‘Yes, we can easily raise the funds for fee-free education’
South Africa must harness the potential of an education levy on pension funds, the skills levy, state funding and a corporate levy, writes
THE #FeesMustFall and #FreeEducation movements oblige all South Africans to come up with a permanent solution to the problem of funding fee-free higher education.
The EFF believes it is possible to offer fee-free education to the majority of South African students immediately.
Fee-free education entails the admittance of all academically deserving South Africans to institutions of higher learning without the requirement of paying fees.
The EFF proposes that the money for this be raised through an education levy on pension funds, the skills levy, additional government funding and a corporate levy.
Precisely how these funding mechanisms will function will be determined after input from society, including government, civil society, trade unions, students and all political parties. The critical questions are:
Who should receive fee-free education?
How much will fee-free education cost?
How much does the government already spend on fee-free education?
Where must the money to fund fee-free education come from?
How will such money be disbursed and distributed?
Only students who pass their senior certificates should be eligible for admission to institutions of higher education.
Fee-free education should only be made available to students who make academic progress in the universities at which they are enrolled.
For a three-year degree, a student who does not pay fees must only be allowed to fail once. If the student fails an academic year twice, that student must be excluded from feefree higher education and be required to pay to continue studying.
The Parliamentary Budget Office has calculated that each student needs R82 000 annually for tuition, accommodation and meals — the central needs for a student to make sound academic progress.
With the additional costs of travel, entertainment, communication and data, each student reasonably needs R100 000 a year to go through higher education.
The EFF proposes that all students whose annual family income is less than R1-million a year be eligible for fee-free education. Which means 90% of students in higher education will be eligible for fee-free education.
South Africa’s public higher education sector has about one million university students and is expected to absorb 100 000 more students each year. At the estimated cost of R82 000 per student per year, the higher education sector will need R82-billion.
The Parliamentary Budget Office estimates that for the next four years, the amounts to provide fee-free higher education for all will be: ý R67.2-billion for 2016-17; ý R75.1-billion for 2017-18; ý R83.9-billion for 2018-19; and ý R93.8-billion for 2019-20. The government spends about R40billion on higher education through direct subsidies and the National Student Financial Aid Scheme.
NSFAS allocations tend to differ from institution to institution, generally providing assistance to families whose annual income is less than R122 000, a threshold which has remained unchanged for far too long and ignores inflation and the declining real value of wages.
The NSFAS formula is not useful because it omits many students who are academically deserving and poor, known as the missing middle.
The fund has a debt book of R24billion, and recovers less than R300million annually from beneficiaries, with no indication that the recovery rate will improve.
The NSFAS will thus never be a self-sustaining bursary loan scheme, and legislation to cancel all NSFAS debt ought to be considered.
State-owned companies and the three spheres of government — legislative, executive and judicial — ought to consider the introduction of additional bursaries and subsidies for poor, deserving students.
Of the four proposed additional sources of higher education funding, pension funds offer the greatest potential.
Overall, South Africa’s pension funds, which are collected through the contributions of employers and employees in the private and public sector, are valued at more than R3.7-trillion.
Pension funds are mostly administered by asset management companies and private equity firms, earning dividends every financial year.
They are mostly used as investment capital, debt, direct and indirect equities in the private sector whose dominant purpose is profit maximisation, being largely used to buy shares in companies, and often invested in money markets and government bonds.
These investments often do not have any direct benefit to the pension fund contributors.
The Public Investment Corporation manages assets worth R1.857-trillion — about 45% of South Africa’s GDP.
The EFF proposes that an annual education levy of 2.5% to be deducted from all pension funds.
Using figures for 2015, this would amount to R92.5-billion, which in itself is adequate to fund fee-free education for all.
Such an education levy on pension funds will assist the pension fund contributors because their children PLAN: The EFF proposes that students whose annual family income is less than R1-million be eligible for fee-free education will gain access to fee-free higher education.
Employers will gain skilled labour, which will improve productivity.
The national skills levy also has strong potential as a source of funding. Sourced from all employers at a rate of 1% of the employer’s salary bill, the total amount levied annually is R2.7- billion.
The EFF proposes that this levy be increased to 2%.
It also proposes that the government’s contribution to higher education be consolidated into a single input, including NSFAS funding. This will come to just under R40-billion.
The government ought to target allocating 1.5% of GDP to higher education, as recommended by its ministerial committee in 2012. This would come to R60-billion, and can be implemented gradually with an increase of higher education expenditure as a percentage to:
0.90% of the budget in 2016-17; ý 1.2% in 2017-18; and ý 1.5% in 2018-19. South Africa is losing, on average, R135-billion a year on illicit financial outflows, although the Davis Tax Committee put that number at a much more conservative R25-billion.
The South African Revenue Service must strengthen capacity to enforce legislation to curb illicit financial deals and add R25-billion annually to fund free-fee education, even if that figure will, admittedly, not remain stable.
The private sector remains a vital stakeholder in funding higher education. In addition to research funds, donations and investment, a statutory levy for fee-free higher education is necessary.
The EFF proposes a corporate levy of 4.9% in addition to the current corporate income tax rate of 28%. This will generate an additional R10billion.
Overall, these four interventions will make R166.1-billion available.
The additional funding should be directed to expanding the system, increasing the remuneration of lecturers and international scholarship programmes.
Funding must be allocated by the Department of Higher Education on advice from the Council on Higher Education. Each university will apply for funding annually, with clear budget plans and control mechanisms .
Parliament should enact a standardised procurement and finance management model which should apply to all institutions of higher learning. The monies allocated must properly be accounted for and must be audited by the auditor-general.
These proposed mechanisms and methods will require decisive political and societal leadership, which must win the support and backing of all sectors of society, including employer and employee organisations.
Fee-free higher education is a necessity in South Africa and only our combined efforts will provide an enduring solution.
Shivambu is deputy president of the EFF and the party’s spokesman on finance
The role of funding mechanisms will be determined by civil society, trade unions, students, the government and political parties The additional funding should be used to expand the system and increase the remuneration of lecturers