Dawid-Willem Pienaar

The ongoing #feesmustfall university protests have been very successful in at least one respect: engaging the country in a discussion around a key aspect of government policy. Too often in South Africa important public policy has been made with little public discussion or debate. Education is undoubtedly one of the country’s most important priorities – it enables individuals to harness their potential and enhance their capabilities, and consequently, contribute to the country’s development. The fees protests create a space for citizens to truly engage in the education policy challenges that face the country. Nonetheless, this opportunity for discussion could be wasted or might possibly even do more harm than good if the discussion is kept too narrow or is conducted in an uninformed fashion.

While the protesters have expressed many legitimate concerns, a troubling development has been the implication by some that only two options are available for each of us. You are either a fully-fledged supporter of the free higher education movement or an outright opponent. In reality, there are a continuum of policy options, each of which involves a series of trade-offs and compromises. An honest discussion of the options available should be predicated on a thorough understanding of these trade-offs and, in particular, what the country’s overall development priorities are and should be.

Post-school education priorities

While it is important to consider priorities by looking across the range of government services – for example, comparing the needs within higher education with those in public health and basic education – here we will focus our attention more narrowly on the trade-offs and alternatives within the Post-School Education and Training (PSET) system. To understand some of these trade-offs, it is worth looking at recent trends in PSET funding, as well as the stated government priorities in this area.

The PSET system is made up of a large number of diverse institutions, but in terms of enrolments and public spending, it is dominated by two types of public providers: universities and technical vocational education and training (TVET) colleges.

· Public universities (which include the institutions formerly referred to as technikons) represent the largest part of the PSET system, with approximately 937 000 student enrolments in 2014 and an estimated total expenditure across all universities of R52.9 billion in 2014/15.[1] About 40% of university funding is through direct government transfers, with 33% coming from student fees and the remaining 27% being from other smaller (“third stream”) sources.[2]

· TVET colleges, until recently known as Further Education and Training (FET) colleges, offer vocational and occupational training programmes that are typically aimed at developing mid-range technical skills and attempt to more directly prepare students for the demands of the workplace. TVET college enrolments amounted to 702000 in 2014 and total expenditure in 2014/15 was estimated at R8.5 billion; over 90% of which was funded through direct or indirect government transfers.[1]

We will now briefly consider Government’s current policy priorities within the PSET system, as outlined in the White Paper on PSET published in 2013. The White Paper is the primary policy document within the PSET system and aligns closely to the targets and objectives set forth in the National Development Plan (NDP).

Policy Priority 1: Growing and improving TVET colleges

The graph below shows the growth of student enrolments in TVET colleges in recent years, as well as the 2030 enrolment targets based on the White Paper. It reflects what is explicitly stated in the White Paper: “The Department of Higher Education and Training’s (DHET) highest priority is to strengthen and expand the public TVET colleges and turn them into attractive institutions of choice for school leavers”.[3] This priority is based on (at least) two arguments. Firstly, the country is not producing enough graduates with the mid-range level practical and technical skills that the economy requires. Secondly, there are not sufficient education and training opportunities and pathways for the millions of South Africans who are not in employment, education or training; and that most of these people either do not have the academic background, interests or competencies to (directly) enter universities.

The TVET system is expected to be the key vehicle to address these issues. This requires substantial quality improvements and increases in learner numbers. TVET college enrolments are targeted to be more than 50% higher than university enrolments by 2030 – which would represent a fundamental transformation of the PSET system. The growth in enrolments between 2010 and 2014 already reflects TVET’s increasing importance. Nonetheless, TVET colleges still face extensive challenges, and transforming colleges into “institutions of choice” will likely require tremendous investment; as discussed below.

Figure 1: Number of enrolments in Universities and TVET colleges 2010, 2014 and 2030 (target)

Sources: [3] and [4]

Policy Priority 2: Expanding access for poor students through the enlargement of NSFAS

A second priority area has been increasing access to higher education for the poor. To this end, we have seen a rapid increase in the amount of funds directed towards the National Student Financial Aid Scheme (NSFAS), which provides bursaries and loans to students from poor households. Since 2000, the contribution made to university fees by NSFAS has grown from around R0.5 billion in 2000 to just under R7 billion in 2014; a growth rate of 20% per year.[1] The growth rate in NSFAS funding far exceeds the growth in direct university subsidies over the same period, which has been slightly above inflation in recent years.

