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Two options for funding higher education in SA

Oct 19 2016 20:30
Liesl Peyper

Cape Town – Increasingly universities in South Africa and around the globe are becoming like corporates and pressurised to raise more third-stream income, the Parliamentary Budget Office said on Wednesday. 

Presenting to the Standing Committee on Finance, Seeraj Mohamed from the Budget Office told MPs that universities’ management efforts, monitoring and evaluation and resources have shifted towards promoting the university’s brand and global ranking. 

“The increased focus on raising more third-stream income means that some universities may be more interested in servicing paying clients and donors as opposed to servicing students and giving lectures.” 

The Parliamentary Budget Office gave parliament a short overview of an analysis into the costs of higher education in South Africa, ahead of the mini budget which is to be delivered on Wednesday October 26 and against a backdrop of violent protests at the country’s universities as students demand free education for all. 

According to the research done by the office, it would cost government more than R250bn in additional funds over the next three years to pay for all undergraduate enrollments. 

Various proposals have been put on the table to increase government revenue to fund higher education, the Budget Office said. 

This include increases in taxes (personal income tax, value-added tax and a wealth tax), graduate tax, an overhaul of the National Student Financial Aid Scheme (Nsfas) and an increase in the percentage of GDP spent on higher education. 

Higher Education Minister Blade Nzimande recently came out in support of free higher education, but only for the poor. There have been suggestions that the so-called “missing middle” will be accommodated with government-assisted loans. 

It is still unclear though how government intends on paying for the R2.6bn it promised to pay for the no-fee increases of 2016. 

The Budget Office said there were two options for funding of higher education in South Africa: 

- a continuation of the current system whereby higher education funding is made up of government funding, student fees and third stream income, including private funding; 

- a so-called “decommodified” model whereby universities are fee-free and government covers the entire cost of tuition fees. This system, however, wouldn’t prevent universities from earning third stream income and relying on the private sector to support postgraduate and research activities. 

READ: Free higher education? Why it’s not possible in SA

Peter van Niewenhuizen, chief financial officer of specialist education company The Growth Institute, told Fin24 in light of the student protests against fee increases, it has become more important than ever for universities to find ways to increase revenue in an effort to counterbalance all the demands. 

“But unfortunately many universities use their third income streams as a cash cow and they misunderstand what these incomes are intended for.” 

Van Niewenhuizen said during a recent workshop he and his colleagues were “horrified” to see that 90% of third income funding lands in personal pockets and not in the actual coffers of the university. 

“This is a trend we’ve picked up. As long as the mentality is there that the third income is a form of self-enrichment for lecturers it will not enable universities to use the third income stream to generate proper funding. 

“Third income streams must go to the right channels and they must give careful consideration to what they actually want to achieve with it,” Van Niewenhuizen said.

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