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Fees fall, but on whom?

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Tshwane University of Technology students protest against the proposed 6% fees hike. Picture: TEBOGO LETSIE
Tshwane University of Technology students protest against the proposed 6% fees hike. Picture: TEBOGO LETSIE

On Friday afternoon, President Jacob Zuma announced that all of South Africa’s 26 universities would capitulate to the demand for a 0% fee increase next year.

But he did not say who would pay for the roughly R2.2 billion it represented.

However, vice-chancellors who went to the Union Buildings wanted a clear commitment that government would be “stepping in to make up the difference”. But the question still remains.

The figure is based on a City Press estimate of the tuition and accommodation fees earned by public universities this year of R22.4 billion.

COST OF THE CONCESSION

Considering that the National Student Financial Aid Scheme (NSFAS) covers a large portion of needy students’ expenses, the money required for the 0% deal is between R1 billion and R2 billion, which is in the region of the fruitless and wasteful expenditure identified at municipal, provincial and national departments by the Auditor-General last year.

The demand for free education could cost up to R20 billion a year. Here are some places Finance Minister Nhlanhla Nene could start looking:

R2 billion

1. The government could scrap or delay the purchase of three new VIP jets for the president and his ministers. The VIP fleet will soon get a Boeing business jet and two new Falcon business jets, costing R2 billion.

R3.9 billion

2. The controversial youth wage subsidy (the Employment Tax Incentive) has cost R3.9 billion since its introduction. In February, Nene said R2 billion had been claimed. This year’s claims will be higher, with R1.9 billion claimed between February and July. National Treasury says 250 000 young people have benefited from the scheme.

R12.2 billion

3. The amount by which the state wage bill will overshoot its budget, which was initially set for an inflationary increase instead of the agreed 10%.

R25.4 billion

4. What government is getting for its shares in Vodacom. Of that, R2 billion has already been allocated to the New Development Bank. Another R23 billion has been put aside to recapitalise Eskom.

R24 billion

5. Tax breaks to businesses. Another R16.2 billion is spent on incentives to small enterprises and cooperatives and through direct funding to encourage industrialisation. Graduates need businesses and industries to grow so that they can be employed.

R51.7 billion

6. Payments made to neighbouring countries under the Southern African Customs Union agreement. Although South Africa collects 97% of customs and excise revenue, it only gets a 17% share of the estimated R80 billion. Tax experts say this is a hefty subsidy and have called for the formula to be re-examined, but this could have dire consequences for neighbouring countries.

R20 billion

7. An increase in value added tax (VAT) from 14% to 15% would raise an extra R20 billion a year, according to the Davis Tax Committee.

THE CALCULATIONS

The latest available figure is from 2012, when students paid R15.5 billion to universities. That amount has grown on average by at least 13% a year since 2000, due to fee hikes and increasing student numbers.

The vice-chancellors also asked for a new commission to look at the “restructuring of the entire system” for university funding.

Although the universities are possibly sacrificing more than R2 billion, some of that would have come from government through NSFAS.

The universities are also making an open-ended commitment to cut costs to limit the damage.

But since there’s no way to accurately estimate the shortfall, a figure of R2.2 billion will be a good place to start.

The students have, however, not mobilised under the banner of #FeesMustStayExactlyTheSame, and free university education is part of the demand.

But what will this cost?

Most agree that free university education does not mean it will be free for everyone, but will help a majority of struggling students.

A working group reporting to Higher Education Minister Blade Nzimande had suggested that a household income below an annual R217 000 defined the “needy”.

It also suggested that the NSFAS system become less concessional by reducing the rebates that successful students receive on their student debt.

This means getting students who graduate and get jobs to pay back more money to fund new students.

This presumes that “free” education will thus take the form of an education with a state study loan.

Based on these assumptions, Nzimande’s working group calculated that R15 billion in loan funding would be required for NSFAS.

This was calculated for the 2014 student “cohort” using 2010 prices.

Correcting for inflation, this would put the figure closer to R19.6 billion.

Student numbers continue to grow, so the cost of that model would probably be more than R20 billion.

The entire higher education budget is R41.8 billion, of which R26.2 billion is used for university subsidies and NSFAS funding.

NSFAS reported disbursements to university students of R7 billion last year, suggesting that the financial aid scheme would need to grow by three times more.

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