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Be Informed: The Impact of Free Education

by Johann Harmse

There has been much talk around the topic of fee-free education. Is this for real? How exactly does the government plan to fund the scheme? If you’re a parent or teacher, how will this affect your wallet? Find out what kind of impact free education will have on you.

Finance Minister, Gigaba’s budget address gave much-anticipated details about how fee-free tertiary education will be funded in South Africa. Hooray! Finally some clarity. An additional R57 billion has been allocated to fund the phasing in of fee-free higher education. Okay, so what does this actually mean?

What did the speech say about free education?

The Finance Minister himself told us, last week, to prepare for bad news regarding the budget address. Our government is always so encouraging.

Let’s break down what he said about fee-free higher education:

1.  All first-year students with a family income of below R350,000 per year will be funded for the full cost of study at universities and Technical Vocational Education and Training (TVET) colleges. This will be rolled out in subsequent years until all years of study are covered.

2.  The largest reallocation of resources towards the government’s priorities was for higher education and training. As we mentioned earlier, this will amount to an additional R57bn to fund the phasing in of fee-free tertiary education. This is in addition to the R10bn provisionally allocated in the 2017 budget.

3. Government has committed to raising VAT as well as holding back on some of its capital projects and reducing spending on goods and services in order to find R57 billion to fund free tertiary education.

4. NSFAS bursaries will only apply to first-year students in 2018, covering the full cost of study for university undergraduates and TVET college students. Returning NSFAS university students who are in their second, third or fourth years in the 2018 academic year and who are from households with incomes below R122,000 a year, will also be supported. NSFAS will receive an additional R105m over the medium term to cater for the additional administration costs of the expanded bursary scheme.

5.  Finance Minister, Gigaba, said that providing free higher education was important in breaking the cycle of poverty and confronting youth unemployment, as labour statistics showed that unemployment is lowest among tertiary graduates.

So, where is the money coming from?

This was the big question regarding fee-free higher education. There are two main ways the policy will be funded.

Tax measures

Government will be raising a number of taxes in the hopes of raising an additional R36bn in 2018-19. The two major tax measures are:

  • a higher VAT rate — up by one percentage point to 15%
  • below-inflation adjustments to personal income tax.

This is the first time VAT has been raised in 25 years.  It is something that will be felt by all citizens. This will also affect almost all commodities. So, teachers and parents, the impact of free education will filter through to your personal spending.

Expenditure reductions

Government will also be reducing expenditure in many areas. These expenditure reductions, approved by Cabinet, aim to amount to R85 billion.

In order to find R57 billion, government has decided to hold back on some of its capital projects and reduce spending on goods and services. Government procurement of goods and services will be reduced by R16.5-billion.   While pensioner grants and child support grants have been afforded only the mildest of increases.

It looks like sacrifices are being made all round to back up Jacob Zuma’s fee-free education announcement.

What does this actually mean for students?      

The Finance Minister stated that the additional funding allocated to fee-free higher education will increase the number of undergraduate university students to be supported by the government. This number will go from 230,469 in 2017-18 to more than 1,123,000 over the medium term. The number of TVET college students will increase too, from about 230,000 in 2017-18 to 1,137,204 over the same period. These predictions are quite extreme so the question is: what are the chances these numbers will be achieved?

Universities South Africa CEO Prof Ahmed Bawa has said that university capacity is fixed at 208 000 people. This is a negotiated figure between universities and the Department of Higher Education. So, how will space be made for some 2 million students that the government plans to support?

Even if we could find space for 2 million students in universities and colleges, government’s strategy to fund all these grants will have a major impact on the lives of all South Africans. Severe measures like a VAT and fuel levy hike will mean families that haven’t had to choose between bread and milk may soon have to. Furthermore, those that used to make this choice may soon not be able to afford either. The cost of living will soon be a lot more, and poor families will be hit hardest.

EduConnect 2Cents

In our last article, we spoke about what the lack of capacity at universities and colleges would mean for South African students in the face of fee-free higher education. Now, in light of the budget speech, South Africa has a lot to think about. The biggest impact on students may not be the free education policy itself but the effects of the government’s strategy to pay for it.

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