‘Solving the Higher Education Funding Crisis’ by the Wits SRC

The University of the Witwatersrand student representative council (SRC) has compiled a “Free Education Model” that it believes is the first to contain input from students.

SRC secretary-general Fasiha Hassan had said that the model would be presented at the “presidential imbizo” on Monday‚ where “all the relevant stakeholders on a national level are going to be in the same room” and to National Treasury later in the week.

It follows in full:

Solving the Higher Education Funding Crisis

Executive Summary of the Free Education Model #FeesMustFall | #FreeOurFutures

The South African higher education system is in a crisis. Our 26 public universities are in various challenges at this time. At the heart of the current crisis is the legitimate call by the student movement to ensure that every academically deserving student has full access to university and to ensure that universities are adequately funded.

The #FeesMustFall movement was founded by students with an explicit and clear mandate of pursuing free education through ending the commodification of education and decolonisation of the higher education system. The student movement has also remained resolute that education is a basic necessity and a right.

In 2015‚ this movement managed to create universal awareness about the structural inequalities within our universities. Our universities have presented a façade that they are public institutions‚ but in reality they are business enterprises pursuing returns at the expense of the social project. In the past 15 years the government has severely underfunded our university system. The consequence of this underfunding is that the burden of costs has been passed on from the state and corporate South Africa to poor and working class families.

Our parents – the teachers‚ nurses‚ police‚ domestic workers and miners — have been called upon to try and buy their way into higher education so that their children can escape the poverty trap and the dehumanisation of the current system. We know that it is through education that the child of a domestic worker can become a doctor; the son of a plumber can become and engineer; and the daughter of gardener can become a pilot. It is unacceptable to deny our people access to these opportunities on the basis that they are born black and poor in a country that exploits and abuses them.

In 2000‚ the government contributed 50% of the costs of running our university system. In 2000‚ our university system had a greater concentration of white students than black students. In 2015‚ our system has increased its concentration of black students; and the government has decreased its contribution from 50% to 39%. The shifting of the burden from the state to the poor and the working class should be the cause of a national outrage.

In 2015‚ the state selectively heard our calls and agreed to suspend the fee increases for our students but this was entirely insufficient as a response and one would have hoped for an adequete and long-lasting solution to be presented. Having reminded the government of its obligations to its youth; we believed that our government would finally take responsibility for the chronic underfunding of our universities and provide us with a roadmap towards the realisation of free education. Unfortunately‚ we were wrong and a year later we sit in the same position.

In September 2016 the Minister of Higher Education announced that fees for 2017 could be increased by up to 8%. For students that are part of the National Financial Aid Scheme (NSFAS)‚ the government committed to insulating them from the fee increases for 2017. In 2 addition‚ the government also committed to insulating students in the missing middle by absorbing the 8% increase on their behalf.

Unfortunately‚ these were nothing more than cosmetic solutions that did not deal with the fundamental problem we highlighted in 2015 – we simply cannot afford fees. The Minister’s decision simply means that fees are frozen at the levels we paid in 2015. This is not what we called for when we marched to the Union Buildings on 23 October 2015.

The government has created a Commission of Enquiry into the feasibility of rolling out free higher education. The Commission is due to provide a report to the government in the middle of 2017. We reject the Fees Commission for 2 reasons. Firstly‚ the terms of reference for the Commission are incorrect. It should not be asking whether free education should exist but when it will be implemented. We also reject the Commission as its decision to only report back in 2017 means that the government has failed to appreciate the urgency of the funding crisis.

As a result of this collective sense of failure by the government to respond to the legitimate calls for universal free education; our universities are burning. From Turfloop to Mangosuthu; from Venda to Zululand; from Fort Hare to Soshanguve – there is a national crisis. The increased militancy at the universities is a result of the collective frustration of students who will yet again be faced with the prospect of being excluded from the system in 2017.

The President of the Republic has recently called upon all stakeholders to provide solutions aimed at resolving the crisis. As the custodians of the #FeesMustFall movement‚ the students should be at the heart of formulating a solution. In light of this‚ students have committed to a process of designing a model for the rollout of Free Education that will serve as a basis for our engagements with the government. In the design of our model‚ the following variables were considered –

• Free education should be for all students

• Students should not be subjected to a graduate tax which imposes a debt burden on them after they graduate

We then commissioned a team of students from different faculties and disciplines. We also called upon experts from various fields to assist in the process of advising the student task team and provide input into the design of the model. We are therefore pleased to present the model for Free Education that has been designed with the mandate of the people most intimately affected by the crisis – the black students of the poor and the working class.

