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09 April 2021 | Story Prof Francis Petersen and Prof Philippe Burger | Photo istock

With a COVID-hit, shrinking economy and a mounting public debt burden, the Minister of Finance, Mr Tito Mboweni, announced a tight budget in February 2021. This budget also constrained its allocation to the Department of Higher Education and Training (DHET).

Within the DHET budget, the allocation to the National Student Financial Aid Scheme (NSFAS) was set to increase from R34,8 billion in the 2020/21 fiscal year to R36,4 billion in 2023/24 – a cumulative increase in nominal terms of 4,6% over the three-year period. This allocation covers NSFAS bursaries to university students and students at technical and vocational education and training (TVET) colleges. 

However, the National Treasury’s Budget Review projected inflation at 3,9%, 4,2% and 4,4% in the three fiscal years from 2021/22 to 2023/24. This means that the consumer price level over the three years is expected to cumulatively increase by 13%, well in excess of the 4,6% increase that the government has budgeted for NSFAS. In addition, the government also expected the number of NSFAS students to increase.

Reallocation of the DHET budget

Predictably, student organisations countrywide have expressed their dissatisfaction, which led to protests and campus shutdowns in March 2021. Tragically, a bystander in the protests, Mthokozisi Ntumba, died during police action in Braamfontein. 

Following the protests, the Minister of Higher Education, Innovation and Technology, Dr Blade Nzimande, announced a reallocation of the DHET budget, as approved by Cabinet. A further R6,3 billion has been allocated to NSFAS. A total of R2,5 billion of this reallocation came from a reduction in the general allocation for universities, R3,3 billion from the National Skills Fund, and a further R500 million from the TVET colleges’ new accommodation construction budget.
The provision of university subsidies was already a concern before this reallocation, with the subsidy per student in real terms in the DHET budget set to drop cumulatively by as much as 7% over the period 2020/21 to 2023/24.
In addition to the subsidy and bursary pressures, student organisations are also demanding the full write-off of student debt. Outstanding student debt at South African universities stands just shy of R14 billion. Much of this debt burden is carried by students from so-called missing-middle households, defined as households with an income of between R350 000 and R600 000 per year.  

The current funding model is not financially and fiscally sustainable

With mounting financial pressure, it is clear that the current model of student funding in South Africa is not financially and fiscally sustainable. The deteriorating fiscal condition also makes it unlikely that the government will be able to fully finance the missing middle. Minister Nzimande has indicated that a National Task Team, involving various stakeholders, will be established to address the student funding challenge in a sustainable manner.

The National Task Team will have to revisit the recommendations made by the Heher Commission in 2016. The commission recommended the implementation of an income-contingent student loan scheme. With an income-contingent loan, the student will obtain a loan to cover all or part of his or her tuition, accommodation, books, living costs, and transport. 

Once a student has finished studying and started working, loan repayment can start, but it only commences when the income exceeds a set threshold. The amount paid per month is also linked to the ex-student’s income level. The loan repayment period can be capped, for instance, at 25 or 30 years. Whatever is not repaid after that, is written off.
Such a loan scheme could augment a revised NSFAS bursary scheme, and instead of the hard R350 000 family income cut-off currently applied for NSFAS bursaries, it could be implemented with a sliding family income scale that allows for a combination of bursary and loan financing. Thus, poorer students will receive a bigger or full bursary, reducing their need for a loan, while better-off missing-middle students will need to obtain a partial or full loan. 

Will students be able to afford the debt burden they incur with such loans? In 2019, BusinessTech conducted a survey among eight large South African universities to ascertain the range of tuition fees that students face per year in BA, BCom, BSc, LLB, and BEng degrees. 

Annual tuition fees ranged from R32 560 to R68 135. In 2020 and 2021, universities applied an increase of 5,4% and 4,7% in tuition fees, respectively, which lifts the range to R35 931 and R75 190 in 2021. Setting the allowance for transport, living costs, books, and personal care equal to the 2021 NSFAS allowance of up to R30 600 and assuming accommodation costs of R35 000 for ten months, means the total tuition fees and other costs will range between R101 531 and R140 790 per year. 

If this was the cost for the first year of study, allowing for further tuition fee increases of 4,7% per year for a second (2022) and third (2023) year, and 4% inflation for all other costs, the total cost over three years with a degree obtained at the end of 2023, will range between R317 716 and R441 113, to be repaid over 10 to 30 years. Note that this cost is the same order of magnitude as the current retail price of R376 500 for a Corolla 1.2T Xs, a mid-size family car typically bought by middle-class (including graduate) families. The car, though, is repaid over just five years.

