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#FeesMustFall Zuma kills the fiscus

Dec 17 2017 06:00
Sipho Masondo, Msindisi Fengu, S’Thembile Cele And Andisiwe Makinana

Johannesburg - Senior Treasury officials yesterday slammed President Jacob Zuma’s announcement of fee free tertiary education next year for 90% of 2018’s first-year students.

The officials warned that Zuma’s plan – announced yesterday morning, just before the ANC’s 54th elective conference got under way – would cost the country upwards of R20bn a year, and could only be paid for through tax increases.

“This thing caught everybody by surprise,” said a top official.

“There isn’t even a Cabinet decision on this. He just made a unilateral decision. In fact, that is why Treasury’s [former budget head and deputy director-general] Michael Sachs left. If Treasury does not speak up soon as to where the money will come from, the ratings agencies will come for us.

“The only way we can fund this is through tax increases next year. There is not much we can do on the expenditure side. We have trimmed already and there is a R50bn hole as it is.”

Zuma announced yesterday morning that government would provide fee free university and public college education for undergraduate students coming from poor and working-class households next year.

These students, who enroll at universities and at technical vocational education and training colleges, and who come from households earning an annual income of less than R350 000, will be subsidised by government through grants, not loans.

Their funding will cover tuition, books, meals, accommodation and transport.

Those coming from households earning less than R600 000 – who form the so-called missing middle – will not be expected to pay the university fee increases of 8% next year.

Zuma said government would also increase subsidies to universities from 0.68% to 1% of the country’s gross domestic product over the next five years, as recommended by the Heher commission of inquiry into the feasibility of fee free higher education, “and in line with comparable economies, in order to address the overall gross underfunding of the sector”.

But another senior Treasury official said Zuma ignored their input and made a “unilateral decision” that the country could not afford.

“The only way to fund this is through tax increases,” said the official.

“Technically, Zuma will say that he consulted, but he never listened to Treasury officials. He is undermining us in everything. He is destroying the country and is just being a populist.”

The official also charged that Zuma “simply ignored all the recommendations of the Heher commission”, adding that he had “undermined the budget process”.

“Zuma was determined to push it through,” he said. “We have already said that there is a R50bn gap in the budget and this will make it even bigger.”

Timing

Officials also questioned the timing of the decision.

“Why now, when there is a budget coming up in February and the state of the nation address, and there was the medium-term budget policy statement recently?” an official asked.

“And, why did he have to do it today? We can only trim so much from the budget. There is little we can do on the expenditure side. This will cost us, at the very least, R20bn a year.”

Yesterday’s announcement follows tense negotiations between interministerial and technical officials that often lasted into the early hours of the morning.

This was confirmed by Higher Education Minister Hlengiwe Mkhize, who told City Press that it was now up to Finance Minister Malusi Gigaba to tell South Africa in his budget speech exactly how much Zuma’s announcement would cost.

“We worked day and night, literally, saying: ‘Let us be as realistic as possible,’” she said.

Mkhize said Gigaba was part of the negotiations between Zuma’s office, herself and Minister Jeff Radebe’s department of planning, monitoring and evaluation.

Mkhize said the teams agreed that fee free higher education was only possible at public institutions, and were satisfied, after working through different scenarios, that the decision was affordable.

She said they resolved not to consider one of the Heher commission’s recommendations – namely, that all under- and postgraduate students at public and private universities and colleges be funded, regardless of their family backgrounds, through a cost-sharing model of government-guaranteed income-contingency loans (ICL), which would be sourced from commercial banks.

“That is impossible,” she said, adding that this would further burden the poor and lock them into debt.

In waiving that recommendation, the number of students who could be provided for by the National Student Financial Aid Scheme (Nsfas) was reduced. However, they decided to retain the Nsfas model, despite the Heher report’s recommendation that it be replaced with the ICL system.

Mkhize said Treasury would have to evaluate where the additional funds, if needed, would be found.

Difficult decisions

But another senior Treasury source told City Press that they had been pushing back against the presidency since the release of the Heher report in “tense” negotiations, and would have preferred the announcement to have been made during the state of the nation address.

“Some very difficult decisions will have to be made. Do you take from housing? And what happens to value-added tax? Those are all of the considerations. So, you can understand that we are not over the moon. But we have been able to buy time,” the official said.

However, Mkhize said the teams agreed that government could fund free education for the poor and working class without tampering with the current budget.

Asked about the timing of Zuma’s announcement and whether the ANC’s new leaders, to be elected today, would change things, Mkhize said the ANC’s top six were also part of the discussions in a meeting three weeks ago, and had bought into the plan.

“They are fully behind it because it is in line with ANC resolutions,” she said.

Naledi Pandor, chair of the ANC national executive committee’s (NEC’s) subcommittee on education, health and science and technology, said they were “in the NEC [meeting] when the statement was released”.

“We now need to study it. But I am hopeful that it advances the resolutions and decisions of this week, as the ANC subcommittee reported, in terms of ensuring that it begins to provide full support to young people who come from poor families that are unable to afford higher education,” she said.

Pandor said Gigaba would announce in his budget speech where the money was going to come from. She also said she was pleased that a grant system, and not a loan system, would be in place because loans would have “continued to cause families to incur a financial burden”.

Mkhize said negotiations were still under way regarding historical debt owed to universities and Nsfas.

“This is in my department’s hands. We cannot give out a blank cheque. We do not want to create a culture of dependency,” she said.

Dr Ahmed Bawa, chief executive of Universities SA, which represents the vice-chancellors of 26 universities, said although the announcement was positive, they were concerned that Treasury and the higher education ministry had “convinced themselves that this was sustainable when this could be a real disaster two years down the line”.

They were also concerned that the announcement was likely to pressure universities because it did not apply to second- and third-year students, or determine whether Nsfas would be able to disburse the funds efficiently.

“We have to work the system together. We are hoping we will make progress. We had a terrible 2017. We hope that it will not happen again in 2018,” he said.

Bawa said they were pleased that student loans would now be converted into grants, in line with their submission to the Heher commission and with the increased subsidies, which he described as “progressive and important”.

Mkhize also defended the decision, saying it was “not reckless”.

But Belinda Bozzoli, the DA’s spokesperson on higher education, said Zuma’s announcement “must be seen for what it is: playing politics with the hopes and futures of millions of young people”.

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