Fees should not fall for all

Student #FeesMustFall protest at the University of Cape Town in October 2015.

Nico Cloete    

Free higher education for all privileges the rich, argues Nico Cloete of the Centre for Higher Education Trust (CHET).

During the student protests for fees to fall, media and student spokespeople have slipped and slid effortlessly between ‘free higher education for the poor’ and ‘free higher education for all’. These are vastly different concepts.

When journalists contact me for an opinion, they invariably ask: ‘Is free higher education a good idea, and where will the money come from?’ The short answer is: ‘No, and there is not enough money in any developing country for free higher education.’ The examples they usually cite are Norway, Finland and Germany – the richest and most developed countries in Europe – but never Africa or Latin America.

Following independence, most African countries had national, flagship public universities offering free higher education. Mahmood Mamdani describes this eloquently with regard to Makerere University in Uganda: ‘The purpose … was to train a tiny elite on full scholarships which included tuition, board, health insurance, transport and even a ‘boon’ to cover personal needs … ’.

This generosity to the elite had two consequences. Firstly, when Makerere could not afford to pay its staff, it introduced a two-tier system: free public higher education during the day and private fee-paying students in the evening. By 2008, Mamdani described this ‘commercialisation’ of Makerere as a devaluation of higher education into a form of low-level training with no research.

The second consequence was the mushrooming of low-quality private ‘universities’ with exorbitant fees for qualifications which had a low currency nationally and no value internationally. Who got access to the full scholarship flagship universities? The children of the business and political elite who themselves had gone to top schools locally and internationally. A few extraordinarily gifted poor students also gained entrance into free higher education. The rest, coming from poor schools, ended up, if they were lucky, in low-quality, fee-paying non-university institutions.

This is the story of free higher education in Africa and Latin America – and a classic example of how state strategies privilege the elite. What is cynical in South Africa is that we are privileging the elite under the banner of a pro-poor policy. But even in OECD countries, Nicholas Barr writes that public universities consistently argue that low or no tuition fees provide greater equality of educational opportunity by providing greater access. But, says Barr, such reasoning is incorrect, because the overwhelming subsidy in public universities accrues to students from middle- and high-income families.

Who in Higher Education is not Delivering?

Initially, the students targeted the blame for the fee crisis at the universities themselves. Instead of joining the students and taking the protest to government headquarters, the vice-chancellors got caught between the students and the state. But by 23 October, the students marched on government in Pretoria and to the ANC headquarters. Secretary General Gwede Mantashe expressed the ANC’s full support of student demands, asserting that the state must be given more power to regulate universities, and strongly criticised the vice-chancellors, saying that the protest at Parliament was the result of their actions.

But empirical evidence shows that the government was not without blame. The graph below shows how the proportion of student fees on the balance sheets of universities more than doubled over 13 years (from R7.8 billion to R17.8 billion), while the government contribution rose by 33% (from R15.9 billion to R21.2 billion).

CHETGraph.pngSource: CHET, financial statements in reports submitted by universities.

An international comparison of government contribution to higher education is the percentage of the GDP that is allocated. In South Africa, this has been between 0.68% in 2004/2005 to 0.72% in 2015/2016. From 2012 data, the proportion of GDP for Brazil is 0.95%, Senegal and Ghana 1.4%, Norway and Finland over 2% and Cuba 4.5%. In South Africa, the 2015/2016 budget for higher education is R30 billion. If the government were to spend 1% of GDP on higher education, this would amount to R41 billion – an additional R11 billion and almost four times the reported shortfall due to the 0% increase.

The first recommendation of the National Commission on Higher Education (NCHE) in 1996 was that government should establish a national student financial aid system. During its first phase, NSFAS became a much-admired student grant and loan scheme and was studied by delegations from a number of other countries, in part because it was one of the few successful student financial aid schemes in a developing country.

However, as the scheme grew, by 2008 there were administrative problems in the head office and particularly at some universities. Following the establishment of the new Department of Higher Education and Training (DHET) in 2009, Minister Blade Nzimande instructed all board members, who were in the middle of a NSFAS review process and implementation of a turnaround strategy, to resign.

Floyd Shivambu, a board member during that period, has described how he was approached by the new Director General of DHET and asked to step down because the Minister wanted to introduce free higher education and needed to appoint experts to implement this. What the Minister actually did was appoint a Communist Party member with no expertise in this area. This was followed by a purge of people with skills; some were forced to leave, others left voluntarily due to what one senior staff member described as the ‘de-professionalisation’ of NSFAS.

NSFAS took another blow when Minister Nzimande reduced their powers to collect debt, resulting in a dramatic drop in loan recovery – from a height of R638 million in 2010/11 (the year the new ‘experts’ took over) to R248 million in 2014/15. At the same time, however, he dramatically increased the funding available to NSFAS from R1.5 billion in 2010 to R3.9 billion in 2014. The combination of de-capacitating the organisation, reducing its debt-collecting powers, and flooding it with new money, is ‘Bad Business Management 101’. In May 2015, Nzimande announced an investigation into corruption at NSFAS, and the treasury is conducting a Performance and Expenditure review.

Cadre deployment and poor management within the DHET have contributed to the financial crisis. The financial reporting system is broken. It does not accurately reflect the financial state of the institutions, nor does it allow for a diagnostic analysis of their financial health. There are no clear indicators in the reporting system about which institutions are heading for a financial crisis, and there is not an accurate reflection of student debt or a realistic assessment of the proportion of debt that could be recovered.

