ALAN'S WITHDRAWAL GETS HIM CLOSER TO THE PRESIDENCY: MY VIEW

 

Alan's withdrawal from the NPP Presidential race came as a shock to many. At least, I didn't expect it. Some people contend that this is the end of his political career so far as the presidency is concerned. I hold a different view, which I articulate in this brief article.

Alan's withdrawal from the race is strategic and in my opinion could get him closer to the presidency. Before the NPP's super delegates conference, Alan was seen as a major contender for the NPP presidential candidate slot, which is no longer the case now. Alan is most likely going to lose if he continues given his poor performance in the just ended super delegates voting exercise. That means he gets nothing close to the presidency. The consolation will be another ministerial or other position.

So, to get back into the game and get close to the presidency, he withdraws from the race - a paradox. This withdrawal and portions of the press statement creates uncertainty about his presidential plans for the future, which includes breaking away from the NPP and contesting as an independent candidate. Alan may not be the most popular and preferred candidate among the NPP elites in the current situation but he has a lot of public administration even among the opposition. So, Alan breaking away will break the NPP eventually in terms of votes during the 2024 national elections, which the party cannot afford.

Alan could therefore use the treat of breaking away to negotiate for the Vice Presidency slot, which according to the grape vine was earlier proposed to him but he rejected. So, Alan could potentially become the president or the vice president; either way, he wins! This outcome if achieved will also be a win for the NPP because a Bawumia-Alan presidential ticket is the strongest the party can present at the 2024 general election among the different combinations available currently. That is partly because, although Alan was part of this obviously underperforming NPP administration, his gentle character and good performance at the Trade Ministry still endears him to the public more than any of the other people tipped for the NPP Vice President slot. Alan image could pacify the public of NPP's deadly sins.

Dr Kenneth Appiah Donkor-Hyiaman

Economist

DOES INCREASING INFRASTRUCTURE SPENDING AND CONSTRUCTION ACTIVITY REDUCE YOUTH UNEMPLOYMENT RATE IN GHANA?

Youth unemployment is a major issue and a security concern in Ghana. According to the International Labour Organisation (ILO), total youth unemployment (% of total labour force ages 15 - 24) was 8.72% in 2019, which is actually lower than the rate for the previous years (8.78% in 2018 for instance). Youth unemployment peaked in 2015 at 14.17% between 2007 - 2019 period and began declining from then (see chart below).

              

Despite the decline in the unemployment rate, stakeholders continue to express concern about the matter. Recently, the Finance Minister, Ken Ofori-Atta, was reported to have suggested that government payroll was full, and as a result, there was no space for employment of the youth into the public sector. He further advised the youth to go into entrepreneurship.

Some social commentators like Kwesi Pratt have blamed the unemployment issues on reducing public infrastructure spending and construction activity. In other words, the construction of schools, hospitals, roads, and bridges, etc create jobs and hence reduce unemployment among the youth and vice versa (see video: https://fb.watch/8MTGV37jMi/ ). This narration makes a lot of sense! I am not a big fan of Kwesi Pratt's analyses of some national issues but he is likely to be speaking the truth on this matter. However, an increase in jobs may not necessarily reduce the rate of youth unemployment if the economically active population expands more than the number of jobs that are created.

While some jobs will be created with a boom in infrastructure development and construction activity, does the rate of youth unemployment also decline? To examine this issue, we test the hypothesis that:

            "Increasing infrastructure spending and construction activity reduces the

             rate of youth unemployment in Ghana"

A preliminary regression analysis of YOUTH UNEMPLOYMENT (i.e. Youth Unemployment, Total - % of total labour force ages 15 - 24) in terms of CONSTRUCTION ACTIVITY (i.e. Construction/GDP Ratio) and INFRASTRUCTURE INVESTMENT (i.e. Gross Fixed Capital Formation) for the 2006 - 2019 period reveals some interesting results. Further analysis and model specification may be required though for policy purposes.

The preliminary results suggest that the level of construction activity and infrastructure investment are positively associated with unemployment and statistically significant at the 5% level. In other words, as Gross Fixed Capital Formation and Construction/GDP Ratio increases, unemployment increases. The model explains about 70% of the variation in youth unemployment in Ghana.

