Malusi Gigaba. Picture: REUTERS
Malusi Gigaba. Picture: REUTERS

Finance Minister Malusi Gigaba told the ANC’s top leadership that the government would need R12bn to fund President Jacob Zuma’s plan to scrap tuition fees for students from poor homes, according to a person with knowledge of the matter.

Gigaba told the ANC’s National Executive Committee (NEC) this week that the Treasury would cut from existing spending programmes and would not announce a special tax or an increase in the value-added tax (VAT) rate to finance Zuma’s plan, according to the person, who asked not to be identified because he was not authorised to speak on the matter.

The Treasury was still exploring ways to fund the plan and would only give further details about the amount needed in the February 21 budget, spokesperson Mayihlome Tshwete said by phone.

Zuma unveiled the free-education plan on December 16, two days before Cyril Ramaphosa replaced him as leader of the ANC. The party’s NEC met on Wednesday in East London to prepare for its anniversary celebrations on Saturday.

SA will have a revenue shortfall of R50.8bn in the fiscal year that ends in March, Gigaba said in the October medium-term budget policy statement.

In November, Zuma told the Presidential Fiscal Committee to cut spending by R25bn in the 2018-19 budget and to find ways to add R15bn to the nation’s revenue to help stave off further debt downgrades. Cutting expenditure could stunt growth in an economy that went through its second recession in less than a decade in 2016.

SA will increase subsidies to universities to 1% of GDP from 0.7% now, over the next five years, according to Zuma’s plan. The Treasury allocated R76.7bn to higher education for the year to the end of March, and estimates this will increase by an average of 8.2% in each of the following three years, the fastest-growing spending item after debt-service costs, it said in the October budget.