A need for public-private partnership

Given the limits on government finance, even to fund all income-contingent loans, there is a need for significant private sector involvement (banks, pension funds) in funding the loan scheme. If 300 000 students each incur a loan averaging R120 000 per year, the cost would be R36 billion per year (and at a GDP of R5 trillion, be 0,7% of GDP), an amount that is surely feasible when combining government and private sector resources. Universities are institutions that affect social change and are drivers of economic growth. Hence, both the public and private sectors are key beneficiaries of the output of universities, and therefore a solution towards sustainable student finance will need to involve an appropriate public-private partnership.  

Such a public-private partnership can include a sliding scale of interest paid on the income-contingent loans, based on the student’s household income, coupled with a partial or full underwriting of the loan by government.

Commercial banks can administer the loan scheme, as they already have well-developed financial vetting systems and expertise. To reduce the risk of non-repayment, and because the loan repayment is linked to a worker’s income level, the South African Revenue Service can collect instalments and pay it over to the loan scheme.

There are, however, a number of factors that can undermine the successful implementation of an income-contingent loan scheme. These include the lack of collateral and the long lead time till repayment starts, the need to subsidise low interest rates, and lastly, the risk of low total repayments. All these will require that the government spends money to ensure the participation of banks and other funders. 

The private sector, though, needs to realise that even though a student loan system inevitably involves risk, it is in the interest of the long-term growth and profitability of the private sector to fund such loans. It is also important for government to realise that higher education is both a private and public good, and that contributing a component to student finance is an investment, and not merely an expenditure.

Prof Francis Petersen is Rector and Vice-Chancellor of the University of the Free State and  Prof Philippe Burger is Professor of Economics and Pro-Vice-Chancellor: Poverty, Inequality and Economic Development at the University of the Free State

News Archive

During 2011: Prestige Scholars Programme (PSP)
2011-12-01

The University has designed the Vice-Chancellor’s Prestige Scholars Programme (PSP) to promote and support the intellectual breadth and depth required of young scholars to pose questions and generate knowledge in their disciplines and hence to occupy the vanguards of contemporary intellectual enquiry. The programme specifically targets members of the academic staff who are near completion, or have newly completed, their doctoral studies.

The goal is to select no more than 100 of the most promising young scholars and to make substantial investments in their development towards becoming full professors. A tailored, intensive programme of support is designated that combines international placement working alongside leading scholars in the discipline of the prestige scholar, with intensive mentorship and support from within the university.

 Description: 2011 PSP_Thuthuka  Tags: 2011 PSP_Thuthuka

Elite young scholars on the Vice-Chancellor’s Prestige Scholars Programme generated R1,2 million in National Research Foundation Thuthuka and Blue Skies funding in 2011 alone. Dr Katinka de Wet in the Department of Sociology was awarded Blue Skies funding for her work on the Hybrid Identity of the HIV/Aids patient. Thuthuka Grant holders Drs Cilliers van den Berg, Olihile Sebolai, Dirk Opperman and Diaan van der Westhuizen work in the fields of German and Afrikaans trauma literature, microbiology, structural and evolutionary biology, and architecture, respectively. This broad disciplinary range typifies the depth and extraordinary range of scholarship present among junior academics at the UFS.


 Description: 2011 PSP_Liza Coetsee Tags: 2011 PSP_Liza Coetsee

Dr Liza Coetsee, a Y2-rated physicist, is the first of the Vice-Chancellor’s elite cohort of Prestige Scholars to submit for National Research Foundation rating. Dr Coetsee works on the latest of the Nanotechnology Surface Science systems housed in our Department of Physics. As Prestige Scholar, Dr Coetsee conducts research on phosphor solar cells. Her aim is to establish a new Phosphor Solar Cell field at the University of the Free State with Proff. Hendrik Swart and Koos Terblans. As a member of the Prestige Scholar Programme, Dr Coetsee will work in collaboration both with colleagues from the Nelson Mandela Metropolitan University and Prof. Eray Aydil from the University of Minnesota and Editor-in-Chief of the Journal of Vacuum Science & Technology.


 Description: 2011 PSP_Olihile Sebolai Tags: 2011 PSP_Olihile Sebolai

Dr Olihile Sebolai is one of the 2 Vice-Chancellor’s elite Prestige Scholars and a microbiologist. In 2011, Dr Sebolai was awarded a Thuthuka Grant for his research on the yeast pathogen Cryptococcus neoformans, the cause of life-threatening Aids-defining illnesses such as meningitis. Dr Sebolai considers how cryptococcal lipids mediate infectious processes leading to illness. An understanding of these cellular processes will offer hope for future drug development to combat the scourge of cryptococcal meningitis, annually causing the death of over half a million people in Sub-Saharan Africa. Dr Sebolai is also interested in mapping the prevalence and distribution pattern of cryptococcal meningitis in the Free State. This, in turn, will assist health authorities to manage current infections and plan appropriately for potential outbreaks. The Prestige Scholars Programme, with the assistance of the National Research Foundation, will afford Dr Sebolai the opportunity to pursue his research in laboratories in the United States and India in 2012 and 2013.


