DHET & NSFAS 2020/21 Special Adjustment Budget, with Minister and Deputy Minister

Higher Education, Science and Innovation

14 July 2020
Chairperson: Mr P Mapulane (ANC)
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Meeting Summary

The Department of Higher Education, Science and Technology and the National Student Financial Aid Scheme briefed the Committee on their adjustment budget allocations and the impact on delivery programmes.

The Department explained that only “front-line” departments (health, defence, police and social development) had been spared from cutting their budgets by 20% to fund government’s COVID-19 response. In the case of the Department, this would have amounted to R19.5 billion. This would have had a serious impact on the whole higher education sector and as a result the final cut had been reduced to R9.857bn.  R8.112bn of the budget cut originated in the skills development levy payment holiday which had been granted to all employers. An amount of R2.5bn had been re-allocated for the provision of student digital devices (such as laptops) but officials were concerned that the onerous conditions imposed would risk incurring irregular expenditure.

The number of students funded by the National Student Financial Aid Scheme had increased by an unexpected 20% in 2020 and the surge was expected to increase still further in 2021. It was estimated that more than R4.3bn would be required to cover the costs of the extension of the academic year at universities and technical and vocational education and training colleges. The Scheme had also planned its outreach programmes to minimise large gatherings of applicants by using electronic communication channels. The Administrator was continuing to make good progress in the investigation of fraud syndicates.

Committee Members were unhappy about the fact that the Department had not been declared a front-line department. They asked questions about the funding of Sector Education and Training Authority students, the estimated costs of the extension of the academic year, the R2.5bn earmarked for student devices and the concerns that this had raised. Engagements with presenters included the impact of the reprioritisation of infrastructure grants and the possibility of their recovery, the money lost through the skills development levy payment holiday, and the effectiveness of the National Student Financial Aid Scheme’s virtual call centre.

Meeting report

The Chairperson welcomed Minister of Higher Education, Science and Technology, Dr Blade Nzimande.

Minister Nzimande said that he had asked the Department of Higher Education and Training (DHET) to look beyond the numbers to the impact of the budget cuts on the whole post-school education and training (PSET) system, on the Strategic Plan and on the Annual Performance Plan (APP). However, there had not been enough time since the announcement of the revised budget to prepare a detailed presentation on the impact on DHET’s mandate. He also noted that zero-based budgeting would need to be guided by the Department’s core objectives.

Presentation by DHET
Mr Gwebinkundla Qonde, director-general, DHET, gave the general context of the Department’s presentation. Only “front-line” departments (health, defence, police and social development) had been spared from cutting their budgets by 20% to fund government’s COVID-19 response.

Mr Lucian Kearns, Chief Financial Officer (CFO), DHET, said that a 20% reduction would have amounted to R19.5bn. DHET had explained to National Treasury (NT) the severe impact that a cut of this size would have had on the PSET system as a whole and as a result the final cut had been reduced to R9.857bn. The total suspension of funds amounted to R6.734bn, of which R4.999bn was re-allocated to the Department’s COVID-19 response, resulting in a net suspension of R1.734bn. The remaining R8.122bn reduction was the result of the four-month skills development levy payment holiday. This would have a negative effect on various learning programmes such as apprenticeships, learnerships, work integrated learning and internships. The R6.734bn suspended funds included a R2.5bn reduction to the National Student Financial Aid Scheme (NSFAS) subsidy, which was however returned to NSFAS to support the provision of student devices. He looked at the key impacts of the reductions on departmental operations, the university sector, the technical and vocational education and training (TVET) sector, the community education and training (CET) sector and departmental entities other than NSFAS. The presentation ended with an overall breakdown of the adjusted budget per programme and per economic classification.

Presentation by NSFAS
Dr Randall Carolissen, Administrator, NSFAS, gave a broad overview of the funding statistics and some of the outstanding challenges in the university and in the TVET sectors. NSFAS had shut down its head office and was operating virtually. In particular the call centre had been transformed into a virtual call centre and was actually working more effectively in this way. Some universities were struggling to pay NSFAS grants onward to students, especially under the lockdown, and this was an issue that would need to be discussed. A tender for handling direct payments to students from banks, which would solve the problem, was already at quite an advanced stage and by 2021 all TVET students were expected to receive grants directly. The number of students funded by NSFAS had increased by 20% in 2020 and was expected to increase still further in 2021.

Mr Prakash Mangrey, Acting CFO, NSFAS, said that based on the assumption that there would be no increase in tuition fees, NSFAS would require an addition of more than R4bn for universities and R350m for TVET colleges to cover the cost of the extension of the academic year. He looked at the NSFAS APP budget, highlighting the changes to revenue and expenditure. He explained that the revised allocation had imposed an onerous condition on NSFAS that it would not be able to meet without incurring irregular expenditure. The R2.5bn re-allocated for providing students with devices was needed to fund the normal academic disbursements. NSFAS had explained this to NT and had suggested that the devices be funded with recovered funds in the case of universities and accumulated funds in the case of TVET students.

