Decent Pay

Decent Pay: Ethiopia’s Key Public Service Issue

In order to achieve the targets established in the second phase of the Growth and Transformation Plan, a robust and efficient civil service is necessary. This is because government employees are responsible for monitoring and implementing development programmes as well as regulating, assessing and approving investments that come into the country. However, Ethiopia’s government offices are often critiqued for their inefficiency, cumbersome bureaucracy and, in some cases, corruption. Studies suggest this is due to the lacklustre compensation, even compared to other African countries. For example, in 2014 the average monthly salary for a civil servant in Kenya was USD679, a figure that stood at USD145 in Ethiopia. EBR’s Ashenafi Endale spoke with government representatives to learn about what’s being done to remedy this crucial policy issue.

Ever since the fall of the Dergue regime, the Ethiopian civil service has undergone major structural reforms in response to the weak and inefficient administrative system that lead to poor public service delivery to citizens. The major objective of the reform programmes was to jettison the archaic, ineffective paradigm that governed the overall structure and environment of civil service throughout the country.
Despite repeated reform attempts, the civil service remains inefficient, due in part to a lack of motivation and low salaries. As a result, some employees have reportedly become careless, negligent, unresponsive and sometimes corrupt.
The need to build an effective and efficient civil service is essential as Ethiopia aspires to attain middle-income status by 2025. However, this requires a workforce that is strong enough to launch, implement and finalise the large-scale infrastructure projects being carried out by the government.
Indeed, the poor performance of government institutions that are entrusted to achieve the goals outlined in the first phase of the Growth and Transformation Plan (GTP I) evince the deterioration of service in Ethiopia.
For instance, the agricultural sector, which was expected to grow by at least 8Pct annually between 2010/11 and 2014/15, lagged 2Pct behind its base case projection. Additionally, the manufacturing sector failed to register the planned 18Pct yearly average growth rate during the GTP I period. Rather, the sector only grew at an annual average of 14.7Pct. Though seemingly marginal deficits, both sectors, already plagued by a number of drawbacks, need more robust performance to help spur continued economic growth.
As the country pursues the GTP II, the Ministry of Mines, Petroleum and Natural Gas (MoMPNG) is one government institution expected to help achieve the country’s goal of earning USD6.1 billion from mineral exports by the end of the 2019/20 fiscal year, according to the GTP II document. However, the Ministry struggles to maintain qualified and competent employees. In fact, the MoMPNG stopped issuing licenses for new mining companies in 2011 due, in part, to capacity limitations.
The Ministry’s mission includes generating, managing and delivering basic geoscientific (mineral and geo-energy) data to the business sector; attracting private investors to develop the mining sector by creating conducive investment conditions; issuing licenses to private investors engaged in mineral and petroleum operations; and administering contracts in accordance with the concession agreements.
“Even though the Ministry started to issue licenses again, of the 517 employees it needs, there are currently only 345,” explains Girma Adugna, Director of the Human Resource Development and Management Directorate at the Ministry. “We have upgraded the salary four times but staff turnover is very challenging and becoming uncontrollable.”
He says that although the Ministry announces vacancies regularly, it is becoming difficult to even hire administrative and support staff, let alone professionals with mining expertise. “The professionals and experts leave for the private and foreign mining companies [that pay] higher salaries after they work here for two years,” he argues. “I receive a monthly gross salary of ETB5,781, which [wouldn’t be the case] at a private mining company. How can we attract an entry-level geologist with a monthly gross salary of ETB2,800?”
According to information obtained from the MoMPNG, there are no senior geologists or mining engineers employed at the Ministry – and only three senior experts work there. The Ministry currently monitors more than 200 mining licenses, eight of which are in petroleum and gas exploration.
“We are expected to be ahead of the mining companies in order to properly evaluate, follow-up and control them, but we are far behind,” says Girma. “We cannot do these three jobs that are the core responsibilities [of the Ministry]. Although the country has a lot of potential, the mining industry in Ethiopia is crippling.”
Indeed, the failure of the Ministry to maintain and hire professional employees has been costly. The MoMPNG, which was tasked to ensure the country earned USD4 billion from the export of mineral products, failed during the GTP I period. The Ministry only achieved 60Pct of the plan.
Bacha Faji, Director of the Public Relations Directorate at the Ministry, acknowledges its failures. “We have never achieved our targets fully. We couldn’t even negotiate on the proposals the private companies brought to us, but now the Ministry outsourced a new study on salary increment and restructuring with support from the World Bank.”
It is not only the MoMPNG that is revising its salary due to workforce scarcity. In fact, there are 72 different salary scales being implemented throughout 180 government institutions, according to information from the Ministry of Public Service and Human Resource Development (MoPSHRD). However, even for those government institutions that have already developed and implemented their own competitive salary scales, staff turnover is still a problem.
