How much does your government spend on you? You might want more, but less is sometimes better

Disparities in state spending on basic services in Africa are extremely wide; from $6 per person in Liberia annually to $4,700 in Algeria!

AFRICAN governments need to spend at least $300 per capita on basic services, including health and education for all, if extreme poverty is to be eliminated on the continent, but current spending is exceptionally low in some countries, a new report shows.

The disparities in government spending on basic services in Africa are also extremely wide, the 2015 Data Report by advocacy organisation ONE indicates.

Data from the World Bank’s International Comparison Programme, quoted in the ONE report, shows that Liberia, for example, spends a mere $6 a year per capita to provide a basic package of services to its citizens, which includes health, education, general administration, defence, police, fire fighting, and environmental protection.

It’s the lowest government spending per capita in Africa, followed by Comoros ($8), Democratic Republic of Congo ($31), Guinea ($32) and Niger ($37) – all these are low-income countries with a small revenue base and low human development. 

The figures are adjusted for purchasing power parity so that they are comparable across countries; the effect of a country’s exchange rate is thus moderated.

Big spenders

Richer countries in Africa, particularly those with large resource endowments, are able to amass more revenue, and so are able to spend much more on their citizens. The highest government spending is in Seychelles and Algeria, which splurge more than $4,000 a year on each citizen.

Algeria’s case is striking because it is the only country in Africa where government spends more on its citizens ($4,311 a year) than citizens do on themselves ($3,983 a year) – making it the true welfare state in Africa; the African average is $594 a year. But the data gets really interesting when we consider government expenditure as a proportion of gross domestic product (GDP).

Per capita spending - top 10 Africa | Create infographics

You would expect that governments would behave like households – rich countries have more resources at their disposal, and poor countries have less, but eventually the proportion allocated to basic services would be about the same.

In other words, both rich and poor countries build schools, for example, and although rich countries build fancier schools and pay teachers more, eventually the proportion of GDP spent on education would be roughly comparable.

Strange spending ways

The data throws that hypothesis far off the mark. The two countries with the lowest spending as a percentage of GDP couldn’t be farther apart, in terms of income levels. Liberia spends 1% of its $537 income per capita on basic services, and similarly, Equatorial Guinea spends 1% of its $39,400 income per capita; the African average is 10% of GDP.

Equatorial Guinea’s spending on basic services comes to $482 per person annually, and this level of expenditure puts it in the region of Kenya, Lesotho and Mauritania – countries that have much less money to spend in the first place.

The bottom five countries all spend less than 2% of their GDP on basic services, but they are a mixed bag in terms of GDP– after Liberia and Equatorial Guinea comes Comoros ($610 GDP per capita), Sudan ($3,608) and Guinea ($1,287).

Among the top 5, Algeria is again at the top, spending 31% of GDP on its citizens. But the top five are also a diverse bunch, with many not having anything close to Algeria’s resources.

Second placed is Lesotho (22% of GDP per capita, which is $2,130), Seychelles is third (21%; $22,569), Tunisia fourth (20%; $10,139) and Kenya fifth (20%; $2,136).

How might one explain the convergence of such diverse countries? It’s a question of politics, Kwame Owino, economist and CEO of public policy think-tank based in Nairobi Institute of Economic Affairs, told Mail & Guardian Africa. 

“These spending disparities are the result of politics because it’s a snapshot of the political economy,” Owino says. “Anything greater than 20% of GDP for a low income country suggests that it is a tax-and-spend government.” 

But high spending is not always a reflection of the quality of public services.

GDP per capita spending | Create infographics

“It [also] tells you about incomes in the public sector, the size of the public sector work force and the average wages in government,” Owino says.

Taking Tunisia and Kenya as examples, both countries spend 20% of GDP on government provision of services, but for different (political) reasons. Tunisia is a relatively developed economy with high per capita spending on health, education and social protection such as unemployment benefits.

But Kenya is characterised by a very large public service, particularly through state corporations, also known as parastatals.

In 2013, a presidential taskforce on parastatal reform found that Kenya had at least 187 parastatals – 55 commercial state corporations, 62 executive agencies, 25 independent regulatory agencies and 45 training institutions.

And although the share of state corporations in formal wage employment has been falling in absolute terms, due to privatisation of a number of parastatals, the taskforce found that state corporations pay more than even the private sector or the overall public sector.

Large state corporations with big budgets do not necessarily translate into better outcomes for citizens – it could simply be a gravy train to dish out the benefits of patronage.

Enter patronage

One study on voting patterns in Africa showed that ethnic favouritism and patronage in Africa was more prevalent in countries that had a strong fiscal capacity such as Kenya, Congo-Brazzaville, Gabon and Togo – in addition to being ethnically diverse and not having a single religion – simply because they collect more revenues, they have more to dish out.

Another survey by Afrobarometer showed that the kind of African with the highest likelihood of giving a bribe was the one in highest contact with the state, and that person tends to be young, male, urban and poor (READ: Why do some Africans pay bribes and others don’t?) So by expanding the “reach” of the government, the perverse effect is not better service provision, but a greater opportunity for shake-downs.

High government spending also has the effect of crowding out private investment, which is almost never a good thing. Libertarians argue that even an incompetent private business is less costly to the public good than an incompetent government, and one depressing World Bank study from India corroborates this view.

Researchers found that under-qualified private sector doctors, even though they know less, provide better care on average than their better-qualified counterparts in the public sector.; the public sector doctors just didn’t bother to take the time needed for a proper diagnosis. 

It all comes down to incentives. In the private sector, money is real, budgets must balance, bills must be paid and counterfeiting money is a crime. 

But government always has numerous trump cards up its sleeve - tinkering with monetary policy, asking donors for more money, bailouts from the World Bank/ IMF, or, simply working government currency printers overtime Zimbabwe-style - that can easily cover up its incompetence.

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