Elections in Africa have become some of the most expensive in the world.

A major part of the reason is deep mistrust among the participants leading to levels of paranoia about rigging that would make an Afghan politician squirm.

But at the heart of the matter is the simple reality that, with the atrophy of most of its pillar institutions, democracy has been reduced to elections in most of Africa. When elections are all there is, the vote attains sacramental significance in the ritualised state, and all fiscal logic must be sacrificed on its altar of convenience.

Hence the reason why the UK spent $150 million on its 2015 general elections, whilst its former colony and democratic imitator, Ghana, splurged $212 million on its 2016 version (the budget was in fact $278 million, but due to constraints about 40% could not be disbursed). Looking at it from a cost per voter perspective, Ghana spent $13.5 whilst the UK spent about $3.2. Put another way, elections relatively cost Ghana more than four times what they cost the UK.

The mistrust and paranoia alluded to above have endowed African countries like Ghana with some of the most advanced electoral systems in the world. Roughly half of African countries have deployed state-of-the-art biometric technologies to prevent cheating at the polls; nearly no Western European or North American country has.

In those places where democracy has led to sound institutions, voters can rely on identification established by other state institutions. In Africa, electoral bodies and the political parties insist on a separate, watertight, identification system just for elections. Everything else can keep using the leaky, messy, systems, but not elections. Elections are holy ground that must not be profaned.

But paranoia-driven, bleeding-edge, technology is not the full story. African electoral management bodies are not the efficiency paragons their political party enablers would have them be. They are as wasteful and disorganised as many of the other atrophying democratic institutions in your typical African country. Once again, let’s use the case of Ghana.

Though the Electoral Commission (EC), Ghana’s elections management body, charges considerable filing fees when political candidates seek to stand for office, and also rents out its services to various political parties and institutions for their own internal elections, it refuses to consistently report its “internal generated funds” (the jargon in Ghana for earnings made by state institutions, usually from commercial services) for financial planning purposes. Expenditure planning datasheets used by the Ghanaian Ministry of Finance to map out spending over the medium-term horizon have in recent times spotted blank spaces where the EC’s internal generated funds data should be. State auditors report spending on capital infrastructure at a level ten times what the legislature approves. They also lament failure by the institution to submit accounts for auditing by statutory timelines.

At one point, the EC even sold access to voters’ data on the electoral roll to a private fintech startup called BSystems and promptly forgot, or so it claims, to collect the revenue.

The 3x growth in its budget from circa $65 million in 2008 to circa $200 million today is thus not all due to the “escalation in sophistication” of the electoral process as a result of paranoia. A significant proportion of the cost escalation is due to sheer waste. And nothing exemplifies that fact more than the EC’s ongoing effort to rip out the existing biometric system used for identifying voters, along with its accompanying electronic infrastructure, and spend as much as $150 million (inclusive of contingency) building a brand new one.

When the EC started its campaign, its claims seemed rather reasonable. It anchored its arguments on apparent facts that the existing biometric system was largely obsolescent, having been implemented for the 2012 elections and used since then for two general elections and multiple district level polls, by-elections, mop-up registration exercises, referenda, and council of state elections etc.

According to the EC, the Israeli contractor responsible for procuring key components of the biometric system – BVRs, used for voter registration and BVDs, used for verifying voters on voting day – had informed them that all the equipment are at the end of their serviceable life and ought to be replenished and upgraded. The vendor had, according to the EC, quoted $74 million for this activity. Buying a brand-new system on the other hand would cost “just” $56 million.

Who can argue with such logic. If throwing away $60 million of existing equipment would lead to cost avoidance of $74 million and replacement expense of just $56 million, then surely this makes sense? Even if doing so would also mean an additional $70 million spent registering and collecting biometrics of all 17 million voters afresh.

Except that the whole argument betrays a mindset of such perverse wastefulness that were the account to be true, every one of the eighty-one information technology (IT) personnel on the organisation’s payroll, who shall be responsible for this new setup, would need to be whipped. And they might deserve it since previous state audit inspections have found equipment gathering dust in various stores, and an absence of even a rudimentary asset register.

But in this instant case of “throwing away millions to save millions is cheaper” though, a certain historical rite comes to mind: the Florentine Bonfire of the Vanities.

A Dominican Friar, called Savonarola, emerged on the scene in Renaissance Florence whose art of persuasion was so strong that he convinced some of that epical city’s most famed artists and scholars to turn over priceless works of art and scholarship to be burned in massive bonfires as acts of edification. Irreplaceable valuables, rare manuscripts and fine ware, were collected from many eminent citizens and brought to the bonfire to be consumed before chanting crowds. Until, finally, the Church began to fear Savonarola’s excessive influence, and had him excommunicated and executed.

