Higher Education and Training funding: input by Financial and Fiscal Commission (FFC); Auditor-General on Department of Higher Education and Training audit outcomes

Meeting report

Chairperson’s Opening Remarks:

The Chairperson noted the apology from a representative from the Department of Higher Education and Training (DHET) for the absence of the Minister and Deputy Minister, who were attending a Cabinet meeting. The Chairperson also noted a request from Mr M Mbatha (EFF) for permission to leave at 12pm. Mr M Tshishonga (Agang) also provided a written apology for his absence from the meeting.

Financial and Fiscal Commission briefing

Mr Bongani Khumalo, Chairperson of the Financial and Fiscal Commission (FFC) began by giving an outline of the presentation, mentioning the key points of the presentation.

Dr Ramos Mabugu, Research Director, FFC, said that the development of higher education was important for its sustainability. As an investment, as it provided for better jobs, salaries and quality of life, and also reduced the risk of unemployment, poverty and deprivation. It collectively benefited the country’s economic growth and development through the increase of technological frontiers. Higher education was a necessary condition for the promotion of democratic values, social cohesion, cultural development and individual security. Policy had to be driven by the realities on the ground all the time, and the financial scheme for students must be looked at thoroughly. The demands for funding continue to increase. What were the alternative ways that could be considered? Something must be done, to ensure that the money that was spent on higher education came back to the economy.

Dr Mabugu asked whether higher education and research was a private or public good. He then answered this question by referring to national research programmes, basic teaching and learning, life long learning and specialized training within public organisations. These factors had to be taken into account in determining the way in which education was funded. In terms of the overview of funding sources, Dr Mabugu stated that households, governments, universities, the economy and students were the direct entities in which funding for students was allocated and utilized. Appropriation and subsidies relied on the taxes of the population, and in the current situation the unsteady growth of the economy meant that revenue was not high, so the allocation to student funding through grants and loans could not be boosted rapidly.

Ms Sasha Peters, Researcher at the FFC, said that the establishment of the Department of Higher Education and Training was aimed at achieving a single coordinated higher education system. The National Development Plan (NDP) had been adopted in 2011 as the driver of government policy and resource allocation, with specific goals to be achieved by the DHET by 2030.  The National Skills Development strategy aimed at integrating workplace training with theoretical learning, while the white paper on post-school education and training aimed at the complete transformation of the post-school sector by 2030.  

The 2014-2019 Medium Term Strategic Framework (MTSF) had set out measurable targets, aligned to NDP and national policy goals. These were to:

• Increase university student enrolment from 950 000 to 1.07 million;
• Increase Technical and Vocational Education and Training (TVET) student enrolment from 650 000 to 1.2 million;
• Increase the number of artisans produced from 18 000 to 24 000 per annum;
• Increase PhD graduates from 1 800 to 3 000 per annum;
• Increase the number of engineering and science graduates;
• Increase the number of qualified TVET lecturers; and
• Reduce the student dropout rate
• The challenges that were prevalent were that access to institutions was racially and regionally inequitable, graduate output was low, and only five universities producd 55% of postgraduate qualifications.

The FFC indicated that R41.8 billion had been allocated for the 2015/2016 financial year, which was an increase of 7.3% from the 2014/2015 financial year. Of this, R32.8 billion was for university education, and R8.5 billion for vocational and continuing education and training.  A further R11.8 billion for the SETAS and R2.9 billion for the National Skills Fund, were a direct charge against the National Revenue Fund. Together with administration and other expenses, the total estimated DHET expenditure for 2015/16 was R56.5 billion.

Ms Peters said that the mandate of the DHET was to expand access to and improve success within the post-school education and training system. The key strategic goals of the Department were to increase the number of skilled youths and students to enter the labour market successfully, and to expand research, development and innovation capacity. A skilled and capable workforce was needed to support an inclusive growth path. The National Student Financial Aid Scheme (NSFAS) was under-funded -- the scheme had less than half of the funds it needed to meet the demands of students.

