Appropriation Bill: DHET briefing

Standing Committee on Appropriations

26 May 2021
Chairperson: Mr S Buthelezi (ANC)
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Meeting Summary

Video: Standing Committee on Appropriations, 26 May 2021

The Department of Higher Education and Training (DHET) briefed the Committee on the impact of budget cuts for the 2021/22 financial year. The meeting took place on a virtual platform, during which the Chairperson appealed to the Department to try to achieve its goals, regardless of the resource constraints, for the sake of South Africa’s youth.

The Department experienced major challenges regarding budget constraints. This was a result of increased student debt in universities, unprecedented Information and Communication Technology (ICT) infrastructure and training, as well as from once-off COVID-19 budget cuts. The budget cuts were in the following areas: National Student Financial Aid Scheme (NSFAS) - R6.884 billion; Universities - R7.701 billion, including R2.4 billion on university infrastructure; Technical and Vocational Education and Training (TVET) colleges - R1.426 billion; and compensation of employees - R4.634 billion.

The Department had to reprioritise funding for these budget shortfalls by moving targets for service delivery. It reallocated maintenance of TVET colleges and universities, decreasing headcounts of enrolment rates in TVET colleges, as well as limited infrastructure and accommodation funding available to universities.

The Committee asked the Department how it plans to deal with the reality of the budget cuts currently, and in the long-term; asked if it would be feasible to implement a full free education programme to accommodate the ‘missing middle’, and the poorest individuals in South Africa; asked regarding the NSFAS; noted concern about the wastage of NSFAS funds, which are used in areas other than to ensure a successful higher education output; and asked if any costs were saved during the COVID-19 period where physical classes could not take place at universities. Concerning TVET colleges, the Committee asked what the DHET plans to do to ensure in-service training for these students, to enable students to complete qualifications.

Meeting report

Director-General of the Department of Higher Education and Training (DHET) overview
Mr Gwebinkundla Qonde, Director-General (DG), Department of Higher Education and Training (DHET), addressed the Committee. He said the budget of voted funds amounted to around R94 billion. Within that budget, a large portion, being R78 billion, is allocated to the university sector. R12 billion is allocated to the Technical and Vocational Education and Training (TVET) College sector. A further R2 billion was allocated to community education and training colleges. Universities received a larger portion of the share, though this is still insufficient compared to the required funds in each sector.

The revamp and increase of National Student Financial Aid Scheme (NSFAS) funding is roughly at R41 billion. When this is added to the amount for transfers to institutions, it adds up to R43 billion. The system is under great constraint to afford adequate physical and information technology (IT) related infrastructure in universities. This must be achieved while also being able to afford facilities to allow teaching, students who are able to afford education, and research to continue.

During this budget restructure, the Department also had to face budget cuts. The DHET addressed the Committee on the impact of budget cuts and the threat it poses to the school system as a whole. Budget cuts could also place an impact on the achievement of some targets, especially those enshrined in the National Development Plan (NDP).

Presentation by the DHET
Dr Thandi Lewin, acting Chief Director: Teaching, Learning & Research, DHET, took the Members through the presentation.

Overall Service Delivery Implications of Budget Reductions
The Department’s service delivery capabilities were severely restricted by budget reductions, posed across government. The functional areas most impacted include; monitoring and evaluation conducted by the Department; funding poor students through NSFAS, and the inability to fill vacant positions, which impacts on the achievement of key delivery targets for the sector.

Because of the COVID-19 pandemic, the budget vote for the DHET was cut by R20.8 billion over the Medium Term Expenditure Framework (MTEF) period. The largest budget cuts in the vote over the MTEF were:

  • NSFAS - R6.884 billion;
  • Universities - R7.701 billion, of which R5 billion was in respect of university subsidies, and R2.4 billion was in university infrastructure;
  • TVET Colleges - R1.426 billion, of which R947 million was in TVET infrastructure, and R400 million was in TVET college subsidies; and
  • Compensation of employees - R4.634 billion.

The Department is concerned about capacity restraints; poor service delivery; overall morale; and the possibility of retrenchments regarding the compensation of employees, while under these budget cuts.

Impact on TVET Budget Reductions
Mr Sam Zungu, Deputy Director-General (DDG): TVET College branch, DHET, presented on the impact of budget cuts on service delivery of TVET colleges. He said it will be difficult for the Department to meet targets related to encouraging youth to attend TVET colleges, as opposed to going to university for higher education. This difficulty was attributed to the budget cuts. Over the next MTEF, the DHET is looking at budget cuts of R4.3 billion. The budget reduction will result in a reduced headcount of enrolments, and there will be insufficient maintenance funds for TVET colleges over the next MTEF period.