Ghana is in the throes of a similar seduction. Many people watch on helpless, and some have even been seduced by the rhetoric, as the EC prepares to rip out $60 million worth of equipment and burn them (for that they must, as there is no market for second-hand electoral technology).

Yet, the EC’s arguments do not pass the most basic of common-sense litmus tests, much less expert review. Those seriously interested in this topic may consider reading this document issued by IMANI on behalf of a large group of civic organisations in Ghana opposed to the EC’s plans.

This simple table below provides a snapshot of the state of the current system by focusing on the key question of wear and tear.

Fig. 1. Ballpark Asset Wear & Tear Analysis*

Biometric Voters Registration Machines (BVRs)
	Class	Baseline Valuation	Number of times used	Depreciated Value
	A	$10.5 million	8 times	$5.5 million
	B	$7 million	4 times	$5.5 million
	C	$5.25 million	2 times	$4.75 million
Biometric Voters Verification Devices (BVDs)
	Class	Baseline Valuation	Number of times used	Depreciated Value
	A	$12 million	10	$4 million
	B	$4.2 million	4	$3 million
	C	$5.25 million	2	$4 million
	D	$5.25 million	0	$5 million

*For ease of analysis, the software and communications peripherals (such as ground satellites) also costing millions of dollars and scheduled for destruction were not considered in this analysis. Thus, not all the $60 million worth of assets to be “bonfired” are represented in this table.

One analogical framework that has brought this fairly complex technical subject home to people is referring to the BVRs as “laptops with fingerprint sensors and webcams” and the BVDs as mobile phones or POS payment terminals. When people are then asked to imagine the wear and tear rate of such devices if they are used only once or twice a year, their eyes light up, the scales fall off, and the con suddenly becomes very clear. The pictures below should make visualisation even easier.

A Biometric Voters’ Registration Kit (BVR) 

Credit: Laxton Group

Credit: Isidore Kafui Dorpenyo

The trick to understanding the con is realising that the BVRs and BVDs were not all supplied in 2011 or 2012 and that not all of them are used for each registration or voting exercise.

The mid-term registration programs (called “limited registration” in Ghana) for instance typically require half of the overall portfolio of BVRs and there is usually an excess margin of about 15,000 BVDs that are not deployed during even general elections, not to talk of smaller-scale elections such as the Council of State elections or by-elections. Meanwhile, about 60% of the system dates from just 2016. Some equipment has, in fact, never before been used.

Furthermore, continuous purchase of fresh equipment from the original Dutch vendors, HSB, has always involved an upgrade of the auxiliary software both on the devices as well as in the datacentre, including the critical fingerprint matching technology, known as the ABIS, supplied by another Dutch vendor, Genkey.

Thus, as is amply clear from the table, it can easily be shown that millions of dollars’ worth of equipment has been used much too infrequently to be damaged beyond repair. And many of the devices were bought too recently to be end-of-lifecycle or incapable of being refurbished except at cutthroat costs.

If the EC were to continue buying replacements for only truly worn out devices, it would also avoid the $70 million it intends to splurge on fresh biometric enrollment of 17 million voters plus many other middleware components.

By buying an extra 3000 BVRs and 10,000 BVDs in a truly transparent and competitive tender, in continuance of the current continuous upgrading regime, it shall be entitled to an upgrade of the auxiliary software as well. It’s total expenditure shall be in the region of $15 million (throwing in datacenter and communications systems upgrades) and not the $150 million it plans to spend.

The EC commissioned an audit of the biometric system in 2016, the only time it has done so. The findings provide no support whatsoever for the obsolescence theory. In fact, the EC’s current claims about how much it will cost to refurbish or upgrade the system are all based on what it claims it was told by a self-interested contractor whose agreement with the EC had been abrogated a year ago. No other independent audit of the biometric system has been conducted since 2016. Requests for even internal equipment audit reports that recommend this drastic, wholesale, replacement action are met by blank stares and stonewalling by the EC.

The costs related to the complete replacement of the system, the EC’s preferred cause of action, on the other hand, seemed to have emerged from a shadowy tender that could qualify as the opaquest tender ever conducted in the world. The hints the EC has given about likely pricing following the sham tender ($3000 for a BVR and $400 for a BVD) suggest costs almost double what countries like Zimbabwe, Kenya and Nigeria have been able to obtain in the market in recent years for one component or the other.

Very untypical of a public tender, neither the Expression of Interest nor the Request for Proposal was published on the EC’s website or exposed to the press. (Mysteriously, the EC’s website went down on January 12^th as soon as the controversy over its plans to build a new register and biometric system flared up again and has since not come back up.) Despite the tender having closed in April 2019, not a single press release has been issued by the EC to provide information on the bidders, the longlist, shortlist, or winning bids. Naturally, no evaluation reports have been seen.