The government has thus prioritised increasing the proportion of funding that is explicitly directed at poor students; a commendable effort, despite the many challenges that continue to confront the NSFAS system. However while NSFAS funding benefits the students receiving it, the university receives the same amount of funding regardless of whether the fees are paid through NSFAS or from private sources. Therefore an increase in NSFAS funding does not practically increase the amount of per student funds that are available to a university. The frequent above-inflation university fee increases – a key contributing factor to student discontent and protests – was therefore perhaps a side-effect of prioritising NSFAS funding over more direct forms of university funding.

Note however that this was not the only, and likely not even the main factor driving increased fees. Universities have experienced relatively high enrolment growth rates and above-CPI increases in the costs they face. These cost pressures appear to originate largely from the deterioration of the rand [7] – affecting books, materials, journals and technologies – although more research is required in this area.

Other policy priorities

The White Paper and NDP include a host of other policy priorities. This includes increasing the number of doctoral (PhD) graduates produced by universities, increasing the number of students in university and TVET residences (in an environment that supports students who otherwise do not always live in conditions appropriate for academic success), implementing initiatives to increase pass rates and lower dropout rates in both universities and TVET colleges and strengthening the community college (adult education and training) system.

Delivering on all of these policy priorities as set forth in the White Paper, which notably does not include fee-free education for all, will require substantial increases in the funding of post-school education and training.

National Treasury recently commissioned DNA Economics and Mzabalazo Advisory Services to perform a research study on the costs and financing options of implementing the White Paper.[1] The study estimated that if the White Paper is implemented in 2030, between R352 billion and R654 billion (depending on which of a wide range of implementation scenarios is selected) will need to be spent annually in the PSET system; up from R63 billion in 2014. Nominal prices can be difficult to interpret, but in real (2014) prices this translates into an increase in total annual spending across the PSET system of between 115% and 296%, in real terms, between 2014 and 2030. In other words, even without fee free education for all, an additional amount of between R73 billion and R189 billion in real terms (roughly between 2% and 5% of current GDP) would need to be found per annum by 2030. [1] And this does not include the hundreds of billions of rands that would need to be spent on infrastructure to enable this expansion.

For comparison, in the same study, it was estimated that the cost of fee-free higher education over the next three years (the Medium Term Expenditure Framework from 2017/18 to 2019/20) would be R90.5 billion.

The costs of implementing the White Paper are thus enormous. Arguments can be made as to whether the White Paper is overly ambitious and whether certain aspects of it are even practically implementable within only 14 years. Additionally, not all of the above cost increases would necessarily need to be borne by the fiscus. Nonetheless, the White Paper cost estimates highlight that existing government policy calls for a massive expansion in the PSET system – and this is without considering the fee-free demands.

Between a rock and a hard place

Assuming the most optimistic cost estimates and fiscal outcomes, obtaining sufficient funding to implement the White Paper will be very challenging. The introduction of fee-free education for all, would greatly increase the funding shortfall. So, even if education is elevated as government’s main policy priority over this period, fiscal sense suggests that it would be near impossible to implement all of these policy changes. The impending risk of a national credit downgrade and stagnant economic (and therefore revenue) growth rates also looms large over these already ambitious spending plans.

These challenges raise additional questions around potential sources of funding; including whether and how taxes should be raised, or how wasteful or ill-conceived expenditure within government could be reduced. But even if alternative revenue streams could somehow be freed up, the amounts required are substantial and would need to compete with every other government spending priority, some of which are manifestly more pro-poor than higher education. Analysis by Servaas van der Berg, for example, suggests that in terms of government university subsidies, almost half (48%) are for the benefit of the richest 10% of the population [5]. Van der Berg warns that this estimate might be overstated, but it is clear from this and other analyses of university attendance, that the benefits of university subsidies would largely flow to richer households.