The Ethiopian Revenues and Customs Authority (ERCA), which is responsible for collecting revenue from taxes and duties, is one such institution. In addition to raising revenue, it is responsible for protecting society from the adverse effects of smuggling and contraband. ERCA currently has close to 11,000 employees, a figure that stood at 2,500 when it upgraded its salary scale seven years ago. The highest gross monthly salary scale at the Authority is ETB10,000.
Despite its relatively favourable scheme, Ayfokiru Hailu, Acting Director of the Communication Directorate at ERCA, says the institution acts more like a training centre than a regulatory agency. “Recent graduates come and leave within two years,” he says. “When we revised our salary scale seven years ago, everyone was applying to [work here]. But now we don’t receive applications for vacancies because other government institutions’ salary scales are almost equal to ours.”
Even the Ministry of Finance and Economic Cooperation (MoFEC), which is responsible for formulating development policies; preparing and budgeting development plans; mobilising and administering external resources; and installing a modern, efficient, and accountable public finance and property administration and controlling system, is not immune to the problem.
“The Ministry loses 30Pct of its employees to other institutions annually,” says Hailu Bacho, Human Resource Development expert at MoFEC. Currently, the Ministry is preparing to enact a new salary scheme that will be implemented at the beginning of 2016/17. Under the new scheme, the minimum salary for professional employees will be increased to ETB4,000 from ETB2,500, while the maximum salary will reach ETB14,500 from the current ETB6,000.
Meagre salaries is one reason why the civil service system in many developing countries is lacklustre. Evidence suggests that government workers either cut their productivity or work hours when salaries are low. The reduction in production is greater as the compensation diminishes. Otherwise, they will actively seek jobs in the private sector.
A World Bank survey focusing on African countries demonstrates that as government compensation falls, both in absolute terms and relative to alternative remunerative activities, civil servants adjust to the new situation. Turnover rates and absenteeism increase; moonlighting becomes more frequent; and the recruitment and retention of professionals becomes increasingly difficult.
Another study shows that low pay discourages employees and stimulates corruption. Moses Kigundu, Professor of Management and International Business at Carleton University in Ottawa, Canada, argues that in Africa, where most governments do not pay a minimum living wage to their employees, remuneration is low and leads to institutionalised corruption, laxity and a general lack of discipline.
Pay reform has been an important issue in public service management throughout the world within the last two decades. Pay is a significant feature of human resources management, and these resources are the most crucial factor in the delivery of a good number of public services.
According to Kithinji Kiragu, expert at PricewaterhouseCoopers, and Rwekaza Mukandala, lecturer at the University of Dar es Salaam, there are two options for any government whose employees are poorly paid.
Their research, conducted on public service pay reform in Africa, demonstrates that the first option is to sustain the wage bill at the current levels, since doing so preserves the level of complementary resources available for development programmes. This option also avoids the risk of wage-led inflation and fiscal instability.
The second option is to raise the wage bill ceiling in the short- to medium-term through a combination of raising taxes, donor support, or cutting down some development expenditures. This ensures that there will be enhanced feasibility for rapidly enhancing pay and timely realisation of the policy goal.
Here, the wage bill to gross domestic product (GDP) real ratio is an indicator of the public service personnel costs share of the total economy. The wage bill represents the total resource envelope from which public service employees are paid. Therefore, if the wage bill is on the decline or shows little improvement while the economy is growing, it means there is still room to make salary adjustments.
Taking into account the disbursed recurrent budget annually, which includes items such as wages, utilities and rent, the wage bill to GDP ratio in Ethiopia hasn’t shown improvement in the past five years. In fact, in 2012/13, the government disbursed ETB26.8 billion as recurrent budget, which makes the wage bill to GDP ratio 4.8Pct. This figure reduced to 4.5Pct in 2015/16.
However, since the government already included an extra ETB5 billion in the recurrent budget for 2016/17, which will be spent on salary increment for teachers in government schools, the wage bill to GDP ratio will increase to 5.2Pct this fiscal year.
In the past, the Ethiopian government has readjusted the civil servants’ salary, aiming to relieve employees from the agony of living under a volatile and inflationary economy. When the government last increased the salary in August 2014, which was one of many since the EPRDF came into power, the increment ranged from 33Pct to 46Pct, in descending order related to civil servants’ previous monthly salary. There were also previous increments in 2000/01, 2006/07 and 2010/11. Additionally, the government introduced a scheme that allows government employees to purchase condominium homes easily, free transportation services and is working to provide consumption goods at an average price.
Despite such improvements, Ethiopian civil servants’ are poorly paid even compared with neighbouring countries. For instance, in 2014 the average government employees’ salary in Kenya stood at USD679 per month, according to the World Bank, while in Ethiopia it stood at USD145.
