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Institutions matter in infrastructure delivery in Ghana

BY: James Dzansi

The provision of adequate infrastructure is essential for sustained and inclusive growth. In Ghana, lack of funding is often cited as the biggest impediment to infrastructure delivery in Ghana. However, a recent study by Martin Williams of the London School of Economics, supported by the International Growth Centre (IGC), suggests that a bigger constraint to infrastructure delivery in Ghana may be from the institutional management of such projects.

The study found out that the manner in which funding from the Districts Development Fund (DDF), District Assemblies Common Fund (DACF) and the Ghana Education Trust Fund (GET Fund) is structured and disbursed has a significant effect on infrastructure development in Ghana.

Project Delivery Outcomes

The study examined a sample of 14,000 infrastructure projects in the period 2011-2013. By classification, schools, staff quarters, toilets, roads and culverts make up the five top infrastructure projects undertaken. 

Over 90 per cent of the projects were programmed to be completed within one year. However, less than half were finished on schedule. Moreover, a third of the projects remained incomplete and often abandoned entirely. Further analysis suggests that reducing the incidence of uncompleted projects could free up 20 per cent  of the infrastructure budget which can supply several additional three-unit classroom blocks per year.

Explanation

A key driver of project completion rates in Ghana is the underlying governance mechanisms of the various funding sources. This is revealed quite strikingly in the project completion rates across the three main funding sources of infrastructure namely, the DACF, DDF and GETFund.

Whereas these sources of funding are comparable in the sense that they are alternative ways through which the central government and donors channel resources to realise infrastructure projects, their governance mechanisms differ in terms of the degree of 1) budget scrutiny, 2) reliability and predictability of fund releases, 3) monitoring and credibility of threats of sanction, and 4) separation of policymaking from implementation.

Take the DDF and the DACF, for instance. Both involve lump-sum transfers for which the MMDAs are responsible for selection, procurement and execution of projects.

However, the DDF and the DACF differ in three important aspects of infrastructure delivery. First, the DDF is subject to a higher degree of budget scrutiny.  This increases their incentives to complete existing projects, before starting new ones. Second, the DDF is subject to a higher degree of monitoring and the threats of sanction are more credible in part because of donor involvement.

Moreover, DDF funding releases are generally more reliable while those of DACF are subject to delays. Unsurprisingly, only 64.0 per cent of DACF funded projects are completed after three years, compared to 78.5 per cent of DDF projects.

The performance of GET Fund projects is particularly unimpressive – more than half (55.2 per cent) of GETFund projects are not completed three years into their commencement. Similar to the DACF, the GET Fund suffers delays in the release of funds with unpredictable duration, a lax monitoring and credible threat of sanction. The GET Fund also suffers from additional institutional weaknesses. Unlike the DDF and DACF, both policymaking and implementation functions are largely conferred on the Ministry of Education. 

For example, whereas DACF projects are always procured at the relevant MMDAs level, the Ministry of Education usually procures GETFund projects. In the few cases where procurement is done at the MMDAs level, contractors of GETFund projects are paid by the Ministry of Education.

Thus, it appears that GET Fund procurement processes are undermining the essence of the decentralisation framework and in so doing proving to be particularly ineffective at local infrastructure delivery. 

What should we do?

The media is replete with stories of abandoned infrastructure projects across the country, forcing both the President and Parliament to pledge action against the practice. The key take-away from this IGC study is that the way funding sources are structured and disbursed has a significant effect on the completion rates of projects across the country. An important avenue for improving infrastructure delivery, therefore, lies in rationalising the institutional mechanisms which underpin the funding sources and ensuring that MMDAs complete existing projects before starting new ones.