compelled to consider the G20 Common Framework. Chad, Ethiopia and Zambia recently asked for support under the Common Framework. The IMF’s attitude has been that these countries must apply the framework to structural reforms and not just debt service suspension or relief. Ghana may have to confront similar treatment soon.

4. The Hurdle of a “Staff Agreement”

 Because of the Finance Ministry’s dismissive tone, the country has yet to prepare the all-important “Letter of Intent”, in which it must detail all the policy actions it intends to take to realise the goals of any IMF program.

Below are the actions Ghana pledged to take during the 2009 to 2011 IMF (ECF) program timeline.

Note that the famous “hiring freeze” was already an element of domestic policy before the IMF got into the picture. It was government of Ghana which saw a slowdown in hiring as a means of “strengthening” the public service and embarked on it. When the time came to present a plan to the IMF in order to get their money and stamp of approval, the government said it would improve its implementation of the plan (because, as usual, the plan had up to then merely been on paper). It was not something the IMF sat in Washington DC to contrive and stuff down the government’s throat.

Readers also have noticed the government’s pledge to fix Tema Oil Refinery. It didn’t happen. Clearly, even with the IMF looking over its shoulder, the Ghanaian government routinely does not get done what it sets out to do.

Below are the highlights of the 2015 program agreement as well.

Readers could not have missed the provision in the 2015 program to conduct an asset review of the banks. Most readers would recognise the important role played by the results of that review in the eventual effort to finally tackle the serious insolvency plaguing parts of the Ghanaian banking industry. One has to wonder why it has to take an IMF program for the authorities to deal with clear and obvious dangers.

A similar letter of intent now has to be prepared to commence the IMF dance. It would be reviewed jointly by the IMF’s country team, other analysts in Washington DC and the government’s own negotiators. The final details will make their way into a Memorandum of Understanding (MOU), which will in turn detail the agreed performance targets for certain important macroeconomic phenomena as well as ceilings and floors for certain borrowing and spending activities of the government. Furthermore, the MOU will detail the disbursement schedule of any approved funds and what will trigger release. In past engagements with Ghana, IMF programs have nearly lost credibility because agreed targets and timelines have not been met as agreed. Because the MOUs also entitle the IMF to receive periodic data updates about a host of things, failure to report accurately and timeously can also cause friction. In 2018, when the last IMF program was in force, the government lied about its external arrears and was forced to write a humiliating apology.

In short, getting to the MOU stage (often called a “Staff Agreement”) entails clear commitments by the government to corrective actions that can address the scale of the challenge facing Ghana. It goes without saying that the bigger the challenges the bigger the commitments to reform the government must make and thus the higher the likelihood that IMF respondents might feel that promised actions do not go far enough.

5. Even a Staff Agreement is not the end of the road

Even after hammering out the terms of an MOU, the Board of the IMF still has to approve. Even after a program agreement is in force, disbursements may need further board approval. Kenya for instance is still waiting for board approval after IMF staff signed off on a disbursement in April. The IMF board, like all boards meet at scheduled intervals to address tabled matters.

6. Ghana needs a shorter-term remedy besides IMF

There have been reports in the banking industry of the government writing to lenders and holders of guarantees to provide extensions to timelines for due payments. The liquidity crunch facing the government is now so intense that this IMF announcement appears to have been made principally to give comfort to dithering prospective short-term lenders. The government has been chasing syndicated loans from commercial banks for a while now. Some of these banks have begun getting cold feet. Some have quietly told the government that an IMF agreement would make lending more palatable. This sudden u-turn in favour of IMF program is thus an attempt to seduce commercial borrowers. It would be wise for the government not to underestimate the markets and start looking for alternatives in cuts to discretionary spending. Equally daunting is how the government can sustain domestic debt servicing in the short-term without central bank financing. Current liabilities falling due this quarter significantly outstrip revenues. Analysts insist it is crunch time.

7. The more broken an economy the longer the IMF negotiations.

Once a country waits till it is desperate before reaching out to the IMF, its situation takes on a character that cannot easily be fixed by medium-term liquidity improvements or even by restored access to the capital markets. Ghana has a credibility issue right now. It is not clear if it genuinely wants to reform its fiscal culture or merely wants a quick fix to restore access to the capital markets so that it can restart its borrowing spree. Recent IMF negotiations with countries like Sri Lanka shows a serious cynicism on the part of the Fund about these kinds of quick fix strategies because of its impact on the credibility of the IMF itself.

8. Ghana should be prepared for the possibility of protracted negotiations

Whilst the IMF has given a lot of hints that it would want to do a deal with Ghana, appetite for a deal is not enough. Even when an agreement is in hand implementation can be bogged down by policy and program disagreements, as has been the situation with Ethiopia since approval of a $1.5 billion program by the IMF Board in 2019. Similar issues have disrupted the $6 billion Pakistani program. It is noteworthy that Zambia continues to have program initiation challenges despite talks with the Fund dating from 2016.

Researchers have tracked the time it takes the IMF, historically, to intervene in an ongoing financial or economic crisis. They have come up with an average of several months even for the relatively more straightforward standby agreements. Ghana’s year-long dilly-dallying fits this pattern.

IMF Response Time Analysis. Source: Mody & Saravia (2013)

Once a Letter of Intent has been submitted by an IMF member state however (usually based on informal understandings reached with country staff), the decision speed improves considerably. Lauren Ferry and Alexandra Zeitz have computed an average of 115 days from commencement of negotiations to approval but a mere 20 days from the submission of a formal request to approval by the IMF Executive Board.

Most researchers report a strong correlation between the strength of a country’s United States (US) and European Union (EU) relationship and the speed of approval. Ghanaian foreign policy analysts generally rate current US – Ghana relations to be relatively less robust but fine enough. EU relations, on the hand, have been generally stable over a long stretch.

Tracking IMF Program Decision-making Timelines. Source: Ferry & Zeitz (2021)

9. A Staff Agreement requires Ghana to accept facts it keeps resisting

A factor likely to influence the smoothness of Ghana’s IMF program initiation is the alignment between the Fund’s view of the Ghanaian fiscal situation and the Finance Ministry’s. One can glean from the routine country visit reports (the so-called “Article IV consultations” underpinning the IMF’s global surveillance mandate) some inklings of divergence between the IMF and the Ghanaian government on the right way to measure Ghana’s true debt position and deficit trajectory, especially in relation to the treatment of so-called “arrears”. Any decision to leave the negotiations solely to the same Finance Ministry mandarins who refuse to grasp the full scale of public liabilities could easily complicate the negotiations. The President should ensure representation from other ministerial and Jubilee House quarters.

10. Clarity on non-concessional funding

One of the biggest stumbling blocks ahead in the upcoming IMF journey is the government’s continued wish to source expensive loans to maintain its dead-end course for as long as possible. The interest rates on these loans are crazily high. The IMF is likely to take a very dim view of them.

11. All the more reason to stem the bleeding now

If showing good faith to the IMF might require a moratorium of sorts on securing ridiculously expensive loans at a time when the government is in desperate need of hard currency to service its international payments obligations, then now is the time to take a hard look at cash sieves like Kelni GVG which continue to bleed Ghana of millions of dollars every month for very little demonstrated return. To date, not a single independent report (not one commissioned by vendors or government agencies directly involved) has established the true benefits of programs like large-scale medical drone delivery, telecom revenue monitoring, fuel marking schemes and assorted government-driven ICT initiatives.

12. A proper spending review is now required

It is apparent from provisional fiscal data that the promised 20% cut across all public expenditure announced by the Finance Ministry was more rhetoric than cold reality. Public spending is actually expected to keep rising over the next quarter. Such a drastic austerity program as promised could not have been implemented anyway without a proper spending review conducted by truly independent-minded people in government. Unless the government is willing to cut loose pet projects of favoured officials and their cronies, such a spending review cannot proceed in good faith.

13. A spending review will have to take down ALL VANITY PROJECTS and perennial wasteful spenders

Should the prospect of an IMF program prompt a genuine spending review, courage would be required to take a knife to vanity projects like the flopped Liquefied Natural Gas initiative of the Ghana National Petroleum Corporation and various bungled flagship projects like One Village One Dam and One Million Cedis per Constituency etc. When a campaign was waged by civil society activists against the decision by the Electoral Commission to throw away nearly $70 million of perfectly sound infrastructure (including thousands of laptops that were then just over a year old), the government studiously refused to listen. Hundreds of millions of dollars have been wasted in a similar fashion across the government in support of various harebrained schemes.

14. Clarity on debt restructuring gameplan

Whilst the IMF announcement may have prevented another rating downgrade in the near-term, any prolonged delay in securing an agreement may actually trigger a downgrade. In a similar vein, whilst the initial reaction of investors to the IMF u-turn announcement has been positive, much of the sentiment is connected to hopes of an orderly debt restructuring deal with very minimal haircuts (cushioned with multilateral resources). Debt restructuring deals are very tough and time-consuming. Failure to present a clear narrative about strategy could easily turn expectations of a medium-term turnaround to fear of fiscal attrition and a disorderly default.

