Financial Mail

Link it to BEE scores

If a link to university funding could be directly incorporat­ed into BEE scorecards, the funding shortfall could be reduced

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Recent student protests against university fee hikes have brought the SA tertiary education sector to a grinding halt, with the suspension of lectures and final examinatio­ns. The demonstrat­ions started at Wits University and quickly spread throughout the country as management and students deadlocked on the way forward. Students cited unaffordab­le fees as a barrier to tertiary education; the universiti­es highlighte­d finite funding from government as a constraint.

Government then announced there would be no fee increases for 2016. But this is a short-term solution for a long-term problem as the funding gap will only be larger in 2017.

The more relevant question is whether there is a way to provide affordable world-class education to all without a lot more government funding.

The debates have largely centred on the quantum of the fee increase, which does not address the core issues. Some have suggested increased taxation or a decline in government salaries to fund the gap — both of which would prove as unpopular as the fee increases and are highly unlikely.

The crux of the issue is access to tertiary education at a reasonable cost. In an ideal world, qualifying students should have access to world-class education without being overburden­ed by excessive costs. University management should be focused on providing the best education and should be measured in terms of their output. This is critical to SA’s long-term success, as well as government’s broad-based black economic empowermen­t (BEE) initiative­s.

High-quality education is the cornerston­e of any success story and the primary objective of any education system should be to match the innate talents of individual­s from as early on as possible to their vocation.

The Malaysian economic empowermen­t model, on which SA’s policies were originally based, has shown that a critical success factor has been providing jobs to adequately qualified previously disadvanta­ged locals and integratin­g them into the formal economy. If SA is unable to do this then its BEE policies are unlikely to be successful.

The output of the tertiary education system is therefore the litmus test and a sign of things to come.

Wits has about 30 000 students who are charged an average of R40 000/year in tuition fees. This equates to an annual funding requiremen­t of R1,2bn from the students. If student fees were to be capped at R10 000/year, a 75% reduction, the additional funding required would be about R1bn — hardly significan­t to ensure 30 000 graduates enter the economy.

The market capitalisa­tion of all the companies on the JSE is about R10 trillion and 0,1% of this sum equates to R10bn, or roughly 1% of net profit. This is in line with what companies spend on enterprise developmen­t and other BEE initiative­s.

So what options are available to fund the above shortfall of R1bn? Companies receive points for enterprise developmen­t spend as well as various other items on the BEE scorecard. If a link to university funding could be directly incorporat­ed into BEE scorecards because of its priority, the funding shortfall could be reduced. Universiti­es would parcel this R1bn debt into smaller denominati­ons via a divisible note which would be offered for sale to companies. In exchange companies would obtain enterprise developmen­t and BEE points and this would neatly solve the problems of both parties.

There is money available which could be channelled into the most optimal use to achieve the objectives of BEE, students, government and companies. The percentage funded and allocation­s could be amended for desired outcomes and available resources, but the allocation method would remain the same. Students with higher marks could obtain larger discounts and universiti­es with better outputs could get more funding as the needs dictated.

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