Dr Carolissen said that the application window for NSFAS funding would be from August 1 to November 30 and NSFAS was expecting a high number of applications. Traditionally, over 100 000 TVET students did walk-in applications in January, and this year NSFAS had planned its outreach programmes to minimise large gatherings by using electronic communication channels. He also spoke about ongoing forensic investigations at NSFAS that had uncovered fraud syndicates operating within NSFAS. Despite these challenges, NSFAS was able to deliver grants to students timeously and employee relationships were good. Some of the bad press NSFAS had received was “absolute rubbish.” He mentioned some irregular executive appointments that had been made, noting that they were being dealt with.

The Chairperson thanked Mr Carolissen for the thorough presentation and the extra information he had supplied. He understood his frustration at the allegations that were circulating in the media but cautioned him against using such emotive language in Committee meetings. He should rather seek to confront the allegations with facts. He said that he had hoped to hear more from DHET on the effect of the budget cuts on its APP. Which priorities would be pursued and which would be abandoned? This discussion would have to take place another time.

Prof B Bozzoli (DA) said that it was outrageous that basic and higher education had not been considered front-line departments. These departments served millions of people and if people did not go to school the entire economy would be damaged. Who decided which departments were declared front-line departments and what was the definition? DHET should appeal the declaration. She thought that the description of some funds as “suspended” was misleading, as these funds were not available to the Department to be used for their original purpose. Particularly in universities, it was unclear what was being defunded. The thousands of students who were funded by Sector Education and Training Authorities (SETAs) were a huge problem that was not being dealt with and she called for more detail on this. She asked whether NSFAS could guarantee that fees would not be increased, as its cost estimates for the extension of the academic year assumed. How likely was it that NSFAS would have appointed a chief executive officer (CEO) by August when the administration period ended, and what would be the effect of not having a CEO? She supported NSFAS’s concerns about the earmarking of R2.5bn for student devices, but wanted to know what the recovered and accumulated funds that were proposed to pay for student devices instead were. She said it was shocking that there were still fraud syndicates operating in NSFAS, and it needed to clarify what was being done about this.

Mr B Nodada (DA) asked how much time the Ministry would need to prepare a detailed presentation of the impact of the budget adjustments on the Department’s mandate. Did DHET have a contingency plan? What plans, if any, were there to recover the approximately R1bn that had been reprioritised from university and TVET infrastructure and efficiency grants? How much had been done to address the certification backlog? The Deputy Minister had said that it would be cleared by March 2020. DHET had noted that the Council for Higher Education (CHE) and the South African Qualifications Authority (SAQA) were “comfortable” with the cuts to their budgets, but would they still be able to fulfil their mandates? How would the 2020 academic year impact curriculum development, particularly in the TVET sector? Had the National Treasury (NT) responded to NSFAS’ alternative proposal to fund student devices? What were the implications of the budget cuts on NSFAS’ APP? Had NSFAS approached the relevant institutions to fast-track the funding of TVET students?

Ms J Mananiso (ANC) asked when DHET would resume filling vacancies, and which positions would they prioritise? She asked about the impact of the revised academic calendar. She asked what plans DHET had in their revised budget to address gender-based violence.

The Chairperson observed that some members’ connections seemed to have been affected by load shedding. He asked whether preliminary work on the University of Science and Innovation in Ekurhuleni would be affected by the budget cuts. What impact would the cuts to TVET infrastructure grants have, given the poor infrastructure in the TVET space? Was the lost income from the skill development levy payment holiday lost forever or could it be recovered in future? What discussions were taking place with NT on the additional R4bn required to fund the extension of the academic year? Would NSFAS be able to secure funding if the 2020 academic year extended into 2021? What was NT’s attitude to NSFAS’s objection to using the R2.5bn for student devices?

Ms N Mkhatshwa (ANC) agreed with Prof Bozzolli on the centrality of education to economic participation, and that it would therefore be interesting to know how Cabinet or the National Coronavirus Command Council (NCCC) decided which departments were declared front-line departments. She asked NSFAS to explain how its administrative costs could go up, while at the same time the costs associated with the actual funding of students seemed to be unchanged, even though the number of students being funded was increasing. She asked how the virtual call centre differed from a traditional one, and suggested that it should be retained if it was more effective.