The EC’s claims of being motivated by savings are thus as ephemeral as the purported divine benefits of Savonarola’s famed bonfires.

The Bank of Ghana (BoG) on November 29^th, 2019, released a document justifying the need for the introduction of “higher-value denomination” currency (HVD) notes.

The question of whether HVD notes are warranted at any point in time is not a merely conceptual one. It is, in fact, a highly empirical enquiry to be approached from a careful analysis of considerable amounts of data about the proportional use of different notes and the differential costs of security and distribution. One cannot have random opinions about such a subject and expect to be taken seriously.

I don’t have any data on the contemporary usage patterns of the different Ghana Cedi (GHS) notes in circulation or about the costs of printing different notes. Like most Ghanaians, therefore, I did not have too much difficulty delegating all thinking about the issue to the fine technocrats at the central bank. Until now.

A bunch of controversies arising from the refusal of major supermarkets and even banks to accept the new notes because they lack the means to validate their authenticity compelled me to finally take a look at the BoG’s explanatory documents today. After all, item authentication has been a decade-and-half interest of mine.

Having now read the BoG document and subsequent BoG press releases on the subject, I am suddenly completely unsure of my earlier faith in the central bank to do all our thinking for us in this matter. I will simply lay out the worrying things I found and let readers of this blog judge for themselves.

1. The most problematic element of the BoG’s analysis is the central reason it offers for introducing the HVD notes. In the very first paragraph of the original Q&A-formatted release, it states as follows:

 High levels of inflation and currency depreciation in the past have eroded some of the gains from redenomination. The deadweight burden, reflected in high transaction cost has re-emerged.

In this one statement is contained all the alarm bells about the depth of technical preparation that should have gone into this exercise.

1. Except in cases of hyperinflation and hyper-depreciation requiring a new currency series, high-value denomination notes are almost never justified by the need to counter or offset routine inflationary pressures over time. For example, when the $100 was first introduced in the US in 1869 (and reintroduced as a federal reserve note in 1914), it was for a time the highest in circulation. In due course, larger denominations surfaced, mostly as a result of wartime and other contingent exigencies. By 1946, a firm decision to stop the issuing of HVD notes had been taken and, by 1969, all currencies higher than $100 were being removed from active circulation to reduce the costs of fighting counterfeiting and money laundering. Today, the $100 bill is worth only $4 if measured against its original value as a result of cumulative inflation. It remains the highest denomination in circulation purely in keeping with contemporary policy. An alternative policy of trying to preserve the face value of the $100 note at the time of the 1969 currency reforms would have required an introduction of $1000 and $2000 bills in the United States, something that cannot be countenanced in today’s anti-terror and anti-narcotics climate.

• •  It is easier to understand the argument when one recalls that in a floating exchange regime, currencies can rise and fall over time. Is the logic here then that should the Ghana cedi strengthen against the USD consistently over time, that would dictate the retirement of the largest of the HVD notes?
• • Things are even starker in a managed exchange rate regime. Consider this fact. By the time of the 1984 budget, the official cedi – USD exchange rate was 35 cedis to the dollar. Governor J.S. Addo lowered the value to 38.5 cedis to 1 dollar, in a conclusive reversal of the last peg from 1978 (of 2.75 cedis to the dollar) then in effect. Yet, ahead of the latest round of managed devaluations in 1982, the highest note, the 50 cedi note, had been removed from circulation (or “demonetised”) ostensibly as an anti-corruption measure (echoing an earlier currency confiscation in 1979).
• • When in 1984, the HVD notes of 50, 100, and 200 cedis were introduced (or, in the case of 50 cedi note, reintroduced), with no serious explanation as to why fears of corruption were no longer an issue, the effective worth of the highest-value note was officially $5. By the time of the 1985 budget, it was $3.7. More interestingly, the parallel unofficial, in actual fact market, rate was about 156 cedi/USD suggesting hence that the 50 cedi note that just 10 years earlier had been nominally worth $50 was now worth just 32 US cents ($0.32) whilst the highest circulating note was worth just $1.28. In short, the history of “face value preservation” tactics and politics in Ghana betrays a ridiculous mixture of arbitrariness and confusion. Trying to bulwark the face value of Ghana’s benighted national currency notes against depreciation and inflation trends is clearly to court absurdity, and also distrust in view of this messy track record.
• • At any rate, the historical record clearly shows that Ghana’s highest-value notes have for the most part generally exchanged for low dollar amounts. In the 1985 to 1990 period, the 500 cedi note moved from $5.5 to $1.5, peak to trough. In the 1990 to 2000 period, the 10000 and 20000 notes emerged as the highest-value notes, yet at their strongest they were about $1.4 and $2.7 respectively.
• • The dramatic change of affairs represented by the introduction of the 50 Ghana cedi note in July 2007, with its debut value of $54 marking the high point of Ghanaian currency face-value politics in 30 years, was a break with the past precisely because it also marked the start of a new series, effectively a new currency. Such an exceptional development cannot set a precedent for the routine preservation of the currency’s purchasing strength at some arbitrary USD rate by printing larger and larger notes to approximate the continuous appreciation of the highest notes’ nominal value(s).
• • By the time of the introduction of the 100 and 200 Ghana cedi notes in late 2019, the value of the 50 Ghana cedi note in USD terms was about $9. In comparison with other HVD notes in Ghana’s history, adjusting for both US and local inflation, this amount, as has already been shown above, was big enough.
• • The largest Nigerian Naira note is exchanged today for $2.75. The largest Kenyan Shilling note is exchanged for $9.91. The largest South African Rand note is exchanged for $13.8. By the time the Government of India removed HVD notes out of circulation due to purported fears about money laundering and crime, the highest Rupee note was exchanging for $14. Simply put, economies comparable to Ghana’s in various characteristics have HVD notes well within the value range of Ghana’s last version, the GHS50 note.