15. IMF toolkit is limited in scope and must be primed

The IMF’s toolkit for pre-emptive restructurings as a means of averting sovereign defaults is only viable with large doses of maximal transparency, sound tactical choices on reprofiling debt (even learning some lessons from interesting episodes like Belize’s), and a return to overall fiscal discipline.

16. IMF will not fix systemic governance deficits

Repeating any treatment for the 17th time cannot be an occasion for celebration. An IMF program is merely an opportunity to attempt a reset of specific fiscal dials. It does not transform national governance culture wholesale on any level. The eventual transformation of Ghana’s economy to one of sustainable growth and widespread prosperity cannot be delegated to technical interventions by international organisations.

17. The fight is still on the homefront

It shall only come about as a product of the nation-building struggle. IMF will come and go. It is not a savior from poor economic leadership. But neither should it be treated as a convenient scapegoat for homebrewed failures. The fight for true economic liberation remains that of Ghanaian citizens alone.

Long before there was Ghana, Achimota Forest was a sanctuary in which certain economic activities and despoilment were banned, and runaway slaves mingled anonymously among the sacred groves secure from recapture. It was the ultimate “retreat” from the sometimes-terrifying normality of war and politics.

The forest’s ancient religious connections are preserved today in its status as the largest outdoor Christian worship site, attracting as many as 250,000 worshippers in 2009, the latest year for which Forestry Service statistics are available.

Today, the site remains the only serious urban forest in Ghana, and the only major vegetation cover in the ecologically sensitive Odaw Basin.

The intertwining of Achimota woodland and the drainage blocks precipitating flooding in that part of Accra has long fascinated Ghanaian environmental scholars.

The interesting thing therefore about how it came to be that the only forested areas near Accra – Achimota and Guakoo in Pokuase – have such intimate links with worship and sacredness is not that religious beliefs can restrain people from destroying nature out of material greed. It is rather that the Ancients may have detected important environmental aspects of these locations and chose therefore to protect them through collective rituals.

It is not for nothing that the escalating flooding patterns on the Achimota – Pokuase stretch, two nodes sacralised by the Ancients and mutilated by modern-day Ghanaians –  appear to have overwhelmed city planners.

The Odaw Basin reclamation strategy has seen halting progress over the years. Image Credit: Gambeta News

For anyone who knows anything at all about the area, the context discussed above coloured the news this week that the President of Ghana has decided to reclassify a large part of Achimota Forest Reserve from remaining in that status because, under a law passed in 1927, he can.

 The portion of the forest reserve, created by the colonial British government in 1930 from a portion of land purchased from two Accra families, affected by the Presidential Order is described in the schedule to the Executive Instrument containing the decision as:

The President was not done, however. He then took a blunt scalpel to the original 1930 colonial order preserving the Achimota forest and with a few delicate strokes shrank it by two-thirds:

Stunned observers in Ghana’s small but significant environmental community could only assume that the action by the country’s Head of State was likely one of those political moves taken without sufficient research, analysis and consultation.

Someone with an obvious commercial interest had smuggled the decision into the hallowed chambers of the President who had proceeded to sign it without the barest amount of professional, impartial, advice.

To buttress the view that the President acted without sound research-backed advice, it is necessary to start at the beginning, and clear many confusions.

In the last couple of days, the Lands Ministry and certain motivated individuals have tried to muddy the waters by deliberately confusing the facts.

When in 1921 the British colonial government compulsorily acquired Achimota lands (and paid the necessary compensation) to the Owoo and Oku We families, the area extended far beyond the space caught in the current controversy. The lands in question totalled nearly 2000 acres.

Half of this land was reserved to build and nurture what would then become just the third secondary school in Ghana – Achimota School.

Nearly a decade later, the colonial government decided to restrict a part – approximately 825 acres -of the remaining half of that original mass of land as a forest reserve. The express purpose was to enhance biological diversity, offer recreational grounds to city dwellers and ensure the sustainable management of wood and water resources.

The Achimota Forest Reserve is completely separate from Achimota School Lands.

The continued confusion of this part of the original acquisition with other parts has been a great disservice to the public debate. The Nii Owoo and Oku We families have for the last two decades, along with persons claiming to be aristocrats of Osu, waged war not over the 43% of the original lands preserved as a protected forest area, but rather on the 57% endowed in Achimota school, large tracts of which have been converted to other public uses such as the building of golf courses and residential dwellings.

In fact, a series of cases associated with this protracted litigation began in 2010 and ended up in the Supreme Court in 2020 regarding the award of roughly 172 acres of Achimota School lands (adjoining GIMPA) to real estate developers and Osu stool claimants (aristocrats from the Osu area of Accra) by an Accra High Court in 2011 as a result of a litigation in which Achimota School was not even a party.

After exhaustively recounting the contorted twists and turns of the legal process that enabled the Osu stool to insert itself into the Achimota School lands saga, when it was not involved in the original 1921 transaction between the colonial government and the two families – Owoo and Oku We –, the Supreme Court reversed the award in May 2020 and sent the case back to a lower court.

Whilst this case was ongoing, the Owoo and Oku We families were also in parallel court processes trying to legitimise encroachment on Achimota School lands by real estate investors to whom they had sold parcels of the land from the School’s 1922 and 1927 colonial government grants. In 2017, judgment was delivered in favour of Achimota school.

Whilst these matters were in court, the government was busy negotiating with the two families. In fact, it appears that the Lands Commission was deliberately mishandling their brief in court in the parallel Osu stool suit because it was aware of how political heavyweights were interested in cutting a deal on the side with various aristocrats and real estate investors.

We now understand that in 2013 the government decided to enter into an agreement with the Owoo family in particular to parcel off some of the disputed lands. Whatever the original merit of that strategy, it was thwarted in the intervening period when courts of competent jurisdiction ruled that all these old families claiming title to Achimota School lands had no basis in fact or law.

The critical thing to bear in mind however is that none of these litigations, out-of-court settlements and government dispensing of largesse affected the forest reserve. These various matters, dissected critically, involved Achimota School lands.

Until the President’s recent action, the Forest Reserve properly speaking – spanning 825.887 acres – has generally been left out of the horsetrading

The sheer incomprehension of the President’s action to shrink the forest reserve and its adjoining area from 1,185 acres to 372 acres (a mind-boggling 70% scale-down) by means of Executive Instrument (EI 154) arises out of the excuse that the reclassification is related to a negotiation in 2013. As explained above, that negotiated outcome has since been frustrated in the courts, and at any rate was related to Achimota School lands and not the Forest Reserve. The reclassification is, on this simple basis, COMPLETELY UNTENABLE.

It appears to seasoned observers that the Oku We and Owoo families having failed to seize Achimota School lands in the courts have now turned their focus on the forest reserve and have colluded with the government to bring about this result.

It is not clear if such an action also has the additional effect of shielding Achimota School stakeholders from further legal harassment by the encroachers who have in recent decades stolen a whopping 33% of the School’s land. Now that a new zone of rich forest has been opened up for concreting, perhaps the 250 acres of Achimota School’s remaining untouched prime land will be spared any further horse-trading by politicians. But whatever the full range of motives, the new declassification and reclassification actions have no grounding in fact, policy, or law.

The fact may not be clear to some otherwise well-informed people, but Achimota Forest reserve is an International Union of Conservation of Nature (IUCN) category VI area. This means that it is not a totally restricted category I or II area; certain infrastructural developments in the area capable of boosting its overall sustainability are compatible with its category VI status. In fact, the eco-tourism park idea, conceived in 2013, was totally brilliant for this very reason. Executing that idea does not require declassifying any part of the land as forest reserve. On the contrary, it leverages the reserve status. Any investor interested in participating in the program would have been required to only propose developments compatible with the category VI status.

Across the world, urban forests like Ghana’s Achimota Forest, Kigali’s Nyandungu, and Nairobi’s Karura have all built eco-tourism park plans on the back of forest reserve protections. Investors are subject to constraints as to what they can build on such lands, but the corresponding tourism uplift usually compensates.

For example, Nairobi’s Karura’s forest reserve status dates back to 1932, just two years after Achimota Forest was likewise declared as a forest reserve. Karura has by and large preserved a protected area twice the size of Achimota Forest right in the middle of bustling Nairobi without any politician succeeding in their perennial quests to whittle down the area. Through an innovative partnership with environmental NGOs, it launched an eco-park concept in 2011, two years ahead of Ghana’s decision to follow suit. In the four years that followed, fees from visitors seeking various forms of recreation averaged around $200,000 a year. In the decade since Ghana declared Achimota Forest an eco-park, the authorities have struggled to collect even a fraction of Karura’s revenue in a good year.

Ghana’s 2013 Achimota eco-park policy has failed not because the area is still protected but because of a lack of political commitment (as evidenced by the horse-trading described above), underinvestment and sheer lack of innovative thinking.

All the above nonetheless, Achimota eco-park still held the promise of preserving the forest reserve status of the area. Until those two fateful days in March and April 2022 when the President of Ghana took his pen and decided to shave 70% off what even a colonial government had considered sacred.

Besides, notwithstanding the slow progress of the eco-park project, other strategic ecological projects have been ongoing well before 2013.

