No-fee campuses death knell for fiscus
President Jacob Zuma has presided over the destruction of jobs and growth and reduced business and investor confidence to shreds, but he has not indulged in outright populist expenditure — until now.
Zuma is reportedly about to jettison the Heher Commission’s findings that free higher education is unaffordable and run with a plan devised by a family friend, Morris Masutha (28), who has a masters degree in small enterprise development.
If Zuma announces free higher education from 2018, without the means to finance it, it will be the most alarming development in the economy since he sacked Pravin Gordhan. It would confirm, once again, that he is prepared to take SA right over the fiscal cliff to shore up his popularity ahead of the ANC’s December elective conference.
Masutha’s plan reportedly puts the annual cost of providing full cover to poor and lower “missing middle” tertiary students (those from households earning under R350,000 a year) at R50bn.
The task team set up by the government in 2016 under former FirstRand CE Sizwe Nxasana found that the cost of providing full cover to poor and all “missing-middle” students (from households earning up to R600,000 a year) would be just more than R40bn.
The difference is that Nxasana’s Ikusasa scheme has a workable plan to raise the R40bn, partly from private institutional investors. It has also been piloted at seven universities over the past year with good results, whereas Masutha’s has come like a bolt from the blue, bypassing the Treasury and other traditional budgeting structures. As a result, the head of the Treasury’s budget office, Michael Sachs, has resigned.
The problem is that an amount of R50bn cannot realistically be raised from the government through efficiency improvements or by rerouting funds from other departments. It also cannot be supported by the low level of growth.
Moreover, SA needs another R50bn just to cover the projected revenue shortfall in the fiscal year so that it can keep funding essential things such as free antiretrovirals and social grants without blowing out the debt ratio.
If this amount goes on higher education, SA will have nowhere left to cut to stabilise the debt position.
Another fact that appears lost on most politicians is that according to the Treasury’s long-term fiscal study, unless growth returns to 3% and stays there, SA is going to battle to keep running these essential social programmes, let alone offer free tertiary education.
SA should stop kidding itself — many other countries have had to rein in or reverse wellfunctioning social programmes as a result of fiscal crises.
Take Ireland, once the poster child of economic success. It was forced to accept austerity measures after the global crisis. Ireland responded to a 25% drop in its tax revenue by cutting departmental spending by up to 30%, the child benefit by 20% and the wages of senior public managers by 28%.
The lesson for other countries was: live within your means, raise government efficiency and enshrine fiscal responsibility into law.
SA has instead borrowed more each year to maintain current expenditure; hollowed out vital public institutions; and allowed corruption to bankrupt several state-owned enterprises. The fiscal situation is now precarious. The country is a whisker away from creditrating downgrades that could plunge it into a deep recession and dangerous debt spiral.
If Zuma announces free higher education in this environment — without a solid funding plan endorsed by the Treasury and the highereducation sector — he will commit the country to fiscal suicide as sure as if he had sliced a blade across its wrists.