Higher education institutions are under severe financial pressure. Although government money has been forthcoming for capital projects and other ear-marked expenditure, state subsidies have been decreased in real terms until recently.
Only from 2008/09 were there increased subsidies and some inflation relief, allowing institutions to increase support to poor students, who sometimes cannot even afford a decent meal, and to offset the impact of fee increases.
But with mounting pressure on higher education institutions not to raise student fees or to limit increases, the jaws of inflation continue to close in on universities’ income statements.
Similarly, the economic conditions are taking their toll on typical households, which struggle to make ends meet, never mind to pay for higher education. Access to higher education therefore becomes a major hurdle in a country that desperately needs skills.
The government’s loan system for poor students, the National Student Financial Aid Scheme, makes a substantial impact, but more support for the scheme is vital.
Although it is in the country’s best interest to improve the funding for higher education, universities face a series of challenges in the quest to balance their books.
One of the longer-term difficulties facing universities is the under-pricing of accommodation. At most institutions the increasing cost of providing student housing remains a deterrent to increasing the supply of accommodation for students on campus.
Internal inflation (which is typically higher than CPIX) is another major challenge universities face. The main reason for the higher internal inflation relates, among others, to the pressures on salary costs. Pressure from the private sector and institutions competing for academics among themselves puts major strain on a university’s ability to retain staff.
A further strain on universities is the under-preparedness of first-year students. Basic skills are lacking when these students enter the doors of higher learning and institutions are required to invest in them to maintain acceptable pass rates. The budget consequences are exponential increases in the allocations for academic development and support.
Millions of rands are therefore being spent on fixing the outcomes of a largely deficient schooling system and this without any increase in resources to universities.
What about other sources of income? So-called “third stream income” is seen as the solution by some. Although nobody can argue against the importance of this income stream, there is always the threat that this may detract from the core business of higher education.
Time spent on presenting professional courses or consulting to create additional income will, in most cases, imply less research time and output and it may even compromise the teaching of formal, subsidy-bearing courses. Third-stream income may alleviate some of the pressures on university budgets, but it is not a panacea for the financial strain institutions are facing.
So, should student fees be the solution then? The answer is definitely “no”, but higher education has few other avenues to explore. It must be stated clearly that fees have never been seen as the balancing number. What must be said, however, is that although the diminishing real subsidies for the sector has created pressure on universities to look at alternative sources of income, fees will remain merely one of these.
Universities cannot afford to subject themselves to real fee reductions — fee increases at a rate less than the CPIX. It spells danger and will lead to instability in the sector in the long term. The reality, however, is that fee increases for 2008 have done exactly that: shown a real decline.
The average fee increase for 2009 seems to be just below 9%, which is below CPIX, never mind the university’s internal inflation. On average, fees make up 28% of the university’s income.
As has been the case with subsidies for some time now, fees are declining in real terms as well. Consequently, higher education will survive for another three or four years if this trend continues, but the pressure is mounting.
Given the above, it is clear that universities cannot afford not to raise student fees. If they don’t increase fees and there is no compensation from another source, the quality and output of institutions will suffer. This will be to the detriment of the higher education sector and the country as a whole.
Henk Kriek is deputy vice-chancellor of finance at the University of Johannesburg