Must try harder

The ANC’s call for an ex­ten­sion of the 2016 univer­sity fee freeze is a threat to the sec­tor

Financial Mail - - FMFEATURE S -

The ANC’s rec­om­men­da­tion that the univer­sity fee freeze of 2016 be ex­tended in­def­i­nitely fails to recog­nise the fi­nan­cial sit­u­a­tion of uni­ver­si­ties — 17 of which are ex­pected to run into the red even if their in­come rises in line with in­fla­tion next year.

It also fails to recog­nise that de­spite its pop­u­lar ap­peal, the 2016 fee freeze made univer­sity cheaper for rich stu­dents while re­duc­ing uni­ver­si­ties’ abil­ity to pro­vide fi­nan­cial aid to poorer stu­dents be­cause they were forced to slash bud­gets and run down their re­serves to plug the short­fall.

It ap­pears the ANC is cav­ing in to pop­ulist pres­sure, given that its rec­om­men­da­tion that “the prin­ci­ple of no-fee in­crease in uni­ver­si­ties should re­main in place” came in re­sponse to the party’s elec­tion drub­bing in big met­ros and on the eve of planned protests by univer­sity stu­dents.

SA’s record of stick­ing to its fis­cal spend­ing ceil­ing sup­ports its in­vest­ment­grade credit rat­ing. Rat­ing agen­cies are watch­ing SA ahead of their De­cem­ber re­views for any signs that gov­ern­ment may re­sort to un­sus­tain­able spend­ing to win back vot­ers.

“The risks to SA’s sovereign credit rat­ing are clear, but a fee freeze won’t nec­es­sar­ily pun­ish SA’s rat­ing as long as it is not debt­funded or, worse, be­comes an­other con­tin­gent li­a­bil­ity that spi­rals over time,” says Deutsche Bank econ­o­mist Danelee Ma­sia.

She be­lieves there are suf­fi­cient funds at na­tional trea­sury’s dis­posal to fund a 2017 fee freeze that costs roughly R2bn/year over three years, as was the case with the 2016 fee freeze.

Firstly, she says trea­sury may have un­der­es­ti­mated SA’s terms of trade gains this year, so com­mod­ity-re­lated rev­enue re­ceipts may be slightly higher than ex­pected. Se­condly, the Na­tional Skills Fund has a sur­plus of R7.5bn over the medium term, re­sult­ing from last year’s ad­just­ment to the skills de­vel­op­ment levy. Of this, R5.4bn re­mains un­al­lo­cated. In ad­di­tion, any un­spent funds from sec­tor ed­u­ca­tion & train­ing au­thor­i­ties (Se­tas) will go back into the fund this year.

Thirdly, trea­sury can tap into the R6bn con­tin­gency re­serve for the cur­rent fis­cal year. It grows to R10bn and R15bn in the other two fis­cal years, re­spec­tively.

Also, since pub­lic ex­pen­di­ture is set to grow in real terms, slow­ing the over­all pace of spend­ing would free up funds. There is also the op­tion of repri­ori­tis­ing within ex­ist­ing bud­gets as gov­ern­ment did in order to find the ex­tra R16bn it al­lo­cated to higher ed­u­ca­tion in the cur­rent bud­get.

“So while it’s get­ting tougher each year to find new fund­ing sources, there still ap­pears to be ad­e­quate fat in the bud­get,” says Ma­sia.

“In my view this ques­tion has less to do with the fund­ing and more to do with the risk it gen­er­ates and the prece­dent that could be set for other sec­tors, as the user­pays prin­ci­ple ap­plies to most gov­ern­ment ser­vices.”

On the other hand, money spent on higher ed­u­ca­tion is an in­vest­ment in the econ­omy from which the whole coun­try ben­e­fits, not just the stu­dent pay­ing the fees.

It is one of the surest ways of achiev­ing so­cial mo­bil­ity and ad­dress­ing in­equal­ity. It should be of grave con­cern to every­one that univer­sity fees have be­come in­creas­ingly un­af­ford­able due to the sys­tem­atic pub­lic un­der­fund­ing of higher ed­u­ca­tion.

Rel­a­tive to GDP, SA’s pub­lic spend­ing on post-school ed­u­ca­tion and train­ing at 0.75% is lower than the OECD av­er­age of 1.59%. Even the av­er­age for mid­dle-in­come coun-

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