Status & effectiveness of student funding: DHET ; NSFAS, HESA, FFC, HSRC & Stats SA briefings

Meeting report

Department of Higher Education: Status and effectiveness of student funding in South Africa
Mr Gwebs Qonde, Director General, said that the National Student Financial Aid Scheme (NSFAS) funding was falling short of demand. Some universities spread smaller awards to a larger number of students, a practice called “top slicing”. In 2013, an additional R1 billion was sourced from the National Student Fund (NSF) to assist with a shortfall of R2.6 billion for university students. It was a once off amount, and not part of the Medium Term Economic Framework (MTEF) baseline. To fully fund NSFAS students, R36 billion for university and R15 billion for Technical and Vocational Education and Training (TVET) students was required over the MTEF period.

Mr Theuns Tredoux, Chief Financial Officer, DHET, noted that the cost to family and state of higher education had escalated over the years. The cost of higher education contributed to the increasing inaccessibility of higher education.

Dr Dianne Parker, Acting Deputy Director General, attended to the Ministerial review of NSFAS. Despite increases in NSFAS allocations, available resources were inadequate to cover all financially needy and academically successful students at universities. First time entry students were particularly at risk of not being funded. The recommendation was for a full state subsidisation of poor students and those from working class backgrounds to be progressively realised over a specific period. The White Paper for post-school education and training made a commitment to progressively introduce “free education” for the poor as resources became available. The Ministerial working group had advised that fee-free university education for the poor was feasible if built on the current NSFAS cost sharing and recovery model.

Mr Qonde concluded with remedial actions proposed. Policy dialogue with other government entities had to ensure common understanding of challenges and address policy development for effective and efficient administration of NSFAS.  Terms of reference for forensic investigations to identify fraudulent activity with respect to NSFAS had been developed. There had to be improved Departmental support to institutions for improving teaching and learning development for students from poor economic backgrounds to succeed.

NSFAS: briefing on NSFAS student-centered model of financial aid
Mr Msulwa Daca, CEO, NSFAS, said that the organisation’s structure, policies and systems had not kept pace with growth in funds. Despite the growth in funds, supply still fell short of demand. There was a shift from an institution-centred to a student-centered model. The student-centered model standardised and speeded up processes. There was an alignment with admission and registration processes, fraud detection and prevention, with improved governance through new systems, and the ability to raise and manage additional funds. The challenge was that the model depended highly on accurate student and institutional data. It was a serious challenge for most universities and colleges in the pilot phase. Dates for the required data and action needed to be aligned to the academic calendar.
 
Discussion
Dr C Madlopha (ANC) noted that the DG had said that NSFAS scarce resources were being stretched, and that funding was inadequate. There had to be firmer guidelines for allocation. The fraud and corruption investigating unit dealt with those matters, but only when damage had already been done. There had to be internal mechanisms for oversight of the scheme.

Dr Madlopha was concerned about allocations still being skewed in favour of the previously advantaged universities, which were in fact still advantaged. She asked what was being done to close the gap between advantaged and previously disadvantaged, with regard to universities. The previously disadvantaged had to get more. There were disparities in the budget. In universities catering to the previously disadvantaged, there was a high level of student unrest. The current formula had to be reviewed. There had been a review by the Minister of Higher Education in 2010, but government was still engaged with remedial plans. The old NSFAS formula had been drawn up in 1999, and it spoke to the challenges of that time.

Mr C Kekana (ANC, PC on Higher Education) remarked that strong statements had to be made about higher education. There was the hope of combating poverty, and of assisting artisans and technicians. Government was being compelled to face challenges and succeed. The question was why it had taken so long to change the structure of the NSFAS, already established in 1999. Government had to take the flak for student protests at universities. The buck had to stop with government. Universities had individual autonomy, but government had to have a say. The imbalance of distribution to universities had to be addressed.

Ms S Shope-Sithole (ANC) remarked that she was impressed with the presentation. The e-learning policy made it possible to close the gaps. She agreed with the principle of rewarding performance. The citizens of tomorrow had to learn to be responsible. She liked the idea of laptops for school children. They were from a background were there were no libraries.

She remarked that fraud was present in the private sector as well, even in churches. The Department had requested ongoing reports to monitor for fraud. The PC had requested quarterly reports. The Special Investigating Unit (SIU) and the Auditor General (AG) had to help deal with fraud and corruption.

She was impressed, because the President’s call for radical change had been heeded. The National Treasury (NT) had to be encouraged to support the Department. The country could not compete without education. Skills and technology were needed. Children had to be skilled.