After it was decided that the Accra zoo in Kanda (originally built as a private menagerie for Ghana’s first President) was too close to the India-built presidential palace for comfort, the zoo’s animals were first relocated to Kumasi before a decision was then taken to reserve 120 acres of the Achimota Forest to serve as a new zoo.

An endangered primate breeding center was then set up in the vicinity to protect two critically endangered monkey species – the Diana Roloway and the white-nape Mangabey – from going extinct. There are bush babies in the forest that are not found elsewhere in the country and with proper warden services would have been carefully managed.

Even more intriguingly, a captive fruit bat species (Eidolon Helvum) in the vicinity is feared to pose a zoonotic threat (potential to transmit diseases to humans) if not handled with care.

Jennifer Barr and her collaborators concluded in a recent paper:

“The results from this study indicate Achimota viruses (AchPVs) are able to cross the species barrier. Consequently, vigilance for infection with and disease caused by these viruses in people and domesticated animals is warranted in sub-Saharan Africa…”

The “Achimota viruses” mentioned in the said study include Achimota Virus 1, Achimota Virus 2 and Achimota Pararubulavirus 3.

In short, no serious advisor with the right level of exposure to these critical matters would have advised the President of Ghana to tamper so rashly with the Forest Reserve. The 372 acres the government has left for the reserve are woefully inadequate to cover even half of the strategic requirements of conservation, watershed management, recreational zoo, biothreats research facilities, etc.

It bears mentioning that, according to researchers, it took 85 years from the time of the designation of the forest as a reserve for depletion of the forest cover to accumulate to 250 acres.

Despite suggestions that the forest is almost already gone, just about 12% appears to have severely degraded since 1991. Source: Tuffour-Mills et al (2020)

With a simple stroke of a pen, the government has sent nearly 800 acres more to that same ignominious end overnight.

Assurances that notwithstanding the massive scaledown of the reserve, all future activities shall be reviewed by the Lands Minister for ecological soundness simply do not add up. Even with the current legal restraints, multiple Judges have accused government actors such as the Lands Commission as deliberately working to aid fraudulent real estate operators to encroach on Achimota lands. How does lifting the reserve status, when the government has over the last several decades proved so incompetent in protecting the area advance the goals of conservation and public interest?

Mr. President, we want our Forest back.

Ghanaians will wake up tomorrow to a new era where the monies they transfer online and on mobile will attract a tax of 1.5% once they exceed a daily cap of GHS 100 ($13) in cumulative payments.

Because of widespread disaffection about the way the government has gone about imposing this tax, riding roughshod over many important stakeholders to bulldoze it through, it has had to make last-minute concessions in an attempt to blunt some of the anger. These concessions were mainly in the form of “exemptions”.

Payments made to a range of recipients, for a variety of purposes, and to a sender’s own accounts and/or wallets, regardless of where they are held, were exempted from the e-levy.

To enable these cross-network, industry-wide, exemption rules and processes to take effect, there was a need for some kind of central catalog of APIs and services for the nearly 400 financial services operators allowed to charge the tax to uniformly adopt for consistency.

The industry proposed a clear set of specifications that they could implement on their own and suggested the creation of a set of APIs operated by a national payments switch, such as the GhIPPS. Other commentators warned about the complexity of developing cross-network, industry-wide, charging rules to deliver fully on the exemptions. Characteristic of the government’s current attitude to stakeholders, all these warnings and admonitions were ignored.

The Ghana Revenue Authority (GRA) insisted that it had developed a solution called ELMAS that could centrally manage all these ad hoc and constantly evolving rules (example: a cumulative exemption cap of GHS 20,000 was abruptly added for corporate banking transactions). It strenuously denied that any private contractors were involved at state cost.

It was eventually discovered that not only was the ELMAS shrouded in opacity, but it was also steeped in confusion and lack of candour. Industry players insist that they detected the involvement of shady and conflicted private contractors behind the GRA front presented throughout the attempts to build the industry-wide charging and exemptions framework. “Conflicted” in the sense that the ELMAS was also pitched as a monitoring system. How then can contractors known to be active players in the industry be brought in stealthily as referees and traffic conductors were it not for cronyism and other self-serving interests?

Whatever be the motivation of the government agencies, the poor design of the whole e-levy; refusal to heed industry advice and the inputs of well-meaning critics; the unrealistic timelines; and the failure to create a truly above-board and professional framework, have all led to a situation where several critical exemptions shall not work smoothly come tomorrow.

Instead of an industry-wide framework, individual financial services operators will use their internal billing systems to apply the tax and any applicable exemptions only within the confines of their own network. Cross-operator exemptions shall be constrained.

The government’s bid to prevent mass defections from electronic payments and a reversion to cash, which would undermine both the revenue objectives of the tax and Ghana’s budding digital economy, is now under threat.

Such a sad spectacle would have been averted if good faith consultations with all relevant stakeholders had been undertaken. Instead, opacity, favouritism, aloofness and lack of candour and transparency, have once again been allowed to derail the reputation of Ghanaian government agencies for professional and effective policy design and implementation.


Every other day, one business contact or the other tells me that they don’t use WhatsApp for sensitive discussions anymore, so to continue the conversation I need to move to Signal. Since I don’t have a big problem with such requests, I haven’t bothered to reflect too much on the trend. Until this afternoon, when another request triggered me a bit, and I thought, heck, let me just write a little piece on the subject.

It is easy for folks to confuse privacy, data protection, and secrecy/anonymity when it comes to modern digital technology. All these concepts are made all the more complicated by having multiple layers of legal and technical complexity.

One simple way to get a handle on the intricacies is to be clear about the “enemy” one is seeking said privacy, protection or secrecy from or against. Is it 1) friends and neighbors, 2) the general public, 3) the government, 4) the technology developer or 5) everyone?

I will tell you upfront: privacy from everyone is simply not a realistic option if one also intends to use digital technology. These is always someone else in the mix. Even apps like Threema that try to up the privacy stakes by emphasizing anonymity cannot be completely invisible to the telecom and datacenter networks through which users access them. So, let’s discard the “everyone” case without further probing. That leaves us with four main classes of “others” against whom one may reasonably seek to assert one’s wish for privacy or secrecy.

In the messaging context, however, there is a presumed openness to friends and others with whom one is engaged in conversation. We can take that category off the list too.

The filtration done so far leaves the following “enemies” on the privacy list: the general public, the government and the technology developer.

All three apps – WhatsApp, Telegram and Signal – are sufficiently well built and maintained enough to do a reasonably good job of making sure your chats go to only the people who they were meant for. Any unintended disclosure is more likely to be due to factors, such as human carelessness, rather than the quality of the specific app. The General Public criterion is thus also easily dismissed as a serious basis of comparison.

So, finally, we get to the meat of the matter. On the few times I have tried to understand the basis of the shift from WhatsApp to Signal or Telegram, a relatively small number of respondents have cited concerns about WhatsApp’s privacy policy and the fact that Facebook’s servers are used for the transport and storage of the data. That is to say, the main concern of this class of users is the conduct of the technology developer.

Facebook’s unpalatable reputation for commercial exploitation of data without due regard to user sensitivities clearly worries some African business folk in my circles. Signal, being a privacy-obsessed non-profit, clearly wins on that score against both WhatsApp and Telegram on the Technology Provider dimension.

The vast majority of my Africa-resident business friends who ask that we shift conversations to Signal are, however, concerned primarily about government intrusion. Especially also because once the government is at the tail-end of the surveillance chain, the risks on all other dimensions multiply. For instance, a Google vendor, Mitto, was found spying for governments without the knowledge of even senior employees, a growing theme in this murky world.

Businesspeople in Africa feel under siege from shadow states, plain extortion, ruling party paranoia about their funding the opposition, and competitors with links to the intelligence services. I find the anxiety about government eavesdropping strongest in East and Southern Africa, though some pretty hairy stories have been heard in Nigeria too. Interestingly, it is precisely in the context of privacy and secrecy where government is concerned that public misconceptions abound.

For instance, there is barely any logic in moving from WhatsApp to Telegram on privacy grounds linked to malicious government or organized hacker activities. Telegram uses an opt-in (non-default) encryption model for message traffic that it refuses to disclose for independent security analysis. Determined security researchers have shown nevertheless that its cybersecurity standards are somewhat looser.

Regarding WhatsApp versus Signal, the analysis is more nuanced and also more interesting. Some users may not even be aware that both apps actually use the same open-source encryption system: the Signal Protocol, which enables end-to-end encryption and perfect forward secrecy, and thus disguises the message from non-senders and non-recipients. The two companies are located less than 30 minutes from each other in the San Francisco Bay in Northern California.

In short, both Signal and WhatsApp are within the legal jurisdiction of the American government and have similar technology philosophies. In fact, the main early financier and co-Founder of WhatsApp is the current co-leader of Signal’s owner entity, and its interim CEO.

Some claims are usually made for Signal’s approach to end-to-end encryption and its implementation of the Signal Protocol for metadata protection (hiding not just the message content but also its critical characteristics like origin, destination and timing). Some argue that as a non-profit it is somewhat less amenable to American government pressure to insert backdoors or to deliberately weaken encryption in the name of national security or law enforcement.