As of 2014/15, the total number of civil servants in Ethiopia at the regional and federal level stood at 1.26 million, of which 904,534 were male, according to data obtained from the MoPSHRD. Of the total government employees, 0.3Pct earn up to ETB499 (USD22.7) monthly gross salary and 21.5Pct of civil servants earn between ETB500 (USD22.8) and ETB1,499 (USD68.4).
Zewditu Dawit, 29, who has been working as a cleaner at ERCA since 2004, falls into this category. She lives with her sick mother and a brother who is a taxi driver. “I earn ETB850 monthly gross salary, which does not even cover the house rent,” Zewditu told EBR. “It is very difficult to live with such little money.”
On the other hand, Wondemagege Teka, 25, who works at the same institution, belongs to a group whose salaries’ are above ETB3,000 (>USD138.8). This group constitutes 27.1Pct of the total. Although he is not as frustrated as those who receive a marginal salary like Zewditu, he claims life is still challenging. “I earn ETB4,020 as monthly gross salary, but my rental expense is around ETB2,600,” he says. “Imagine surviving on the leftover money for the whole month.” The remainder of government employees earn between ETB1,500 and ETB2,999.
Although government officials agree about the importance of paying a competitive salary to retain and attract new staff, they say that is not enough. “Employees leave not only because of [relatively meagre] salary but also if there is a bad working environment,” argues Haji Ibsa, Director of the Public Relations and Information Directorate at MoFEC. “It is about bringing and implementing the best system in order to create a conducive environment for government employees.”
Indeed, literature written on the matter suggests that salary increments operate in conjunction with other organisational and managerial systems because the work culture that prevails in a given government institution influences employees’ motivational and behavioural responses. As a result, decent pay and salary increment do not operate in isolation from other organisational and managerial systems – meaning purely technical solutions, however elegant, might not work.
The MoPSHRD says it is on the verge of taking long-term measures to remedy the difficulties regarding civil servant compensation. “The Ministry is close to finalising a point-rating payment system and will start working with universities to balance the demand and supply in the labour market,” says Yigezu Jemaneh, Human Resource Advisor to the Minister of Public Service and Human Resource Development. “The new payment system will be based on the performance of the employee and will solve the salary difference among government institutions.”
Yigezu argues government universities have been producing graduates in a way that fits their capacity, not what the market needs: “From next year on we will work with them to produce what the country wants. We will also have a state minister who will handle the human capital development specifically.”
While the existing payment system, which is known as position classification rating, has been in place for the last 40 years, the MoPSHRD has been studying the point-rating system for the last 20 years, according to Mehari Samuel, Human Resources Senior Expert at the Ministry. “The latter system is expected to be ratified as a proclamation in the near future,” he says.
Under the point-rating system, each job in the civil service system is evaluated and ranked under 22 job levels. “Payment for each job in the point-rating system is calculated based on the resources of the government to pay and the expenses that will allow the last employee on the last rank to be financially safe under the existing economic condition,” he says.
Currently jobs in 12 ministries are evaluated under the point-rating factors, with support from consultants from the United Kingdom. MoFEC’s new salary system is based on the scale in the point-rating system, while teachers are not evaluated yet, according to Mehari.
However, some argue that the point-rating payment system will worsen the problem. Experts say this is because, unlike the existing system, under the point-rating system, employees themselves have to be evaluated by the staff of the same organisation to fall within one of the 22 job levels. Some of the factors that will be used to evaluate each employee include the type of work, level of responsibility, and the performance of the employee.
“A point-rating payment system is not advisable, especially for government institutions,” argues a human resource development expert who spoke to EBR on the condition of anonymity, “it is highly subjective and inapplicable.” According to this expert, the subjectivity issue emerges because there are many evaluation factors and they vary depending on the employee and the institution, which makes evaluating subjective.
“Any employee, whether you hire them with the highest possible salary or less, always expect the next salary increment after a certain amount of time,” says the expert. “Therefore, in addition to a reasonable salary, you need to offer trainings opportunities, career development, and giving a reasonable amount of rewards if the institution performs beyond its targets or if the institution generates its own income.”
Regardless of the differing opinions, there’s a general consensus that policy makers have a difficult choice to make, between allowing a fall in real pay levels for public servants and a fall in the service delivery. However, improving public service pay is a complex and tiresome job. On one hand, the government will be put in difficult position of prioritising and downsizing huge public projects if it decides to increase the salaries of its employees.
On the other hand, studies demonstrate it is critical that government employees be adequately compensated to improve their efficiency and quality of life – and, in turn, improve the quality of service delivery. However, some suggests that increasing benefit packages should be done carefully, as the measure could potentially trigger inflation spiral or may require downsizing public projects. EBR


4th Year • August 16 2016 – September 15 2016 • No. 42

Ashenafi Endale


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