Mr M Figg (DA) remarked that the briefings were passionate, but he wondered what the Minister of Finance would say. He appreciated the assurance that fraud and corruption would be dealt with. He asked about the possibility that students and university staff were also involved in fraud.

He referred to funds for needy students. There was a need for ability testing, before funds were awarded. He suspected that throughput rates were not as high as the briefings had stated.

He noted that the focus had been on universities. There had to be more emphasis on TVET institutions. Academic staff were not required to have teaching qualifications, which could contribute to low throughput rates.

He asked if the R1 billion for the national Skills Fund was a loan or a grant.

He acknowledged the challenge of high student debt, and asked if universities were approached for the recovery of debts.

Dr B Bozzoli (DA, PC Higher Education) remarked that there was a “storm” of factors that impacted on the NSFAS. The problem would remain insoluble unless more funding was made available. There was going to be an increase in the number of students admitted. University subsidies had gone down over the preceding 20 years, while universities had increased their fees. There was poor administration of colleges and universities. Increased funds to NSFAS had to be inflation based. 2.5 million students would be entering tertiary institutions in the near future, which was a recipe for riots. If students without resources were admitted, there would be even more rioting than in the current year. There was a massive structural problem that would remain difficult to solve unless there was more money. More children in schools had led to more money being made available. It was not like that at the tertiary level. At the school level, when classes became bigger, more teachers were appointed. At universities, lecture halls were simply filled to overflowing. There was no preparedness to pay for the increase in student numbers.

Dr Bozzoli said that forensic investigations were long overdue. Fraud uncovered in financial aid offices would save money.

Mr A McLoughlin (DA) said he was worried about the fact that a presentation for an education department contained no full stops or semi-colons.

He referred to slide 3. In 2013 an additional R1 billion had been sourced to assist with a shortfall of R2.6 billion for university students. He asked what had been done about the R1.6 billion that still remained.

He then referred to slide 7. The increase in TVET allocations had been reduced to 5% for 2015/16, and yet student enrolment was projected to increase at a rate of 6.1% per year.

Mr McLoughlin referred to disbursements listed in slide 8. A bursary was a contract. He asked what kind of quid pro quo performance would be required from students. The objective was to educate as many people as possible. It could not be done without reference to the economy. The problem was how to absorb more students while the economy was growing at the rate of 1.6%. There had to be an alignment with economic expectations, and with the needs of the economy. More people could be absorbed as artisans and technicians.

He asked if the family threshold referred to in slide 15 constituted gross or net earnings.

NSFAS had come into being in 1999, and should by now have already seen the opportunities for fraud and corruption. R20 billion had landed up in the wrong pockets. The question was where the buck stopped, and who was to be held responsible. There had to be action against those who caused the problems. He asked what could be done to recover the R20 billion lost, in the form of criminal charges and firing people.

According to slide 25, some students were still at university after nine years. Students failed and continued to get grants.

Mr McLoughlin remarked that the additional funds referred to in slide 30 where all from the fiscus. He asked if it was necessary to split them.

He noted that the NSFAS had received a disclaimer opinion four years before.  That had made alarm bells go off. It was the worst audit opinion an entity could get. The NSFAS had to up its game. NSFAS still referred to the “pilot phase” (slide 6). He asked when the pilot phase would end.

Mr N Gcwabaza (ANC) said that the real causes of increased higher education costs had to be researched. University fees had increased at the rate of 9% due to higher education inflation, whilst there was only a 4.6% increase in NSFAS allocations for 2015. There was student unrest at the start of every academic year, and a clamour for funding. He asked about other factors contributing to rising fees.

He asked what had caused the student decline referred to in slide 7.

He said that higher education funding was not just about money. There were also challenges related to the passage of students through the system. The number of students justified the money, but the skills developed also had to be linked to social and economic transformation. Employment had to reduce poverty. It had to be known what students were capable of, when more money was requested from the Treasury. Output had to speak to issues.

Mr Gcwabaza asked how much of R25 billion awarded as bursaries had been lost due to fraud. What efforts were made to recover lost money? How much had not been paid back by working students? Money was lost when students dropped out. He asked if money remaining could be re-allocated, if ten out 20 students dropped out.

He asked if the situation had improved with regard to the dropout rate. It was questionable whether money paid directly to students was good policy. It created opportunities for fraud. A voucher system could be used instead of cash, to save money on travel and meals.

Mr M Mbatha (EFF, PC Higher Education) said that fee-free higher education had to be seen in the context of a society getting poorer. The TVET project was receiving less on a year on year basis. Interest in the TVET system had to be heightened, and more had to be invested in it.

