RES­CUE

FUND­ING Pri­vate sec­tor ini­tia­tives, set up to help with stu­dent fund­ing, are un­der way – with plans mooted to fi­nance other na­tional projects

CityPress - - Business And Tenders & Auctions - DEWALD VAN RENSBURG dewald.vrens­burg@city­press.co.za

An of­fi­cial launch for the ea­gerly an­tic­i­pated Ikusasa Stu­dent Fi­nan­cial Aid Project was post­poned this week, de­spite the pi­lot plan amount­ing to R200 mil­lion be­ing set aside for up to 2 000 stu­dents this year. Ikusasa (an isiZulu word mean­ing “the fu­ture”) is the pri­vate sec­tor’s solution to the so-called “miss­ing mid­dle” prob­lem at uni­ver­si­ties and col­leges: the large pro­por­tion of the stu­dent body too rich to qual­ify for fund­ing from the Na­tional Stu­dent Fi­nan­cial Aid Scheme (Ns­fas), but too poor to ac­cess com­mer­cial stu­dent loans.

De­tails of the scheme’s progress were re­vealed this week at a meet­ing of the As­so­ci­a­tion for Sav­ings and In­vest­ment SA (Asisa).

This fol­lowed a meet­ing by the CEO Ini­tia­tive, the group of ma­jor com­pa­nies which have joined forces with Fi­nance Min­is­ter Pravin Gord­han – and gath­ered pe­ri­od­i­cally since Jan­uary 2016 – to de­vise ways to avoid a down­grade of South Africa’s credit rating and spear­head in­clu­sive eco­nomic growth.

Asisa CEO Leon Cam­pher said the tar­get was to launch Ikusasa next year, fol­low­ing the pi­lot plan.

“They are still work­ing on the modelling and have to make cer­tain brave as­sump­tions,” he said.

Roughly speaking, though, it could cost R30 bil­lion to R40 bil­lion a year to cover the whole co­hort of stu­dents fall­ing into the miss­ing-mid­dle cat­e­gory.

“In essence, govern­ment and the pri­vate sec­tor will di­vert money into this ve­hi­cle,” said Cam­pher. The pri­vate money is meant to come from two sources. First, the idea is that money al­ready ear­marked by fund­ing com­pa­nies for in­ter­nal staff devel­op­ment – in terms of the BEE Codes – gets di­verted into the new fund in­stead.

This would be based on a per­cent­age of pay­roll, sim­i­lar to the skills levy that is used to fund the Sec­tor Ed­u­ca­tion and Train­ing Au­thor­ity sys­tem.

The skills levy, which com­prises 1% of com­pa­nies’ pay­roll, is es­ti­mated to to­tal R16 bil­lion a year by now.

If 1.5% of pay­roll could get di­verted into Ikusasa, this would amount to R24 bil­lion, cov­er­ing a large part of the re­quired fund­ing.

The hope is that Ikusasa can “build its own bal­ance sheet” with con­tri­bu­tions from the pri­vate sec­tor un­til it is able to is­sue bonds.

Whether Trea­sury will back these bonds is one of the as­pects be­ing ne­go­ti­ated, said Trevor Chan­dler, Asisa’s se­nior pol­icy ad­viser.

“The bonds will have to meet fun­ders’ re­quire­ments,” he said.

Like Ns­fas, Ikusasa will work on a com­bi­na­tion of grants and loans, with the em­pha­sis shift­ing to loans the higher the in­come of a stu­dent’s house­hold gets. Chan­dler stressed that Ikusasa would not re­place Ns­fas. “The ques­tion will arise where one man­date ends and the other be­gins,” he told City Press.

The eco­nomic modelling is holistic in that it con­sid­ers Ns­fas and Ikusasa at the same time, but the for­mer re­mains fo­cused on stu­dents from homes with an in­come below R122 000, while Ikusasa is ear­marked for the miss­ing mid­dle with in­comes of up to R600 000 a year.

“The fi­nan­cial model is sub­stan­tially dif­fer­ent,” he said, adding that the Ns­fas model was in­her­ently un­sus­tain­able since it con­verted loans into grants – which are not re­paid – for suc­cess­ful stu­dents.

While this was a good in­cen­tive, said Chan­dler, it meant that the stu­dents most likely to be able to re­pay their loans were in­ten­tion­ally ex­empted from hav­ing to do so.

CEO INI­TIA­TIVE’S OTHER PLANS

The CEO Ini­tia­tive’s so-called Youth Em­ploy­ment Sys­tem (YES), may be launched in July, Cam­pher said.

The goal of YES is to put 1 mil­lion peo­ple through paid in­tern­ships within three years.

The cost will be borne by the pri­vate sec­tor and sup­ported by a ne­go­ti­ated pack­age of govern­ment in­cen­tives.

Com­pa­nies back­ing this plan won the ma­jor con­ces­sion they needed from govern­ment last year – a scrap­ping of the cap on the em­ploy­ment tax in­cen­tive they can claim.

This in­cen­tive, bet­ter known as the youth wage sub­sidy, is ex­pected to sub­stan­tially sub­sidise the YES cam­paign.

The CEO Ini­tia­tive is the group which has been ac­cused by the Gupta fam­ily’s Oak­bay In­vest­ments of be­ing the source of a con­spir­acy to boy­cott all their busi­nesses.

It was at an early meet­ing of the CEO Ini­tia­tive in Jan­uary last year that Oak­bay claims Gord­han “in­structed” cor­po­rate South Africa to de­stroy the Gupta fam­ily.

On Monday, about 120 CEOs met with Gord­han at Ned­bank’s Sand­ton of­fices, where progress with the ini­tia­tive’s var­i­ous “work streams” was re­ported.

Most of the ven­tures be­ing born out of the CEO Ini­tia­tive in­volve pack­ag­ing pub­lic goods as projects that pri­vate in­vestors can put money into.

Ac­cord­ingly, Cam­pher de­scribed the mis­sion of al­most all the ini­tia­tives as “crowd­ing in” fund­ing.

There are plans to crowd in fund­ing for di­verse projects, from bulk wa­ter in­fra­struc­ture to stu­dent hous­ing.

There is also a plan to crowd in fund­ing for emerg­ing farm­ers and for a “re­de­vel­op­ment” of the Vaal Tri­an­gle.

“The idea is to crowd in fund­ing to re­lieve the fiscus,” said Cam­pher.

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