One narrative that has been pushed is that it is unjustifiable and perhaps immoral to advocate for a system of free education for all‚ including the rich. Core to the argument is the idea that the rich can afford to pay and that government funding should be directed to other resources. After careful consideration of the merits of this argument we are of the opinion that a model that pays for everyone is more appropriate in the South African context. There is no doubt that the rich can afford to fund their education‚ however‚ this then means that their contribution to the education system will limited to the 3 or 4-year timeframe in which their children are in the university system.

Additionally‚ the consequence of apartheid planning being what it is – the vast majority of the wealth live within close proximity of the economic hubs where universities tend to be based. This simply means that a child of a billionaire in Sandton will be living at home rather than on campus during their studies. This means that their contribution to the education endeavour is actually limited to just tuition fees and nothing more. The rich in South Africa make up less than 4% of the population and are – at least anecdotally – predominantly nuclear families which means that the contribution made by them in terms of direct payment into the system is actually quite low. For the sake of sustainability we would prefer an additional tax on the wealthy for education purposes as it essentially ensures that they will contribute to the higher education system for much longer than the duration of their children’s degree or diploma.

Our model is based on the understanding that the full cost of study of each student needs to be covered. This includes the costs of tuition‚ accommodation‚ meals‚ books and basic necessities. It is not acceptable or sufficient to have a model that fails to cover all these items. Research has indicated that students perform best when all costs associated with their studies are covered. Our model is also based on the understanding that we all share a collective responsibility to maintain the autonomy of our institution; the quality in the production of knowledge (research) and excellence in the dissemination of knowledge (teaching). We do not share the view that the call for free education will result in a decline in quality as our model insulates the academic enterprise from any adverse impacts.

Our model is based on the understanding that higher education is a public good that generates significant benefits for society and the individual. Education is not a commodity to be bought by the individual for his or her private advancement in society. No one should have to pay to learn. Rather‚ the public function that higher education serves — that of producing graduates to perform various duties and services‚ and to produce new knowledge for the development of society – must be acknowledged and protected. Consequently‚ there is a need to fund it using available resources in a sustainable manner. The rollout of the model is explained as follows –

Universities generate their funding from 3 sources – government funding; corporate/private funding and student fees. In an ideal mix; the 3 sources of funding would be as follows – 50% government; 30% corporate/private and 20% student fees. In South Africa in 2000‚ the mix was 49% government; 27% corporate/private and 24% student fees. In 2014‚ the mix was 38% government; 29% corporate/private and 33% student fees. This means that in a 15- year period the government contribution has decreased by 10% and the burden on the students has increased by 9%. For the purposes of illustrating how our model works; we will assume that a typical university costs R100 million per annum to run.

If a university needs R100 million to run the funding mix indicates that the government would contribute R38 million; corporates would contribute R29 million and the students would be expected to contribute R33 million. If the university has 1 000 students‚ then the cost allocated to each student would be R33 000. 4 If the government made its contribution to 50% of the total cost‚ then the burden would be reduced. In that scenario the government would cover R50 million‚ the corporates would cover R29 million and the students would be allocated the burden of R21 million. This would translate to a cost of R21 000 per student. By simply asking the government to restore its contribution to 50% of the cost – we will see fees falling for students across the board.

Our first call therefore is to the government to immediately increase its subsidy allocation to the university system to the 50% levels that were achieved up to 2000.

The second recommendation relates to the infrastructure costs that form part of the university cost base. A university is responsible for identifying its infrastructure requirements and needs on an ongoing basis. Universities then depend on the state to provide grants to fund infrastructure development‚ replacement and maintenance. Our universities currently have an infrastructure backlog that would take more than 12 years to clear if we keep waiting for the government to make funds available for infrastructure development. In our estimate‚ 10% of the university cost base relates to the infrastructure costs rather than the ongoing costs related to salaries and utility costs. At the same time‚ companies on the JSE are sitting with large cash reserves that are not being invested in the university system. This is because we have never called upon all sectors of society to invest in our education system as part of the social compact.

In our model‚ we are calling on corporate South Africa to open an infrastructure fund in which they can invest money which will be used to build infrastructure across our universities. We further call upon national treasury to facilitate this process by creating a higher education infrastructure fund to allow investment into our future now. For example a company will pay R100 million into the fund ‚ and over 10 years receive R10 million back annually as per their tax at that point in time. This encourages corpoate investment into higher education infrastructure.

This has the dual benefit of clearing the backlog and also providing capital injection in the system without affecting other government programs. Never again should students from DUT suffer the indignity of squatting in rooms illegally due to a lack of accommodation. Never again should students at Sefako Makgatho Health Sciences University struggle to do their practical work due to a lack of laboratories in their campus. Never again should students at Wits have to sleep in libraries and lecture halls.

