Higher Education funding: Parliamentary Budget Office research findings

Meeting report

Opening Remarks
The Chairperson opened the meeting by welcoming the members. She asked everyone to take a moment of silence and meditation. She then noted that during the year 2015, this Committee met with other stakeholders on the issue of funding of higher education, noting that greater access to higher education is the way to overcome South Africa’s sordid history. This was a pressing issue, as university students nation-wide have expressed their displeasure with varying levels of violence.

Briefing by Parliamentary Budget Office
Prof Mohamed Jahed, Director, PBO, thanked the Chairperson and honorable members. He stated that the point of the presentation was to highlight key issues in this ongoing debate. He argued that the longer this Committee delays on this issue, the more the issue is exacerbated. This is about resource allocation in the broader scheme of things.

Dr Dumisani Jantjies, Deputy Director: Finance, PBO, noted that the main focus of this Committee should be the reduction of university costs for underprivileged students.

Prof Seeraj Mohamed, Deputy Director: Economics, PBO, explained the current state of universities in South Africa. There are historical inequalities between historically black and historically white universities:
Some Historically White Universities have larger endowments, resources, infrastructure and access most of the third stream income, including from private sources. #FeesMustFall calls for the decolonisation of education reflect frustration with continuing poverty, inequality, the pace of change and expectations around future employment.
The increased focus on raising more third-stream income means that some universities may be more interested in servicing paying clients and donors than students and teaching. Academics also feel the pressure to teach more, publish more and to raise more third-stream income. There is a global trend of not only outsourcing ‘non-core’ activities such as cleaning but also to ‘contract-in/casualise’ a lot of teaching staff while maintaining a smaller permanent staff.
The Post Secondary Education and Training (PSET) system is ‘unbalanced”. There are too few students in adult education, the further education and training and college systems relative to universities. At the moment the system is weighted to the more expensive university system. There is a need to rebalance the system to take pressure and undue expectations off the university system. Therefore, part of the strategy should be to continue to fix the whole of the PSET system and to build-in the ability of students to transfer their qualifications between parts of the system. The perception that universities are the centres to get the education and skills required in the market place has to be addressed. The mystification and decontextualisedreferences by government, business and the media when they talk about ‘a shift to a knowledge economy’ creates fears. The high level of unemployment and the reshaping of South African labour markets adds to the view that one requires a university qualification to get a job.

Prof Mohamed stated that poorer students in the university system are not isolated from the socio-economic issues of their families, with some students having to return home mid-semester to help provide for the family. In addition, there are also issues of poor students not being able to find housing, not being able to afford transportation, or goinghungry, all of which exacerbate the already vast gap between students with good basic education, and those without.

On the issue of inequality, Prof Mohamed stated that South Africans may not fully understand the levels of inequality in South Africa. The missing middle (class) falls into the top 20% in South Africa. The lower class is much larger than many people recognise. In South Africa, the top 1% should not be considered elite, and the elites should only be considered the top 01-0.2% of the population. Free education “benefitting the elites” only applies to about 5% of the population.

DrJantjies, referring to page 21, stated that government fees have reduced from 2000 to 2013, which has forced the universities to raise fees accordingly. There is an argument that the SA government has not followed the trends of other countries using a certain percentage of their GDP to fund education. Fees have increased at a higher rate than GDP growth, as seen on page 23. In addition, with universities trying to cut costs, student to lecturer rate has deteriorated from 1994 to 2015, going from a rate of 1:39 to 1:62.

Dr Jantjies laid out the three main options for funding undergraduate students at 16%, 25%, and 100% student coverage. 16% means an additional R13 billion would be needed from government, 25% means an additional R35 billion needed, and 100% means an additional R250 billion would be needed. He continued by arguing that taxes needed to raise anything over R31 billion, over the medium term, is unlikely due to poor growth, with the feasibility of raising taxes in the range of R16 –R25 billion much higher.

Dr Mmapula Sekatane, Policy Analyst, PBO, spoke about the National Student Financial Aid Scheme, noting that NSFAS right now is limited to funding students whose household income is R122,000 or less. This model however is being reviewed to include households with incomes between R250,000 to R500,000. She noted however, that NSFAS only helps students pay for tuition, and does not help students with accommodation, food, etc.

Dr Sekatane stated that NSFAS only recollects debts at a rate of about 12% over the past few years. Another issue is that NSFAS up to this point has not made a distinction between full and part-time students, fundingboth at a 100% rate. Giving a counter example, Dr Sekatane noted that in Malawi the higher education system has gone to a free model, however, the system is quite small, and very difficult to get into. Additionally, if you fail a single module, you are restricted from continuing, making higher education far more restrictive for students that aren’t either the “cream of the crop”, or who have attended highly rated schools.