2. The BoG makes plausibly persuasive points about an expansion of incomes leading to an increase in preference for the then highest-value notes, the GHS20 and the GHS50. In the European common market, for instance, it is the 50 euro note, not the higher value 100 and 200 euro notes (or the 500 euro notes that are being demonetised over the usual concerns) that are in widest circulation. In the US, the highest circulation bill is the $20, whilst the highest value ($100) bill is mostly preferred outside the US. Thus, the preference for higher value notes in Ghana is a significant point. However, the point in the way it was put in the BoG release, that “GHC50 and GHC20 account for about 70% of the total demand”, is completely vague. Is this “demand” being expressed in monetary value or quantity terms? If in value terms, then it is completely unremarkable since the face value being several multiples of the face value of the lower denomination notes, their quantity could well be tiny and still constitute 70% of usage. In such a scenario, the need to print larger quantities would be far from clear, and user preference may well tilt to a medium portion of the value spectrum as is the case in many other countries.

3. It is important in connection with the above point to note that convenience is affected by both the concern about carrying large sums of low-value notes and the, almost converse, concern about finding change when counterparties pay for goods and services with large notes. Thus, preference is an entirely empirical matter and rather technically complex to compute. If the BoG wished to educate the public in this matter by releasing that statement, it ought to have been clearer.

4. Most strangely, the BoG chose to provide none of the critical information that would have best assisted curious persons in evaluating the propriety of its decision to introduce high-value denominations against the global trend of demonetizing high-value notes. At the heart of any sound analysis would be a trade-off between printing less money (and the concomitant result of users carrying less money) and creating highly tempting targets for crime.

The cost of printing higher quantities of money in the face of a rising average size of transactions in the economy reduces the seigniorage revenue of the central bank. Thus, if the average size of transactions moves upward, it makes sense to introduce more HVD notes. At the same time, such notes are more expensive than lower-value notes because they require more security features to prevent counterfeiting and more policing to suppress money laundering. For example, in the US, the most expensive notes (such as the $50 bill) can be as much as four times (4x) costlier to print than the cheapest ones (such as the $1 bill). The right balance between transactional convenience and policing cost is, as always, entirely empirical. By refusing to provide a breakdown of the costs of printing the different bills and the quantities in circulation as well as the average velocity per class and other critical monetary parameters, the BoG shows a complete disinterest in helping analysts come to any sensible conclusions about the need for these new HVD notes.

5. The weirdest of all the claims in the BoG document is the assertion that, somehow, printing high value notes will reduce the “deadweight burden” associated with current transaction costs. This claim is manifestly erroneous. There is no welfare loss context here to even warrant use of the “deadweight burden” term.

6. Lastly, we live in a time of great cynicism about the procurement practices of governments. The introduction of a new class of currency notes represents a potentially major procurement opportunity for agents and representatives of the mints and printing presses in Europe and America with whom the Republic of Ghana deals on these matters. Where the new bills are significantly more expensive than older bills, commissions may be in order, opening the door to unpleasant allegations about the real motives impelling the procurement action. It would have been reassuring had the BoG provided information about the procurement terms of this new production, whether by De La Rue, the loss-making, financially struggling, security printing firm or Crane Currency, the controversy-plagued contractor, now embroiled in corruption allegations in Liberia.

The decision to shroud all these important matters in silence, including even the name of the printer/mint, is doing very little to dispel lingering doubts and confusion about this whole HVD notes printing business.