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These limitations are likely to lead to decreased funding across all state-dependants.<br /> <br /> As highlighted by South African economist Dawie Roodt in <a href="https://dailyinvestor.com/finance/35428/south-africas-finance-minister-in-very-deep-trouble/" target="_new"><I>The Daily Investor</I></a>, South Africa’s debt-to-GDP ratio is projected to escalate significantly, reaching over 75% by the end of the current financial year in March 2024, and is expected to rise further to 80% in the following year.<br /> <br /> This situation is accentuated by the <a href="https://www.dailymaverick.co.za/article/2023-11-01-more-tax-to-come-but-no-soe-bailouts-as-godongwana-juggles-public-finances-to-extend-r350-grant/" target="_new">Medium-Term Budget Policy Statement</a>, which indicates an alarming trend in debt service costs. For instance, in the 2023-24 financial year, the country is obliged to allocate ZAR354.5 billion (US$18.7 billion) for interest payments on debt, which exceeds the amount set aside in February’s budget by more than ZAR14 billion. This figure is predicted to increase to ZAR385.9 billion in 2024-25 and further to ZAR455.9 billion by the 2026-27 financial year.<br /> <br /> Such escalating debt service costs are unsustainable, posing a significant risk to the nation’s fiscal health. Moreover, the Treasury’s strategy of borrowing to cover short-term interest debt is not viable in the long term, as it perpetuates a debt spiral. This scenario necessitates re-evaluating financial strategies to ensure sustainable funding for universities and other state-supported sectors amid these challenging economic conditions.<br /> <br /> <b>Not frontline</b><br /> <br /> During the COVID-19 pandemic, the government’s decision to reallocate funds from the higher education budget to support South African Airways established a precedent for prioritising non-essential departments over what is traditionally seen as frontline services. This action highlighted the vulnerability of higher education as a funding source for fiscal adjustments in other economic areas. These ad hoc decisions lead to colossal policy instability.<br /> <br /> Although education budget-related, repurposing higher education funds to augment the Early Childhood Development (ECD) grant is also a cause for concern.<br /> <br /> The Estimates of National Expenditure detail a cabinet-sanctioned reduction of ZAR1.8 billion from the 2023 baseline to bolster ECD, predominantly at the expense of university infrastructure – reducing its budget from ZAR3.5 billion in the previous year to a mere ZAR673 million, as reported by <a href="https://wiredspace.wits.ac.za/items/7731433c-bbc1-4fd0-b531-61c4465c0e90?_gl=1*cx2fzc*_ga*MjQ1MjI3NTUzLjE2ODk2Nzc4MDQ.*_ga_JPCF6M80CQ*MTcwMTA3ODc5NC40LjEuMTcwMTA3ODkwMS4xOS4wLjA." target="_new">Sachs and colleagues</a>.<br /> <br /> Further adjustments were announced on 1 November 2023, revealing an additional ZAR2.6 billion reduction in the higher education budget. This was justified by lower-than-anticipated numbers of students in Technical and Vocational Education and Training (TVET) colleges qualifying for financial aid, primarily due to unsatisfactory academic performance, enabling the DHET to reclaim over ZAR2 billion.<br /> <br /> A supplementary ZAR517 million was extracted from university subsidies, totalling a ZAR4.2 billion cut for 2023. While these figures may seem trivial against a ZAR90 billion higher education budget, a more discerning assessment reveals significant implications.<br /> <br /> The bulk of this budget includes allocations for the National Student Financial Aid Scheme, or NSFAS, and block grants to universities, with NSFAS receiving ZAR46 billion (including TVET colleges) and universities ZAR43 billion.<br /> <br /> Notably, as observed in an <a href="https://www.dailymaverick.co.za/opinionista/2023-11-15-as-nsfas-funding-balloons-higher-education-budget-cuts-will-strangle-sa-severely-in-the-long-term/" target="_new">article</a> by Rhodes academic Professor Sioux McKenna, this marks the first instance where NSFAS funding has surpassed that of higher education subsidies, signalling a shift in educational investment priorities.<br /> <br /> <b>Strategic reassessment of priorities</b><br /> <br /> The 2000 World Bank publication <I>Higher Education in Developing Countries: Peril and Promise</I> marked a pivotal departure from the prevailing educational investment narrative that favoured primary and secondary education for their perceived higher returns. This publication catalysed an ideological transformation, prompting a reassessment of the importance assigned to different educational levels.