Dr Jantjies noted that demand for higher education has increased rapidly over the years, but the system has not kept up with demand. Funding for higher education is seen as the main barrier to accessing the system for poorer South Africans. However, even though funding is the main barrier, when disadvantaged students do make it into the system, they are not prepared for the demands of university studies.

Discussion
The Chairperson thanked the presenters from the PBO for their well-research and insightful presentation, calling on members to put forward their questions.

Mr A Shaik Emam (NFP) thanked the PBO delegation, and noted that every time it came before this Committee it provided excellent work. One of the key issues is with basic education, arguing that it is a serious issue for South Africa. There is a perception that the state is a cash-cow. NSFAS is poorly managed and its 12% recovery rate is unacceptable. In his view, the country is not in a position to fund free education, noting that the country was losing a lot of money each year through improper funding, usage, corruption, etc.

Mr Shaik Emam noted that another key problem is top-slicing from the universities, referring to page 29 of the presentation. He argued that there is a massive skills shortage in the country and the universities are not addressing those issues.

Mr M Figg (DA) stated that there is a serious problem with higher education in this country. Referring to page 12, he noted that government can not come up with the excuse that it does not have enough money. “Higher education must be funded”.  There had been substantial growth in student numbers, but more universities have not been added. Perhaps there needed to be caps on who is funded, noting that everybody can not be funded. His worry is that if funding is free for everyone, then anyone will go to school. The government should not be funding students who are not passing their modules.

Referring to the PSET system, he noted that South Africa had done away with artisanal training, and technical colleges, and therefore there are students at university who perhaps should not be at university, but instead should be in PSET institutes.

The Chairperson asked members to focus their answers on either the short-term, medium-term, or long-term solutions. She also asked for crisis intervention options in the short-term.

Mr N Gcwabaza (ANC) thanked the Chairperson, and asked to start with the issue of decolonisation. He was concerned that not everybody understood what decolonising universities meant. For him, it meant that we need to dig deep into the structure of South African universities, there needs to be more thought given to the issue of decolonisation, and universities need to promote indigenous knowledge. He also noted that disadvantaged students may be a cause of the high drop-out rate.

Mr Gcwabaza asked the Committee to think about how to save this academic year, and the next academic year.

Mr Gcwabaza noted that there is big administration and lean lecturing staff at many universities. This is the same as in government. “You can’t have bloated government at the top, and lean at the level of service delivery”. He asked to address the challenge of providing free education for older students, stating that this Committee believes that there must be free education, but it needs to be a slow and steady advancement of free education, it can not be made free next year. He added that he is concerned about the wastage in government.

Mr A McLoughlin (DA) noted that this is a very complex issue. Universities produce what the economy wants. “We have a colonial university system, because we have a colonial economy”. He wanted to know the cost of decolonizing the university system, and asked if that cost has been factored in.

Mr McLoughlin asked what number of the 200 000 university students graduate, and what numbers actually get jobs. “We as a country, as an economy, are failing them because we are not providing jobs for them”.  He also asked for clarification on the issue of recouping value from students who have gone through some university, but were unable to graduate, noting that they were educated, but nothing to show for the university studies they did complete.

Ms D Senokoanyane (ANC) noted that the most important thing for her is the issue of addressing inequality and transformation, arguing that people who can afford to pay, must pay. Government does have a responsibility for those who are poor, but the private sector also needs the skills universities provide, but so far they have not got involved in the search for a solution to the issue of fees.

Ms Senokoanyane stated that a lot of these problems are part of the historical legacy of apartheid, noting that before 1994 there was very limited access to these universities, leaving historically black universities underfunded – this trend continues today. She further asked if there is enough done to promote PSET institutions, noting that many students don’t know about these other options.

Ms Senokoanyane stated emphatically that NSFAS needs to be better managed, stating that a 12% recoup rate is an embarrassment, and that at 12% NSFAS is like a free education scheme. She concluded by explaining that the difference between South Africa and countries like the US, UK, Germany, etc., is that in South Africa there isn’t the money to fund higher education. In those other countries, there is the money; it is more a matter of policy.

The Chairperson reiterated that education was pronounced as the apex priority for the government, and that it is vitally important that at the end of the debate, the Committee come up with a sustainable solution. She asked for options from the PBO, adding that, “the youth also has a role in assisting us to find the best solution”. In her view, they were not assisting us in finding a solution, they are aggravating the situation. Much as it is their right to protest, they also have a responsibility to help us find solutions for nation building.

ProfJahed thanked the Members and the Chairperson for their engagement with the presentation, noting that free education is not just about money; it is also about decolonisation. This is about allocating the money, and noting that before we can make a monetary allocation, the government and university system needs to decide where that money should be allocated to.

Dr Jantjies, responding to the Chairperson’s question about revenue on page 27, noted that the issue is that there is not enough money in the system to fund free higher education, and trying to do so will pose a risk to other fiscal policy objectives.