WhatsApp and Signal head-to-head on security. Source: Mehak (2021)

Signal enthusiasts would normally frame such distinctions as done in the above table. How each of those supposed strong suits provide protection against determined US government intrusion is highly debatable. And there is already a growing citizen movement against encryption because of things like child trafficking that are changing the terms of the debate. Even as the US Government surreptitiously buys up and hold stakes in the encryption companies themselves.

But we need not dwell too much on the details here since few Africans in the category I am discussing are worried about US government surveillance or law enforcement overreach particularly. The overwhelming majority care more about surveillance by their own governments in Africa.

There is no evidence to show that WhatsApp will be more submissive to an African government’s request for backdoors than Signal. WhatsApp has put up a fairly valiant resistance in India to government demands. The economic case for capitulation is obviously stronger in India than in Africa. The case may nevertheless be made that Signal’s small size and lack of a Facebook-like global footprint should make it more impervious. But a counterpoint can work in Facebook’s favour: its vast resources can help it implement more complex legal and political shields in places like Africa.

At any rate, an African government interested in surveillance is less likely to proceed like the US government, India or China by seeking to enter into elaborate arrangements with tech giants for backdoor design and implementation. Most African governments simply lack the technical capacity to design those kinds of regimes. They are more likely to invest in cyber-offence tools and contractors, as some of them have done already. Tellingly, Bulgaria-based Circles, a spyware vendor steadily overtaking NSO in notoriety, has a third of its government clients based in Africa.

Advanced professional hacking tools and services from the likes of Israel’s NSO and the Anglo-German Gamma Group have also been traced to African surveillance operations. In fact, it is widely believed that Uganda’s attempts to hack the Apple phones of US diplomats in Kampala using NSO’s Pegasus are what caused the abrupt switch of US posture towards NSO from tolerance to hostility.

When it comes to tools such as Pegasus, the target is the phone’s actual operating system. Any malware that takes sufficient control over the operating system of a device could also steal the private keys downloaded from the platform and render any encryption vulnerable.

We know from the Jarett Crisler case that Signal message content and metadata can be extracted by US law enforcement agencies most likely through exfiltration of encryption keys by exploiting both phone operating system and hardware vulnerabilities. Indeed, at least one Israeli company openly boasts about giving law enforcement agencies the tools to bypass Signal’s encryption. With these vendors willing to do business with any government that will pay, the risks to privacy have metastasized from the policies and conflicts of the technology provider or its privacy commitment to pure commercial jungle warfare.

In short, there are many reasons why an African businessperson may wish to switch among the big messaging apps. Keeping the government’s long nose out of one’s business affairs is, unfortunately however, increasingly less tenable as a basis for choosing among the options available.

I have received a letter from the Office of the Senior Presidential Advisor of Ghana (formerly, “Office of the Senior Minister”) purporting to be a response or rejoinder to two tweets about Ghana’s stagnant public sector reforms effort I sent out on 21st and 25th February, 2022.

For clarity, I reproduce the tweets here.

It is heartening to note that the Office of the Senior Presidential Advisor (OSPA) shares with many of us the belief that public sector reforms in Ghana remain a pressing and crucial issue, and thus require careful scrutiny.

The OSPA’s 5-page response/rejoinder to my claims of the their obsessive focus on procuring expensive cars to the neglect of other, perhaps more critical, matters is thus the least one could expect in these circumstances.

Unfortunately, the response falls short of the requisite thoroughness, accuracy and candour required to address the concerns analysts continue to have about the results to date of Ghana’s longstanding quest to reform its public sector to improve its effectiveness and contribution to total development. Before we delve into these shortcomings, it is essential, given the sheer depth of this topic, to recount the full history of Ghana’s attempt to comprehensively reform its public sector institutions from the center. Below, a compilation of the reforms and their chronology by a team led by the World Bank’s Nick Manning in 2012 is reproduced verbatim.

Non-Structural Reforms

Structural Reforms

A simpler overview that covers more recent attempts is provided below.

Source: Martin J. Williams and Liah Yecalo-Tecle (2019)

It is easy to deduce from the above that serious attempts at actual structural reforms of the Public Sector did not even begin until 1994, and this doomed attempt – the National Institutional Renewal Program (NIRP) and Civil Service Performance Improvement Project (CSPIP) – had by 2001 completely lost steam. Since then, a mix of different strategies have been pursued culminating in the current emphasis on “results” and “delivery”.

From this results and delivery emphasis, three key themes for the reform agenda emerge:

  • Increasing Personnel Productivity
  • Making Decentralisation Work and
  • Eliminating graft, corruption, poor governance & other unprofessional conduct

Even as individual initiatives, like computerisation of public finance administration and linkage of capacity building with demonstrable skills upgrades in the Civil Service, have repeatedly failed, a rinse-repeat-recycle process have kept these goals at the forefront of the reform agenda.

Here are some of the practical issues that we currently grapple with as a country because of persistent failure of public sector reforms:

  • The country spending more roughly 40% of total government revenues on paying public sector workers every year over the last decade, considerably higher than most of its peers. Yet, salary agitations remain rampant, suggesting poor distribution, high distortions and low productivity. A conclusion supported by the fact that Ghana actually employs fewer public sector workers in some crucial areas like health, education, security and agriculture than peer countries in Africa and that its public sector personnel are marginally less educated than on average.
Source: IFS (2019)
Ghana’s high wage bill as a share of government revenues compared to peers. Source: IFC (2019)
Ghana’s relative public sector compensation bill is enormous even by global standards. Source: World Bank
Source: IFS (2019)
  • Long delays in paying salaries of newly recruited staff due to poor payroll vetting procedures. Erratic pay has become so institutionalised that some rural banks are reported to be building products around it. It is not clear how an employer can maintain staff motivation when salary arrears can pile up for months on end.
  • Poor maintenance of amenities and delivery of social services in many peri-urban and rural areas as a result of the inability of local government bodies to raise local revenue.
  • Consistent poor financial and performance results at many state institutions according to perennial Audit Service indictments.
  • Continued extortion of citizens by public sector workers before delivering benefits to which citizens are entitled. Both Afrobarometer and Transparency International data shows zero improvement of citizen experience of corruption and extortion over the last decade.
Corruption Perception among the population. Source: Afrobarometer (2019)
Source: Yeboah-Assiamah et al (2016)

To do justice to the Office of the Senior Presidential Advisor’s (OSPA) rejoinder, the above context should shape our approach.

I made the following claims on Twitter:

  1. A summary of the 2020 Annual Report of the Office of the Head of Civil Service corroborates the position that the bulk of expenses made in pursuit of public sector reforms by the OSPA went to buy cars. That fact cannot be challenged as it is based on a verbatim extract from that report.
  2. A larger share of the World Bank resources given to the OSPA to spend on advancing public sector reforms in Ghana went into buying cars. The evidence for this is from the World Bank’s own reports on the project and will be presented in this essay.
  3. The largest single completed expenditure was for 7.4 million Ghana Cedis worth of cars in December 2019. The Senior Minister insists that the expense was 8.5 million GHS worth of cars and the spending year was 2020. I relied on World Bank reporting, which I will reproduce below. At any rate, this “clarification” makes no material difference to the core argument.

Before I produce the relevant extracts from the World Bank reports, it is important to remind readers to analyse the scope of activities listed by the OSPA in their “rejoinder” to determine if indeed their explanations measure up to the scope of the public sector reform challenge described thus far in this essay.

Are vehicles for personnel the most critical instruments for boosting fiscal decentralisation, eliminating corruption and extortion and boosting productivity? Is there any evidence to suggest so from any study? Can the OSPA cite any such studies? How has the public sector reform project fared as a result of this decision to focus on buying brand new cars for sixteen agencies?

Find below an overview of what the former Senior Minister committed to in exchange for funding from the public purse to transform the public sector.

Source: World Bank

Has the OSPA delivered?

  • Did 250 government agencies establish fully functional client service units by the end of last year?
  • Did Parliament of Ghana ratify the African Charter on Values & Principles and is it being applied to professionalise the public service?
  • Has the Subvented Agencies Reform Programme been successfully implemented and output measured in accordance with the targets?
  • Was there a positive improvement in macroeconomic indicators such as inflation, primary/cash deficit, exchange rate, debt sustainability etc.?

Our investigations reveal serious underperformance on each and every bar the Office has set for itself in every one of these critical areas, not to talk of complete neglect in the OSPA’s strategy of very critical matters like public sector workforce rationalisation, state enterprises (still declaring record losses) and effective fiscal decentralisation.

Even within the narrow confines of the World Bank assisted component of the OSPA’s strategy – improving specific services delivered by sixteen selected agencies across the Ghanaian Public Sector – the performance of the OSPA has been woeful.

From mainstreaming gender priorities to modernising records administration, building systems to reduce vendor payment arrears accumulation in the Civil Service to reforming pension administration, and from transforming the speed with which institutions like CHRAJ manage complaints to overhauling performance contracting at Civil Service Director level, there has so far been little evidence in the Public Sector that the strategy is even beginning to take off, much less have impact. Below is an overview of the resources committed from the World Bank loan to driving the reforms exercise between inception and 2023.

