HILARY JOFFE: A review of higher education financing is urgently needed

Higher education minister Blade Nzimande recently described the National Student Financial Aid Scheme (NSFAS) as one of the most progressive efforts by the government to break the legacies of intergenerational poverty .

The board of NSFAS was in the news this week as it put its CEO Andile Nongogo on notice and cancelled contracts with its payments providers, following an independent investigation which found Nongogo interfered with procurement processes and appointed his friends. The story began when the four payments providers, who had little or no experience in financial services, were appointed in line with NSFAS’ new “student-centred model” and proved disastrously unable to get grant money to tens of thousands of students — which SA’s banks could easily have done at little or no cost.  

It is a sad reflection on the risks of rent-seeking and corruption that tend to arise in SA when large pots of money are involved — as they are in NSFAS, whose budget has more than quadrupled to R50bn over the past five years thanks to the FeesMustFall free higher education bonanza dished out by former president Jacob Zuma just before he was ousted. 

But the NSFAS debacle also puts the spotlight, ahead of November’s medium-term budget statement, on a very large item of government spending which is putting ever-increasing numbers of grant-funded students into universities ever more crippled financially.  

It is a prime example of the extent to which SA’s fiscal problems are really policy problems, reflecting the government’s failure to face trade-offs and make evidence-based decisions. It’s far from clear that SA is getting a return on its investment in free higher education in terms of better-quality graduates. But it is clear that the government’s approach to funding higher education could have dire consequences for the quality of research and teaching at SA’s universities. 

Nzimande wants to “massify” higher education. He has hailed NSFAS as one of the ANC’s most progressive interventions. It now funds students from households earning up to R350,000 annually, as a result of Zuma’s intervention, and as Nzimande has pointed out, it is unique in the world in that it pays for accommodation and personal care along with fees and books. What’s more, these are all grants, not loans — unlike most other countries, SA does not expect graduates to pay back the money however successful they might become. In effect NSFAS is a social grants system for young South Africans. 

Whether SA can afford such an expensive system is a big question, especially given its increasingly severe fiscal constraints. As one of the options to reduce public spending, the IMF has proposed that limiting tertiary education subsidies to vulnerable households could save 0.5% of GDP. The Treasury put the NSFAS R50bn on its long list of items for potential savings it presented to the cabinet at the recent Spier meeting.  

The 1.1-million NSFAS-funded students are an important political constituency and it is highly unlikely the ANC is going to walk back on any of the grants in an election year. If anything, it is going to be under pressure to spend more. As it is, NSFAS has capped accommodation grants and limited student eligibility in an effort to contain costs — which keep climbing as more students are enrolled in universities and TVET colleges, as they take more time to finish their degrees (if they finish them at all), and as living costs rise. 

The trouble for the universities is that as the NSFAS budget ballooned in recent years, the government found the money in part by stripping universities of core funding. The February budget allocated just R45bn in total transfers to universities. That’s the core subsidies universities receive to pay staff, to build and maintain facilities and to fund research and other core operating costs, of which fees cover only a small part.  

Research by Wits University’s Michael Sachs shows that while government spending on NSFAS has increased sharply in real terms since 2017, universities’ core funding per student has fallen in real terms. And university and technical college infrastructure budgets have been slashed even in nominal terms. A rising number of university undergraduates face a dwindling resource base as spending for lecturers, infrastructure and operating payments is cut, and the imbalance “may lead to a deterioration in the quality of learning and teaching at higher education institutions while the ability of universities to sustain research and learning is also likely to come under continued pressure”, Sachs wrote in a recent paper.  

Adding to the pressure for some leading universities is that they find themselves having to supplement the NSFAS grant for their poorer students, because an accommodation grant which is adequate in Polokwane does not go very far in Stellenbosch, for example, and because it does not fully cover degrees such as law. While the universities can turn to fund-raising to try to plug the large gaps emerging in their budgets, this is not easy in a stagnant economy, where the calls on corporate social responsibility budgets are many. 

What Sachs calls the “inverted priorities” in education are hardly helping to improve SA’s notoriously poor education outcomes. They raise the prospect of funding crises at some of the best universities in coming years. And they raise questions about what this will mean for the quality of SA’s graduates and of the research and innovation which has been one of SA’s economic strengths. 

A review of the whole structure of higher education budgeting and policy is urgently needed. At a time when the government’s deficit and debt metrics are deteriorating — and the Treasury has signalled big spending cuts will be needed — SA cannot afford yet more dysfunctional decision-making in this or any other sector.  

Nzimande can be expected to stick to his massification strategy, funding more grants and enrolling more students, especially in the run-up to the election. But cutting rent-seeking and corruption in NSFAS in the shorter term could help to make it more efficient and yield better outcomes for students and educational institutions.

In the longer term, the government could and should look to cutting some of the more dysfunctional institutions in the sector including the R23bn a year Setas (Sector Education and Training Authorities) as well as the underperforming TVET colleges. And its ambition to add two more new universities to the rather excessive 26 universities SA already has should surely be tempered. 

• Joffe is editor at large