Ms Y Phosa (ANC, Chairperson, PC Higher Education) asked what could be done to clamp down on student protests. Increased access for the previously disadvantaged would require significant resources. The budget shortfall was a big gap. R9 billion was needed over the MTEF period to close the gap. She proposed a strong motivation to the Treasury to make that amount available. The R9 billion had to be an increase over the baseline, to make R9 billion per year available over the MTEF.

Mr Qonde responded that the formula for the funding principle depended on the size of the institution. Unisa had the largest enrolment, at 300 000. The Tswane University of Technology was the next largest, at 52 000. It was not just the number of institutions. Funding programmes for engineering and medicine were more expensive than those for a Bachelor of Arts (BA) in History, for instance. In determining the number of students, the Department was guided by executive instruction. There had been a Ministerial statement that funding for the historically disadvantaged was to be prioritised. Funding for NSFAS was translated into the infrastructure fund and the teaching development grant. Funding skewed towards the historically advantaged students was not correct. Over the preceding eight years, the disadvantaged had received 40% of total funding. Internal mechanisms to address fraud and corruption were pro-active. Where systems lapsed, people got through, and other measures had to be employed. There was collaboration with Home Affairs and SARS to clamp down on fraud practices, but only so much could be identified. Those involved with fraud and corruption were also updating their own technology.

A fee-free costing model had been developed at the ANC conference in Mangaung in 2012. There was progressive provision for fee-free education, and it was possible. There were 67 000 students in the TVET system, and 953 000 at the universities. There was overemphasis on the inadequacy of resources. The question was what kind of culture and work ethic was required to get better output for less. Student unrest was not just a matter of a shortage of funds. The strike by Tswane students was attributed to the shortfall of NSFAS funds, but that was not the case. For fee-free education there, had to be a balance between university students and artisans and technicians. Funding had to be steered towards the TVET institutions. That was also the pattern in the leading countries.

Dr Parker said that efficient teaching staff had to be developed for the TVET and the universities. The university sector had aligned skills production with the needs of the economy, but TVET institutions had to be strengthened. The Department had an oversight role over the administration of NSFAS. There was R20 billion missing from the system, and R41 billion had been spent thus far. Forensics would tell how much had been misspent. Throughput rates had been followed since 2004. Part-time studies took longer to complete. They could take as long as ten years. The Department had embarked on a larger study of throughput. Access to support was a policy issue.

Mr Daca responded that vouchers had been introduced in the new model. The situation with regard to dropouts was that whether money had been paid or not, if a student dropped out at the end of the year, the money was gone. Some universities charged more, but gave of their own resources. The 2012 turnaround implied changing a massive system. That was why it was still referred to as a “pilot phase”.

Ms Shope-Sithole remarked that there was no option but to support more funding. The Treasury had to demand a monthly report on fraud in higher education. Internal audit of risk management had to be in place.

The Chairperson remarked that the Treasury had to look into the late payment of money to students.

Ms Julia de Bruyn, National Treasury, noted that the entire school system did not function according to the same academic year. Books for basic education for the following year were already being bought.

Mr Qonde added that various institutions were affected differently. Institutions paid their own salaries. By January, they were out of cash and could not pay.

The Chairperson advised that the Treasury and Higher Education should engage on the matter.

Higher Education South Africa: Funding in South Africa: context and key challenges
Dr Jeffrey Mabelebele, CEO, Higher Education South Africa (HESA), noted that the state budget for higher education had begun to decline in 2004. Many students had dropped out for lack of funding. There were other contributing factors to dropping out, but funding was the catalyst. There were decisions to be reached about possibly reducing intakes, and whether the current trajectory had to be adhered to.

Dr Max Price, Vice-Chairperson, HESA, said that the income per FET-enrolled student was a core issue. The same amount would buy less in future. The NSFAS had only increased numbers, without increasing fees.

Dr Mabelebele indicated that according to a global trend graph, Cuba devoted 4.47% of its GDP to higher education, whereas for South Africa it was 0.71%. The ideal GDP percentage for South Africa had to be determined.

Prof Ahmed Bawa, Funding Strategy Group Member, HESA, said the DHET had to be engaged about research and knowledge production. It was not only about churning out numbers of people, but it was not only about quality teaching either. There was a storm under way in the current year. At the Durban Technical University, 76 000 people had applied for 6 000 places. A creative way had to be found to deal with post-school education. South Africa had to produce people who could participate in the global economy.

Discussion
The Chairperson remarked that funding as percentage of the GDP was important. A comparison had to be made with Zimbabwe and other African countries. Funds had increased slowly but had actually declined in real terms.

