Missing middle loans ‘still work in progress’

The budget is notably silent on the new loan scheme for students announced by higher education science & innovation minister, Blade Nzimande in January, suggesting the National Treasury was not on board when he went public with the policy.

“It is still work in progress,” said Treasury deputy directorgeneral for public finance Mampho Modise, when asked why there was no provision for the scheme over the medium term.

Nzimande caught the higher education sector by surprise when he announced a new loan scheme for students who do not qualify for bursaries administered by the National Student Financial Aid Scheme (NSFAS). The new scheme would run in two phases, with phase 1 providing loans to 47% of the estimated 68,446 “missing middle” students in the 2024 academic year, financed with R3.8bn drawn from the National Skills Fund and the Sector Education and Training Authorities.

He did not elaborate on how it would be funded in the years to follow. The “missing middle” refers to students who come from households with an annual income above the R350,000 qualifying threshold for NSFAS bursaries but cannot afford to self-finance their studies.

The budget not only raises questions about how the government will fulfil Nzimande’s promise, but also highlights the financial pressures facing the higher education sector.

The budget for post-school education and training fails to keep pace with inflation over the medium term, growing by just 2.5% in nominal terms. The Treasury estimates inflation will come in at 4.7% over the period, which means the budget will shrink in real terms.

It has slashed subsidies to universities and NSFAS over the next three years, warning that the cuts may put a damper on the government’s plans to increase student numbers. University subsidies have been cut by R4.9bn, while the allocation to NSFAS is slashed by R16bn as part of an overall R27bn cut to higher education. Cuts totalling R6bn have been made to infrastructure grants to universities and to Technical and Vocational Education and Training colleges.

The Treasury has offered some relief to provincial education departments, which will benefit from an extra R25.7bn to cushion the impact of 2023’s higher-than-anticipated wage settlement. Compensation for employees accounts for 77% of provincial education expenditure, according to the Treasury.

However, spending will remain constrained as the Treasury has imposed a R49.8bn reduction to the baseline for basic education. As a result, the basic education budget grows by a nominal 4.7% over the medium term, which means it remains flat in real terms.

Consolidated government spending on basic education is set to increase from a revised estimated of R313.7bn in 2023/2024 to R324.5bn in 2024/2025, and then rises to R341.4bn 2025/2026 and R360.0bn in the outer year.

The budget for the national school nutrition programme, which provides free meals to 10million children, has been protected, and grows at 5.1% over the medium term. The grant is set to rise from R1.59bn in 2024/25 to R1.9bn in 2025/26 and R2.0bn in 2026/27.

Funding for the early-childhood development grant increases over the medium term, in line with the state’s commitment to expand the subsidy to more eligible children.