Source: World Bank

Essentially, Ghana has gone to borrow $35 million to reform the Public Sector yet little progress is evident. Still, the OSPA keeps buying cars to distribute to bureaucrats. Meanwhile, little is being done to set the project on a serious course to results.

Worse, in some cases, the targets set simply conflict with other government policy. For example, the push to reduce vehicle registration to 1 hour is based on arbitrary standards. Currently, both roadworthy certification and environmental standards compliance (for emissions tracking among others) in the vehicle registration process fall far short of acceptable standards. No resources have been devoted to improving the equipment and skills needed to enhance these and similar aspects of the vehicle registration process. Indeed, in a study by Dr. Ayetor, Dr. Ampofo and their colleagues in 2021, only 25% of Ghanaian cars in the study sample passed vehicular tests based on national and global standards. Any artificial reduction in registration time would thus only go to damage the quality of certification and compliance even further. Which then raises the question: what difference would buying cars for DVLA make in this major area, for example?

In a similar vein, the poor coverage of birth and deaths in Ghana is due to poor coordination among local government institutions and the Birth & Deaths Registry. Poor public education through strong social institutions like religious bodies and traditional authorities has also been identified as a major weakness. Based on what research then was a decision made to prioritise the buying of cars for the Births & Deaths Registry?

NITA is expected to act as the primary IT Services Provider to all government agencies. As part of the reforms effort, NITA is expected to sign service level agreements with these agencies so that they can be assured of responsive service when they need it. NITA so far refuses to invest in building these helpdesks and operationalising them for the full range of agencies that need support. What has buying cars for NITA bosses to ride around town got to do with addressing this problem?

For every single one of the 16 agencies and the targets of improvement set for them, factors other than transportation/mobility matter far more. Yet, the OSPA decided, for reasons they fail to disclose in their “rejoinder”, that cars should be the most critical input in transforming the processes of these institutions.

Not surprising then that the rating of the project continues to be unsatisfactory.

Source: World Bank

More than 80% of project indicators by my reckoning are not on track.

As is customary in government business nowadays, public accountability, which was designed into the project, has been virtually zilch.

Source: World Bank

As I have already indicated, without any serious rebuttal from the OSPA, the bulk of spending (~80%), as at end 2020, has been on cars.

Source: World Bank

The only substantive push for stakeholder engagement was money disbursed to support Civil Service Week and a so-called Results Fair, which as many would recall consisted primarily in the government announcing projects that make it look good but unrelated to public sector reform.

In short, public sector reforms in Ghana is a big deal, but the Office of the Senior Presidential Advisor is misguidedly investing in cars rather than in critical inputs required to make a serious impact on productivity, professionalism and decentralisation.

As for whether the bulk of the cars were bought in 2019 or 2020, the discrepancy is purely one of accounting treatment. The contracts to buy the cars were signed in 2019. In standard accounting, expensing happens when expenses are incurred. The OSPA can choose to focus on when the cars were actually delivered. It makes no material difference.

Source: World Bank

In view of all the above, I humbly decline the invitation of the eminent and esteemed former Senior Minister to retract and apologise for my claims. On the contrary, I choose to double down and amplify them, as I have done in this essay. Thanks to the OSPA for initiating this dialogue.

On 14th January 2022, the Pan African Payments Settlement System (PAPSS) launched in Accra. In addition to six West African central banks, mainly from the mainly Anglophone WAMZ region, Afreximbank (the lead sponsor) and the AfCFTA Secretariat, a number of important governments and corporations graced the event to signal their support.

PAPSS is considered the fourth of five key pillars supporting the effective rollout of the African Continental Free Trade Agreement (AfCFTA), a treaty signed by 54 of Africa’s 55 countries (excepting Eritrea) and ratified by 41 of them so far with the goal of creating the long awaited common market across the continent.

AfCFTA is momentous even by global standards. It is the world’s largest trade area by participating members, even if other trading blocs like RCEP and the EU have greater weight by GDP. But Africa’s integration and unity has had so many false starts that AfCFTA has been greeted by much apprehension since it was signed in 2018 and even after it went live in January 2021. Take the famous “open skies agreement” which is now two decades deep into oblivion.

Mindful of this context, many observers have been looking for “what is different this time around”, and some have fallen for tech, financial technology in particular, which is where PAPSS comes in.

PAPSS’ key promise as a saviour of AfCFTA is deliciously straightforward, not only will it save the continent $5 billion in fees that currently goes offshore, it will also help AfCFTA take trade among African countries, presently estimated at 17%, to as much as  ~22% by 2040, generating additional value of about $70 billion.

Indeed, if forces like tech push liberalisation even harder, the proportion of Africa’s trade that stays within the continent could exceed 25%. A sensible ambition when you consider that nearly 70% of European trade happens within the EU and 60% of Asian trade within Asia. PAPSS will do this by enabling African traders to pay for goods in other African countries using their own domestic currency whilst the seller gets paid in their local currency as well.

Like every big idea in Africa, PAPSS has been tried in different forms and guises over the years in Africa. A number of Africa’s major regional trading blocs have something similar. In the Southern part of the continent, SADC has a unified payment system called SADC-RTGS (previously, SIRESS) patronised by 14 of its 16 countries (with transactional value exceeding $450 billion by March 2020). The East African bloc has EAPS and both major Francophone-dominated zones – WAEMU (West Africa) and CEMAC (Central Africa) – have unified, multi-country, cross-border payments systems as well. In fact, 30% of trade in the Francophone trading blocs happen in the regional CFA currency on the regional payment networks, such as CEMAC’s SYGMA, already.

So, apart from ratcheting up the scale, could PAPSS change the game much more radically? A lot would depend on a more rigorous definition of the problem it has set out to solve and a lot of strategic wizardry. Misunderstanding PAPSS’ true opportunity would lead to disappointments and confusion.

Some have dubbed PAPSS a SWIFT killer because of certain misconceptions about the promise to “save Africa” billions of dollars of fees which currently go overseas. But this is a complete misapprehension.

SWIFT is the global behemoth that enables banks to send secure transactions to each other authorising payments from sender to beneficiary. 11,500 out of the world’s 25,000 banks, of which about 1050 are in Africa, send 42 million such messages every day to 200 countries around the world. The actual fee per message is around 4 US cents ($0.04). This is hardly the driver of the 6.3% of sending amount that senders pay on average to transfer money from country to country or the $25 to $65 senders see on the telex advice when they wire money from their bank to a recipient in another country.

Those costs are driven by intermediary banks between theirs and the recipient’s, sometimes called “correspondent banks”. Because it is unlikely that the sender and the recipient would both have accounts in the same bank, especially for an overseas transaction, the only way to transfer money in the current global banking system is for the sender’s bank to look for another bank in which both they and the recipient bank have accounts. These would typically be big global banks since it would be ridiculous for each bank to hold accounts in thousands of banks around the world.

A few hundred global and regional banks are trusted enough to serve as bankers to other banks in order to facilitate these global payments. Occasionally however one finds that there is no intermediary bank that both sender and recipient banks share in common, necessitating the search for an intermediary between the intermediaries. Now, because each bank needs to be paid for their service in the chain, costs can rack up.

For that reason, the issue with enhancing payment flows and cutting costs is not really about the need for an African financial messaging service. In fact, the biggest of the existing regional payment networks, the SADC-RTGS, actually uses SWIFT for the messaging part of the process (as does the UK’s CHAPS network and many others around the world). In fact, the SWIFT charges in the transaction fee are lower than the SADC-RTGS charges.

In many respects, the framework and architecture for all cross-border payments draw on the standard Real-Time Gross Settlement (RTGS), which dates back to 1970 when its bare contours were set by the US Fedwire system. There are about four major companies around the world trusted by central banks and other major financial system actors to build these networks: Sweden’s CMA, the UK’s Logica, Swiss-South African Perago and Montran, an American firm.

The costs of implementing RTGS networks in countries and linking them together is far from prohibitive. In 2008, the African Development Bank (AfDB) provided a grant to the four West African countries outside the Francophone CFA area that had not built an RTGS network to build one and network them together to establish a common network. The project, undertaken by Sweden’s CMA and French-Tunisian firm, BFI (eight other contractors playing minor roles), cost about $36 million.

Source: AfDB

If there is a serious driver of cost in the African context, as far as the technology infrastructure itself is concerned, then it is primarily volumes and participants. African banking systems often have lower volumes of transactions than elsewhere, leading to a higher cost per unit transfer.

For example, take Liberia. Once the AfDB-funded RTGS platform went live, the country’s central bank needed to devise a formula to charge participants. Below is the breakdown it came up with the breakdown below.

Source: Central Bank of Liberia

It is clear from a even a cursory glance at the table that the primary cost driver here is firstly the number of participant banks sharing the capital costs, and how that will be passed through in fees to the end user. A fact clearly evidenced by the lower costs for similar services in the United Kingdom.

Source: Bank of England
Source: Bank of England (2021)

Apart from the somewhat trivial costs associated with SWIFT, its large volumes also provide a resource base that guarantees very robust infrastructure and high uptime availability.

