Building PFM Capabilities in Africa

For the past 30 years, governments across Africa have been implementing public financial management (PFM) reforms with mixed results. While budgets, laws and processes have improved, they are often not effectively implemented (Andrews 2010). Technical solutions, commonly copied from upper-income countries, do not always take into account the local context and can lead to capacity gaps and a lack of ownership when the project finishes and the consultants leave.

A multimillion dollar project in Ghana to introduce a new financial management information system was later deemed as, “overly complex, when simple spreadsheets could have done the job” and created, “a very big conceptual, technical, and managerial challenge” (World Bank 2008). Similarly, a project to introduce a Medium Term Expenditure Framework (MTEF) in Ghana used activity-based budgeting, “which generated voluminous, highly detailed documents, which made it difficult to discern the strategies and priorities underlying MDA budgets, thus effectively defeating the purpose of the exercise” (OECD 2012).

It might not come as a surprise then that Ghana’s president, Nana Akufo-Addo, had the following to say last week while at a joint press conference with visiting French president Emmanuel Macron:

“We can no longer continue to make policy for ourselves, in our country, in our region, in our continent on the basis of whatever support the western world or France, or the European Union can give us. It will not work. It has not worked and it will not work. Our responsibility is to charter a path which is about how we can develop our nations ourselves.”

Research at the Building State Capability (BSC) program focuses on how governments can solve their own problems, using their own resources and their own ideas. And earlier this year, our BSC team collaborated with CABRI to work with government teams from 7 African countries to do just that.

In May 2017, self-selected teams from Ghana, Liberia, Lesotho, Nigeria, Sierra Leone, South Africa and The Gambia attended a workshop in South Africa, equipped with a pressing PFM problem that they would like to solve. Over four days, the teams were guided through a process of creating a problem statement that matters, deconstructing the problem to its root causes, identifying suitable entry points for action for the next two weeks and deciding what success would look like in six months. Each team was also paired with a coach from CABRI to support the team.

After the workshop, we kept in touch with the teams online with frequent team and individual assignments asking for updates on what was done, what was learned, and what was next for each team. The CABRI coaches also held regular check-ins with their teams (both remote and in-person) to keep the teams motivated and on track.

Next week (December 11-13) we will all meet again in South Africa for a final workshop where the teams will present on what they have achieved and learned over these 7 months and what is next. There will also be plenty of opportunities for peer learning, as the teams will give structured feedback to their colleagues after each presentation. The workshop’s focus is all about the teams as they are the ones that have done all of the work.

This is a relatively new approach to training for BSC and we have been pleased so far with the results. 90% of the government officials completed an evaluation survey and 100% of them rated the quality of the program as excellent or very good. Here is what one participant had to say about the experience:

“This program is unique and different to any PFM training I have attended. Why? The program took the ‘do it yourself’ approach. It used the local themselves as the experts to define, and with guidance and support from the CABRI team find solution to the defined problem. Other PFM training I attended in the past, like the Medium Term Expenditure Framework training, the experts were those that came from outside with their very exotic ideas that basically left when the ‘experts’ packed off and left. They just didn’t work.”

We are looking forward to hearing from the teams next week and plan to write a few more blog posts in the upcoming days on this topic. You can keep posted here for future updates.

Is it Time to Specialize Aid?

Aid plays a huge role in the economy of Liberia. Even after taking out UNMIL security funding, official development assistance to the West African country is projected to be USD 785m in FY14*. Compare this to the size of the national budget for the same fiscal year – USD 583m – and you can begin to see the weight that aid flows carry.

While amounts are useful to look at, what I’m specifically interested in exploring at the moment is how fragmented these aid disbursements are. The OECD, a rich- country think tank, defines this fragmentation as “aid that comes in too many small slices from too many donors, creating high transaction costs and making it difficult for partner countries to effectively manage their own development.”

The idea is that aid can be more effective if donors specialize instead of having multiple projects spread thinly across multiple sectors. From the government’s perspective, the increased reporting and coordination that is required from dealing with multiple donors is not trivial. Ministries have limited resources that can make seemingly simple tasks of sharing data, editing excel sheets, and printing documents difficult. These “little things” add up and can create big challenges.

So how fragmented is donor aid in Liberia? To answer this question I looked at all aid disbursements in Liberia for 2013, which included data provided from 18 international donors. By calculating the Herfindahl coefficient for each donor, a tool typically used to measure market concentration among firms, I was able to determine the level of fragmentation in each donor’s aid portfolio. To calculate this coefficient you take the sum of the squares of market shares (in this case how much aid is spread across multiple counterpart ministries) and it yields a value between 0 and 1, where 0 represents a completely fragmented portfolio and 1 corresponds to a completely concentrated portfolio. In our case, the lower the number, the more spread out and fragmented the portfolio is.

Donor Agency

Herfindahl Coefficient

# of Projects

# of Counterpart Ministries

European Union

0.17

18

9

USAID

0.17

41

16

Sweden

0.20

10

7

World Bank

0.31

22

14

United Nations Children Fund

0.33

7

4

United Nations Population Fund

0.37

4

4

African Development Bank

0.51

9

5

World Food Programme

0.52

3

3

DFID

0.55

4

2

Japan

0.55

6

4

United Nations Peace Building

0.60

2

2

Germany

0.67

5

4

France

0.68

4

4

Ireland

0.69

4

4

Norway

0.96

3

2

GIZ

1.00

1

1

Global Fund

1.00

3

1

World Health Organization

1.00

11

1

The above table shows that the European Union and USAID have the most fragmented aid portfolios in Liberia, both with a Herfindahl coefficient of 0.17. With 41 projects spread across 16 ministries, USAID has its hands in every major sector. As an American, this makes me question whether US taxpayer money could be spent more effectively in Liberia if it was focused on one or two areas, such as roads or energy, instead of being spread across 16. On the other end of the spectrum, you can see that while the World Health Organization has 11 projects, it has a coefficient of 1 as they are all with the Ministry of Health & Social Welfare. By specializing on health projects, the WHO helps make it easier for the Government of Liberia to manage its own development. It could make it even easier by consolidating the number of projects it implements.

It is true that each donor has its own political strategy when it comes to distributing aid. But it is important for donors to keep in mind the capabilities of aid-recipient countries in effectively managing aid inflows. Increasing the number of projects across multiple sectors increases the administrative costs and burden for both the donor and government. By contrast, specialization has led to great

advances in industry and it has the capability to do the same in the world of development assistance. This shift will require not only increased dialogue between donors and recipient countries, but also more coordination between donors as they decide in which sectors to specialize. Not an easy task, but certainly a worthy one as it can increase the effectiveness of aid and give government ministries the space to build stronger, more impactful relationships with donors.

* While aid is projected to be USD 785m in FY14, it is likely that this number will be lower. During the previous fiscal year, only 68% of projected aid was actually disbursed. This is partly a direct result of the “little things” I described above as delays in getting documents printed, shared, and signed by the respective government parties force projects to become delayed.