An International Monetary Fund (IMF) official has queried South Africa’s move to offer free tertiary education, saying instead more money should be spent on primary and secondary education.
“South Africa needs to spend a lot more effort in having the basics right instead of focusing on the high end … You need to improve primary and secondary education so that people who end up in university are sufficiently trained to survive its rigours. That’s where a lot more money should be spent,” Montfort Mlachila, IMF senior resident representative in South Africa, said.
“Spending a lot more money at the tertiary level through free tertiary education is missing the crucial issues. A lot of the students who do get to tertiary education and get it for free can definitely afford it, even if they can’t afford it immediately they can in future by getting jobs.
"The probability of finding a job if you are a graduate is very high. Unemployment among graduates is less than 10%. The average for youth is well north of 50%.”
Mlachila said that while the country had “excellent universities”, the number of graduates who achieved “good results, especially in some of the critical subjects such as sciences, technology and mathematics, is very, very low”.
He said South Africa’s economic growth continued to underperform significantly compared with other emerging market countries.
“The country has had a low growth for a time,” Mlachila said, “and is on track to have almost a decade … of negative growth in income per capita terms. This is highly unusual for a country not in civil strife or facing some kind of cataclysm.
“It’s remarkable to see a country not growing at all [in per capita terms] … It means the poor are getting much poorer. One of the reasons South Africa is growing poorly is the low levels and growth of private investment.”
Low levels of private investment largely had to do with low levels of business and consumer confidence.
The country’s overall level of general government debt is “one of the highest” in the emerging world.
“South Africa’s debt levels are quite high. Two [of four countries that have higher debt levels than South Africa], Ukraine and Argentina, have IMF support. South Africa is definitely above the emerging market average,” Mlachila said.
The yield for South African 10-year government bonds was “much higher than the emerging market average”, he said.
The challenge was to get South Africa’s economy growing and this was likely to come through “structural reforms”. Mlachila suggested these reforms:
. Tackling corruption and strengthening governance; and
. Promoting competition including:
V Seeking strategic equity partnerships with the private sector in key network industries; and
V Restructuring weak state-owned enterprises and operating them commercially.
. Advancing labour market reforms to:
V Ensure compensation levels and their growth are in line with productivity growth;
V Reduce the cost of hiring and firing; and
V Improve the quality of education.
The return on capital in sub-Saharan Africa has been higher than in South Africa even for those countries that were adjusted for political and other risks.
“South Africa is one of the few emerging markets that have a positive net international investment – largely explained by one major investment in [Chinese internet company] Tencent.”
The IMF forecasts that sub-Saharan Africa will grow by 2.7% this year and 3% next year. Sub-Saharan international sovereign bond issuance this year was on track to reach almost $15 billion, which would be an annual record, Mlachila said.