In an analysis by the CEMAC Central Bank (BEAC) in 2017, it was shown that 80% of adverse incidents reported related to the region-specific network SYSTAC whilst transactions operated on the global SWIFT network registered only 5% of the reported incidents. Of these incidents, whilst 100% of the SWIFT ones were resolved, 60% of the SYSTAC incidents remained unresolved.

Not surprisingly, many of the major African banks have not been as enthusiastic as one would assume in promoting regional payment networks. Even the most successful regional payment networks can find this barrier daunting. Five years after launch, only 31% of banks in the SADC region had signed on to SIRESS (now SADC-RTGS) and nearly 60% of all traffic still bypassed it.

Messaging facilitation is thus not a significant source of new value to entice banks to a payment network. The real source of value, the ease and course of intermediation, is also the biggest driver of cost, partly through margins buildup and an even more critical factor, liquidity risk.

A proper understanding of the intermediation and liquidity issues also addresses another misconception around PAPSS: speed of payments.

It is not the inherent inefficiency of the SWIFT system itself that causes delays, contrary to some popular perceptions. In actual fact, the average time to settlement of 40% of all SWIFT transmissions is five minutes. Intermediary bank involvement drives this average up to 30 minutes for 50%, 6 hours for 75%, and 24 hours for 100% of all transactions on the network. Virtually, all sources of delay are due to errors during initiation, of which 34% are formatting related alone.

In 2017, SWIFT introduced a set of enhancements called the Global Payments Innovation (GPI) meant to reduce the value chain related challenges and errors that often gets blamed on it. Of the banks in Africa that have adopted it, transaction time for 70% of payments is within 5 minutes. Any extra delays are due to factors such as regulation (many African banks, for instance, run additional manual anti-money laundering and anti-fraud checks before crediting inbound remittances). The problem is that only 5% of African banks (less than 50 out of nearly 4500 GPI-adopting banks worldwide) have signed up to the strict service level commitments needed to activate GPI for their customers.

Without African banks themselves stepping up to the plate to improve intermediation, PAPSS by itself will not be able to transform the payments value chain and cut the costs, time and inconveniences that are currently in the way.

The closest thing to what PAPSS wants to create is the European Union’s TARGET system (more precisely, its TARGET2 incarnation), the principal outcome of the Single Euro Payments Area (SEPA).

If one looks at the TARGET2 price list, almost all the cost drivers relate to the risks and value of liquidity facilitation (and also error management, but that is incidental):

Source: TARGET

When one steps into a bank branch in Kampala to make a transfer of about $500, the charge for an outward EAPS transfer (made on the regional network) is $11.5 and $21 for a SWIFT payment. If the user initiates the payment online, the cost drops to less than $6 regardless of method. Anything else that is added relates to the presence or otherwise of an intermediary bank. The total expense associated with the transaction thus relates much less to the means of issuing the payment instructions (the payment platform, properly speaking) and much more to the commercial forces within the interbank network.

As the Kenyan Central Bank (CBK) noted in its recent discussion paper on the prospect of launching a Central Bank Digital Currency (CBDC), the East African Payment System has struggled primarily because of such commercial forces, in this case the burden on individual member banks to hold enough liquidity of the different currencies involved in a cross-border transaction. Indeed, it is primarily such liquidity issues that made adoption of RTGS so slow to begin with. Unlike the batch settlement method where banks net off how much they owe to each other due to the transfers that have occurred over the period, RTGS type systems require constant, or at least high frequency, settlement making smaller and weaker banks potential bottlenecks in the chain.

CBK muses in its CBDC paper whether cryptocurrency innovations can help mitigate these currency interconvertibility situation. PAPSS does not go the cryptocurrency route. Near as I can tell, the mighty balance sheet of Afreximbank is the gamechanger here. Afreximbank aspires to become the major intra-day credit provider for liquidity purposes that in many domestic RTGS systems, central banks tend to play. Would it do this for free or at a cost?

There is no doubt that the entire success of PAPSS turns on how masterfully Afreximbank can position itself as the credit facilitator of continental trade. The political economy challenges are of course formidable but the path is clear.

Even within regional monetary unions in the continent, political friction is constant. Recently, the CEMAC central bank purported to block a national switch in Cameroon for competing with the regional payment network.

 Some have suggested that PAPSS could circumvent friction by simply interconnecting the regional platforms like EAPS, SYGMA and SADC-RTGS to each other. Doing that, however, will imply a completely different business model as PAPSS would then not be able to market directly to banks.

The fact though is that 96% of all Africa-bound payments originating in the East African Community (EAC) end up within East and Southern Africa. 92% of Africa-bound payments originating in Southern Africa stay in that region. In Anglophone West Africa (WAMZ), on the other hand, less than 40% of Africa-bound payments stay within the WAMZ. Not surprisingly, enthusiasm for PAPSS is currently strongest in WAMZ, where the central banks have signed the four foundational legal instruments underpinning PAPSS, and, till date, lukewarm elsewhere.

It is not too clear that the inter-regional payments systems integration value proposition is the strongest. Right now, there is significant room for improvement within the regional payment networks themselves. PAPSS can become the powerhouse for driving collaboration among those banks that really want to cut intermediation fees and enhance the liquidity profile for cross-border trade payments, regardless of where they may be on the continent. As the SWIFT GPI saga has demonstrated, payments transformation is purely ecosystemic and value chain dictated.

Some trends point to opportunity. Between 2013 and 2017, intra-African correspondent banks increased from 230 to 260 whilst the number of foreign correspondent banks willing to do business with African banks dropped significantly. It would just be a matter of time before smaller African banks are relying more on the bigger African banks to navigate the global banking arena.

With its growing financial muscle, strong relationship with the AfCFTA Secretariat, and through deeper alliances with the AfDB and Africa’s biggest banks, Afreximbank can reduce the costs of maintaining expensive global relationships for the continent’s smaller and mid-size banks who do much of the SME banking.

The real opportunity in payments revolution is not at the RTGS layer, which is by and large a solved problem. It is in the “open banking” layer, where much smaller players can connect across simplified connection pipes to introduce life-changing services beyond moving money from point a to point b. To do that though means solving the massive issues of liquidity, identity, cross-border KYC, and currency interconvertibility, all of which are long overdue for radical innovation.

To date, regional payment networks relying on traditional tools have not been able to do this. PAPSS has the opportunity to go to the banking associations and governments and offer radical new approaches to cost-cutting within existing regulatory jurisdictions and once they bite to architect a continental model based on well functioning units. Such a move would not make it a friend of many of the traditional incumbents, but nothing ventured nothing gained.

In the 24 hours since my comment on the e-Passport controversy, more information, especially a video of the key ceremony in Montreal, has emerged to show that the situation is even crazier than initially thought.

It is clear from the video that the ICAO officials who received the Ghanaian delegation were under a completely different impression about the Public Key certificate (think of it as a very hard to forge “electronic signature” for the state of Ghana) that the Ghanaians wanted to submit to the ICAO Public Key Directorate (PKD). They clearly thought that it was meant for the other 79 governments in the PKD to be able to authenticate an electronic chip embedded in the Ghanaian Passport, not a national ID card.

The remarks of both officials who welcomed the delegation expressly relate to how Ghana’s passport would now be more secure from fraud than has been the case in the past. The occasion was meant to be celebratory. A decade ago, only two African countries were part of the PKD – Nigeria and Morocco. Ghana’s joining takes the number to an impressive 14.

Source: ICAO

As it turns out, the Ghanaians had no intention to use the certificate for the Ghanaian passport, which is still one of the few in the world without an electronic chip (one of only 9 in Africa), making it highly subject to abuse. In a famous forensic study, 46% of Ghanaian passports tested turned out to be fake.

What is even more bizarre about the whole saga is that last October the German company that built the Ghanaian solution being used for the PKD enrolment, Cryptovision, announced how proud it was that its technology was being used to turn the Ghana Card into an e-Passport. They were educated about their misconception and then compelled to correct the statement to read that the Ghana Card is now an electronic Personal Identity Card, not a ePassport.

Screenshot of Cryptovision PR statement (as of 16th February 2022)

Considering that Cryptovision is the company that built the chip solution and software, the CAmelot  platform, being used by Ghana to broadcast its national electronic signature through the ICAO PKD, it should at least know what the real arrangement with ICAO was.

Indeed, the project scope negotiated by Cryptovision’s Adam Ross for the Ghana Card in 2013 explicitly describes an electronic personal identity card rather than an e-Passport.

e-Passports, as I have tried to explain in detail in two previous articles, constitute a special category among electronic identity cards generally because they are meant to be embedded in passports. Passports have a unique capacity as travel documents already accepted across the world for human mobility purposes due to the dictates of clear international law.

As Adam Ross himself has outlined below, Ghana did not engage Cryptovision to customize its ePasslet solution for an e-Passport solution as countries like Angola and Malaysia did.

Extract from brief presented to customers by Adam Ross, a Cryptovision Executive

It is thus completely mind-boggling that Ghana, knowing all this, would still send a bevy of senior officials, including its resident Ambassador in Canada, to Montreal to attend a key ceremony, ignore the official publicity template issued by ICAO in the key ceremony dossier, and then announce to the world that ICAO has accepted the Ghana Card as an e-Passport, when its base solution is NOT configured for that purpose.

