How COVID-19 Impacts District Assemblies’ Revenues

One mid-morning in the first week of May, two weeks after President Nana Akufo-Addo had announced end to the covid-19 lockdown in Accra, a fairly tall middle aged man wearing a white surgical mask walked into the finance department at the District Assembly office and straight towards me.

I was standing about two metres away from my workstation, in the isle, after I got up briefly form the computer where I was thinking through the likely ways covid-19 impacts District Assemblies’ revenues especially the internally generated funds.

I thought he looked like someone I had worked with some years earlier.

“Uncle George, you can’t make me out…” the man said as he pushed the mask down.

“Frank!” (not his real name though) I exclaimed through my own mask “It’s the mask, oh. It’s been quite a while since I saw you.”

“How are you?”

Frank and I worked together another when I was a revenue accountant and he was a field revenue staff in another District.

He passed by my office on his way home after checking on one of his clients located in the same precinct as my current office is. He told me he had taken up a part-time employment with a cleaning company. He and his colleague field revenue staff were removed from their schedules “for non-performance” months after a new management assumed office in their District. Since then, they’ve never received any wages.

As uncertainty about the wages and employment of he and his colleagues lasts, he is trying to earn some wages so he can provide for his family through the covid-19 pandemic. Many employees and their families, and indeed employers are experiencing loss of income as the covid-19 pandemic continues to spread across the world.

State of the COVID-19 pandemic

The global infections have passed five million, and three hundred and fifty thousand deaths as at 25th May, 2020. In Ghana there have been 6,808 infections with 32 deaths. The infections continue to rise.

A host of strong public health and far-reaching social control measures, including lockdowns, taken by governments and local authorities to contain the spread of infections are producing cascading effects of disruptions to production and supply chains locally and internationally.

As governments place general restrictions on movement of people and issue health advisories, regulators are also introducing new regulations as measures of risk mitigation in the covid-19 and possibly a post covid-19 business environment.

Economic effects of COVID-19 on business and industry

As covid-19 and its effects unfold, economic growth is expected to slow significantly. The International Monetary Fund projects the global economy to contract sharply by -3% in 2020, on the back of the pandemic. In Ghana the Ministry of Finance has cut the forecast for the 2020 GDP growth rate from 6.8% to 1.5% on account of the impacts of covid-19 and the collapse in crude oil prices. The projected economic contraction will have crucial consequences for the fiscal budgets of central government and local authorities alike.

The pandemic is unleashing a series of cascading effects on industries. The range of effects include disruptions to supply chains, loss of income, fall in demand for goods and service and bankruptcies.

Disruptions arise out of the travel bans and lockdowns in industrial zones and major economic centres. The disruptions affect the supply of inputs to industries and the delivery of products to markets. Industries unable to generate revenue to pay wages, and so lose all or part of their incomes, and are unable to pay wages. The loss of income is leading to falls in demand for goods and services.

Whereas the loss of income is shrinking demand, consumers are learning new behaviours and adopting new attitudes to living in response to the covid-19 risks, also producing changes in demand across markets.

The fall in demand for goods and services, and uncertainties in the business environment, and the other effects enumerated have hit businesses hard. Most of the hard-hit businesses are the micro, small and medium enterprises.

In Ghana, the Trades Union Congress has articulated to government the problems of organised labour. The majority of their members work in the micro, small and medium enterprise space. MSMEs account for more than 95% of industrial establishment in Ghana and employ in excess of 70% of the workforce.

Like, my friend Frank, most of those employees who have lost their incomes have got to find a way to provide food and shelter for their families through the pandemic.

The labour unions have made a request to government for support, and the government has responded by instituting a GH¢600 million stimulus package through the National Board for Small Scale Industries.

What are the Implications of COVID-19 District Assemblies’ Budgets?

As the pandemic keeps on developing, the full extent how COVID-19 impacts District Assemblies’ revenues is not yet determined. But the trend is certain.

MSMEs, at the local level, constitute significant large base for internally generated funds for District Assemblies. They are the payers commercial and industrial property rates, and a range business permit fees. Their employees also contribute to the large pool of ratepayers of residential property rates. Due to this connection, any decline in performance of the MSME sector would naturally impact IGF revenues of the MMDAs.

Also the District Assemblies’ Performance Assessment Tool policy expects every District Assembly to improve revenue mobilisation annually by at least 20%. The Assemblies would not perform very well on that criterion for 2020.

Moreover, the covid-19 threats to IGF revenues may be exacerbated by any existing levels of risks, for instance, such risks that relate to organisational and strategic policy with respect to the revenue operations in the District Assemblies.

In the light of all these, when one considers how COVID-19 impacts District Assemblies’ revenues, one is most likely to foresee a decline. At this time, a decline in revenue collection for 2020 is a certainty for the majority of MMDAs. The fall in revenue will impact the Assemblies’ ability to discharge their mandates fully, including execution of revenue mobilisation programmes in itself.

For example, as revenues decline, commissions (being a stated percentage of actual revenue collected) of contract revenue collectors are expected to decline. The decline will limit how much funds are going to be available for staff wages and logistics, including PPEs.

The effect will be the same even in the case where revenue collection is not outsourced, but is collected by Assembly’s own staff. Most recurrent expenditure will be adversely affected: staff compensation, annual repair and maintenance programme, development projects, etc. And the negative impact on revenue could go beyond the current year 2020.

How Can COVID-19 Risks Be Mitigated?

What should District Assemblies do in the face of the covid-19 threats to IGF?

This moment of pervasive covid-19 calls for strategic reviews. Metropolitan, Municipal and District Assemblies ought to assess their the threat of covid-19, their strengths, weaknesses and opportunities to determine the strategic options to take in the short term with the view to optimising and protecting revenues.

In the scheme of revenue strategy formulation and execution, revenue personnel are crucial organisational resources. This view has not been very well understood in many MMDAs, and has lead to inappropriate human resource management practices that have exacerbated both strategic and operational risks to revenues collection. The MMDAs should take this moment of strategic review to do things better.

When revenue personnel like Frank and his colleagues get the right organisational support, they would perform better than they used to do.

This is also the time MMDAs should pursue a course of active stakeholder and ratepayer engagements in order to fashion mutually beneficial strategies for revenue mobilisation. Ratepayers already are burdened by the impacts of the pandemic. It is imperative that revenue mobilisation approaches take cognisance of that fact when developing their individual revenue strategies.

The covid-19 moment calls for new and a more professional attitude and approach to revenue process management in the MMDAs, because doing business as usual cannot help to achieve the revenue objectives. The District Assemblies may fail in the discharge of their mandates when they are unable to mobilise the financial resources that are required.

Leave a Reply