<br /> <br /> By 2021, the stance of the <a href="https://www.worldbank.org/en/topic/tertiaryeducation#3" target="_new">World Bank</a> had evolved significantly, underscoring the paramount importance of tertiary education. It reported that tertiary education graduates enjoy the highest economic returns across the educational spectrum.<br /> <br /> The economic returns for tertiary education graduates are the <a href="https://documents1.worldbank.org/curated/en/830831468147839247/pdf/WPS7020.pdf" target="_new">highest in the entire educational system</a> – an estimated 17% increase in earnings as compared with 10% for primary and 7% for secondary education. These high returns are even greater and more significant in Sub-Saharan Africa, with an estimated 21% increase in earning for tertiary education graduates.<br /> <br /> This 21% increment is particularly noteworthy for the region. It casts the ZAR1.8 billion allocation for early childhood development as potentially myopic and seems to disregard the stark unemployment rates reported by <a href="https://www.statssa.gov.za/publications/P0211/P02113rdQuarter2023.pdf" target="_new">Statistics South Africa</a> for the third quarter of 2023. These rates are alarming: 38.8% for individuals with less than a matric qualification compared to 8.5% for those with tertiary education.<br /> <br /> The situation is compounded when considering the youth demographic. In the same quarter, approximately 10.2 million young people aged 15-24 were reported, with 32.7% not engaged in employment, education, or training, or NEET – a figure that rises to 42% for the 15-34 age bracket. Excluding NEET, this indicates that a staggering 67.6% of 15-24-year-olds are not gainfully employed in South Africa.<br /> <br /> Such data underscores the critical need for increased investment in universities and TVET colleges.<br /> <br /> Addressing the educational needs of individuals aged 15-24 is paramount to ameliorating South Africa’s employment rates. Strategic funding in higher education is not merely a fiscal consideration; it is imperative for equipping a significant demographic with the skills necessary for employment and, by extension, for enhancing the nation’s economic trajectory.<br /> <br /> <b>A tragedy of errors</b><br /> <br /> The DHET faces several substantial challenges that extend beyond the misallocation of funds to ECD programmes. These challenges include:<br /> <br /> • For TVET students, NSFAS funding is available, but the lack of academic success and the subsequent return of funds highlight the need for a more sustainable approach. This trend looks set to continue in 2024, with acting CEO of NSFAS, Masile Ramorwesi, <a href="https://www.groundup.org.za/article/nsfas-budget-cuts-could-leave-more-than-87000-students-without-funding-in-2024/" target="_new">saying</a> that the expected 10% reduction will mean 87,712 students will be unfunded next year.<br /> <br /> • NSFAS has been marred by a series of controversies, ranging from the misallocation of funds to non-existent ‘ghost’ students, arbitrary funding decisions, corruption, and questionable leadership. The preference of the Minister of Higher Education, Science and Technology, Dr Blade Nzimande, for <a href="https://sundayworld.co.za/news/education/direct-payment-model-here-to-stay-as-nsfas-applications-open/" target="_new">direct funding</a> to students further exacerbates issues, as universities are left to shoulder the financial burden when student funding is delayed or withheld.<br /> <br /> • As McKenna indicates, continuing current trends may compel universities to halt hiring for permanent academic positions and increasingly depend on part-time lecturers.<br /> <br /> This precarious financial situation is further aggravated by budget reductions primarily affecting infrastructure, posing additional challenges for institutional maintenance.<br /> <br /> The financial sustainability of universities is at risk, particularly for the historically disadvantaged and newly established institutions in regions like Mpumalanga and Kimberley. Without sufficient alternative revenue streams, many of these institutions face a dire future, with the potential for institutional collapse within the next five years if these issues are not systemically addressed.<br /> <br /> • Private higher education institutions significantly contribute to developing skills vital for the economy. However, with NSFAS limited to funding students at public universities, those in private institutions face a gap in support. Government intervention to extend financial aid to these students is crucial for fostering equitable access to education and enhancing the nation’s skill base, thereby supporting broader economic growth.