Business

Sasha Planting
3 minute read
22 Feb 2017
7:56 pm

Fees won’t fall further

Sasha Planting

Proposals for a graduate tax have been shelved, unlikely to raise revenue needed to fund universities.

Government has allocated a further R5 billion to higher education in the outer year (2019/20) of the expenditure framework, adding to the R32 billion in extra funds previously announced.

Beyond this, there are no further plans for additional funding as more funds for post-school education would require reprioritisation of funds away from other programmes or an increase in tax revenue.

This allocation will be used to fund the increase in the National Student Financial Aid Scheme (NSFAS), which provides poor students with the funding necessary to access a university education. Funding over the medium term will increase from R11.4 billion to R13.9 billion. In addition, the scheme will receive R7.7 billion over the period to support those students who were underfunded in the 2016 academic year.

Transfers to NSFAS, which provides loans and bursaries to an estimated 405 000 students a year, account for 25% of the higher education budget.

Transfers to universities, accounting for the other major slice of the budget, will increase from R28 billion in 2016/17 to R38.2 billion in 2019/20. Most of this increase is driven by funds reprioritised to the department to cover fee increases for the 2017 academic year (up to 8%) for students from households earning less than R600 000 a year.

“Government has pumped in an enormous amount in a constrained financial environment,” deputy finance minister Mcebisi Jonas said at the pre-budget press briefing. “We can quibble about whether it is enough, but as we deal with this it is important to ensure that while we focus on one part of the education system, we do not de-emphasise other parts of the system, such as early childhood development and basic education. These have to be fixed if the benefits of higher education are going to accrue. The efficiency of the education system has got to be improved. It does not make sense for a country like ours to keep on pumping resources into a system that falls short in giving the economy the kinds of skills it needs to grow. We need to have that difficult conversation.”

It would appear that proposals for a graduate tax have been shelved because it’s unlikely to raise the revenue needed to fund universities.

According to budget documents, in 2011 there were 1.3 million individuals who had completed a degree in South Africa, and of those about 80 000 graduated in 2014. National Treasury estimates that if each new graduate faced a one percentage point increase in their marginal tax rate, the tax would raise R200 million in the first year. If the increase applied to all graduates it could generate R3 billion annually. South Africa’s 26 public universities spent R59.8 billion in 2015.

“There are many processes underway [to resolve the funding crisis],” added finance minister Pravin Gordhan. “We have done the best we can under the fiscal environment. The aim of the various initiatives is to bring the different role players together so that we can talk, exchange information, and then on the basis of facts, we can map out a plan.”

Higher education spending, after debt service costs, is government’s fastest-growing spending category.

Brought to you by Money Web

For more news your way, follow The Citizen on Facebook and Twitter.