In summary, these preliminary results suggest that increasing infrastructure spending and its associated construction activity does not reduce the rate of youth unemployment even though some jobs may be created along the line, contrary to Kwesi Pratt's expectation. This finding may hold given the increasing award of infrastructure contracts to foreign companies that continue to import labour from other countries to execute these construction works, which is common in Ghana. This result however does not mean that increasing construction activity and infrastructure investment will not create jobs.

 

WHY ARE VALUERS IMPORTANT?

A Valuer is a person whose job is to estimate the value (price) of something (i.e. property) that is to be purchased inter alia. The process of estimating the value of something is called valuation. Availability of property values (prices) enable exchange to occur in the market. Thus, Valuers and valuation are important in the price discovery process in any imperfect market where price data is hard to come by.

Two or more Valuers will often give you different values for the same property. This variation in values is primarily due to the imperfection of the property market, typified by access to unequal information. Therefore, a certain range of values may be accepted.

However, what happens when the Valuer's estimate of value is inaccurate? A study by Awuah et al (2016) showed that there are serious concerns over the standard of property valuations produced in Ghana. These concerns relate to valuation errors, in particular, wide variation in valuations. In terms of statutory valuation, they found out that valuations of two valuers were averagely over 60% apart. This means that valuations are uncertain and misleading.

Why are Valuers confusing buyers and sellers in the property market with inaccurate values?

Are these errors part of the reasons for the ever-increasing property values in Ghana?

If the very reason for the emergence of the Professsional Valuer is violated, what then is the use of Valuers and their valuations?

On the Proposed National Rental Assistance Scheme by the NPP

 The NPP launched its manifesto for this year's election two days ago. They proposed at least five main interventions in the housing market. A key one is the proposal to establish a National Rental Assistance Scheme (NRAS) to address the short-to-medium term market failures in the renter-segment of the housing market. The Scheme will provide low-interest loans to eligible Ghanaians to enable them pay rent advance.

This particular proposal has aroused discussions about its appropriateness and feasibility relative to the need to enforce rent controls imposed by the Rent Act, 1963 (Act 220) and the Rent Control Law, 1986 (P.N.D.L[1] 138). In other words, why not enforce the existing laws instead of providing loans to the target group? I believe that making a good judgement of this proposal requires a good understanding of why the conditional rent payment-in-advance exist in the first place. This is the subject of two feature articles I wrote about a year ago. (See PART 1: https://www.linkedin.com/…/why-do-landlords-ghana-charge-t…/) and PART 2: https://journalofalandeconomist.blogspot.com/…/why-do-landl…).

In this brief note, which is a precursor to a longer proposition on this proposed intervention, I highlight one reason why the Rental Assistance Scheme might be better than government spending more resources to control rents by enforcing the already outdated Rent laws.

Economics 101 teaches us that conditional and preferential sales emerge in markets characterised by a deficit in supply relative to demand of a good or service. Thus, it is only a regularity that our housing market, which has a huge deficit of about 2 million units, especially in terms of low- and middle-income housing, is characterised by a conditional sale feature - rent payment in advance. This is a major financial burden to most Ghanaians, both according to anecdotal and empirical evidence (See Ehwi, Asante & Morrison, 2020 - https://www.tandfonline.com/…/full/10…/10511482.2020.1782451).

A market solution to rent payment in advance is to shift market power from landlords to tenants by giving them more options - i.e. supply more houses than demanded to dissipate any incentive for the landlord to increase rent. On paper, this solution sounds simple but is often not achieved because of limited resources inter alia. As a result, most housing markets like ours are landlords' markets. In other words, landlords have market power to determine market conditions including prices (rents), when and how it is paid (conditional sale) as well as who gets to use the property (preferential sale).

To protect tenants from the profiteering landlords between the 1960s and early 1990s, most countries passed laws to control rents and other lease features. Rent controls are a form of price ceilings above which landlords cannot fix rent. This simple solution worked in the short-run because most houses are not boxes that can easily be carried away or converted to other uses if the current uses were unprofitable due to the rent controls. In many cases, landlords must apply to the Planning Authorities for a change in use of the property if other uses were more profitable. However, this process takes time, sometimes years especially in countries with well-function planning systems.

