Heher, Davis reports against fully subsidised university studies for all
Free university education for all is neither affordable nor desirable, but the government could raise the money to help academically capable students who need financial assistance, according to the Davis Tax Committee.
It has proposed a hybrid system of grants for the poor, government-backed loans for the “missing middle”, and fees for the wealthy, which it says would require an extra R15-billion a year.
Increasing the top marginal tax rate for individuals by 1.5 percentage points would raise an additional R5.1-billion, changing the capital gains tax inclusion rate for corporates from 80% to 100% would yield an extra R1.4-billion, and increasing the skills development levy by 0.5% would provide another R8.8-billion, it said in a report on funding university education.
“While it may not be the most politically palatable option, it does provide the largest immediate reduction in financial exclusion for the smallest government expenditure.”
Free university education for everyone was not an option, the committee said.
“It is simply not possible to find an additional R60-billion to R90-billion without massive reprioritisation or large-scale additional borrowing.
“Thus whatever additional funds can be raised and ring- fenced for higher education should be done in an explicitly pro-poor fashion.
“A blanket fee-free policy is regressive and amounts to a large additional subsidy for the rich.”
The report was published shortly before President Jacob Zuma released the Heher Commission’s report into the Feasibility of Fee-Free Higher Education and Training, which considered the entire post-school education landscape and reached a similar conclusion for university students.
But it recommended that students in the technical vocational education and training (TVET) sector should get free education, with grants that covered their full study costs.
For university students, it recommended a cost-sharing model of government-guaranteed income-contingent loans (ICL) sourced from commercial banks.
The ICL model would see students repay these loans over a 15-year period, dependent on whether they ever reached a minimum threshold income.
The government would bear the liability for the loan should the student fail to reach the income threshold.
Banking Association of SA managing director Cas Coovadia said banks were prepared to consider discussions with the government regarding the provision of loans to students.
However, speculation that Zuma wanted to disregard the report had muddied the waters.
“What we need is more information on what sort of structure the government will put in place to reduce the risk on the loans,” Coovadia said.
The commission also recommends that R50-billion from the surplus of the Unemployment Insurance Fund be used to help fund infrastructure development at TVET colleges.
However, UIF spokesman Makhosonke Buthelezi said: “That’s a tough one – I am not sure at this stage if that will happen. We will obviously have to have further discussions.
“The UIF belongs to workers.
“We are actively involved in TVET colleges around the country, supplying each of them with R1.8-million annually for courses.
“But those students who are funded at the colleges were previously UIF contributors and have availed themselves for further training. They are now getting the benefit of that contribution.
“Students are a whole other kettle of fish as they do not contribute to the UIF.
“And our priority is the workers who contributed to the UIF, not the students.”
Noxolo Koko, regional secretary of the South African Students Congress (Sasco) – which recently regained control of Nelson Mandela University’s student representative council – was less than impressed with the commission’s findings.
“Sasco wants nothing but the pronouncement of free education – this report is not what we want to hear,” Koko said.
“The government has a poor understanding of higher education.
“There shouldn’t be divides. How can TVET get free education yet university students who initiated this movement must still pay?
“The government also lacks understanding of how the labour market works. Labour doesn’t just swallow up graduates as soon as they qualify.
“And if they [government] are able to repay the debt of students who can’t find jobs, why not just fund the students and avoid the debt situation all together?”
University of Fort Hare spokesman Khotso Moabi said they were not pleased with the report as the university required an income for operational purposes.
“An analysis of the university’s finances clearly indicates that UFH will not be able to operate effectively if [fees are] not increased.
“Whatever directive and policy is set needs to ensure that the university’s financial obligations are not compromised,” Moabi said.
Eastcape Midlands College marketing and communication assistant director Elmari van der Merwe said the commission’s report hardly affected TVET colleges.
“The government already subsidises 95% of TVET students, and students who currently have debt will not be exempted from having to pay,” she said.
“The TVET sector will benefit as it will make access to TVET colleges possible for more students.
“We welcome the recommendation to develop more student accommodation, as Eastcape Midlands TVET College has no hostels.”
NMU, Rhodes and Walter Sisulu universities all said they wanted to examine the 700-plus page report before responding
DA higher education spokeswoman Belinda Bozzoli said: “We welcome the professionalism and richness of the report and look forward to studying it further.
“The president, who has been studying the report for more than two months now, must tell South Africa whether or not this report will form the basis of the ANC government’s new funding model for higher education.
“Bizarre rumours have been swirling that [Zuma[ is intending to bypass this multimillion-rand report in favour of an amateur, populist funding model that entails the crude introduction of a R40-billion boost to student funding, to be financed through such drastic measures as the undermining of the role of the Treasury, the possible cutting of social grants and an increase in VAT, with little consideration given to other issues at stake.”
THE MOST IMPORTANT POINTS
Key points from the Heher Commission report’s executive summary and recommendation include:
- A non-negotiable of the income contingent loan (ICL) is that those who can afford to pay must pay;
- Repayment on an ICL only begins when the student reaches a certain threshold income;
- Payments only continue until such time as the loan is paid off;
- The repayment period could be set to a maximum period so as to ensure that payment does not affect retirement accumulation;
- Those who emigrate could be required to pay off the loan before leaving the country;
- All students at technical vocational education and training (TVET) colleges should receive fully subsidised free education in the form of grants that cover their full cost of study and no student should be partially funded;
- R50-billion should, subject to the necessary legislative amendment, be transferred from the surplus in the Unemployment Insurance
- Fund and be ring-fenced for infrastructure of TVET College;
- The provisions of the ICLs should replace the participation of the NSFAS in the funding of university students;
- Application and registration fees for institutions should be scrapped; and
- The government should increase its block funding to higher education as a whole‚ to reach at least 1% of gross domestic product.