Scrap YEA, Review YES and Reform YIAP

Let’s face it, good intentions notwithstanding, a very good economic policy could fail for lack of effective execution. This is the very prognosis that Rural Heights Foundation has made with regards to the new administration’s policy proposals to eliminate fiscal waste, generate growth and create jobs for the many unemployed youth across the nation. The apparent disconnect between public-sector job creation agenda and private sector growth is somehow lost in the complex maze that binds fiscal and monetary policy. When governments gets into the business of directly “creating jobs”, the unavoidable consequence is fiscal deficits, particularly in Ghana’s case where employee compensation takes a high chunk (41.3% in 2015) of domestic tax revenue. The “evils” of deficit financing is well known to the markets through high borrowing cost, inflation and exchange rate volatility. Ghana’s public sector wage is one of the highest in sub-Saharan Africa, making public sector employment a key policy issue in the country’s 3-year fiscal consolidation program with the IMF. This is why the policy proposals by the new administration to re-focus on the private sector as the “engine of growth” has injected fresh confidence into the markets. The new administration’s plan to eliminate “nuisance taxes”, focus on Agric and decentralize industry through its one-district-one-factory agenda, would undoubtedly put the economy on a growth trajectory. What remains a policy concern however is a string of public sector mechanisms for job-creation and skills development which has had tremendous fiscal impact yet their benefits have eluded measurability.

Youth Enterprise Agency (YEA) – To scrap or not to scrap?

The statutory framework that established Youth Employment Agency (Act 887), indicates the function of YEA, inter alia, to be “a) set standards and procedure for the employment and career development of the youth in the country; b) train and provide the youth with the requisite skills for the labor market.” Obviously this is a needless duplication of the function of the National Youth Authority. Within the context of revenue constraints under an IMF-led fiscal consolidation program, there is a legitimate economic basis for questioning the duplication. Why run two different admin structures on parallel budgets to do deliver similar outcomes? This is an important question that the new managers of Ghana’s economy must address, particularly given the fiscal constraints and the possible resource crunch that may emanate from its contractionary fiscal policy stance. There is also the issue of program evaluation which is somehow lost in the policy discourse due to the besmirched history of YEA prior to its change of name. In fact there is a far bigger policy issue of the effectiveness of public sector employment programs. For instance, the “job creation and development” budget line expenditure of Ministry of Employment and Labour Relations (MELR) in 2015 was GH¢ 4,387,859, out of which only GH¢ 434,824 (9.91%) and GH¢ 136,797 (3.12%) went into actual goods and services and capital expenditure respectively. A whopping GH¢ 3,816,238 (86.97%) was used in paying employee emoluments (source: MELR Appropriation Bill - Summary of Expenditure by Sub-Programme, Economic Item and Funding, 2015). Though not unusual in Ghana’s public sector financial management, such allocation structure raises important questions about whether programmatic interventions are achieving results given the skewed “investment” in current liabilities.

Youth Enterprise Support (YES) – A Good Initiative

YES is a commendable initiative in terms of the program’s implication for Government payroll and its dual focus on skills and entrepreneurship development. According to Global Entrepreneurship Monitor (GEM), a large number, about a third, of young adults choose entrepreneurship out of necessity than opportunity. Though not an ideal motivation, the high rate of youth unemployment and underemployment in Ghana provides that useful context to drive the adoption of entrepreneurship by the youth. The concept undergirding Youth Enterprise Support‘s design is consistent with a market-based approach to value creation. There are other risk areas for policymakers to examine however. The sustainability of most youth employment programs in sub-Saharan Africa is widely documented. According to a paper by the African Development Bank (Ncube et al, 2014) Swaziland’s youth entrepreneurship program (Youth Enterprise Fund) ran into difficulties in 2011 and 2012, due to fiscal constraints on new funding and low repayment rates on the existing loans. Albeit performance data on Ghana’s Youth Enterprise Support is not publicly available, repayment rates of similar publicly-funded programs such as MASLOC (62.69 percent in December 2013; 65.60 percent by September 2015) gives cause to worry. These notwithstanding, the program concept is undoubtedly a good one. As such we recommend a comprehensive program review with the intent to manage risks better and eventually scale up coverage.

Youth in Agriculture Program (YIAP)
With food security increasingly becoming an issue on a global scale, Government’s policy proposal to locate a factory in every district has sent strong signals to the markets that agriculture will play a key role in its growth plans going forward. This means that every program designed to harness youthful energies must be revived, including Youth in Agriculture Production. The program, started in 2009 was restructured in 2015 and placed under YEA as the Youth in Agriculture module. This is in spite of the fact that the coordinating vehicle for the original program still operates as a directorate under Ministry of Food and Agriculture. There is an urgent imperative to harmonize such programs and bring them under YIAP’s umbrella for alignment and ease of coordination. So instead of the National Youth Authority implementing a parallel program, it may be fiscally prudent to rely of YIAP secretariat as an implementing agency.

Within the last five years (2011-2015) Ghana has spent a whopping GH¢34.1b (USD 8.7b) importing processed foods, vegetable products and live animals (and related products), as data from Ghana Statistical Service (DIMTS Report, 2015) Shows. Jumpstarting a Youth in Agriculture Program may just be what the economy need to address youth unemployment, improve Ghana’s merchandize trade position and help ease up on currency volatility.

Source: www.ruralheights.org