The same rent controls however harmed tenants in the long-run because it reduced the stock of houses available to the poor and its quality. This happened because of the law of supply - less is supplied as prices decrease - and capital flight - investors and landlords invested their surplus funds in other assets other than the rent-controlled housing market. Informally, this resulted in rising house prices and rents on the few housing stock because demand exceeded supply greatly. More financially capable tenants often ignored the law and paid the highest rents to secure their accommodation - i.e. black market activities became prevalent! This is a clear case of unintended consequences of a 'bad' policy that distorted prices and market signals.

Many countries have thus move away from rent controls to alternatives that improve the demand side of the market with minimal distortions to houses prices (and rents) and thus housing supply. This alternative includes the use of subsidies, which is considered as a best practice. Here, the government subsidises housing for the poor through various mechanisms including the voucher systems, which seek to improve their capacity; i.e. ability to afford. This is what the NPP Rental Assistance Scheme is seeking to do. Unlike rent control, which distorts prices and hence reduces housing investment by the private sector, the Rental Assistance Scheme, which combines the features of subsidy and a loan, will rather incentivise and stimulate supply as a response to increased effective demand by the target group - youth.

However, subsidies could be expensive and must be paid for by the tax payer. Therefore, some Social Commentators argue that it would be better to enforce the existing rent control laws than to provide such huge subsidies to tenants. This argument however ignores the fact that enforcement also requires resources, which could be more expensive than subsidies with added distortionary effects. The reason is that law enforcement is less costly and works well when there is high voluntary compliance. For instance, if 2 out of 100 landlords breach the Rent laws (i.e. there is high voluntary compliance), it would be cheaper to enforce the law (all things equal) than the case of only 2 or none of the landlords complying (low voluntary compliance), which is the current situation in Ghana. In this case, more resources will be needed to bring the 98 landlords to book. Therefore, the idea of enforcing a badly designed rent control law may be counterproductive! Our focus should be on the structure and implementation details of the scheme.

As indicated above, there are many good sides to this proposed Rental Assistance Scheme which cannot be discussed in detail in one article. I will therefore treat the various components in separate articles starting with this general observation.

Why the Covid-19 App is Key in our fight against Covid-19 Virus: A Researcher's View

The Government of Ghana launched a Covid-19 app yesterday amidst limited pomp and pageantry. The app is meant to track the spread of among the Ghanaian populace. Some people believe this investment is completely misplaced because in their thinking, the citizen's need food rather. Others are concerned about the foreign origin of the software developer and the $1.4 million cost involved as speculated. They believe, the government could have engaged a local developer at a lower cost in the light of promoting local content and capacity building as well as preventing the flight of our limited financial resources. 

There is another group led by Bright Simons, the popular Honorary Vice President of Imani-Ghana, who question the development of an app at a time when the owners of technology platforms like Google and Apple on which this app will operate have banned all such apps. This view, however, could have been more accurate. A quick search online (https://www.cnbc.com/2020/03/05/apple-rejects-coronavirus-apps-that-arent-from-health-organizations.html and others) could have revealed that government-approved Covid-19 apps are exempt from this crackdown by these platforms. Like me, it is not uncommon to hear Bright constructively criticising the government and the academic community for a lack of research on critical issues facing the nation. This critique however falls short from my expectation.

However, a little reading by citizens could have saved them the anger. A little circumspection by Bright Simons and his disciples could have revealed that the app is a data collection and analytical tool, a part of the research process he advocates for, which will provide us with the needed real-time information about the spread of the virus. With technology and statistical methods such as machine learning, this could be a low-cost tool in our efforts at targeting people and groups for mass testing for the virus more effectively given our limited resources. In other words, the nation could be saving money through efficient targeting and testing rather than waste money on inefficient testing approaches like waiting for people to report symptoms at the hospital.  Simply, this could be an imperfect alternative to mass testing for the virus given the predictive abilities of machine learning technology. A little patience could have saved us the misinformation making the rounds. Notwithstanding, all of these concerns are legitimate given the need for more transparency around this and future deals.

