Picture: REUTERS
Picture: REUTERS

The government is doing the best it can to address the funding challenges in higher education, within a constrained fiscal environment, Finance Minister Pravin Gordhan said on Wednesday.

Gordhan said in his budget speech in Parliament that the government was determined to address the challenges identified in post-school education and training in a phased manner.

Resources would be taken into account in determining the pace with which these could be addressed, he said.

But he appeared to put the nail in the coffin of a graduate tax‚ saying the funds raised would not be nearly enough to cover the running costs of South African universities.

“Government recognises the needs articulated by students in universities and TVET [technical and vocational education and training] colleges,” the minister said.

Gordhan said in addition to the increases of R32bn made in the higher education allocations in last year’s budget, and the 2016 medium-term budget policy statement, a further R5bn in the outer year of the medium-term expenditure framework had been added.

According to the budget review, spending on higher education and training, which includes universities and TVET colleges, is expected to reach R89.8bn by 2019-20, growing at an average annual rate of 9.2% over the medium term, making it the fastest-growing expenditure item after debt servicing.

Spending is estimated to amount to R77.5bn in 2017-18, increasing to R80.8bn in 2018-19.

A total of 615,000 university students will receive National Student Financial Aid Scheme (NSFAS) loans and bursaries over the next three years. The scheme will receive additional allocations of R7.7bn over the medium term to help unfunded NSFAS university students from the 2016 academic year continue their studies.

Transfers to NSFAS are expected to rise from R11.4bn in 2016-17 to R13.9bn in 2019-20.

University subsidies

University subsidies will increase by about 11% over the medium term. The budget review details that university subsidies for 2017-18 will amount to R31.6bn, R36.1bn for 2018-19, and close to R38.2bn in 2019-20.

Universities have previously pointed out that government funding remains inadequate. SA’s higher education costs have risen at twice the national inflation rate over the past 20 years. At the same time, state funding for higher education declined in real terms, forcing universities to impose fee increases higher than inflation to mitigate the shortfalls.

There is concern that students could again embark on protests this year to demand no fee increases and ultimately free higher education.

Gordhan said there were processes in place to come up with lasting solutions to the student funding challenges.

Graduate tax

The budget review document outlines how a graduate tax would be unlikely to assist with the financial needs of the higher education sector.

The document states that “several groups have put forward the idea of a graduate tax to be levied directly on all university graduates. The idea offers several potential advantages‚ including effectively targeting private returns to higher education.”

However, it says that Treasury estimates that if the tax were levied on each new graduate‚ about R200m would be raised.

If it were applied to all of SA's graduates‚ it could generate R3bn a year - a fraction of the R59.8bn spent by the country’s 26 universities in 2015.

Late last year, President Jacob Zuma released a draft report on the feasibility of free higher education.

The report‚ by a commission of inquiry he established in June 2016‚ suggests students should pay back money if they receive assistance from the state.

“Because higher education and training produces substantial long-term benefits for both the state and a successful student‚ persons who enjoy fee-free higher education should be treated as loan recipients‚” the report said.

It also noted that a reasonable obligation to repay in full or in part would arise when a certain level of income was earned. The final report is expected to be completed in June 2017.


Treasury director general Lungisa Fuzile said during the media briefing on Wednesday that inefficiencies within the higher education sector needed to be addressed.

“Difficult” questions needed to be asked about whether the country was getting value for every rand spent in the sector, he said.

“We cannot keep pumping resources and not getting the kind of skills that our economy needs … this is the kind of conversation we need to have,” said Fuzile.

He also said it was important not to focus on just one part of the education system, “to the detriment of the basic education [sector] and early childhood development”.

With TMG Digital

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