(See presentation for further details)

University Budget Reductions

University budget reductions began last year with once-off reductions. The reductions came as a result of the COVID-19 pandemic, and amounted to R2.6 billion. Over the next MTEF period, universities can expect a 9.37% reduction as a result of baseline cuts and the reprioritisation of NSFAS to accommodate shortfalls. The COVID-19 pandemic highlighted the deep inequalities in society. It also highlighted the impact on access to institutions, which the DHET is trying to address through earmarked grants and infrastructure funding. While digital learning may allow for reduced costs in the long-term, in the short term framework it raised costs, as a result of ensuring there is adequate Information and Communications Technology (ICT) support and training.

The COVID-19 budget reductions are compounded by fiscal challenges and student funding disruptions. The pandemic created significant student debt, which will be mitigated through slower enrolment growth in universities and reduced infrastructure and accommodation funding. The DHET can also expect research output, development of new universities, and existing infrastructure development, to suffer greatly in the short-term.

Long-Term Sustainability Plan for NSFAS
The Department is considering proposing policy changes to the current funding modalities. The aim is to ensure a sustainable funding framework for the university sector, together with student financial aid. Due to fiscal constraints, changes may likely occur over a longer period.

Damage to University Infrastructure
The Department saw a decrease in protest action because of the COVID-19 pandemic, which needed students to operate off campuses. Universities are responsible for ensuring adequate mechanisms are in place when protests occur, and to ensure the protection of people and property. Tertiary Institution Risk Insurance of Southern Africa allowed universities to cover insurance claims. The Minister will be engaging with the Minister of Police and other key stakeholders, in bringing long term sustainable plans and risk mitigating strategies around the matter.

Impact of COVID-19 on Skills Development
The skills levy collections were reduced from R19.413 billion to R12.4 billion. This is because of a four month skills development holiday, which was part of Covid-19 Tax Relief Measures. This led to revising targets, by bringing targets down, in the Department and Sector Education and Training Authorities (SETAs) Annual Performance Plans (APPs), for the 2020/21 financial year.
The DG assured the Committee the DHET is working on other considerations, such as leveraging partnerships, acquiring donations, and additional support. Regarding infrastructure constraints, the Department is applying to the budget facility for infrastructure in National Treasury. The Department is utilising every available opportunity to mitigate the impact of the cuts and shortfalls in the system.
The Chairperson said, when the Minister of Finance presents the Budget to the House, it is sent to the Standing Committee on Finance, and to the Standing Committee on Appropriations. The Standing Committee on Finance deals with the fiscal framework and taxes introduced by the Minister, while the Standing Committee on Appropriations deals with the Division of Revenue and Appropriations bills. The Committee met to discuss the Appropriations Bill, as introduced by the Minister in February 2021. The DHET was invited to speak to the Committee on the economic status of the country, and the fiscal framework for higher education, which were exacerbated by the COVID-19 pandemic.

The Chairperson asked the Department how it deals with the reality of the budget cuts. He said budget cuts should be a temporary problem experienced by the DHET. As the economy grows it will place South African Revenue Services (SARS) into a position to receive more money to deal with the fiscal challenges experienced.

Ms N Hlonyana (EFF) said the Committee was unhappy because the Minister and Deputy Minister were not being present at the meeting, and did not issue an apology.

Ms D Peters (ANC) asked the DG if it would be feasible to have a complete free education programme for the middle income individuals, and poorest individuals in South Africa, taking into account the high inequality, unemployment and poverty rates. Only education can give the son of a farm worker the opportunity to become a president or a school principal. Education is pivotal to break free from intergenerational poverty.

She asked how far the country has come in moving towards beneficiaries of educational grants benefiting from it, at the present time. She asked how the Department minimised the wastage of NSFAS money paid out to students. She was especially considering payments made around the time when events are held, where students often spend the money on alcohol. She asked if universities saved money during the 2020/21 financial year, because of COVID-19 restricting access to physical classes, student housing, and catering programmes. Many universities remained closed throughout last year and relied solely on online classes.

Ms Peters asked what the long-term plan of the DHET is regarding student accommodation, taking into account the budget cuts affecting universities. The number of students entering tertiary education is increasing. This requires projections and planning for student accommodation, to increase too.
During the Presidential Infrastructure Coordinating Commission Secretariat (PICC), there were discussions about alternative building and accommodation to cater for students, within the radius of the university.