As a Researcher and Policy Analyst, I hold a different view in terms of the usefulness of this app to our fight against the virus after examining the divergent views out there. This situation should not be considered as a usual binary decision between choosing and app and feeding the masses. The app is complementary!

I therefore support the data-driven approach adopted by the government, although the processes could be made quicker and more transparent. I believe the Covid-19 app is a proactive and efficient approach to gathering data on how people's health conditions are changing over time to inform national action and intervention. Remember, the symptoms are key in determining who has or is likely to have Covid-19 or not. This is part of the data, the government hope to collect via the app. Therefore, the app is not useless as some people are intimating profusely on social media. People are just not used to this form of tracking, a sign of the need for better government communication.

Nevertheless, there are also legitimate concerns about how a four-paged questionnaire or so as attached could help track the disease. For example, how is the app going to track my condition after I have filled it? This is where I think the government did a poor job at educating the public on how the app works at the launch. At least, one of the speeches delivered could have focused on that. 

This brief opinion piece is meant to express my understanding of how the app works or should work to be useful to our fight against the virus. 

Now, this is how I understand the workings of the app, which is probably missing from the discourse so far. The questionnaire is meant to collect panel data (data on people over time). So, filling it once would be useless in helping to track changes in your symptoms and health condition, unless, there are people in the back office who will call us for updates on our health conditions periodically. The key word here is periodically! This approach is just inefficient, if this is the case. 

The rationale in my thinking is for people to update their health conditions PERIODICALLY as they change, so that the researchers at the back office will have more than one data point across time and people to be able to track changes in health conditions generally. So, the TRACKING bit is only possible in an efficient manner if these periodic updates are made. It is similar to administering the same questionnaire to the same people at different time periods. We can observe the changes in the answers provided, which could help in forming an opinion about whose reported symptoms over time are similar to those expected of Covid-19, where such people are located and their concentration in an area. With the use of mobile technology, you could also track the movement of those people, which could be helpful in contact tracing, since some people may forget all the places they have been over a period of time.

In other words, the app is to help democratize medical diagnosis via technology, similar to what Medical Professionals do when you consult them. This is not much different from many of the current technology apps for health diagnosis; some of which we are already using in this country. 

This is not data Google has or will know just by having your mobile number without the people supplying additional information, as some tech guys are speculating on their Facebook walls. If the so-called app developer is American, I am sure they will have a fair idea of what data Google has and does not have. The lack of the required data by Google is probably the reason this app has been developed. In this case, all of these tech guys, many of whom are genuinely concerned and others just grieved, need to be circumspect about the kind of information they put out there. Many may be speaking out of a lack of understanding of how the app works and that cannot be a demonstration of professionalism.

The government must quickly come out and clarify how the app works and the duty of citizens. The cynicism out there is understandable but citizens must be careful about where they get their information from and how they spread falsehood online. It will come back to hurt us!

Kenneth Appiah Donkor-Hyiaman, Ph.D

Department of Land Economy

Kwame Nkrumah University of Science and Technology (KNUST).

Disclaimer: The views expressed here are solely the views of the author and not necessarily the views of institutions he is affiliated to, including the KNUST.

Covid-19 and the sustainable development agenda: A paradox

Sustainable development is development that meets the needs of the present generation without compromising the needs of future generations. It is therefore that development that meets the short-, medium-, and long-term goals of society. Another key dimension of sustainable development is its focus on the trinity of development - activities that are economically viability, socially equitable, and environmentally friendly.

Covid-19 is having tremendous paradoxical impacts on the trinity of sustainable development. First, it is taking human lives and threatening human existence. There have been over 59,949 deaths out of the 1,127,528 cases of Covid-19 recorded globally. Experts estimate more deaths in the future.

Economic viability of many business models and activities is low. Quarantining and lockdowns have forced many countries' industries to shut down, with many factories closing their doors. Many non-essential businesses especially have already collapsed and many more including some essential item producers are in ICU. Dabenham, a popular clothing outlet, is on the verge of bankruptcy according to media reports. Potato farmers in the Netherlands are running out of storage for over a billion kilos of potatoes. Thus, limiting further production,  employment and income generation. About 10 million Americans have lost their jobs in the last two weeks according to the World Economic Forum. Covid-19 appears to be a disincentive to the holy grail of capitalism - productivity. Perhaps, it is this existing conception and form of productivity that is at risk. We need to rethink economic productivity!