Universities South Africa’s backtrack

In July 2015, the South African vice-chancellors relaunched their organisation formerly known as Higher Education South Africa (HESA). The opening statement of Universities South Africa declares: ‘In our pursuit of sufficient consensus on the issues and challenges confronting our universities, we will be more consultative and more inclusive of the variety of interests and constituencies within the university sector and beyond. We are adopting a more activist stance.’

Any organisation that relaunches signals that there are problems, and the words ‘consensus’ and ‘activism’ in the statement are illuminating. For years, this organisation has been deeply divided between the historically-advantaged and historically-disadvantaged and, more recently, divided between traditional universities and universities of technology. Access to resources, responding to differentiation, and taking on government about funding, are all issues that have deactivated the organisation. Currently Universities South Africa does not have a CEO to run the office.

In a report dated February 2008, HESA expressed support for self-regulation and objected to government suggestions about regulating fees by raising, amongst others, the following issues:

  • The setting of upper limits on fees will impact negatively on the autonomy and flexibility of individual higher education institutions.

  • Capping tuition fees will not necessarily improve access for the poor, but may instead lead to higher education becoming cheaper for the rich.

  • The capping mechanism will discourage institutional differentiation and will actively advance institutional homogenisation.

Yet when President Zuma announced on 23 October 2015 that there would be a 0% fee increase, Universities South Africa had agreed and the President, not Universities SA made the announcement.

The ministerial funding review, supported by Universities SA recommended that “capping of fees” should not be implemented, due to the fact that the quality of higher education will suffer and universities would not be in a position to cross-subsidise other financially needy students through university funded student bursaries.

The data shows that in 2011 more than a billion rand was made available by universities as financial aid bursaries to undergraduate and postgraduate students. These funds are channelled to bursaries from trust funds, donor funding etc. as well as from student fee income. A total of 478,194 undergraduate and postgraduate students were financially assisted by universities over the period 2007 to 2011. If student fees are capped, universities would not be able to continue this practice of cross-subsidization within institutions.

The main actors in the student fee crisis – government (national treasury), DHET, NSFAS and Universities South Africa – have let this problem develop. And none seem to be able to take the lead in addressing the problem.

A ‘war room’ for differentiated fees

What could be done so that higher education does not require annual bailouts? Perhaps the Eskom situation provides some pointers. A ‘war room’ was established under the Deputy President comprising representatives from a number of other ministries, experienced business leaders and a few academics. The top management structure stepped aside and an interim leadership was installed. The aim was not only to get the lights back on, but to work out a sustainable strategy. The Deputy President is not unfamiliar with higher education funding: he was involved in the DHET 2014 review of funding to universities.

One task for a war room for higher education would be quite simple, but very hard to implement politically; increase funding from 0.7% to a more internationally comparable rate of 1% of GDP. A more complex issue is whether the additional money should go to NSFAS or to the institutions directly: there is an argument that if it goes to NSFAS with government regulating fees, then the system will be on a cyclical bailout path.

More complex, and also very difficult to implement, would be a differentiated fee system. What is easy and morally defensible is free higher education for the very poor (e.g. an annual income below R120,000). Nowhere in the developing world are loans for this group successful because loan schemes depend on high graduate employment (and both the greatest university failure rates and graduate unemployment rates are amongst the poor). Furthermore, many of the poor work in the informal sector where it is very difficult to collect debt.

Also not that complex to implement, and morally very defensible, is that the rich must pay more. While it was laudable that the children of the struggle veterans marched with posters demanding free higher education, they should have carried a second poster which said: ‘We will pay more.’ If one assumes that the annual income of their families is around R1 million, then paying R80,000 (NSFAS estimates of average annual total fee and living costs) would be less than 10% of their income. If these students went to the UK or the USA they would pay three to five times more. A CHET study found that one of the reasons for the influx of students from the rest of Africa to South African doctoral programmes is that at a South African university ranked by Shanghai in the top 500 in the world, it costs just over $10,000 for a year of fulltime study, compared to around $30 000 in the UK and over $50,000 at a top US university!

The missing middle

By far the most complex group is what NSFAS insiders call the ‘missing middle’. This group do not qualify for NSFAS funding, and at the lower middle-class end, not easily for bank loans. The lead article in The Argus (2 November) describes in detail a middle-class family comprising a mother as teacher, a father as a media worker and two girls at two different Cape Town tertiary institutions. It shows that their living costs in a lower middle class suburb amounts to around R17,000 per month, and their combined income is R20,000 – this leaves R3,000 for entertainment and education. The article also shows that having two children in tertiary education was not only unaffordable, but it also counted against them in getting financial assistance.

Matthew Lester, Professor of Tax at Rhodes shows that for the about half a million South Africans who earn more than R500,000 per annum university education is very affordable, for the ‘rest it is beyond the means of most South African households.’

Free higher education sounds revolutionary, and it is an appealing mobilising ‘cry’, but in a developing country it is financially and morally wrong. What we need is affordable higher education for all – with a clear understanding that affordable means different costs for different groups in society.

Editor’s summary

What the author argues

  • Free higher education in a developing country is financially and morally wrong.
  • Higher education should be free for poor families (e.g. those who earn less than R120,000 per year).
  • The rich should be paying more than they are now. The author suggests that families with income of R1 million per year could pay R80,000 per year in fees.
  • The hardest people to find a solution for are middle-income families.
  • The NSFAS used to function well, but has been undermined by the DHET.
  • The state’s contribution to higher education is low by international standards.

What a higher education report found

  • Upper limits on fees will negatively affect the autonomy and flexibility of institutions.
  • Capping tuition fees will not necessarily improve access for the poor, but lead to higher education becoming cheaper for the rich.

The author is the director of CHET. This is a shortened and edited version of an article that was published in University World News. Views expressed are not necessarily GroundUp’s.

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