Should free higher education be financed? A team of expert panellists speaking at the University of Cape Town’s African Institute of Financial Markets and Risk Management asked the difficult questions on Friday, 28 October 2016. The answers were surprising – starting with challenging the very concept of free education.
“Free” education is a fallacy – universities are expensive and costs are skyrocketing, and we should rather be asking who will pay and when.
So says Professor Nico Cloete of the Centre for Higher Education Transformation and University of the Western Cape (UWC). Cloete was speaking at a panel discussion held by the African Institute of Financial Markets and Risk Management (AIFMRM) at UCT and appeared alongside Treasury’s Michael Sachs, the University of Stellenbosch’s Professor Servaas van der Berg and AIFMRM’s senior lecturer Dr Co-Pierre Georg.
In the wake of the Medium Term Budget Policy Statement delivered by Finance Minister Pravin Gordhan on Wednesday, Cloete argued that while investment in higher education was very beneficial, it was realistic to examine the payment framework.
“Globally, and in Africa, there are considerable benefits to higher education,” he said. “In Sub-Saharan Africa, private returns to higher education are higher than returns to primary and secondary education. South Africa has the highest private returns to higher education in the world.” These include higher salaries, savings, professional mobility, life expectancy and quality of life, as well as public benefits such as greater productivity, increased consumption, workforce flexibility, reduced crime rates, a greater appreciation of diversity and improved ability to new technologies.
“Considering the private benefits and the fact that South Africa has such high graduate employment, the most important fees policy question is: ‘Do students pay while at university, or while they are working?” he said. “I prefer the latter.”
A key problem is that costs are skyrocketing, he added; South Africa’s higher education costs grew at twice the national inflation rate in 20 years, alongside exorbitant costs of managerial packages. Vice-chancellors earn, on average, three times more than senior professors.
How to finance these costs remains the key question; one the other panellists unpacked in more detail. Georg pointed out that loans were unsustainable. “Student loans can never work,” he said. “It’s a system that was broken from the beginning. What we should learn from the global financial crisis is that student loans are basically bad loans, and the only reason they exist at all is because they are government guaranteed. What adds to this is that NFSAS applications, where you have to prove you are poor, are dehumanising.”
Van den Berg argued that the priority should be to finance poor students, but that it would be money poorly spent to do so for wealthier ones. Currently, 33% of university students come from the poorest 80% of households in the country, he said. The richest 30% therefore contributes 2/3 of those at university at present. Additionally, comparing the number of bachelor’s passes achieved across quintiles, it becomes clear that there is a relationship between the number of bachelor’s passes achieved and the school’s general wellbeing.
“The answer should not be to fund the most affluent in our society,” he said. “We should not fund university education for everyone, even if one does not consider what else that money should be used for.
“If one looks at the cost of tertiary education, you could be giving one student as much as ten child support grants. Is that appropriate if the student can fund themselves?”
Sachs, speaking from government’s perspective, echoed the need to prioritise. “The [FeesMustFall] movement has raised an important issue and generated very important suggestions,” he said.
However, budgeting was a balancing act. “There are rights that should be provided for by the state. The state must take reasonable measures within its available resources.” In the case of children under 18, Sachs pointed out, these rights are not conditional. Basic education is Constitutionally guaranteed, while further education is a right through reasonable, legitimate measures, which the state must make progressively available and accessible. “This, in a way, can frame the Budget,” he explained.
According to Sachs, basic education enjoys around 17% of the budget; housing and municipal infrastructure around 14%, healthcare 13%, social development 13%, post-school education 5%, and together this adds up to 62%, which accounts for the population’s rights. The other 38% must cover defence, police, courts and the justice system, home affairs, science, research, foreign affairs and everything else, he said.
Fiscal sustainability, he added, meant it was not feasible to provide for free or subsidised higher education through further borrowing, since borrowing has already increased from 20% of GDP to 45%. “We don’t want to reduce necessarily, but we do want to stabilise the growth of debt,” he explained. “Eventually, creditors come back. Progressive realisation implies an obligation to remain sustainable.”
Increased taxation was also not necessarily a solution, he argued. “There is a complicated relationship between taxation and the size of the economy. You can have a situation where you raise taxes very abruptly, choke off growth and the actual resources you get from that raise in taxation is less than you would have got had you not raised taxes. There are a lot of factors that you have to take into account.”
Ultimately the task of the Fees Commission would be to investigate the feasibility of fee-free education, said Cloete. But the billion-dollar question would remain: “How many groups can raid the Treasury?”