<br /> <br /> • In the intricate tapestry of South African higher education financing, a particularly stark disparity emerges at the intersection of income brackets and eligibility for educational support. Taxpayers, many of whom have household incomes ranging from ZAR350,001 to ZARR600,000, find themselves in a bind; they earn too much to qualify for government aid, yet too little to afford university fees comfortably. This group, colloquially known as the ‘missing middle’, faces a conundrum where their financial contributions support the very systems from which they cannot benefit.<br /> <br /> • Conversely, households earning between ZAR0 and ZAR350,000, including South African Social Security Agency, or SASSA, grant beneficiaries and the working class, are entitled to income-contingent bursaries that do not require repayment.<br /> <br /> • This dichotomy paints a picture of inequity, as those who are shouldering the tax burden are paradoxically denied access to the educational resources they help fund. While there is talk of instituting an income-contingent loan scheme to bridge this gap, Nzimande’s sporadic mentions of such a solution have yet to coalesce into a concrete plan. As a result, the missing middle remains in a state of limbo, with anticipation for a tangible resolution hanging uncertainly in the balance.<br /> <br /> • The burgeoning student debt, estimated to reach a staggering ZAR21 billion, poses a significant financial risk for South African public universities. This immense sum, accrued from unpaid student fees, threatens to undermine the financial stability of these institutions.<br /> <br /> As universities are compelled to redirect funds to cover the shortfall, essential projects and academic programmes suffer from budgetary constraints. The obligation to service debt interest compounds the fiscal challenge, further diverting resources away from their primary educational mission.<br /> <br /> This scenario is not merely a financial ledger issue, it has palpable academic repercussions, as students saddled with debt often face the untenable prospect of being unable to graduate. The government’s role in addressing this crisis is critical; there is an urgent need to devise a sustainable funding solution that alleviates the debt burden on the universities and the students, ensuring that higher education remains a viable pathway to personal and national advancement.<br /> <br /> The current trajectory of educational funding and management in South Africa raises severe concerns about the future sustainability of higher education institutions. The misdirection of funds, inefficiencies in financial aid distribution, and governance issues within the NSFAS create a precarious situation for universities, particularly those serving historically disadvantaged communities.<br /> <br /> Strategic intervention becomes increasingly urgent as these institutions grapple with financial constraints, staffing challenges and deteriorating infrastructure. Policymakers and educational authorities must thoroughly reassess funding allocations and support mechanisms. This should reinforce the educational framework, ensuring that higher education can fulfil its critical role in societal advancement and economic development.<br /> <br /> The commitment to such reforms will not only safeguard the interests of current and future students. It will also serve as a cornerstone for the nation’s progress in the global knowledge economy.<br /> <br /> <I>Dr Linda Meyer is the managing director of IIE Rosebank College and Patrick Fish is an educational consultant.</I> </div><br><script src="https://www.universityworldnews.com/subscribe2.js"></script> <div style="background:#ffe57d;padding:8px" id="subform"> <span style="font-family:arial"><b>Receive email updates from UWN</b></span> <br> <input type="text" name="email" id="email" value="" style="width:65%;font-size:16px" placeholder="enter your email address">   <input type="submit" style="background:#000;color:#fff;padding:4px;font-size:20px; border:1px solid #000;font-weight:normal;border-radius:8px;font-family:arial" name="action" id="signupbutton" value="Sign Up" onclick="return formCheck();"> <br> <input type="checkbox" id="globalnl" name="globalnl" value="1"> Global newsletters    <input type="checkbox" id="africanl" name="africanl" value="1"> Africa newsletters    <input 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