Economic Update

Published 02 Apr 2018

Plans to make higher education free for most South African students in a phased rollout took a step forward in late February, with news that the government was allocating R57bn ($4.8bn) to cover tuition fees for low-income, first-year students.

The initiative, announced by Malusi Gigaba, the former minister of finance, in his 2018 budget speech, provides funding for students whose families are on annual incomes of R350,000 ($29,650) or below. It is part of a longer-term initiative aimed at making tuition at higher education institutions free for almost all attendees.

Initially, the allocation for low-income families is expected to total R12.4bn ($1.1bn) for the academic year 2018/19‚ rising to R20.3bn ($1.7bn) in 2019/20 and R24.3bn ($2.1bn) in 2020-21. The fund will be expanded over the next five years to include all years of higher education.

Revenue for the measure will be met in part by a 1% increase in value-added tax. Other tax reforms have also been proposed, including increases for fuel and alcohol, and higher excise duties.

In total, the 2018 budget allocates R324bn ($27.5bn) to higher education and training, making it the fastest-growing spending category in the 2018 budget, according to local press reports.

Cost of tuition a growing concern

By expanding access to education for low-income students, the government hopes to improve employment rates and reduce poverty. According to Statistics South Africa (Stats SA), the unemployment rate for graduates in the second quarter of 2017 stood at just 7.4%, compared to 27.9% for students with a high school diploma and 27.7% overall national unemployment.

Cost is a significant barrier to education access, according to Stats SA’s latest general Household Survey, which found that almost two out of 10 potential learners could not afford to attend a school or tertiary institution.

Tertiary education costs are also rising. In 2015 they increased by 9.8%, outstripping headline inflation by 5.2%, and prompting demonstrations in which protesters called for tuition fees to be scrapped. According to local media reports, while fees remained static in 2016, they were on course to rise by 8% in 2017, sparking a new wave of protests.

With government grants already providing the sector with 45% of its income, and tuition fees covering an additional 32%, up from 27% in 2006, there are concerns that the spending plans announced earlier this year may fall short of the sector’s requirements, particularly if universities need to expand to take on the extra students.

In an interview in mid-March, Thabo Mbeki, former president of South Africa and chancellor of the University of South Africa, suggested that a cap on the number of incoming students might be needed in order to avoid capacity issues.

He also said the new policy could lead to higher dropout rates if issues within the wider education system were not addressed.

In 2015 some 32.1% of enrolled students left university within their first year, according to a report from the Department of Higher Education and Training (DHET), while 47.9% did not complete their degrees. A 2017 PPS Student Confidence Index survey, conducted among 2500 fourth-year and above students, found that around half of those surveyed felt unprepared to study at the university level. The report also found that some students were unhappy with their programme of study, having in many cases missed out on their first choice.

Sharper focus on vocational skills

Efforts to increase capacity have already begun at the vocational level, with the opening in early March of 26 Centres of Specialisation (COS) across the country.

The new facilities, which fall under the DHET, have been set up in colleges selected for the initiative following consultations between government and industry experts.

Training will be offered in 13 specialist areas where skills gaps have been identified and the profession is seen as key to boosting broader economic growth. Trades selected include electricians, plumbers, diesel mechanics, boilermakers, fitters and turners, welders, riggers and mechanical fitters.

As part of the programme, the COS will provide the host colleges with resources and equipment that will strengthen the quality of teaching on key courses.

Students will also be supported in their efforts to find work after they graduate, since each centre has connections with employers in their related fields. These links will be utilised to help place students in employment post-study.

Technical and Vocational Education and Training colleges enrolled 737,880 students in 2015, up from 35,000 students in 2014, and are expected to enrol over 2.5m by 2030.