On the question of student fee inflation, Mr Jantjies noted that government spending reduced between 2000 to 2013 from 49% to 40%, meaning that student fees increased from 24% to 33%, with third stream university income remaining static at 27%. University costs have increased in recent years as more students have come into the higher education system.

Prof Mohamed thanked the Chairperson and started by addressing the point of NSFAS failings. When NSFAS was started, there was apprehension about giving it the ability to strictly collect fees. Over a decade or so, NSFAS’ collection rate went from 35% in 2004, to 17% in 2009, to 4% in 2014.

He explained that there is concern amongst economists that increasing the debt burden carried by the middle class will not aid South Africa in the long-term, noting that moving into the middle class is difficult enough without high debt, and with high debt, remaining there becomes quite difficult.

Returning to the decolonization discussion, Prof Mohamed noted that we should not see the education system as something that feeds the economy. We should see it as something that creates the opportunities for creating and changing South Africa’s economy in the future, arguing that decolonising the higher education system is about building a future that is appropriate for South Africa as a whole.

The Chairperson asked that the PBO come up with concrete solutions, stating that South Africa needs radical transformation. She emphasised that the government has an opportunity right now to transform the system, saying, “Let’s not miss this opportunity.” She added that, if we lose out on the academic year, there will be serious money wasted, and that this would be fruitless expenditure.

Mr Gcwabaza noted that this Committee must be careful not to put undue pressure on the PBO. It should not ask the PBO to find money as it was the Committee’s responsibility to find the money.

The Chairperson replied that the Committee is under pressure, adding that: “I am under pressure. The country is under pressure.” The PBO is a budget office, and should advise the Comittee on the budget.

Prof Mohamed, speaking issues of funding free education, argued that government needs to create a framework that maintains a stabile level of funding over the long-term.

Ms C Madlopha (ANC) acknowledged the pressure that this Committee is under. Even some of the most developed countries can not afford completely free education. Free education can not happen overnight, but that the government must fund free education for the most underprivileged students.

Ms Madlopha asked for clarification on how the system contributes to the lack of money going to the students, noting that if the government funds free education under pressure, but can not afford to keep doing so; this will be a reoccurring issue in the future. If we can fund 16%, we should do so. If we can’t fund 100%, we need to be honest with the students. We need to find a solution for South Africa. Solutions in other countries are not necessarily going to work in this country, noting that South Africa has unique problems, and needs unique solutions.

The Chairperson reiterated once again that this Committee needs to try and find a possible solution. This Committee can not go to the National Assembly without a solution. This Committee has a mandate to come up with a solution.

Ms Senokoanyane thanked the PBO for their high-quality presentation, and stated that their work is invaluable in coming up with a solution.

Mr Shaik Emam thanked the Chairperson. He noted that this Committee and Parliament did not initially take the students’ demands seriously. It is common knowledge that at this stage South Africa can not afford to fund free education. But students coming from the poorest sectors should be provided with free higher education. The students will want a very sincere proposal, and see that it is being implemented, with clear timeframes, and deliverables. He argued that, “They [the students] make these big demands because they know that if we don’t strike, we don’t burn, we don’t damage, nobody will listen to us.”

Mr Shaik Emam expressed his desire to put together a team, from every political party, to go out and address the students. He argued the students think that the government is being disingenuous, and noted that the Committee needs to meet the students halfway, freeze the increases in fees until there are medium and long-term solutions.

The Chairperson argued that there needs to be a clear and implementable plan, with short-term, medium-term, and long-term solutions. Addressing the issue of freezing increases, she noted that there is another Committee working on that issue, but that this Committee also needs to be informed on the feasibility of that solution.

Mr Gcwabaza noted that it is a university’s discretion to raise, or not raise fees. This Committee needs to look at what is being paid for when universities raise fees each year.

Mr McLoughlin noted that we need to ask the Minister for a larger share of the national budget. Without that, there will not be enough money to pay for higher education.

Mr Figg noted that government spent R634 billion on Goods and Services, with a lot of that money being wasted, not through corruption, but actually wasted. He stated his desire that expenditure be curbed in this area. In addition, Parliament could call to levee a tax on the private sector when they do business with the government.

The Chairperson noted that there could also be the option to levee an education tax that was solely for education.

Ms Madlopha noted that the Minister came to this Committee requesting that they assist him with the issue of the budget for higher education. The 8% increment is only for those that can afford it.

The Chairperson reiterated that this Committee has a mandate to come up with possible solutions, asking if it would be a viable solution to increase the deficit to fund education, and only education. Money will be wasted if the Committee can not come up with a solution so that the students go back to class.

Dr Jantjies thanked the Chairperson, and agreeing with Mr Shaik Emam, noted that it is almost impossible to come up with a budget when no decision has been made on what is going to be funded.

The Chairperson concluded the meeting by stating that the Committee will meet the Budget Committee the following day, and will come up with a budget and a more concrete solution.

The meeting was adjourned.