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Can South Africa afford free higher education?

Can South Africa afford free higher education?

In December, South Africa’s former president Jacob Zuma announced that the government would introduce free higher education for poor and working-class students from 2018.

The announcement came just before the conference of the ruling African National Congress (ANC) that would choose his successor as leader of the party. As he was fighting for his political life and about to lose one of his key levers of power, the move looked like a last-minute attempt by Zuma to burnish his tarnished legacy.

He may have succeeded up to a point. Party stalwarts could not oppose the move.

It is such a popular and sensitive issue that once the policy was declared, it would be politically difficult for any cadre, no matter how senior, to come out against it. And true to type, Zuma ensured that the one person who might have reservations about the new policy, finance minister Malusi Gigaba, would have little choice in the matter.

Naming a figure

However, two weeks later, at a press conference organised by Hlengiwe Mkhize, the higher education minister, ahead of the start of the university academic session in early January, Gigaba was neither present nor did he send a representative, leading to speculations that the Treasury might be at odds with the new policy.

Mkhize did provide some clarification, though: “We got clearance from Treasury that as long as we are within the parameters we will get the money.”

But how much would it cost? Initially, no one could say. That changed in about mid-January – Gigaba now had a figure. It would cost the fiscus about 12bn rand ($984m) to fund free higher education, but details would have to wait for the budget in February.

This much he insisted, though: the plan would be implemented over a period of eight years to ensure it does not put the authorities’ already strained finances into further disarray. “It is about how to manage the process and implement it in a sustainable manner without having to breach the fiscal expenditure ceiling,” Gigaba told reporters. Ever the team player, Gigaba also put in a few words in Zuma’s defence: “If the president had not acted this year to provide some funding it would have resulted in further protests.” 

Self-fulfilling downgrade

With the fiscal deficit at about 15bn rand (4.3% of GDP), another billion dollars would not be a material deterioration. While preferring to suspend full judgement till the exact details are revealed, John Ashbourne, Africa economist at London-based Capital Economics, believes that “the situation would not be hugely worse with this kind of spending.

This is [however] a regressive and inefficient way of solving education equality in South Africa.” But rating agencies might not be too amused. “I think that South Africa will probably lose its last investment grade rating,” Ashbourne muses.

London-based independent researcher Archibald Pempeh agrees: “This approach to free education, if not well thought through, may create a black hole in the budget and eventually impact other sectors of the economy, making a downgrade inevitable.”

Moody’s is the only one of the three major rating agencies that still rates South Africa as investment grade. The populist drift of the ANC might finally make it lose its patience.

Curiously, Gigaba plans to fund the free education policy without new taxes such as a hike in value-added tax. Instead, some spending programmes will be cut.

But which? And what will be the consequences for the beneficiaries of that spending? The likelihood that recurrent expenditure like public wages or perks for government officials would be affected is slim. Such a zero-sum eventuality means that the authorities have simply decided to yield to those who can shout the loudest. The populist nature of the move is evident.

Sustainability and quality matter more

But is there not a way to fund free education sustainably? The primary vehicle for funding higher education for poor South Africans is the National Student Financial Aid Scheme (NSFAS). It performs this function by a loans system. Under the new policy, NSFAS would be predominantly a grants provider.

When the free education policy was first announced, NSFAS chair Sizwe Nxasana said in a radio interview that “the decision has to be welcomed, assuming that the country can afford to do all that.” The news was still just sinking in.

In January, NSFAS spokesperson Kagisho Mamabolo, in remarks to the press, seemed more confident, suggesting the scheme’s past resilience in the face of pervasive loan defaults by beneficiaries puts it in good stead to handle the impromptu free education policy: “Our debtors were not paying back the student loans and we were able to still fund new students going forward. That essentially means that we are capable of implementing this new strategy without any hiccups.”

The evidence on the success of free education policies is mixed. China tried it once. Now qualifying poor Chinese students who wish to attend university must work towards winning a scholarship.

Some European countries provide free higher education without the quality of instruction and educational attainment diminishing. But even so, there has not necessarily been a significant boost in enrolment amongst working-class students.

“Only a small fraction of students attend. And cutting fees doesn’t help the poorest people, because they won’t attend anyway due to the opportunity cost,” says Ashbourne, referring to the need of many working-class high school graduates to seek paid employment in order to support parents and relatives.

“Most of the students – particularly black [ones] – failed by the South African education system are failed early on and never get a chance to go to university, [so] put the extra money into basic education and totally reform that system,” he argues. “But this would be unpopular with students, cause big protests, and be politically impossible – so I doubt it will happen.”

In conclusion, he says: “Realistically, keep university fees, but create bursaries for poorer kids. There is no reason to subsidise middle class students who would go anyway.”

Rafiq Raji

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Written by African Business Magazine

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