South Africa’s finance minister, Pravin Gordhan, has had to juggle two competing sets of demands in approaching the 2016 medium term budget. On the one hand the government’s debt-to-GDP ratio has doubled since the global financial crisis in 2009.
Since then, South Africa has also suffered from low economic growth, which places a damper on tax revenue growth. Thus, to ensure that debt does not become unsustainable, the minister announced tighter spending ceilings. On the other hand the government also faces pressure from students to spend more on higher education and to ensure fee-free education. Essentially he is walking a tightrope.
He announced that government expenditure on higher education and specifically universities will be the fastest growing expenditure items on the budget. Subsidies to universities are set to grow by 10.9% per year in the next three years, while transfers to the National Student Financial Aid Scheme are set to grow by 18.5%. Specifically, these measures are aimed at improving the access of poor students and students coming from what is called the missing middle.
The medium term budget also showed that government expenditure on higher education increased in the past couple of years, though this increase mostly benefited vocational colleges, sector education and training authorities and the National Skills Fund.
I think that the minister did the best he could, given the constraints within which he operates. If South Africa wants more, it will require a change in government policy.
Lack of leadership
We should distinguish between what the minister can do and what the government can do. The minister did what he could within the budgetary and policy constraints within which he operates. The government, however, should have provided leadership. And note that I am saying that “it should have provided leadership”, not “more leadership”, as there has been no leadership at all coming from the government regarding the higher education crisis.
The students’ demand for fee-free education is not a demand that universities can deal with on their own – the provision of higher education is expensive, and if government is not providing the funding, universities have to charge fees. Thus, the government should have engaged with students much earlier, and if it did not see its way open to fund fee-free education, it should have explained much earlier why this is the case.
In the medium term budget the Treasury highlighted that higher education benefits both society and the individuals obtaining qualifications, and that if they subsequently become affluent citizens, the country should expect them to make a contribution to the next generation’s education. This is the key.
First, as a society South Africans need to ensure that whether or not someone obtains a higher education qualification depends on merit and not their parents’ financial status. Thus, the country needs to ensure that there is a funding mechanism that allows academically deserving students from poor backgrounds to obtain a higher education qualification.
And by poor I also mean students from the missing middle. This funding should also cover more than just tuition fees. It should also ensure that while these students study they do not have to worry about where the next meal comes from, or whether or not they will have a roof over their heads. Students who come from higher-income families, however, should pay for their own tuition – why should anybody else be paying for them?
Having said that, South Africans also need to understand that even though they might be poor when they start higher education studies, once they obtain a degree they will join the middle class – the top 10% of income earners. That is a benefit that people without a higher education qualification are less likely to enjoy.
Thus, even if they are not paying while studying, it is completely justifiable to expect them to pay for that private benefit at some stage in their lives. Why should anybody else be paying for it?
Thus, South Africa needs to consider different options to fund higher education. It might entail a loan that is repaid in future, it might entail a bursary linked to a graduate tax, or a bursary linked to a generally higher income tax. The point is that repayment of some sort is needed to ensure that the country has the funds to also pay for future generations’ higher education.
But, South Africa spends only about 0.7% of GDP on university education and almost 1.5% on post-school education (which includes Technical and Vocational Education and Training colleges). If the country wants to create the intellectual basis to support a growing skills-based economy, then government, the private sector and private households will all need to spend significantly more on all post-school education.
Dysfunctional school system
South Africa’s school system is weak and thousands of schools are virtually dysfunctional. Students leaving these schools are unfortunately woefully underprepared for higher education or the labour market.
South Africa also has a dismal vocational education system. According to the 2011 census only about 1.6% of the labour force holds a N1-N6 technical qualification, leaving the economy short of much-needed artisanal skills. The technical colleges also do not have a good reputation, leaving many students with the justifiable perception that obtaining a higher education is the only way out of poverty. This failure and the resulting perception are of course significant contributing factors to the current crisis.
Therefore, the problem is not just underfunded universities, but also dysfunctional schools and a too small vocational training sector. All of these need additional funding in what is a very constrained budget.
What is therefore required from all South Africans is to discuss the trade-offs government makes when setting its expenditure priorities in future. But, private businesses and individual households also need to reset their priorities and make more future-oriented expenditure trade-offs. That will require from South African citizens to invest more in education.
Government must step into the breach
Student activists demanding fee-free education will not be satisfied with this medium term budget statement. However, I also hope nobody expected the minister of finance to announce a big policy shift regarding the financing of higher education. He was in no position to make bold new policy proposals to finance higher education.
South Africa is still awaiting the report from the Heher Commission, which, unfortunately, is taking frustratingly long to produce. The government and the ruling party have also not made any policy announcement regarding their long-term policy plans to finance higher education – the absence of leadership I was talking about.
The country should therefore understand that the minister of finance is not the sole, or even primary person, formulating higher education policy – he can merely give effect to government’s policy.
What South Africans should do is demand leadership from government as a whole to establish and maintain a sustainable and quality-driven basic, vocational and higher education system that will support future economic growth.