Dr Mabugu added to the presentation by stating that the average household income for a black African was R69 000. This observation indicated that there was an increasing number of students qualifying for higher education. Another challenge was the low recovery record. For example, only R3.2 billion of a total R12 billion loan book had been recovered, which was the second lowest recovery rate in the world. These funding issues meant there was insufficient focus on affordability and the overall adequacy of revenue. The biggest issue was the need to be accountable to taxpayers, and this could happen if a new funding framework was introduced in South Africa, in order to avoid performance shortfalls and the rising costs of higher education.

The Chairperson asked the representatives of the Department of Higher and Education (DHET), for any additions to the presentation.

Mr Firoz Patel, Deputy Director-General, DHET indicated that the presentation accurately presented the situation in the education sector.

Mr Theuns Tredoux, Chief Financial Officer, DHET, said that previously disadvantaged universities needed extra focus when funding, given the history of the country. No infrastructure funding had been mentioned in the presentation, and that was a matter that needed to be looked at.

Discussion

Ms J Kilian (ANC) commented that was it clear the government’s way of doing things lay in legislating and funding. People at different levels must be brought through for the purpose of building the nation. She raised a concern that funding must be prioritised on students from disadvantaged backgrounds. It was a national imperative to achieve the goals of the National Development Plan.

Mr Y Cassim (DA) said the level of funding for universities was lower than the average for Africa, and more money must be invested as a percentage of the gross domestic product (GDP) into higher education. He asked about the family contribution and the recoverability rate, saying that when students did not quality they could not pay back their loans.

Prof B Bozzoli (DA) commented on the hostility towards the funding for specific research programmes. She asked about the third stream income for historically disadvantaged universities, and whether only the state could rescue them? What had Mr Patel meant by stating “the real new funding framework?”

Mr E Siwela (ANC) said that universities were too expensive for many South Africans. Although technical colleges were fully funded, there should still be a way to ensure quality and enough infrastructural development. Was it a reality or a perception that the NSFAS was under-funded and did not have enough money, and yet could still meet the National Development Plan goals?

Ms S Mchunu (ANC) said that there were numerous instances where there had been a mention of insufficient funding. Had this been shared with the National Treasury? What role did the Financial and Fiscal Commission play in this regard? Did it pressure Treasury to fund higher education?

Mr S Mbatha (EFF) commented that the story of a black child was that of being trapped by policies not favorable to a post-democratic South Africa. The system was flawed and financed those who could actually afford, but the black child was left in isolation and not helped out by the system.

Mr C Kekana (ANC) commented on the comparisons made about the financing education, saying there were other African countries which were growing faster economically. What was the research from our universities doing, if it did not come back directly to benefit the government? What was it that was not being done in Africa about education, which still kept the country underdeveloped?

Mr Khumalo responded on the question of NSFAS, saying that there were undeniably negative outcomes. However, the problem must be solved at the lower levels as well. Sufficient money was spent on basic education, but serious challenges came at the higher educations sector. There were people who were benefiting from NSFAS who were not supposed to benefit. The demands grew all the time. It was difficult to admit that NSFAS was under-funded. The funding gaps were still to be looked at critically. There was no doubt that more resources were required in the higher education sector. On the issue of the recovery rate, he said fundamental research had not been adequately acknowledged as a driver of our economy. Budget constraints were of vital importance in this matter, and only the National Treasury could conclude on such matters.

Prof Daniel Plaatjies, Researcher, FFC, responded on the mix of funding relating to the critical need to appropriately finance historically disadvantaged institutions. The standard of measurement for these institutions must be looked at again. It was important to think about public financing arrangements, and to have a committee such as this one to plead their cases well, so that the National Treasury could allocate the deserving amount to higher education and training. The role of a university had to be understood in the light of its contribution to South African society. There were other financial resources that were included in the budget of this Department -- financing did not just end with the NSFSAS.