Ms Peters said student accommodation should not be seen as a luxury as it gives students access to university resources and security. This was especially true in the case of women in relation to considerations of Gender Based Violence (GBV). 

Regarding youth who qualify from TVET and technical colleges, Ms Peters said it was important for the Department to acknowledge the difficulty experienced by students, especially those coming from smaller institutions, to physically find job placements within companies. She asked why universities and colleges have not provided the training opportunities for these students, through engaging with companies and other departments.

Ms Peters asked the DHET to what extent it collaborates with science and technology stakeholders to ensure the continuation of research and development in South Africa, with the purpose of making the country strong competitors in a global context. She asked what the current budget for the Council for Scientific and Industrial Research (CSIR) is, and if it is adequate enough to provide for and promote economic recovery. South Africa should be partnering with vaccine developers to create its own vaccine. She asked how much of the budget should be spent on research and development.

The Chairperson said at the heart of the questions, committee members were concerned about the impact of the output of education, in higher education. Impact could be interpreted as the number of graduates produced, though Members may disagree and see impact relating to economic growth for the betterment of the country.

Previously there was in-service training at State-Owned Enterprises (SOE), which was available to students. He asked why it would not be possible to continue to provide students positions in these companies, while considering the budget constraints. Companies should be subsidised to take in students for in-service training, to allow for placement and working around the budget constraints. He asked if this proposal could be considered by the Department.

Regarding staff support in government outside NSFAS funding, the Chairperson questioned how supportive NSFAS was towards students. He said there was only one form of a bursary from the Department available to students. He asked if it was possible ensure the government was providing the maximum output to students, through the double-dipping of available student loans.

The Chairperson noted concern regarding the maintenance of universities, especially previously disadvantaged institutions, where some facilities were not even painted. He asked if there are oversight measures to ensure government subsidies are used towards maintenance of these facilities.

Regarding discrimination of students coming from historically disadvantaged universities, the Chairperson said the job market and government were not extending employment opportunities to these students. He asked the Department if it agreed with this statement and what could be done to mitigate this. He felt it was important for government not to perpetuate this kind of discrimination in the present South Africa.

The Chairperson said the rate of uptake of TVET college graduates speaks to the input of government funding provided to these colleges. Bachelor’s passes from universities place an impact on the career path of students, in comparison to students who attended TVET colleges. He asked the DHET to come up with a solution for the immediate budget challenges.

Regarding Sector Education and Training Authorities (SETAs), the Chairperson asked if there was a correlation between the training given by SETA’s and employment creation. He asked how the Department plans to deal with budget cuts currently, and going forward. The mitigating measures must ultimately have an impact on the economic growth of the country.

Department’s response
Mr Zungu gave background to how TVET colleges were designed, with the intention of catering to people who were already employed and were seeking technical qualifications from companies. With the growing demand for skilled youth in the country, TVET colleges opened to everyone to acquire skills. TVET colleges were referred to as ‘sausage machines’, because of the demand of having to absorb the large number of students who could not be placed in companies.

There were ongoing discussions within the industry, through the skills branch of SETA, to assist in engaging with employers to open up pathways for students to be placed. Economic constraints consequently shrunk the opportunities available to these students. The DHET is currently discussing other available opportunities, so as not to rely solely on big corporations for placements.

One of the biggest challenges was, SETA does not have the funds to pay stipends for job opportunities in all of the SOEs. Mr Zungu said the biggest challenge was, big corporations also do not have the capacity to find placements for all of the students requiring jobs. The growing demand of student placements is countered by the shrinking number of opportunities available in our current economy. DHET is currently in discussions with the Skills branch, regarding if the Skills Development Levies Act could try to accommodate students even in the non-skills levy companies.

The skills acquired from TVET colleges should also be directed towards entrepreneurial opportunities for students, where students can create businesses, instead of seeking employment. There are opportunities where TVET graduates can immediately walk into entrepreneurial opportunities, though graduates still require guidance and support from funding entities and government institutions.

Dr Lewin said, referring to the Chairperson’s question on how the DHET will deal with budget cuts, the reductions over time played a significant role, while trying to ensure the long-term sustainability of the institutions, particularly ensuring adequate subsidy levels. This year was a shocking one because of the need to reprioritise within the Department’s budget. The Department must try to limit the cuts within the core operations of institutions. This could include postponing developmental infrastructure projects while working with universities to ensure it is more efficient with spending funds. Dr Lewin said the Department engages with the university on these matters regularly, to ensure it is informed about happenings at a departmental level.