Mr Qonde said that the Department had enquired with NT about the definition of a front-line department. NT had responded that they were just implementing a Cabinet decision. DHET had then moved on to determining how best to mitigate the negative impact of budget cuts to a sector that was already underfunded and volatile. This was the context for the decision to suspend and reallocate funds. Most of the cuts had been made to “softer” areas. Nevertheless hard decisions had had to be made and DHET had succeeded to a large extent in shielding NSFAS. The second critical issue was the extension of the 2020 academic year into 2021, which he expected would need a special Cabinet Memorandum and would have huge financial implications. This was all taking place against the background of a contracting economy. The Department’s Strategic Plan and APP affected the entire higher education system. DHET was considering the inputs that had been made by various parts of the higher education sector, and its current assessment was that there would be no changes to the Strategic Plan, and no substantial changes to the APP beyond the shifting of in-year delivery dates, and the addition of an addendum on COVID-19 response measures to the Strategic Plan and the APP. The Department was however currently engaging with the Presidency on proposed employment relief interventions to be factored into APPs. He noted that NT officials had played a part in preventing huge negative impacts on the higher education system.

Mr Zukile Mvalo, Deputy Director-General: Skills Development, DHET, said that the Strategic Plan and APP were being revisited as it was clear that the number of students in all workplace-based learning programmes would be reduced. In addition, the availability of the actual workplaces themselves was also lower under the various levels of lockdown. The Minister was encouraging companies to prioritise learners alongside workers as people returned to work. He assured the Committee that the [long-term five year] Strategic Plan would not be interfered with, only the 2020/21 APP, but the Department had been told by NT that the money lost through the skills development levy payment holiday would not be recoverable. SETAs were currently busy revising their Strategic Plans and APPs and these revisions were due that week.

Dr Diane Parker, Deputy Director-General: Universities, DHET, said that the net reduction in the block grant to universities was R380m, or 1% per institution. This would come from their discretionary funds. Universities were saving money by cutting expenses and not filling vacancies, and the lockdown had also produced savings in, for example, electricity bills. The R500m cut to the university infrastructure grant was significant, she admitted, and the effect would be to delay the completion of projects that had already been started and delay the start of future projects. DHET had looked at earmarked grants, such as the University Capacity Development Programme and interest earned on grants, as an area where funds could be reprioritised to support institutions. The creation of the University of Science and Innovation would not be stopped but it would be delayed. There had been extensive discussions with all universities and private accommodation providers on how to mitigate the impact of the extension of the academic year on students. The Department was working on a draft gazette which would hopefully be published within the next few weeks.

Dr Aruna Singh, Deputy Director-General: TVET, DHET, said that the academic calendar had been revised into two trimesters instead of three, and one semester instead of two. There was a huge challenge at the colleges, however, with campuses opening and then closing again on a regular basis. Colleges had been instructed to prioritise lives. The cut to infrastructure grants would affect TVET colleges, but R2.4bn had been paid out since 2018 already and as spending had been very slow, the new money would probably not have been spent. This mitigated the impact of the cut.

Dr Carolissen said that the estimated cost of the extension of the academic year was the result of modelling the allowance that students would need. It was not yet part of the planning going forward. The student device proposal had its origins in a yearly teaching aid allowance given to students and NSFAS had been encouraging universities to use some of these funds to buy devices even before the pandemic. NSFAS did not want the provision of devices to university students to be an additional cost, so they had decided to fund them against the 2021 teaching aid allowance initially and thereafter use debts from the old student loan system. In the case of TVET students, a once-off cash injection to kick-start the program in 2020 had been recommended. He said that after fee-free education had been announced, there had been a 5% increase in university applications. But in 2020 the increase had been 20%, much higher than any model had anticipated, and he expected further increases post-COVID-19. Whether NSFAS could or should provide for all these extra applicants was a policy issue. He explained that in a physical call centre, the agents were confronted with frequently angry or irritated students and had to resolve difficult queries in a short space of time. The virtual call centre had different escalation levels. This had proven to be much more effective, and the lessons would be incorporated into future plans. He said that the Minister would pronounce on the lack of a CEO. NSFAS had gone through all the appropriate recruitment procedures but had not found a suitable candidate. However both he and the Minister were committed to an orderly transition back to normal operations at NSFAS without losing the gains that had been made during the period of administration. He accepted the Chairperson’s comments about the language appropriate to the Portfolio Committee.

Mr Mangrey said that NSFAS had initially approached the public finance division of NT about its concerns around the R2.5bn earmarked for student devices. The public finance division had advised that the communication should be made through the Department. NSFAS had discussed it with the Department. He suggested that the Deputy Director-General and the CFO of DHET were best placed to comment at this stage. NSFAS’s position was that the implementation of this condition would be tantamount to irregular expenditure.

Deputy Minister of Higher Education, Science and Technology, Mr Buti Manamela, said that the Department was working on the certification backlog and would try to provide a progress report within the next few days.

The Chairperson observed that the impact of the extension of the academic year went beyond finances to the students themselves. Substantive teaching and learning had not been taking place at a number of universities. At Fort Hare particularly there had been student protests and the administrator was arrogant and intransigent. The University of KwaZulu-Natal had also seen disruptions. The full effects of the pandemic would have to be assessed at the end of the year. It was also clear that APPs would have to be revised and brought to the committee.

The meeting was adjourned.

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