Dr Mabugu commented on the issue of Africa rising and South Africa being left behind. There had been a series of domestic issues that had needed immediate attention, hence the national priority had not been purely the development of education and research output, but rather socio-economic matters needing urgent attention. South Africa was exceptional, as it spent more on education, but the outcomes to date did not suggest this. Therefore the issues of accountability were relevant, in order to find ways in which to raise funding for better usage and thus reach tangible outcomes.

Mr Cassim followed up on the question of the GDP allocation. Had the FFC done any research by themselves on this issue?

Ms Kilian said that the United Kingdom had reduced public higher education spending. Was there a specific field where basic and higher education spending could be differentiated?

Mr Khumalo responded that South Africa had not cut expenditure on the higher education sector.

Ms M Nkadimeng (ANC) asked about the involvement of the FFC in the new universities, assisting them with their financial frameworks.

Ms Kilian asked to what extent the FFC was looking at the improvement of qualifications as an objective for economic growth.

Ms Mchunu asked what the FFC thought about a forensic team being sent to universities as a way to end fraud.

Mr Siwela asked what the FFC felt about the NSFAS funding being turned into a bursary for final year students.

Mr Khumalo responded that the Commission had not taken a view on a forensic audit. The decision was respected as it would clean up the system. The Commission also could not take a view on the conversion of NSFAS loans to bursaries.

Dr Mabugu said that the issues of sustainability, social spending and creating economic growth must be considered as soon as possible.

Mr Patel said the FFC had to ensure equity in regards to funding, and for the allocation of resources to match the right priorities.

The Chairperson asked the two interns from the FFC to give a short feedback on their observations of the meeting.

AGSA on Department of Higher Education and its entities 2015/16

Ms Michelle Pillay, Senior Manager, Auditor General of South Africa (AGSA) reported that the audit was undertaken to ensure public confidence in the DHET budget allocation and expenditure. The outcomes of the audit covered the DHET, Sector Education and Training Authorities (SETAs), NSFAS, and were for consideration by the Portfolio Committee for the purpose of performance monitoring and budget analysis.

In terms of the outcome review, the audit had three programmes -- Universities, Vocational Continuing Education and Training, and Skills Development. The findings of the review of the Agricultural SETA had led to the identification of two main goals. These were establishing private-public partnerships to encourage better use of work-place skills development, and strengthening agricultural and rural development processes and strategies to alleviate poverty, and promote food security and the growth of the rural economy. In many instances, the indicators were not well defined, and the goals were not yet specific and measurable.

What was mostly important for this Committee was the consideration for performance monitoring, in which it had to take into account that the Annual Performance Plan (APP) was aligned with the NDP and the white paper on post school education, and whether there were adequate resources (human and financial) available to achieve the APP.  The Committee should look critically at whether the targets were realistic, and should review quarterly progress against the APP.

The NSFAS budget analysis had been noteworthy. The core service of the scheme was to provide loans and bursaries to deserving students throughout South Africa. In the 2015/16 financial year, there had been a 5% increase in the allocation of these funds and a major decrease, of -18%, in administration and service expenditure. This was significant, since there has been a lot of dissatisfaction over the roll out of the NSFAS loans and bursaries, and the commitment shown to cut expenditure to make more funds available was definitely worth taking note of.

Mr Cassim asked about the reliability of the targets in the auditor’s presentation, whether they were measurable and effective in giving a realistic view of the financial situation of the DHET and its entities. Was it possible to actually measure accurately to see if the targets had been met?

Prof Bozzoli said that budget shortfalls should be covered, as this happened every year.

Ms Kilian asked about the budget analysis, and commented that it would have been helpful to have seen a consistent trend in the years that the Department had been audited.

Ms Cindy Smit, Manager, AGSA, responded that in terms of the measurement of the targets, the auditing strategy attempted to give the most accurate account of the auditing of all accounts in the Department. Budget shortfalls had been subsided over the past few years by National Treasury. The budget had also been looked at in light of the performance framework. Other departments had not yet been looked at for comparison in terms of trends, but it would be helpful to do that in the future.

The Chairperson thanked AGSA for the presentation.

The meeting was adjourned.