Mr Gcwabaza remarked that if funding did not result in a product, there would not be economically active people. The tax base had to be increased. He asked why skills did not talk to the transformation of the country.

Dr Madlopha remarked that although there was investment in education, skilling was inadequate.

Dr Mvuyo Tom, Funding Strategy Group Chairperson, HESA, said that there was a skills continuum. There was a focus on areas that had to be responded to.

Mr Figg suggested that more money should be invested, that throughput had to be increased, and that funds had to be channeled to whom they were intended.

Mr Jaco van Schoor, Funding Strategy Group Member, HESA, replied that the subsidy was shrinking, while tuition fees were increasing. There had to be a balancing act.

Mr Mbatha remarked that non-South Africans were being employed. The skills base of Africans was lagging far behind.

Dr Bozzoli said that she sensed that some universities were not doing their job well. 90% of  Wits University graduates got jobs within a year.

Mr Kekana said that there were weaknesses with regard to both inadequate funding and the ability to utilise funding. It had to be borne in mind that graduate professionals like engineers had to be assisted by technicians. The ratio was ten technicians to one engineer. There had to be a review of how many students graduated in maths, science and accounting.

Dr Tom responded that technicians would be trained to work with engineers.

Prof Bawa added that HESA wanted to be engaged with the shift in the higher education structure. The TVET system was broad-based. It would not do to cripple the university system. The question was what kind of post-school system could be achieved with existing resources.

Mr Kekana referred to the statement of Mr Mbatha about non-Africans being employed, and pointed out that a country like Japan had relied heavily on German professors to establish their science and technology base.

Dr Price said he agreed that universities had to produce graduates. It had to be remembered that not only science, technology and accounting contributed to the economy. There was evidence of unemployed graduates in the Western Cape. A national destination study had shown that black graduates were not employed because of racism. Focus had to be on the higher education budget. The percentage that went to research and innovation was poor.
 
Ms Shope-Sithole said that statistics were needed that compared accountants produced by the universities, to those produced by the Auditor-General (AG).

Dr Tom replied that the higher education system produced accountants, who then proceeded to the AG. A B Comm accounting degree first had to be completed at a university.

Financial and Fiscal Commission (FFC): briefing on higher education funding
Mr Bongani Khumalo, Chairperson, FFC, took the Committee through the linkages between higher education and economic development; and higher education spending and the GDP. Government spending as a percentage of total expenditure was falling. 66% of students enrolled at universities and TVETs were African, 22% were White, 6.7% were Coloured and 4.7% were Indian. High African enrolment did not translate to a high participation rate. Access to higher education was still racially and regionally inequitable. Graduate output efficiency was low. 20% of universities produced 55% of postgraduate qualifications. Post-school education was becoming more expensive and cost escalation outpaced inflation. The current funding model disregarded the cost of running certain programmes; the location of institutions; historical legacies; resource endowment and revenue raising potential of some universities, and the quality and level of preparedness of students. Challenges were subject to a probe by the Ministerial Committee on the review of higher education funding.

Human Sciences Research Council (HSRC): briefing on a funding framework for higher education
Ms Angelique Wildschut, Senior Research Specialist, HSRC, stated that post-matric education had to be evaluated for private and social returns. The developmental state had to create opportunities for students from low income households. There had to be cost-sharing, as higher education had both public and private benefits. There had to be quality and competitiveness, responsiveness to social and economic needs, and enhanced co-ordination between the universities and the FET/TVET sector. The NSFAS mechanism had to consider academic potential as a criterion for allocating loans. There had to be stricter application of the rules regarding length of support to students. The current growth path exacerbated the mismatch in the skills profiles of labour demand and supply, and so reinforced inequality.

Statistics South Africa (SSA): Statistics on South African higher education institutions
Mr Pali Lehohla, Statistician General, said that Unisa had the most students, but those students took longer to graduate. The general pattern was that without schooling, a person would not have money before the age of 65. With education, a person could get money earlier. There had been much weaker gains among the African group of all ages over the preceding 20 years. There had in fact been regression. The Unisa model had to be considered. It accommodated six times more than other institutions, but represented only a quarter of bursary funds. The information technology (IT) revolution could drive open source-based free education. It could be possible to have a Unisa model without fees in the future. Harvard University enrolled 10 million people on an online package. It was projected that in 50 years, all 4 500 higher education institutions in the United States would cease to exist.

Discussion
Mr Kekana remarked that it was all fine and well to hear in what direction the world was moving, but the question was how far behind the USA South Africa was. The Third World was 20 years behind the USA. South Africa could not use the US model. IT in schools was a long-term prospect. The question was, how many schools had IT?

