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The problem of funding SA students can be solved

- William Gumede

SA’s private financial sector should fund all students, no matter their means, with loans underwritten by the state.

The current model of student funding is unsustainable and needs a new one that is centered on providing loans, rather than grants, to every student, no matter their income status, at tertiary institutions. The National Student Financial Aid Scheme, currently mired in red tape, inefficiency and poor decision-making, just like many other government agencies, should be abolished and be replaced by a private sector fund supported by government.

According to Universities South Africa student debt stood at R16.5bn in March this year. This year 120 000 students may not be able to graduate because they owe higher education institutions – collectively this group owes universities around R7bn.

Student funding policy should be based on honesty, affordability and pragmatism. Up to now, student funding policy, like most ANC government policy has either been based on ideology, wishful thinking and not on financial realities.

Former President Jacob Zuma had insisted for populist, ideological and cheap politicking campaigning reasons ahead of the ANC’s 2017 national elective conference and the 2018 national elections, insisted that all education should be free in the form of grants. The post-Zuma ANC leadership has continued with the current unsustainable model for a combination of ideological, wishful thinking and political expediency – to secure populist votes.

South Africa’s tattered public finances are unable to finance a student funding model that is based on grants. This is not to dismiss that over R4 trillion of public money has been lost over the past decade and a half, through government corruption, mismanagement and ideological projects.  Another R1 trillion had been given by the private sector as handouts to a handful of politically connected black economic tycoons, who have not added value in terms of new manufacturing, employment and ideas to the economy. Off course, such a waste of money makes it difficult to argue that there is no financial capacity in the state to finance higher education or any other need. Nevertheless, a loan-based funding scheme is the most pragmatic solution.

The Heher Commission into the Feasibility of Fee-Free Higher Education and Training, chaired by Justice Jonathan Heher, established in 2016, proposed an income-contingent loan scheme – which was rejected for political expediency by former President Zuma and the ANC government. The rejection of the Heher commission’s practical recommendations has been typical of the ANC government whose approach to policymaking has been to establish commissions to essentially kick for touch difficult policy decisions to placate public criticisms, but then reject the recommendations of such commissions if these are not populist or ideologically acceptable to the ANC.

In a more pragmatic approach, free education should be every student having the right to get a loan, without any means-testing. Many of the recent student debtors are those who belong to the “missing middle”, those students too poor to pay for higher education, but not poor enough to qualify for funding from the NSFAS. There should be no exclusions from student loans, such has been the case of the current system where the “missing middle” group are excluded from NSFAS funding.

New loan-based funding should include post-graduate studies. Currently, funding for post-graduate studies is limited. Any new loan-based funding model must be integrated to include technical and the vocational sector.

Repayment of a new loan-based funding scheme should be structured over the lifetime of the recipients, tailored to their income after graduating. No current student with outstanding debts should be prevented from getting their academic results, graduating or seeking employment.

All current outstanding student debt should be restructured to be paid over the life of recipients. Students’ debts should be scrapped at death, critical illness and disability. Parents, children and families of recipients should not be settled with the responsibility of the debts that students incurred.

NSFAS should be abolished – or drastically overhauled, to become more commercially orientated. NSFAS has been run as a typical state-owned company, with red tape, incompetency and influence-peddling by politically connected businesses to secure procurement contracts, which have driven up administrative costs, slow delivery of services.

The NSFAS racked up R5billion in irregular expenditure during the 2019/2020 financial year, and R3.2bn during the 2018/2019 financial year. A R3.2bn tender to issue laptops to NSFAS funding recipients was drawn out because of the insistence on narrowly defined BEE criteria, rather than on quality, competency and value-for-money.

The current model is dependent on NSFAS existing. A new system should be a combined public-private financial system. Either the banks should provide the loans – underwritten by the state; or the current NSFAS should be put into a commercial fund that would be jointly managed by the banks. The banks would then distribute the loans and the state will guarantee the loans.

South Africa has a large private financial sector, so from a pragmatic point of view, they should be involved in financing student studies, their participation should be opposed to, as is the case with many ANC policymakers currently being ideologically opposed to involving the private financial sector in student funding.  

Former education director-general Itumeleng Mosala has said that the ANC government was offered a US$5bn loan at low interest by the Japanese government in 1994 to establish a student fund to fund the higher education poor students but that the government rejected it at the time. The ANC government has made many of such decision blunders, because they base decisions on ideology, lack of expertise or wishful thinking or lack of imagination.  

Companies implicated in corruption should contribute to a new loan-scheme fund as part of the reparations. Dodgy BEE deals to small politically connected ANC elites should be stopped and companies should rather contribute to education as a form of BEE.  

Universities have seen declines in subsidies from government. Funding for research in public and private institutions have shrunk across all sectors – under the competitiveness of the economy, and thus the creation of jobs, attracting new investments and fostering development.

It is important that the government set aside at least 2% of GDP for higher education and training. Furthermore, large private companies must also be compelled to set aside a proportion of their profits to fund research, education and innovation – not only to make themselves and the country competitive. Finally, recipients of a new loan scheme must also be compelled to do community work in return for getting public money. All recipients of funding must also attend democracy and civic education – to learn the values of the Constitution, such as gender equality and ethical behaviour. It will also be useful if recipients if attending a personal finance management course becomes compulsory. Learning the values of the Constitution and personal finance is something that should become compulsory for all higher education students.

William Gumede is Associate Professor, School of Governance, University of the Witwatersrand & Executive Chairperson of the Democracy Works Foundation. 

This is an extract from William Gumede’s remarks made at the meeting of university principals and chancellors at the Chancellors’ Forum to discuss ways of tackling South Africa’s ballooning student debt, convened by Dr Precious Moloi-Motsepe, the Chancellor of the University of Cape Town.

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