If the DHET sees a long-term erosion of subsidy levels and growth of enrolment numbers, the Department will have to manage growth in line with the fiscal constraints to ensure quality. In conversations on funding, this was a critical issue. The Minister previously said it is a key issue to balance funding between supporting students, in relation to accessing higher education and training, and accessing high quality education and training. Over time this will reduce the inequalities between institutions. In the long term the erosion will have serious effects, but the short term effects should be manageable through postponing programmes and working closely with universities on how budgets are managed.

Responding to the Chairperson, Dr Lewin said the Department must become more efficient in investing in universities. This results in skilled graduates with employable skills. The DHET monitors the process quite closely through annual cohort studies. The Department has seen a significant improvement of the throughput of students, and reduction of dropouts. This is a result of funding support for students, significant investments in supporting teaching, and student support initiatives. There was notable work done to support student studies. One example of support was funding, and there was success in other ways.

The Department is concerned with inequalities and outcomes, especially concerning the distance learning sector where students work while studying. Dr Lewin said as much as the DHET is focusing on input, there needs to be a focus on output, for the improved efficiency of the system.

Regarding the feasibility of free education for all students, she said the Department saw an increased demand for funding support. This is because more students are accessing higher education and TVET colleges, and families were unable to fund studies during COVID-19, with the weak economy impacting families.

It is likely, without significant additional funds, the DHET will be unable to support further growth in the budget. The Department must look into developing a sustainable policy in line with the country’s governmental goals, to ensure access and success in higher education fields. The Department must be innovative to develop a more comprehensive student financial aid model to support students going forward.

Dr Lewin noted the importance of the student financial aid model being sustainable, to avoid strain on the fiscus while trying to meet the policy goals enshrined in the National Development Plan. Cohort studies showed students who are NSFAS funded do perform significantly better than other students. This evidences a link between funding support for students who need support to access higher education, and the student’s success within the system.

Regarding policy issues around student funding, Dr Lewin noted concern about double-dipping issues. The DHET works closely with university financial aid offices which identify where this may be occurring. There are strict rules regarding NSFAS and double-dipping finances. Students who are NSFAS funded are not allowed to take other funding for the same purpose for which the student is receiving NSFAS funding.

The Department observed anecdotal evidence to prove that many students coming from poor families feel pressure and sent money home during the COVID-19 pandemic. The Department must look into policy issues to ensure the money being given to students to succeed academically is being used for those purposes. The Department is working with NSFAS and allowing universities to put supporting mechanisms in place for students. This will allow students to make a choice with the student’s money, while ensuring funding is being used for the intended purposes.

The DHET will receive further information regarding the savings made by universities during the year. This is expected when it receives its financial reports for 2020. It appears from initial engagements with institutions, to be very unlikely the universities acquired overall savings. Universities may have made savings in particular areas, such as accommodation costs, and municipal bills when students were not on the physical campus. However, many of those costs were continued where accommodation contracts were in place, or universities did not receive funds from fee costs, as the services could not be delivered. Institutions also had significant health and safety expenses, as well as the costs accumulated for providing ICT support, access to devices, distribution costs, and additional training fees. Many costs significantly increased last year in comparison to the savings made.

Regarding long-term plans for accommodation, student housing is a major priority for the Department. It is prioritised through support given by the Infrastructure and Efficiency grant, and through ongoing work done in the Student Housing Infrastructure programme. The Department has a programme to oversee infrastructure funds, which includes a Macro-Infrastructure programme, and online monitoring, which also provides active support to universities and TVET colleges, regarding managing infrastructure funds. The DHET noticed a significant growth in capacity at an institutional level. This is the case regarding managing and procuring infrastructure, which resulted in enormous gains in relation to timing infrastructure projects, and spending and monitoring. Even with the decrease in infrastructure funds, the Department is determined to maintain the levels of oversight which grew significantly.

On Research and Development Expenditure (R&D), Dr Lewin said it was a joint venture with the Department of Science and Innovation, which has a far smaller budget. The Department hopes to see the system grow in spite of the economic setbacks. On the continent, South Africa contributes largely towards producing research, and has an international impact in many areas of research. The Department is working to grow this area.

Dr Lewin said the Department must build the post-school system holistically, which includes increased intake in TVET colleges. This will require significantly higher investments and development of capacity in this area. It will indicate to future students, this is an institution of choice, and it will ensure real opportunities are provided for students in the post-school system.

