/ 18 December 2017

JZ’s fees plan ‘reckless, regressive’

Ill-considered: The writer argues that spending more on basic education and early childhood development may lead to a greater reduction in poverty than allocating billions to tertiary education.
Ill-considered: The writer argues that spending more on basic education and early childhood development may lead to a greater reduction in poverty than allocating billions to tertiary education.

The presidency’s announcement on Saturday of fee-free education for some students is bad practice and bad policy. The proposal will not help today’s poor students. And its long-term cost to the economy has simply not been calculated. The announcement was released in response to the report and recommendations of the fees commission chaired by retired Judge Jonathan Heher.

As a matter of good practice, and standard government procedure, large changes in planned public expenditure should not happen in the very short period between the medium-term budget policy statement — which outlines the framework for government finances over the next few years — and the budget in February.

In this context, and the fact that public finances are under significant pressure, the announcement is extremely irresponsible and comes on the back of an equally dubious decision by the presidency to only release the commission’s report after the medium-term budget policy statement.

The proposed policy adopted by the presidency further substantiates reports that President Jacob Zuma had preferred advice from a private individual linked to the State Security Agency and the president’s daughter, over advice from numerous government officials — leading to the resignation of the head of the treasury’s budget office, Michael Sachs.

It is even unclear whether the proposal was approved by Cabinet and therefore binding on treasury.

From a public finance perspective, there are three proposals critical to the 2018 budget:

  • That fully free higher education be extended to all students from households earning less than R350 000 a year, starting with the new cohort of entrants in 2018;
  • That higher education expenditure be increased from 0.68% to 1% of annual economic production (GDP) over the next five years; and
  • That there will be no fee increase for student from households earning up to R600 000 a year.

The first and third proposals are the crucial ones in relation to equity and the demands of the #FeesMustFall campaign. Just as that campaign was criticised for not prioritising the poorest students, Zuma has engaged in rhetorical sleight of hand.

The statement redefines “poor and working class students” to be those from households earning less than R350 000 and commits to providing free education to them, starting with the incoming cohort.

This does not reflect a primary concern for the welfare of the neediest students.

Under these proposals, in 2018 a second-year student from a household earning R130 000 may only get limited partial funding, while a first-year student from a household earning R320 000 will get full funding. No sophisticated public finance analysis is required to see that that is far from progressive. Limiting the increase in the funding threshold to first-year students may make the proposal more affordable in the short term, but it does not help most needy students.

Furthermore, the long-term funding implications remain severe and probably unaffordable without cuts to other critical expenditure areas.

Similarly, many analysts and experts have already shown and argued over the past two years that government funding used to exempt households earning up to R600 000 a year is regressive; in other words, it shifts public and private resources to better-off households in a way that increases inequality.

Finally, the proposal to increase higher education funding to 1% of GDP is wrongheaded and vacuous.

Although a number of other supposedly credible reports use percent of GDP as a measure — such as the national development plan and fees commission report — it only makes sense if it is the best use of the money in the South African context.

The amount of money that should be directed to higher education depends on country-specific factors such as:

  • The quality of the basic education system;
  • The percentage of the population that is of school-going age;
  • The extent to which universities receive income from fees and other sources; and
  • The proportion of students who can afford to pay fees.

More funds for basic education and early childhood development — along with initiatives to support poor youth who are neither employed nor in education — would arguably lead to greater reductions in poverty and inequality than allocating more money to universities.

It is also notable that there is no sense of how much the proposals would contribute to an increase in the percentage of GDP allocated to higher education. That would require modelling, which, by virtue of bypassing the treasury, has probably not been done. This reflects the broader lack of substance or analysis accompanying Zuma’s statement.

Given all the above — and leaving aside the many political considerations that may well be behind this recent move — it should be clear that the president’s announcement is irresponsible and regressive.

There are more equitable and affordable ways of improving access and outcomes in education in ways that do not undermine the national budgeting process.

Seán Mfundza Muller is a senior lecturer in economics and research associate at the Public and Environmental Economics Research Centre at the University of Johannesburg