Ms J Kilian (ANC, PC Higher Education) remarked that the Unisa allocation was expensive. But there was no contact learning there. The question was what kind of model South Africa needed, given the backlogs and the history behind them. She agreed with Mr Kekana. There had to be a proper preparatory phase. There were students with potential who were not getting a basic foundation. For NSFAS to be effective, it had to be known what was inherited from basic education.

Mr Risenga Maluleke, SSA Deputy Director General, replied that catching up with the USA could be done by evolutionary or revolutionary means. Challenges had to be looked at.

Mr Qonde replied that the DHET had investigated distance education. There had to be pedagogic methods that produced results. The country had to develop its own standards. Research had to be aligned with the needs of industry.

Mr Gcwabaza said that online education could eliminate much frustration.

Dr Madlopha referred to slide 16 of the FFC briefing. She asked if universities were completely autonomous in their setting of student fees. People were dropping out because they could not afford tuition fees.

Mr Khumalo responded that universities competed for students. Universities had to determine choices for students.

Dr Madlopha remarked that higher education funding had to be revisited. Universities were getting 82% and the Further Education and Training (FET) colleges 18%. Africans were flocking to the FET institutions. Funding was inadequate. She asked about the relationship between the DHET and the professional councils in the built environment. Professional engineering councils were blocking African skills.

Mr Khumalo responded that higher education was not to be seen in isolation. There had to be data to understand the situation. The question was how much money, besides NSFAS funding, came from the National Research Foundation (NRF). It had to be known how much money was in the system. The FET system was weak. For many, there was either the option of university, or no higher education at all. There had to be a look at demand side numbers. To determine if there was sufficient money, one had to ask who the beneficiaries were.

Mr Mbatha remarked that there was a general understanding that fees went up every year. He asked why that was the case. The question was how to shock government to feel the pressure as higher education felt it, and how to make the best case for NSFAS funding, given the priorities of government and the needs of the people.

Ms Shope-Sithole asked that the DHET apply its mind to how e-learning could assist. She herself had opened a school at Bushbuck Ridge in 1984, to teach computer skills, and later accounting.

Mr Figg remarked that the problem of unskilled black people was visible at street level. It was caused by inadequate funding. He suggested that the number of graduates needed in different sectors, like agriculture, be determined.

Mr Lehohla remarked that better funding had to be aligned with developments in industry and technology, like the Square Kilometre Array (SKA) telescope project and oil discovery. People had to be trained quickly to take advantage of developments. E-learning and distance learning could save accommodation costs. The question was whether systems could catch up. South Africa was not that far behind. Technology made the earth flat. Computer literacy had to improve, especially in the rural sreas. The Unisa model predated itself. It could transform itself into a technology-based institution. Blacks and Coloureds had been left behind. There had to be policies to secure black advancement.

Mr Maluleke said that the question was whether the apartheid city structure could absorb larger student numbers at universities like Stellenbosch. It was not only a matter of money.

Ms Wildschut said that there had to be support for NSFAS. The NSFAS structure had to be refined. The nature of future support mechanisms had to be determined.

Mr Mbatha noted that fees had gone up by 30% between 2010 and 2014. There had been student strikes. He asked what drove universities to raise fees.

Mr Van Schoor replied that professors earned large salaries. Subsidies had been increased at less than the inflation rate.

Mr Maluleke said that increased allocations to universities should not be looked at in monetary terms only. If one looked at the increases in numbers, the increase was not big. The increase in student numbers had overtaken the increase in funds.

Mr Kekana remarked that IT in South Africa was an infrastructural issue. There were mountainous regions in rural areas were there were no cellphone signals. It would take a few years to supply infrastructure. There could be a strategy to prioritise the matter, and an increased budget for that. He asked if medicine could be taught through IT, as students had to perform practical work.

Ms Shope-Sithole remarked that a lead had been taken to show faith in IT. Lectures could be recorded on a computer and listened to again.

Ms Phosa said that there was a need to address under-funding. There had to be quality education to redress the imbalances of the past.

Mr Qonde responded that the NSFAS contributed to the growth of a black middle class. Human resource (HR) capacity had to be developed.

The Chairperson concluded that education had to be funded better. The old ANC slogan of “freedom in our time” could become a resolution to catch up with the advanced countries in our lifetime. The matter had to be prioritised. There were not enough resources. There would have to be another meeting. There were challenges in the economy to be reckoned with. It was too early for recommendations. The issue had to be returned to in another joint sitting, when resolutions had to be formulated.

The chairperson adjourned the meeting.