Must try harder

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

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-