Mr Qonde said in the 1990’s, upon the NFAS consolidation, government capped funding to students at a combined annual income of R122 000 per family. It remained this way until 2010, when as a result of pressure, institutions gave poor students funding. It was however not the full amount the students needed to finish the qualification. This resulted in the accumulation of debt by a number of students. In 2010 the President issued an intervention of R5 billion to alleviate some of the pressures of funding. This was not sufficient to prevent institutions from top-slicing, which eventually resulted in the Fees Must Fall movement.

In December 2017, there was a determination and announcement regarding the figures which spiked to R350 000, combined annual family income. Students in this category receive free education, including accommodation, books, learning, and food and living allowances, for each student. The DHET cannot control how a student spends the allowance. The student must at least have funds to be sustained throughout university. Where students choose to spend the money on items beyond the student’s education, the Department cannot control this.

The problem lies in the gap of R351 000 to R600 000, combined annual family income, which makes up the middle class, and places pressure on the Department. This area is currently under review to ensure there is some mechanism of assistance to ensure these students can also receive higher education. The Minister was instructed to work on this missing middle, which may require relooking the entire programme and working out a sustainable policy intervention.

Regarding efficiencies when supporting students, Mr Qonde said double-dipping does not happen at an institutional and NSFAS level. NSFAS ensures funding is provided on a once-off basis.

Mr Qonde said the Department intervened regarding maintenance. In a 2014 study, it showed institutions combined, have deferred maintenance of up to R24 billion, in combination with the pressures of student accommodation and other infrastructure. The budget is not sufficient. This requires the Department to find other mechanisms to mitigate issues of student accommodation. The DHET had engagements with Public Works, National Treasury, the Fund Management sector, banks, and the Economic Development Department, to work out payment mechanisms to allow the private sector to loan money for infrastructure rollouts.

The Development Bank of Southern Africa (DBSA) and National Treasury (NT) came together and a memorandum of agreement was signed. It makes some resources available to ensure infrastructure rollouts for building student accommodation can continue. According DHET calculations, if it was to rely solely on state funding over ten years, only 30 000 new beds could be provided. After the intervention from National Treasury and DBSA, funds were committed to allow for the rollout of infrastructure for institutions. This led to the establishment of the Student Housing Management (SHM) offices at DBSA, which hopes to avail 300 000 new beds for universities and TVET colleges over ten years.

There are some interventions announced by the President, of which DBSA is a fund manager. There are 13 new projects in the pipeline in various TVET colleges and universities, as the second phase of intervention by DBSA. R122 million was contributed recently in a project for institutions, while the budget facility topped up R28 million, which was complimented by a DBSA loan of R278 million. This allowed almost 300 000 new beds to be rolled out. It is looking at increasing this intervention programme.

The National Skills Fund (NSF) and SETA invested in all state-owned companies for training artisans, which are currently operational. The Department partnered with other departments to ensure the training of some artisans. As a result, the Management Development Programme (MDP) placed a target of producing 30 000 artisans per annum by 2030. From the 30 000, the Department already exceeded its target as a result of the combined funding interventions.

The DHET introduced entrepreneurship programmes in many institutions to ensure students are trained to create a business. He noted a campus where students are learning mechanics and are taught how to establish a business as a mechanic. Students who went through this programme were able to sustain themselves without external employment.

The DG welcomed any comments and support to maximise the work the DHET underwent.

The Chairperson asked the DG what his comment was regarding students with accents being discriminated against in public institutions, on the basis of the accent.

The DG said he did not necessarily view it as discrimination. Though, he did acknowledge the matter is not confined solely to the higher education sector, it happens at a school level as well. The prestige of what a programme offers is what defines the school. Where perceptions of a programme from certain institutions are not sufficient, it is a reflection of societal perceptions, and not necessarily the school. On this basis, interventions are implemented to upgrade qualifications of teachers, and lecturers already in institutions, to enhance the prestige of the institutions. This will result in the production of good graduates within the job market.

The Chairperson agreed perception does not necessarily reflect the current reality. Though, the DHET should be alive to when it comes to ensuring institutions do not perpetuate discrimination.

The Committee Secretary said the Minister and the DHET did issue an apology for the Minister’s absence from the meeting. The Minister was seeing to a long-standing commitment.

Consideration of Proposed Technical Corrections to the 2021 Appropriations Bill
The technical corrections to the 2021 Appropriations Bill were adopted.

The meeting was adjourned.


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