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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

New South African literature festival offers something for everyone
2016-03-23

The University of the Free State (UFS) in partnership with the Vrystaat Arts Festival is proud to present the first literature festival in central South Africa from 11-16 July in Bloemfontein. Afrikaans books and writers will feature prominently, in addition to other indigenous languages such as Sotho and Zulu. Several authors will be celebrating literature in English.

Vice-Chancellor and Rector of the University of the Free State Professor Jonathan Jansen says:  ‘The aim of the festival, part of the bigger Vrystaat Arts Festival, is to strengthen a culture of reading, not just in the Free State but nationally. The festival will market books as well as embrace new developments in the field of writing. I am incredibly excited about this inaugural event, which the university will support in the long-term.’

The theme of this year’s literature festival is ‘Our Africa’ and promises to provide all booklovers and readers tantalizing food for thought. Some of the authors attending the festival include, amongst others, the Hertzog-prize winner Adam Small, celebrating his 80th birthday as well as the release of his latest drama. Another legendary writer, dramaturge and actor, John Kani, will be speaking at the festival about his most recent theatre productions. The ever popular Marita van der Vyver will be visiting the festival from France, and the highly acclaimed writer Zakes Mda, will be flying in from the United States to deliver the inaugural Sol Plaatje Lecture. Mda, also a visual artist, will have some of his works on display.

Other international guests include Chika Unigwe, originally from Nigeria, who rose to fame in Belgium, and was described by South African writer Zukiswa Wanner as one of the five most renowned writers from Africa. Also attending will be Iranian writer Kader Abdolah, whose novels have been translated into more than 21 languages. Abdolah, a political refugee who escaped from Iran to the Netherlands in the 1980s, went on to establish himself as one of the most prominent Dutch novelists. Wilfried N’Sondé, originally from the Congo, who now lives in France, will also be a festival guest.
 
Theo Kemp, Coordinator of the Literature Festival says: ‘It is critical for us that robust debates on current affairs takes place as part of the festival. Festival participants will be able to engage with a range of authors on topical and sometimes sensitive issues. We welcome this debate – it is rare to have a platform where we can argue passionately yet respectfully about the future of our country in an international context.’

Critical topics covered include themes such as the state of Africa’s economies (with analyst and writer Victor Kgomoeswana); the relevance of the Anglo-Boer War in contemporary society (with Albert Blake and Johan Kruger); philosopher Achille Mbembe talking with Kevin Bloom and Richard Poplak about the changing face of Africa; and the political analysts Susan Booysen and John Matisonn examining the South African landscape in a post-municipal election environment.

Theuns Eloff, previous Rector of the University of Potchefstroom, whose new book What now, South Africa is launched this year, will partake in discussions around current affairs. So to Melanie Verwoerd and Sonwabiso Ngcowa aim to explore the phenomenon of the so-called ‘born frees’ in their book 21 at 21: The Coming of Age of A Nation.

Climate change and its impact on the Free State’s environment is another critical topic covered by Bob and Mary Schole with their book launch of Climate Change: Briefings from Southern Africa.

Festival goers can also look forward to a poetry café, where music and poetry will be mixed; informal visits with writers around food and story telling; as well as word and music productions where popular travel writers such as Johan Bakkes, Dana Snyman, Erns Grundling and Pienkes du Plessis will be present.

Writers will also be involved in a range of panel discussions – including on the ethics of writing biographies (Lindie Koorts and Mark Gevisser); alternative narratives of South Africa in the eighties (Ivan Vladislavic and Johann Roussouw); and discussions with writers such as Hans du Plessis, Bernard Odendaal, Hanlie Retief, Rudie van Rensburg and Irma Joubert.

Workshops will also feature in the programme with writers such as Francois Smith and Henning Pieterse, associated with the Department of Afrikaans and Dutch at the UFS, offering short courses on creative writing; while Johann Roussouw from the Department of Philosophy at the UFS will present a series of talks on the books of Karel Schoeman.

The final festival programme will be launched on 28 April 2016.

The Vrystaat Literature Festival was initiated by the University of the Free State in partnership with the Vrystaat Arts Festival. Project sponsors include Media24, ATKV, Vlaamse Letterenfonds, Institut Francais, Nederlandse Letterfonds, Van Rensburg Pataloe and the Flemish Embassy.
 

For further enquiries contact:

Theo Kemp
theo.kemp@volksblad.com
+27(0)83 462 9613
www.vrystaatartsfestival.co.za

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