The National Student Financial Aid Scheme (NSFAS) currently provides low interest loans and academic bursaries to students that meet certain financial and academic criteria. The NSFAS assisted over 400 000 students at Universities and FET colleges in 2016. This number has more than doubled since 2009. Although this is a positive increase, it has placed a lot more financial strain upon this institution as more students seek financial assistance. The #FeesMustFall campaign is focused on achieving free tertiary education for all but the question on everyone’s lips, is “How should free tertiary education be funded?”
A number of possible sources of income have been put forward such as:
- Increasing corporate taxes
- Increasing skills development levies
- Wealth taxes
- Imposing a graduate tax
Each of these propositions suffers from potential drawbacks – “there is no such thing as a free lunch”. What this means, is that someone – or some institution – always pays. The crux lies in what the price will be:
- From a corporate point of view, any taxes levied upon businesses would drive up the cost of doing business in South Africa. This could potentially come at the cost of jobs as the additional taxes and levies may make other markets more appealing for businesses (lower cost markets). The unemployment rate is currently at 26.6% which is extremely high even compared to similar emerging markets such as Brazil, Russia, India and China. According to the International Labour Organisation’s World Employment and Social Outlook (WESO) report, all BRICS nations, other than South Africa have an unemployment rate below 8%.
- Increasing the skills development levy on business could have similar consequences to increasing corporate tax
- On the other hand, imposing taxes on individuals may be the last straw for an already overburdened tax base.
- In a period of time when youth activism is on the rise, is it not possible that those taking part in the #FeesMustFall campaign will embark on a #TaxesMustFall campaign if they are charged a graduate tax? A graduate tax may be viewed as being equivalent to a student loan that often burdens the recipient for a large portion of their employed lives.
The concept of ‘free tertiary for all’ should be examined when deciding on how the required funds should be raised. Should there be certain criteria which should be met for a student to receive free education? Similarly, in this case, should the opportunity for free education only be available to those that lack the financial means and have strong academic records which would suggest they will complete their studies? It is currently estimated that less than half of students that start a three year degree complete their degree. This means that free education for all would result in more than half of the funding going to waste if the current ratio is maintained. Should students continue being funded if they have failed exams – this is the case in Sweden – and what are the negative consequences to the economy? If the reasons behind this high dropout rate are financial, then free tertiary education will help young people complete their degrees. If the reason is substandard academic performance, then free education for those not completing their studies would simply result in funding academic failure.
The harsh reality is that funding all students (irrespective of academic performance) would result in wasteful expenditure in the cases of those that do not complete their studies. The idea of imposing specific academic results and financial criteria should be modelled when making a decision on how to respond to the student’s demands for free tertiary education.
Preference for funding should also be given to those that are studying skills in low supply in the labour market – talent shortages. In the recent Talent Shortage Survey which was released, it indicated that 34% of local employers are struggling to fill vacancies within their organisation due to a lack of required skills. By providing incentives to students to pursue specific fields of study, there can be a ‘win-win’ as students will receive funding while the economy as a whole will benefit from a larger pool of talent for skills which are in short supply. A good example of an area of severe talent shortage is Women in STEM (Science, Technology, Engineering and Maths) – according to 21st Century, in Africa, only 7% of the workforce in this area are women.
There are many factors to be considered in the heated debate surrounding the #FeesMustFall campaign. Economic viability is first and foremost in this debate. In other words, a sustainable funding model must be found if this is to be considered a potential reality. Given the high dropout rate that is present within universities, academic performance should be a significant consideration when deciding who should receive funding.
Similarly, the financial position of applicants should also be a consideration so that more resources can be made available to those that desperately need them. These are not new ideas but rather sit between the current funding models available from the NSFAS and the demands of those embarking on the #FeesMustFall campaign.
If something is given freely without conditions, it is often undervalued in terms of its real importance – the imposition of conditions would serve as a driver of success. South Africa cannot afford to fund all students however, South Africa can afford to fund successful, productive students that will contribute to economic growth in the long term.
B.Com (Hons) Economics
B.Sc Chem. Eng., MBA – Leadership & Sustainability