Only pressure on SA’s elites can ease university fee stress

There is a new student movement sweeping South Africa’s universities. Its enemies? Excessive fee increases and underpaid workers.

The next step in this fight could be taken beyond university campuses. The final battle will be fought at South Africa’s national treasury and Reserve Bank for four simple reasons:

  1. There needs to be more state funding for higher education. Finance Minister Nhlanhla Nene could make this happen when he delivers his medium-term budget policy statement on October 21 – but he won’t;
  2. The South African state has the ability to raise such funding from financial markets, corporations and rich people;
  3. The social spending component of the fiscus has been far too low; and
  4. Interest rates should be decreased. This would allow for more state borrowing and reduce South Africans’ extreme debt load, including that of recent graduates whose repayment rates are miserable.

1) More state funding for higher education
Higher Education and Training Minister Blade Nzimande set up a committee to review university funding. In its report, released in October 2013, the committee found that: “… the amount of government funding is not sufficient to meet the needs of the public university system … Government should increase the funding for higher education, to be more in line with international levels of expenditure.”

South Africa’s budget for universities as a percentage of GDP, the committee reported, was just 0.75%. That’s lower than the Africa-wide proportion of 0.78% and the global proportion of 0.84%. It also falls short of the proportion of 1.21% spent by OECD countries.

The committee also found that in the decade between 2000 and 2010, state funding per full-time equivalent student fell by 1.1% annually in real terms. But each of these students’ fees increased by 2.5% annually during the same period.


At a higher education summit held recently in Durban – coincidentally, just as fee protests hit the headlines – Deputy President Cyril Ramaphosa admitted that black Africans make up 79% of South Africa’s population, yet their participation rate in higher education is “less than 15%”. He said:

Higher levels of funding and the expansion of the capacity of the higher education system will be needed in future to ensure that higher levels of participation of African and coloured students are achieved.

Even the centre-right Democratic Alliance accepts that the national treasury has been “hiding” during this debate. Behind the fiscal conservatism of treasury, in Pretoria, are the men they report to in the biggest financial institutions and credit rating agencies – mostly in Sandton.

2) State borrowing could be higher
In the last comparison available (from Barclays Bank), both South Africa’s total accumulated public debt and annual deficit are below that of many peer economies.

Also, in historical terms, the public debt today is by no means at an excessive level, according to the treasury’s own data.

The earlier peak period of relatively higher spending and borrowing occurred during an economic emergency: the 1930s Great Depression. Today’s “Great Recession” justifies the same treatment, though now aimed at meeting low-income black people’s needs.


         South Africa’s debt levels. (National treasury)


3) Social spending is far too low
Not enough state spending goes to society. The majority goes instead to corporate welfare and rich people. The most recent OECD comparison reveals that South Africa spends at half the level of Russia and Brazil.


OECD 2011, OECD Employment Outlook


4) Interest rates are far too high
Neoliberals run not only South Africa’s treasury but also its Reserve Bank, which has a policy of imposing excessively high interest rates on the state and student borrowers alike.

The main way that the largest northern governments – the US, European Union, Japan and the UK – have dealt with their own recent fiscal squeeze, especially as bank bailouts mounted into the trillions of US dollars, was by printing currency. This practice is called quantitative easing.

In contrast, South Africa’s Reserve Bank keeps inflation in the 3-6% band by using extremely high interest rates. These are entirely inappropriate given the economy’s depressed state. Today, measured by ten-year government bonds, only Russia, Turkey, Indonesia and Pakistan have higher interest rates than South Africa.

Resistance to these arguments
The four arguments above face both intellectual and policy resistance.

There is the fatuous Reserve Bank claim that South Africa has an insufficiently low savings rate. This allegedly justifies high interest rates. Yet there is plenty of loose funding, as witnessed by how much money sloshes around in the Johannesburg stock exchange.

Neoliberals do have a valid rebuttal to the arguments above: if interest rates are lowered and social spending and state borrowing raised, there will be even worse capital flight. This is indeed a very serious problem in terms of both illicit financial flows and licit outflows of profits, dividends and interest, especially given that South Africa’s total foreign debt is around US$150 billion. This must be distinguished from public domestic debt, which is still manageable.

The solution lies in reimposing exchange controls.

Taking the fight beyond universities
To ease universities’ fiscal stress there will need to be some political stress on the treasury and the Reserve Bank. This, in turn, will place financial stress on the Sandton bankers and corporate elites who have enjoyed amongst the world’s highest profits and engaged in massive offshore funds transfers.

Another opposition political party, the Economic Freedom Fighters, has popularised the phrase “Pay back the money!” Added to this are recent anti-corruption marches that reflect a healthy and widespread anger at the elites’ looting.

If students continue to ally with underpaid university workers and link class and race as well as they have so far, the challenge ahead is crystal clear: target the men who control the finances.

Patrick Bond, Professor of Political Economy, University of the Witwatersrand

This article was originally published on The Conversation. Read the original article.

The Conversation

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Patrick Bond
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