In our model‚ we call upon corporate South Africa to champion the creation of the Infrastructure Fund which will reduce the cost of running our universities by 10%. In this approach‚ the R100 million is now allocated as follows:

–Government – R50 million (50%)

–Corporate/private – R29 million (29%)

–Infrastructure Fund – R10 million (10% of the original R100 million)

–Student burden – R11 million (11%)

At this stage – fees have fallen from R33 000 per student to R11 000 per student. 5 We believe this can be achieved without adding an undue burden to the various stakeholders in the system.

Once the fees have been reduced to R11 million for the students‚ we have identified various sources of funding that can be used to inject additional funding into the system. In our model‚ we call for the abolition of the NSFAS model as its loan approach only contributes to the ‘black tax’ phenomenon. Instead of NSFAS‚ we recommend the creation of a ‘Higher Education Endowment Fund’ to be dedicated to funding students across various institutions. The funding would be on a grant rather than a loan basis.

The Higher Education Endowment Fund would be created as a standalone entity and funds would be utilised only for the purposes of funding students at our universities. The Endowment Fund would then recover its funds through a levy system once students have graduated. This is superior to the current loan collection system as it uses existing infrastructure and does not require any additional investments in order to facilitate collection.

How do we fund the Endowment Fund

In order to provide funding for the Endowment Fund‚ we have identified 5 possible avenues that can be used to source the funding. The 5 sources are as follows –

1. The Skills Development Levy

2. An increase in the company tax rates

3. An increase in tax rates for the rich

4. An apartheid windfall tax on all companies that benefited from the evil regime

5. An increase in the wealth taxes (donations tax; dividends tax and estate duty)

The Skills Development Levy

In 2000‚ the state introduced a Skills Development Levy which is an amount paid by a company that employs people. The levy is then used to fund various training programmes in the workplace and beyond. The levy is calculated at 1% of the salary bill. In 2015 alone‚ this generated more than R12 billion.

We therefore recommend that the levy be increased to 3% for the next 3 years. This will inject an amount of at least R24 billion each year which can be ring-fenced into the Higher Education Endowment Fund.

In order to facilitate this‚ all we need is for the Minister of Labour – in conjunction with the Minister of Finance – to amend section 3 of the Skills Development Levies Act and change the rate from 1% to 3%. This can be done through the issue of a notice in the Government Gazette.

Increase in company tax rates

Companies in South Africa currently pay taxes at 28%. In 2015/16‚ company taxes contributed R189 billion into the National Revenue Fund. An increase in the rate from 28% to 30% would generate an additional R13‚5 billion. In order to facilitate this‚ we need the Minister of Finance to make an amendment to section 5 of the Income Tax Act.

Increase in individual tax rates

Individuals in South Africa currently pay taxes at a rate that ranges from 18% to 41% for the rich. We have estimated that an increase in the tax on the rich from 41% to 42‚5% would generate an additional R6 billion per annum.

Apartheid windfall tax

It is a universally acknowledged scandal that South Africa has a large number of companies that either stole money from the Reserve Bank or unduly benefitted from apartheid looting in the past. We estimate that at least R26 billion could be recovered if the state undertook legal steps to recover the stolen funds.

Wealth taxes

South Africa has various forms of wealth taxes – donations tax‚ capital gains tax‚ dividends tax and estate. They range from 15% to 20% in value. We believe that increasing the rate of tax on these wealth instruments to 20% would generate an additional R10 million per annum into the fiscus.

Based on this analysis‚ it is clear that South Africa is more than capable of raising the funding required to cover the rollout of free education without having to remove funds from muchneeded basic services. The Minister of Finance‚ Labour and the President can invoke their powers to support the funding avenues we have exploited. The Ministry of Labour has the discretion to amend the Skills Levy rate from 1%. The Treasury has the power to enact provisions in the Act that support our call for corporates to invest in the Higher Education Infrastructure Fund. The President has the power to enact bills bypassing the long parliamentary process if it is in the Public Interest. The analytics we have gathered indicate how each of the avenues we have identified can generate sufficient funding.

We also believe that the creation of a dedicated infrastructure and endowment fund to be overseen and managed by an independent board of governors will ensure that the funds are used for the specific purpose of funding higher education.

Contrary to the narrative used as an excuse from government‚ we do not need to have the poor fighting for the crumbs at the table of the privileged. What we do need is political will and public pressure. We would like to invite students and academics from across the country and the various organs of state to interact with us and map a way forward where we can all partner together towards the journey of realising free education now. We have shown that not only is ours a noble and much needed goal‚ it is also entirely possible.

If you would like access to the full model or to interact with the research group please email: freeourfuturesa@gmail.com THTUTO KE LESEDI LA SECHABA | EDUCATION IS THE LIGHT OF THE NATION

 

- TMG Digital

 

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