Here is how ICAO defines the eMRTD functionality:

a  Machine  Readable  Travel  Document  (MRTD)  that  contains  a  contactless  Integrated  Circuit (IC)  chip  within  which  is  stored  certain  specified  MRTD  data,  a  biometric  measure  of  the  passport  holder, and  a  security  object  to  protect  the  data  with  Public  Key  Infrastructure  cryptographic  technology,  and  that conforms  to  the  specifications  set  forth  in  ICAO  Doc  9303.

It further defines a “participant” (i.e. member state like Ghana) in the PKD scheme as:

a  Contracting  State  or  any  other  entity  issuing  or  intending  to  issue  eMRTDs  who  follow these Regulations  for  participation  in  the  ICAO  PKD.

Professor of Law, Adam Muchmore, describes the distinction between passports and other identity documents, as follows:

Passports, as prima facie evidence of nationality,’ are “normally accepted for the usual immigration and police purposes.”‘ In other words, states take daily legal action on the basis of passports issued by other states, without taking time to investigate whether the passport holder is “really” a national of the issuing state…A passport in this case is different from a national identity card, addressed only to other actors within the issuing state. [Emphasis not author’s.]

A passport’s position in international law is so fortified that no identity card however supported by the interplay of commercial and political interests in a country can usurp its role without consequence.

The principal legal specifications on the subject of electronic travel documents (or, more precisely, “machine readable travel documents (MRTDs)”) binding ICAO itself is the so-called “Doc 9303”. The 8th edition of which was released in 2021. The broader legal framework for the whole business of travel document technical specification can be found in Annex 9 to the Chicago Convention, the world’s main body of international aviation law.

In 2005, the standard to which MRTDs should conform was agreed by the ICAO member states and 2015 was set as the deadline for the phasing out of non-conforming travel documents. Doc 9303 has since been kept up to date with all essential technological evolution.

The specification defines an ePassport as:

Commonly  used  name for an  eMRP. See Electronic Machine Readable Passport (eMRP).

An eMRP, on the other hand, is defined as:

A TD3 size MRTD conforming  to the specifications of Doc  9303-4  that additionally incorporates a  contactless integrated  circuit including  the capability of biometric identification of  the holder. Commonly referred  to as “ePassport”.

What the term “TD3” means can be found in Part 4 of Doc 9303.

Parts 5 and 6 of the same technical document describe other machine-readable official travel documents specified in various bodies of international law, especially those dealing with crew, refugees and human rights.

Section 2 of Part 4, relating to the description of ePassports, describes the form factor (i.e. how an ePassport should be presented) as follows:

The MRP shall take the form of a book consisting of a cover and a minimum of eight pages and shall include a data page onto which the issuing State or organization enters the personal data relating to the holder of the document and data concerning the issuance and validity of the MRP. After issuance, no additional pages shall be added to the MRP.

Section 2.2 goes further to specify the dimensions of the booklet:

The nominal dimensions shall be as specified in ISO/IEC 7810: 2019 (except thickness) for the TD3 size MRTD, i.e.:  125.00 mm (4.921 in) wide by 88.00 mm (3.465 in) high

Part 4 also presents the all-important machine readable zone in the drawing below:

Source: ICAO

And furthermore specifies the biodata page as in the diagram below.

Source: ICAO

Even clearly itemising which zones are mandatory.

Source: ICAO

It then presents several examples of conforming pages of a compliant e-Passport, such as this one:

Source: ICAO

Such is the serious technicality of what is at stake here. It is evident from all the preceding that ICAO indeed had no authority to go contrary to its own enabling regulations and authorize the Ghana Card, which simply does not conform to the specification (contrary to several assertions by government of Ghana spokespersons) to be used as an e-Passport.

Even more emphatically, the government’s continued insistence that the Ghana Card is a e-Passport is both incorrect and embarrassing. It puts ICAO in a tight spot since the government refuses to accept the former’s informal clarification. The official posture of the government is to doggedly hold on to its position despite clear evidence of confusion in the aviation community. In this strange conduct, the government is aided by pliant public actors who can’t or won’t call it out.

Yet the PKD as structured requires clarity as to which documents precisely a member is applying its certificate to.

Extract from an official ICAO Presentation

The live verification protocol of the PKD is a tight security system based on rules and standard operating procedures.

Extract from an ICAO Presentation

The overarching principles for the establishment of the PKD are set out in the procedures as follows:

  1. The ICAO PKD has been established to promote a globally interoperable ePassport validation scheme for electronic travel documents to support ICAO’s strategic objectives to improve aviation security and improve the efficiency of civil aviation. 

2. The benefits of ePassport validation are collective, cumulative and universal. 

3. The objective of the ICAO PKD is to support validation of all ePassports that are widely accepted for travel and identity verification purposes by ICAO Contracting States.

Extract from ICAO PKD Procedures Manual

No country in the world that has joined the Scheme has ever thrown into question the conformance of the procedures and state practice, on the one hand, with the ICAO PKD enabling legal documents, on the other hand, in the way we have witnessed these last few days.

The time for wordplay and needless argumentation to end is now. The government of Ghana should formally retract its ePassport claims for the Ghana Card and immediately take steps to transition the indomitable Ghana Passport to a full electronic passport (with an ICAO-compliant chip) so that the country can fully benefit from the fees it is paying to be part of the ICAO PKD. A serious Minister of Foreign Affairs would make a clear statement on this matter, in their capacity as the seniormost official responsible for the sanctity of the Ghana Passport.

And to the extent that international law makes the question of nationality of a passport holder moot, it is also time for the government of Ghana to rescind all the rules made by the National Communications Authority, the Bank of Ghana, and other overzealous agencies barring holders of the Ghana passport from accessing telecommunications and banking services in Ghana. No country in the world has done this. Ever! Ghana is not that special.

We know that the investors behind the country’s heavily outsourced Ghana Card intends to meet their target of $1.2 billion of revenue in a few years. But it should not be at the expense of the country’s international image and the rights of its citizens.

The first time I read Amartya Sen’s The Argumentative Indian, I laughed and said to myself, “the eminent economist has probably never met a Ghanaian in his life!”

My reaction was tongue in cheek, however, since Professor Sen’s main thesis is not that Indians just love arguing for arguing sake, but rather that the subcontinent’s heritage of intellectual pluralism is foundational to its unique democratic project.

Ghana’s “argumentative tradition” is more literal; in Ghana, everything is debatable!

On 6th November 2021, I appeared on Citi TV’s Big Issues program, where the topic of discussion was Ghana’s “digitalization agenda”, championed by the country’s Vice President, a subject I subsequently wrote about here. In the studio was the Executive Secretary of the Vice President, who also doubles as a Chief in both the Sefwi and Mamprusi areas of Ghana.

A lively debate ensued about a flurry of PR statements from the Vice Presidency touting the national ID card (the “Ghana Card”) as a “e-Passport” due to Ghana’s decision to join the ICAO PKD Network. During the discussion, it became apparent that unnecessary confusion was being created about how the development was a benefit conferred on Ghana because of the Ghana Card, seeing as that misconception is completely untrue. The Ghana Card has no role to play. It is not the card that has been “recognised” but Ghana’s “public key”, which the lay reader can think of as a “highly secure electronic signature”. That key can be embedded in any ID document at all. After the show, I wrote my article and considered the matter closed.

Until I woke up a few days ago to an official Ghana News Agency report splashed across Ghana’s media networks that ICAO has “recognized the Ghana Card as an e-Passport”. The subsequent rebuttal of this bizarre and incoherent claim by ICAO itself did nothing to quieten the controversy. Debate continues on social media even now, with government affiliates still pushing the narrative of the “Ghana Card having become an e-Passport” and opposition activists having a field day with the ICAO statement.

But what makes this a uniquely Ghanaian contrived controversy?

Because, first of all, no country in Africa that has joined the ICAO PKD network has succeeded in transforming it into a high-stakes, high-octane, political jamboree. See the list below.

List of African PKD Participants

Nigeria has been a member of the PKD network for more than a decade, but I don’t recall seeing a single episode of government-opposition tussle over what this means. In each of the African countries that have chosen to publish their public keys in the ICAO directory and comply with the smart chip standards that make verification of the public key possible by the other 79 countries that are part of the process, the whole endeavour has been treated as an obscure technical development.

Joining the ICAO PKD simply means that other countries in the network can confirm that the “electronic signature” on documents issued by a joining government are genuine. This process itself has got nothing to do with e-Passport functionalities per se, which are about encoding the principal information of the traveler (including biometrics) in electronic format and the acceptance of the document in which the electronic information is embedded. India has been a participant of the PKD since 2009 but it is only now about to add e-Passport functionality to all its passports (some Indian officials have had e-Passports since 2008).

Uganda has been part of the PKD for nearly three years now but is only now about to transition from machine-readable biometric passports to a full e-passport. Indeed, Ghana initiated that process in 2014 but could not conclude the contracting to complete. Of course, Ghana had not joined the ICAO PKD when it was contemplating this transition in 2014 but one does not need to be part of the ICAO PKD to issue e-Passports.

