In Ghana it has become customary for private firms, government departments and individuals to send elaborate gift baskets, known as hampers, to business colleagues and contacts.
It has been estimated that the cost of these hampers to the government is GH¢11 million.
On the face of it, this is a sensible directive and the good intentions behind the directive are not in doubt. The government’s finances are not in good order.
Figures released recently by the Economist magazine attest to this: “Inflation is soaring above 13 per cent, budget deficit growing from four per cent to nearly 12 per cent of GDP due to a splurge in spending by the Mahama government in the run-up to the general election of December 2012, steep rises in the price of electricity and water, both in erratic supply, plus increases in food costs have all contributed to the rapid shrinking of the real value of wages.”
Given the dire situation of the economy, which has produced what most people say is one of the bleakest Christmases in recent memory, the government would appear justified in banning all unnecessary expenditure in order to reduce public spending. The ban on hampers was calculated to make good headlines and they did.
It is a political response to a very hard year when the government has been fighting hard to create or maintain a positive image, especially in the media.
The move was endorsed by anti-corruption groups, including the Ghana Integrity Initiative which has called for strict compliance with the directive. However much the ban may make political capital for the government, its economic impact is a different matter.
Let us start with the timing of the ban. It was announced in the first or second week of December by which time those at the retail end of the Christmas gift business would have made substantial investments in anticipation of the seasonal trade.
Consider the situation of cane basket weavers for whom the Christmas hamper business accounts for more than half of all annual business, according to reports.
Typically, they would have bought their cane, wood, and other products with which they make these gift baskets by the beginning of November to catch the trade in December. A ban coming so late means that these people’s money has been locked up through no fault of theirs.
It is worth remembering that these people are struggling to maintain even their small share of the crafts trade which is now dominated by cheap Chinese imports manufactured on a large scale. Christmas is the only time when, by some unexplained convention, Ghanaians decide to make hampers from natural cane baskets.
Basket weavers are not the only people affected by the timing of the ban. The gifts that go into the hampers, usually drinks, biscuits and the like, are bought locally. This is a substantial part of the Christmas trade for which the businesses, usually small scale retailers, would have made provisions.
Even if the goods are bought from the big supermarkets that are springing all over Accra lately, the effect is the same; some of these shops hire additional hands to handle the extra Christmas trade.
Internationally, Christmas is recognised as a major spur for economic activities, especially retail trade. Without reliable figures here, we can use those from elsewhere to get a sense of impact of the Christmas trade on economic performance.
According to statista.com, the US statistics portal, the US generated about US$ 3 trillion during the Christmas holidays in 2012, which was about 19.3 per cent of the retail industry’s total sales that year.
In plain language, this means that one-fifth of the retail trade in the USA was Christmas-related. As a result of this Christmas trade spike, 720,000 people were employed to compensate for the holiday rush.
The story is the same all over the world, whether in the developed or developing economies. People spend more money during holiday seasons than at any other time during the year and this is good for the economy.
It is for this reasons that governments encourage spending during holiday periods, and specifically Christmas even in countries without dominant Christian traditions.
In Ghana, government spending is by far the biggest influence on the economy. In addition, although the number of people on government payroll is a small proportion of the population, the impact of their spending ability reaches far across the population as a whole.
This does not happen in Ghana alone. Since the major Western economies went into financial difficulties in 2008, their governments have pumped trillions of dollars into their economies in order to revive their national fortunes.
One of the main reasons why most Ghanaians are feeling a severe financial pinch this year is because so many contractors and suppliers of goods and services to the government have not been paid. This means that the money in circulation is smaller than it would be if the government had paid its creditors.
Of course, this means further that the government’s unpaid creditors have not been able to order or pay for goods and services themselves, thus deepening the sense of economic stagnation that feels so real this Christmas season.
In any case, since the government collects more taxes via the indirect route such as VAT, it is also in its own interest to stimulate spending, especially at the retail end.
Every time anyone makes a purchase a good chunk of it goes into government coffers, so the more people pay for purchases the better our public accounts become. Furthermore, when people make sales they also buy other people’s goods and thus serve to strengthen the economy.
Of course, none of this justifies a reckless dissipation of public funds, and set against the need to provide social services such as health and education, no sane person would argue that Christmas gifts are a priority.
However, apart from the economic case for stimulating Christmas sales, there are also many good reasons why businesses and even government departments engage in public relations, of which Christmas gifts are an essential part.
There are customers and clients who must be recognised for going beyond the call of duty in some special way. In such cases, a Christmas hamper may be the most transparent and cost-effective way of showing appreciation.
Again, despite the need to cut cost across government spending, it is important to allow government agencies the flexibility to determine their own essential priorities within the general policy guidelines.
One of the bad consequences of rule by sudden bans and decrees is that organisations lose the confidence necessary for the performance of their more complex tasks; instead they prefer to wait for directives and orders from the centre, which creates unnecessary bureaucracy and red tape.
Let me hasten to add that I am not in favour of misusing public money on unmerited gifts for cronies. To be honest, I am not even personally in favour of this whole Christmas hamper culture, but an outright ban a couple of weeks to Christmas is not a good idea.
Furthermore, in the absence of other structured means of stimulating the retail trade at Christmas, the removal of GH¢11 million worth of trade has serious consequences.
If the government truly wants to cut spending, Ghanaians can offer some really useful advice. For example, why is it necessary for every government minister, deputy minister, DCE and all manner of assorted officials to ride in chauffeur-driven 4×4 off-roader vehicles?
We could start by emulating the example of the President of Uruguay, José Mujica, who lives in a cottage and drives himself in a VW Beetle car and also donates 90 per cent of his $12,000 a month pay to charity.
Or the government could use the whole of January 2014 to think up and cost all the schemes and plans it wants to implement for the next 11 months. This is called planning. It helps.
Happy New Year to all Diary readers.
Culled from The Mirror