Moving forward

Clearly not all PSET priorities can be simultaneously paid for; compromise as well as innovative solutions will be required in determining PSET policy generally, and university fee policy in particular.

The level of university fees are unaffordable for too many; a situation that is not sustainable in a society crying out for greater equity. However, in practice, a large number of university attendees are able to afford their fees up-front and a significant proportion could afford to repay (reasonably priced) student debt. It would seem inequitable for these students to be afforded free higher education while other parts of the education system (such as the TVET system) remain chronically underfunded and while public schooling is not yet free for all.

Another option is to bring in additional government revenues through increased taxation. This raises a number of immediate questions, such as whether higher education should be in the front of the queue for such additional revenue or whether higher taxes could weaken the economy. These are extensive discussions in their own right but will not be covered here. However there are also several less obvious issues inherent in tax increases that should be considered. For example, it would be difficult to guarantee that any tax increase will be (continuously) directed towards universities, unless an earmarked tax or levy is put in place. And if an earmarked tax is put in place, and universities are simultaneously not permitted to charge fees (i.e. fee-free education is implemented), there will essentially be a fixed budget for university spending. In this case, universities will lose their ability to generate additional income when needed, which in turn could lead them to restrict access or lower quality.

Most urgently, it appears that solutions need to be found that provide greater support to poor and middle class students. This could take the form of a combination of grants and loans, and needs to cover not only fees but also the associated costs of attending university. As argued by Nico Cloete, perhaps we should call for affordable, rather than free, higher education for all. [6] It should be noted that even this compromise position would have significant financial implications for the state, and will require reprioritisation or additional taxation.

In the current climate, views will differ strongly on all of these issues. It is understandable that many protestors have taken a hard line on fee-free quality education; this is an easily understood, clearly articulated and popular message. Likewise, government is right to be concerned about the immediate fiscal and wider economic costs associated with these demands. It should also be recognised that students hold a range of views and space should be created for these to be heard and discussed. To find a solution acceptable to most, an honest, informed and more inclusive debate is needed. This will require all parties to engage on the long-term interests of the country and the needs of the education system as a whole; and to acknowledge that in the short term it is simply impossible to resolve the multiple policy challenges that currently confront this sector.

References

[1] National Treasury (2016) Consolidated Report on the Costing and Financing of the White Paper on PSET. Available online at: https://www.gtac.gov.za/Pages/PER.aspx

[2] DHET (2015) Are we making progress with systemic structural transformation of resourcing, access, success, staffing and researching in higher education: What do the data say? Paper prepared for the second national Higher Education Transformation Summit. Available online at: http://www.dhet.gov.za/summit/Docs/2015Docs/Annex%203_DHET_Progress%20with%20transformation%20_What%20do%20the%20data%20say.pdf

[3] Department of Higher Education and Training (2013) White Paper for Post-School Education and Training

[4] Department of Higher Education and Training (2016) Statistics on Post-School Education and Training in South Africa, 2014

[5] Servaas van der Berg (2016) Funding university students: Who benefits? Published in the Council of Higher Education’s 2016 publication “Kagisano Number 10” colloquium on Student Funding. Available online at: http://www.che.ac.za/sites/default/files/publications/Kagisano%20Number%2010%20-%20Student%20Funding%202016%20-%20electronic.pdf

[6] Nico Cloete (2016) The ideology of free higher education in South Africa The poor, the rich and the missing middle? Published in the Council of Higher Education’s 2016 publication “Kagisano Number 10” colloquium on Student Funding. Available online at: http://www.che.ac.za/sites/default/files/publications/Kagisano%20Number%2010%20-%20Student%20Funding%202016%20-%20electronic.pdf

[7] Philippe Burger (2016) Between the devil and the deep blue sea? The financing of higher education. Published on the Econ3x.org web forum. Available online at: http://www.econ3x3.org/sites/default/files/articles/Burger%20P%202016%20Government%20subsidies%20to%20higher%20education%20-%20FINAL2.pdf