In fact, there are countries like South Africa and Kenya with advanced digital travel identity systems in Africa that are not yet participants in the PKD system. Some countries like Taiwan that have migrated from machine-readable to the e-Passport model cannot directly participate in the ICAO process because of geopolitics, even though Hong Kong and Macao, autonomous regions of China are both participants.

So, this is a very simple matter. In the past, passports could only be read visually. The border agent/immigration officer would process the traveler’s entry by typing their details into host/receiving country’s system. The world eventually moved on to the use of machine readable passports whereby the immigration officer just scanned the passport and the computer automatically extracted the information.

In 1998, Malaysia pioneered the use of biometric passports, the next step in the evolution. The biometric signature of the passport holder was transformed into a format that could be read by scanners at many immigration counters around the world. For this to be possible, an 8 kilobyte integrated circuit card (or “chip”) was embedded in the passport to hold the traveler’s biometric data.

The problem was that, for full security, it was important for this biometric data to be encrypted else a criminal could cut their own chip and embed false data. But encrypting the data also meant that some method had to be found for the destination country’s immigration officers to decrypt and read the data on the card. This is where the ICAO PKD came in handy.

In 2004, ICAO published a specification of how all countries should store and secure information in the passport on the chip, and Belgium became the first to comply, and one of the most enthusiastic upgraders in the world. In 2007, ICAO also established a secure channel, the PKD, through which countries can decrypt the secure information in the e-Passport chip.

Source: Kumar & Srinivasan (2012)

Note that all this while we have been talking about the passport that everyone is familiar with, that same precious booklet that for some is the symbol of true freedom. We have not talked about smartcards. In fact, there is no expectation that a country will use a smartcard for any of this stuff. A “e-passport” is a functionality not a device.

Of the 150 countries that issue passports with some e-passport capability, virtually all of them integrate that capability into the passport booklet itself, primarily because that is the one that all countries accept and is currently universally compatible with the global visa regime and the ICAO e-Passport definition. Thus, countries have focused their investments on incorporating e-passport functionality into their passport booklets. In fact, some countries like the United States deny their visa waiver programs to nationals of countries that do not do this.

Notwithstanding the fact that many e-Passport issuing countries are not part of the ICAO PKD, commercial vendors have found a means to embed the capability to read most of these passports in scanners and software that they market to governments around the world.

Ghana is, in fact, one of the few countries in the world still issuing passports with no chips. Passports that therefore cannot be securely validated by commercially available software or through the ICAO PKD as the map below shows.

Source: Read ID (2021)

With more and more countries embedding e-passport capabilities into their passports, making them readable in more and more airports, there is a steady race towards a period where visas will also be “written” to chips in passports issued by other governments. But this will in no way lead to an abandoning of passports for smartcards because electronics can and do fail. Hence, visual and optical reading will for a long time remain necessary. Passport booklets are not going anywhere soon, only the chips in them will evolve.

Image credit: Infineon

So where does the Ghana Card comes in? The Ghana Card as I have stated elsewhere is a major distraction from the critical task of securing the Ghana passport! Ghana is a member of the rapidly declining group of countries whose passports still have no chips (as clearly evidenced in the map above.)

Ghana’s laggard status here is really problematic considering the continued abuse of the Ghana passport by identity criminals and the associated risk to national security. And considering the unfavourable attention the country has courted internationally. Yet, because of powerful vendors behind the Ghana Card and the fact that it is a massive, highly commercialized, Public-Private Partnership (PPP), there is a crass attempt to divert resources to it at the expense of the beleaguered passport, something that a serious Ministry of Foreign Affairs wouldn’t and shouldn’t tolerate.

Of course, there are countries that have embedded chips in their national ID cards like Ghana has done. And some of those chips are ICAO PKD-compliant. But as can easily be seen by analysing the ICAO PKD key ceremony, it is not ICAO PKD-compliance that confers the e-Passport functionality. Joining the PKD, at the cost of less than $30,000 a year, simply means that any ID document that Ghana electronically signs can be verified by other members of the PKD. But the overwhelming majority of countries apply the PKD system to their normal passport booklets instead of national identity smartcards (like the Ghana Card).

To activate a e-Passport, the chip should be incorporated in a document that is already accepted as a passport by a wide range of states. Interestingly, even among the 82 PKD states only a little more than half actually connect to the system to validate ID documents operationally. In short, the vast majority of states have border systems set up to verify passport documents by conventional means.

Right now, more than 90% of the countries in the world where Ghanaians may want to travel accept only the Ghana passport for the obvious reason that they are not party to the ECOWAS Biometric Identity Card (ENBIC) accord (which itself is still not fully operational since Senegal pioneered compliance in 2016). So the decision to prioritise the Ghana Card over the Ghana Passport for smart chip functionality is quite frankly bizarre.

Even within the West African region, the smart card authorization systems needed to read the ECOWAS Biometric Identity Card format do not exist in several airports. Most airlines are equipped to read the MRZ in the standard passport (that is why you see the check-in agents swiping the edge of the biodata page when checking you in) and not smartcard chips, nor are they allowed to access the ICAO PKD LDAP as yet (except in pilot form). Airlines around the world have security systems geared to the conventional MRZ in passport booklets.

Whilst the Ghana government has the sovereign right to tell airlines to just look at the smart card and allow people to board, there are security implications. For example, in some countries like the United States, which have laws like the REAL ID Act, airlines must confirm that international travelers are in possession of a passport or specifically authorised documents.

The key issue here is that whilst the passport remains the most critical travel document in the world, the government of Ghana, for totally unclear reasons, has decided to neglect its security, and is instead prioritising a domestic ID card. Its agents and spokespersons are on social media arguing over everything else apart from the essential question of why.

Talk about the Argumentative Ghanaian!

Ghana’s recent downgrading by Moody’s and the country’s angry response has triggered a flurry of commentary about the broader issue of bias in the ratings issued for African countries by three large Western corporations.

I recently wrote a piece that sought to look at the matter comprehensively. But judging by the feedback I have received it is the “bias” issue that most readers find interesting. So, I have updated that section of the essay with the following additional thoughts.

Whilst there is no denying the fact that African and Latin American countries have experienced more downgrades during this crisis, it is not clear how that fact alone can justify a charge of “systematic bias” when such bias is not aligned with the usual incentives of the agencies widely believed to favour upgrades.

Economist Hippolyte Fofack suggests that this could be due to an overactive sense of “reputational preservation”. Or, put another way, the agencies are overreacting in order not to miss a default and thus lose the confidence of investors. Perhaps, the sense is that in Africa it is safer to be wrong pessimistically rather than optimistically. Considering though that the rating agencies are super keen to grow their business in Africa and any country downgrade tends to result in automatic downgrades of existing and prospective corporate clients whose credit is tied to their host countries, such a logic is hard to fully unpack.

To be truly objective, we must also consider reasons other than bias why Africa and Latin America suffer such an unfavourable skew of downgrades. Historically, Latin America has accounted for a significant proportion of all global sovereign debt defaults and restructuring episodes. So much so that some of the countries there, like Argentina, have come to be viewed as serial defaulters (10 or so at last count). Between 1861 to 1920, 41 of the 58 defaults were in Latin America. Later in the century, African sovereigns joined the melee. In the 1980s “debt crisis” sparked by Mexico, Africa accounted for 34 of the 70 defaults, whilst Latin America followed with 29.

Usual suspects | The Economist
Jonathan Fortun on Twitter: "Last week, we saw #Argentina's ninth default  in history. The #Latam region has been prone to defaults, especially during  the 80s" / Twitter
Citing: Jonathan Fortun (2020)
Sovereign defaults from 1824 to 2004. Source: Borenzstein & Panizza (2008) | Figures quoted in the main text also draws on this work.

In short, there is a historical basis to suggest that African governments are risky business. Take the case of Mali, for instance, which lost its S&P rating in 2008, and then proceeded to default in 2012, thereby validating the action retrospectively.

To compound the historical default rate problem, African sovereigns have also historically accounted for a small proportion of syndicated loan and bond issuances worldwide. The small sample size of African issuance concentrates the effects of default and reduces the amount of information available for effective risk analysis, whilst also promoting overfitting to narrow risk models. In brief, the history of past defaults exert a greater Bayesian force on futuristic risk predictions when dealing with smaller data sets in view of the wider bounds of uncertainty.

Africa’s limited issuance compounds the effect of prior defaults on perception due to wide uncertainties. Chart credit: Presbitero et al (2016)

Even if we accept the arguments holding that there is a systemic bias against African governments unrelated to fundamentals, such as those by Fofack and the Africa Peer Review Mechanism (APRM), which a few years ago set up a program to monitor the effect of credit rating actions on African countries, the resulting analysis should merely establish a uniform hurdle for the whole of Africa. What then are we to make of Ghana’s specific deteriorating circumstances?

The above factoid highlights the scale of the Ghana “special case” and makes a compelling pitch for the Fitch and Moody’s downgrades, for instance. It warns that Ghana may simply not be the right poster child for a case of rating agency bias, however prevalent such a bias. For the full treatment of this argument, please read the main essay.