STATUS AND EFFECTIVENESS OF STUDENT FUNDING IN …

1 1 STATUS AND EFFECTIVENESS OF STUDENT FUNDING IN SOUTH AFRICA Context and Key challenges HESA presentation to the Parliament s Standing Committee on Appropriations Parliament of South Africa, Committee Room 1, Cape Town Tuesday, 21 October 2014 1 INTRODUCTION The post-apartheid era in South Africa has spawned much analysis and commentary about the challenges facing universities in a changing world. Some changes are social, economic, political and cultural, with a direct bearing on the performance of the Higher Education sector as a whole. Inarguably, the most pressing challenges facing our system in the current period are (i) FUNDING and (ii) Improving STUDENT success rates. Before a brief input is made on the two matters above, an overview of the system shows rapid expansion in the last few years.

2 Figure 1& 2: STUDENT Enrolment and size of the post-school system: 2 6 STUDENT EnrolmentTotal number of students2010201120122013(preliminary)Tot al number of students892943938,200953373983698 Total number of international students66181700607285773859 Number of students (FTE)600002628 409634 548665 857 Post-graduate students138 610147 893149 027159 750 Post-graduate students (internationalstudents)18 84520 04620 77023 364 Source: DHET (HEMIS data) 3 The South African Post-school System 2012(Sources: DHET, 2012. Statistics on Post-School Education and Training in South Africa & HEMIS, 2012. StatsSACensus 2011) Source of the slide: Centre of Excellence in Scientometrics and STI Policy, University of Stellenbosch & CHET As can be discerned from the table above, the University system remains the biggest of the three; and the TVET college sector is rapidly expanding to accommodate the bulk of post-school students in years to come.

3 Both the National Development Plan and the DHET s White Paper on Post-School Education and Training system have set a growth target for the university system to grow from 983 698 (2013 preliminary, unaudited figures) to million students in 2030. A large portion of the projected growth will have to be funded by the state. 2 KEY ISSUES FOR DISCUSSION Proceeding from the premise that both the DHET and NSFAS will highlight with some level of details the FUNDING framework and its challenges (informed by the Report of the Ministerial Committee for the Review of FUNDING of Universities), our input is confined to FUNDING and STUDENT Success Issues at the level of generality. Our input goes further to make recommendations on how each of the challenges could be resolved.

4 FUNDING of the Higher Education System As a way of giving context to the issue, it should be noted that since 1994, government s support for higher education has been significant. The FUNDING of universities has been on an upward trend, from R11 billion in 2006 to R26 billion in 2013. While the increases are welcome, it should be noted that higher education expenditure has been declining alarmingly in STUDENT per capita terms due to growing STUDENT enrolments during the period. The expenditure has also been declining as a percentage of the Government's budget and of GDP. 4 This decline in Government subsidies has put pressure on the other two sources of income available to universities viz tuition fee income and third stream income (typically research grants, contract income, donations etc).

5 While universities have increased levels of third stream income to some degree these increases by no means compensated for declines in Government subsidies, leaving universities in increasingly worsening financial positions. The table below aptly illustrates the shrinking of the government s FUNDING proportion, and the steady increase of STUDENT fees as a proportion of total FUNDING . Figure 3: education income sources, ZAR(billion)(Source: DHET, Financial Statements in Annual reports submitted by Universities) Source of the slide: Centre of Excellence in Scientometrics and STI Policy, University of Stellenbosch & CHET Although the allocation to the NSFAS is set to increase from billion in 2013 to billion in 2016/17, the annual STUDENT protests at some universities highlights the sad reality that the allocation is not adequate to meet the FUNDING needs of students eligible for NSFAS loans and bursaries.

6 Apart from the inability of NSFAS to fund the increasing number of eligible students already in the system, three other factors are likely to compound the FUNDING challenge of universities in the short to medium-term: a. The White Paper on Higher Education and Training (ibid) sets a target of university participation rate of 25% by 2030 (representing an enrolment of around million students) through planned growth . It also reaffirms the principle of cost recovery of loans as the basis for a sustainable national STUDENT financial aid model. It further makes a commitment to progressively introduce "free education for the poor in South Africa as resources become available". 5 b. The NDP (NPC, 2011) also proposes an increase of gross enrolments from 950,000 in 2010 to 1 6 million in 2030.

7 The Plan admits that a greater understanding within government is required to acknowledge the importance of science and technology and higher education in leading and shaping the future of modern nations (ibid). Given this acknowledgement, it is becoming self-evident that without such a guaranteed increase in state revenue, attempts at expansion cannot succeed. c. The class of 2013 achieved a National Senior Certificate (NSC) pass rate of 78%, the highest since 1994. The number of bachelor s passes increased by 60%, and the number of overall passes increased by 32% (DBE, 2014). It is projected that this number of passes will increase in the coming years, putting pressure on universities and other post-school education and training institutions.

8 Figure 4: Higher Education as % of GDP on higher education as % of GDP, 2010 (Source: OECD, downloaded from ) Source of the slide: Centre of Excellence in Scientometrics and STI Policy, University of Stellenbosch & CHET. Higher Education as an expenditure of GDP remains woefully low. South Africa is spending far less on Higher Education as a % of the GDP compared to both emerging and developed economies. If this projected growth has to be realised, Higher Education as a % of GDP has to increase significantly in line with that of most emerging countries. Sustainable ways through which the projected STUDENT enrolment growth in universities will be funded and ensure that NSFAS support is sustained over time should be found in order to make possible increased participation in 6 higher education to meet both equity and growth targets.

9 It was in the light of this reality that HESA convened a Colloquium in July 2014 involving the following partners: a. National Treasury; b. Department of Higher Education and Training; c. Higher Education South Africa (HESA); d. National STUDENT Financial Aid Scheme; e. The Presidency; and f. South African Students Union From the Colloquium, the following resolutions, amongst others, were adopted for further exploration: Issue Description Policy Dialogue A Policy Dialogue will be constituted as soon as possible in order to take forward the matters arising from the colloquium, as well as to address further policy development issues emerging from, amongst others, the NSFAS Review and FUNDING Review reports. The Policy Dialogue is to comprise 3 representatives each from the DHET, NSFAS, HESA, National Treasury and SAUS.

10 The DHET will act as convener of the Policy Dialogue. Dealing with Fraud The colloquium noted that fraudulent activities divert resources of NSFAS away from eligible students. Fraud needs to be stemmed so that resources are freed up for needy students. HESA and the NSFAS will set up a Task Team to look at how best to identify fraud and to prosecute offenders Review Final Year Programme A review of the Final Year Programme should be conducted to determine its EFFECTIVENESS . Review of Merit Scholarships HESA should undertake a review of merit scholarships in order to inform a system wide decision as to whether these funds should rather be used to augment financial aid. This matter will be discussed by HESA and a sector-wide decision made. Phasing out of Rebates There was in-principle agreement that the phasing out of rebates (bursary components to NSFAS awards, very low interest rates for loan repayments etc.)