Among the trinity of sustainable development, the environment seems to be the obvious and greatest gainer so far. As a result of quarantining and lockdowns, Nitrogen Oxides and Carbon dioxide emissions are crashing as the world winds down, but experts say the drop won’t last if governments don’t start moving to cleaner energy. The world is seeing the biggest drop in carbon dioxide emissions since world war II. In China, carbon emissions were down an estimated 18 percent between early February and mid-March due to falls in coal consumption and industrial output, according to calculations first published by climate science and policy website CarbonBrief. That slowdown caused the world’s largest emitter to avoid some 250 million metric tons of carbon pollution—more than half the annual carbon emissions of the United Kingdom.

Meanwhile, in the European Union, declining power demands and depressed manufacturing could cause emissions to fall by nearly 400 million metric tons this year, a figure that represents about 9 percent of the EU’s cumulative 2020 emissions target, according to a preliminary forecast issued last week. And while data for the United States remains limited, experts expect that the coronavirus’s impacts will also ripple into the atmosphere as the economy continues to tailspin.

Global demand for fossil fuels like petrol, diesel and aviation fuel is plummeting. There has been an enormous reduction in flights, public transport and road traffic, and April is expected to record the lowest monthly liquid fuels demand since data started in 1998. Oil prices have suffered their biggest fall since the day in 1991 when American forces launched air strikes on Iraqi troops following their invasion of Kuwait. Brent crude futures, the global oil benchmark, were down 22%, last trading at $35.45 per barrel. US oil is trading at $33.15 per barrel, a decline of nearly 20%.

Capitalism is obviously on suspension since consumption and demand for non-essentials is declining. The low and middle-income class, who are a major source of consumption and the sustenance of capitalism, are locked down. Faced with resource scarcity, they have now focused their demand on only essentials and many have been forced to contemplate the reuse of their limited resources, a key concept of sustainable development. The focus on the production of essential goods and services by many governments around the world has been remarkable. General Electric, an automobile manufacturing company, is being forced by law to manufacture the essential ventilators needed to fight Covid-19 instead of cars, which are in limited use during these lockdowns. The production of these non-essentials and their associated ‘unnecessary’ jobs continue to be one of the critiques of capitalism among Economist. All of these have reduced the unnecessary use of nature’s resources.

The social equity dimension of sustainable development is also receiving the much-needed attention. Across the global, redistribution of resources from the rich to the poor is ongoing. Donations towards finding a vaccine for Covid-19 and supporting the poor during these lockdowns has increased.  Covid-19 seems to have a potential of being a great leveller! All of the sudden, the rich and governments, who have neglected the poor, the main source of their wealth, are beginning to have a second look at their social policies and interventions towards this fragile group of our society. Governments have become more effective and efficient in honouring their social contracts - delivery of services to their citizens. The public interest is now being pursued to a greater extent. Public resources and infrastructure that are ready for use but a yet to be commissioned because of petty and mediocre politics are now being put to use. In Ghana for example, the Bank Hospital, which was completed about a year ago but not commissioned for use is now opened to treat Covid-19 patients, although limited to the so-called VIPs in the country. Unjustifiable discrimination in this distressed time is shameful.

Covid-19 has obvious negative impacts on human existence and sustainable development, but its positive impacts are far reaching than the negatives even in the short-term. Covid-19 and its effects appear to be a necessary evil that promises greater sustainable development if its effects last longer. Perhaps, while the medical experts attempt to find a cure for Covid-19, Economists could research into how to maintain the conditions that have generated these positive outcomes. Understanding the paradox of Covid-19 and the sustainable development agenda reveals the high degree of interdependence among humans of all classes, businesses, resources availability and usage. This period offers us an opportunity to redesign our business models into more sustainable and resilient forms. 

Kenneth Appiah Donkor-Hyiaman, Ph.D
Department of Land Economy
Kwame Nkrumah University of Science and Technology (KNUST).

Disclaimer: The views expressed here are solely the views of the author and not necessarily the views of institutions he is affiliated to, including the KNUST.