 Description: 2011 PSP_Louis Holtzhausen Tags: 2011 PSP_Louis Holtzhausen

Dr Louis Holtzhausen, member of the Vice-Chancellor’s Prestige Scholars Programme, has been named by the South African Sports Confederation and Olympic Committee (SASCOC) as team doctor for Team South Africa during the All Africa Games, the largest sports event in Africa. National teams from African countries participated in 23 sports events. As an esteemed South African academic in sports medicine Dr Holtzhausens’ participation was an extension of the work already being done under his supervision at the UFS’s Sports Performance Unit. Many of the athletes who prepared at the Unit were also part of the team. Elite athletes’ illness and injury profiles are one of Dr Holtzhausens’ research focus areas. The exposure to this group in competition was of great value in the identification and development of research niche areas.


 Description: 2011 PSP_ Chantel Swart Tags: 2011 PSP_ Chantel Swart

The South African Society for Microbiology awarded Dr Chantel Swart-Pistor, a Prestige Scholar on the Vice-Chancellor’s elite programme, the top prize for her PhD during a recent gala dinner in Cape Town. Dr Swart-Pistor accomplished a breakthrough in the field of nanotechnology with The influence of mitochondrial inhibitors on zoospore and ascospore development. Her supervisor, Prof. Lodewyk Kock and co-supervisors, Dr Carolina Pohl and Prof. Pieter van Wyk, also stressed the important collaboration with Proff. Hendrik Swart (Physics) and Pieter van Wyk (Centre for Microscopy), which made Dr Swart-Pistor’s work possible. She has presented her work in Beijing (Medichem 2011) and Philadelphia (Biotechnology-2011). She has been invited to return to China in 2012.


 Description: 2011 PSP_ Lizette Erasmus Tags: 2011 PSP_ Lizette Erasmus

Dr Lizette Erasmus, scientific chemist and one of the Vice-Chancellor’s Prestige Scholars, has just returned from a three-month-long research visit to Prof. Hans Niemantsverdriet at the Technical University of Eindhoven in The Netherlands and the University of California, Davis. Dr Erasmus specialises in heterogeneous catalysis. Her visit to Prof. Niemantsverdriet, one of the global experts in the field of surface science, served to round of existing research. In California, Dr Erasmus visited her mentor, Prof. Bruce C. Gates, as part of the objectives of the Rector’s programme for the internationalisation of young researchers. Prof. Gates, an expert in catalysis, could contribute to Dr Erasmus’ research on the characterisation of heterogeneous catalysis and catalytic reactions. In exchange, her expertise in organometallic synthesis added value to Prof. Gates’ existing research. Their continued collaboration gave availed them of the opportunity for interdisciplinary interaction between engineering (Prof. Gates’ speciality) and chemistry, and promises to contribute to increased collaboration between the two universities in future.


 Description: 2011 PSP_Dirk Opperman Tags: 2011 PSP_Dirk Opperman

Dr Dirk Opperman, specialist in structural and evolutionary biology and National Research Foundation Thuthuka Grant holder, joined the Vice-Chancellor’s Prestige Scholars Programme after his postdoctoral work at the Max Planck Institute (KOFO) in Germany. Dr Opperman is the recipient of institutional seed funding to establish a protein crystallisation unit, which in turn led to the donation in 2011 of a multi-million Rand X-ray diffractometer¬ from the University of the Western Cape to complement his existing access to international synchrotrons. Dr Opperman is spending part of 2011 at the University of Exeter (UK) to further his research into the three-dimensional structures of specific enzymes and their trajectories of evolution to specific functions.


 Description: 2011 PSP_Abiodun Ogundeji Tags: 2011 PSP_Abiodun Ogundeji

Abiodun Ogundeji is a member of the Vice-Chancellor's Prestige Scholars Programme. Abiodun's work was recently recognised when he and his co-authors received an award for the best contributed paper at the 49th annual conference of the Agricultural Economics Association of South Africa on the topic, Impact of climate change on planning and dealing with flood disasters in South Africa: A case study of Soweto on Sea. The paper was co-authored by Prof. Giel Viljoen from our Department of Agricultural Economics and Herman Booysen, as well as Gawie du T. de Villiers, Research Associates in the Department of Geography. Abiodun is currently conducting invaluable research on the quantification of the economic value of climate change impacts and the benefits and costs of adaptation in South Africa.

 

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