Strategies to help fund university enrolment expansion

African countries have been urged to explore creative tax strategies as one way to improve the financing of universities. Dr Patrick Awuah, founder of the private Ashesi University in Ghana, told the African Higher Education Summit that to raise Africa’s enrolment ratio from around 7% to 30% meant governments would have to spend 50 times more on the sector.

Awuah was moderating a high-level panel on “Investment in African Higher Education” during the summit held in Senegal’s capital Dakar from 10-12 March. The panel looked, among other things, at ways to boost the financing of cash-strapped African universities.

According to Awuah, the continent is spending only around US$1 billion a year on higher education. Raising the higher education enrolment rate to 30% would require about US$50 billion a year – or 50 times more than current spending.

He and other delegates at the summit observed that there was no way African governments – most of them suffering from severe debt crises – could allocate more money to higher education without involving the private sector, donors or introducing higher education taxes.

The issue of a university tax took centre stage, with some delegates urging the African Union to recommend that African countries introduce a higher education tax in addition to allocating 1% of gross domestic product to research.

The African Union delegation at the summit was led by African Union Commission Chair Dr Nkosazana Dlamini-Zuma, accompanied by Commissioner for Human Resources, Science and Technology Dr Martial De-Paul Ikounga and Dr Beatrice Njenga, head of education at the commission secretariat.

The tuition fee option

Professor Rahmon Ade Bello, vice-chancellor of the University of Lagos, said that as far as universities were concerned, it did not matter who pays the tuition fees.

According to Bello, universities would like proper assessments to be conducted to establish the actual cost of degree programmes, and then upfront, full-cost tuition fees to be levied.

“Public universities are not interested as to whether parents or the government would be paying tuition fees, provided they are paid on time.”

Public universities in Nigeria, and many other countries, were in a quagmire because they were forced to admit large numbers of students while insufficient funds were dispatched from government. “Institutions should be assured of sustainable sources of income in order to mount quality programmes,” said Bello.

The vice-chancellor also said there was a need for African governments and stakeholders such as the World Bank and the African Development Bank to ensure the existence of low interest loans that could be directly accessed by higher education or as soft loans to students.

A background paper, Total Approach to Financing Higher Education Student Loans, based on Tanzanian higher education, said full-cost tuition fees levied through student loans is now the main source of university finances besides government subventions.

Alternative funding options

According to the report, there is a need to explore how loans boards could tap capital market finances in order to expand their lending capacity.

Experience gathered from Ghana, Kenya, Rwanda, South Africa and Tanzania – all countries with relatively successful student loan schemes – shows that no African country has started sourcing student loan funds from private capital markets.

Claudia Costin, senior director for education at the World Bank, said African countries could usefully study the Chile and Malaysia experiences – two developing countries that source student loan funds from local private capital markets.

However, the background report stressed, “considering the infancy of primary and secondary private capital markets in African countries, coupled with the low incomes of people, the concept of student loan sustainability needs to be linked to government subventions”.

On cost-sharing, most vice-chancellors complained that a large group of parents and students were not willing to pay for higher education, even when they are not among the needy.

Representing African Development Bank President Dr Donald Kaberuka at the summit, Sunita Pitamber urged public universities to investigate the reasons behind the reluctance of students and parents to pay tuition fees.

“We need to know whether most people are not willing to invest in university education because it has lost value,” said Pitamber, who is the Bank’s director of operations.

Pitamber observed that there was an urgent need to reverse the decline in financing of and investment in universities in Africa, as the continent’s future depended on the growth of quality higher education.

She argued that new sources of funding must be identified quickly to cater for the emerging youth bulge in Africa, and warned that international aid would not be enough.

According to background draft conference documents, international aid in support of higher education is about US$600 million annually.

But the crux of the matter is that only about 30% of aid to higher education goes directly to African universities and research centres, with the larger share provided in the form of scholarships to universities in donor countries – so universities abroad, not those in Africa, are the main beneficiaries.

Financing problem to remain acute

The conference found no easy solutions to the problem of financing higher education in Africa – but there was general consensus that the situation was likely to remain acute.

According to Pitamber, with current rising demand for higher education, enrolment in African universities was likely to triple by 2030 and governments might not be able to respond adequately.

Increases in the public resources allocated to higher education will depend primarily on economic growth or improved fiscal conditions.

Given such challenges, the World Bank's Costin advised African countries to double their efforts to improve local funding of public higher education by forging partnerships with the private sector. She urged countries that have not introduced student loans to do so and possibly emulate the Kenyan, South African and Tanzanian models, where students are given low interest loans.

It emerged that most universities on the continent are operating under serious financial constraints and, according to Pitamber, 30 Sub-Saharan African countries require more than US$6 billion in the next 10 years for higher education, beyond current allocations.

She warned that unless new funding strategies were put in place, financing gaps would widen at the rate of demand for higher education and expansion of higher education systems.

Such financial gaps, Pitamber suggested, could be reduced through market driven degree programmes and partnerships with the private sector. She called on universities to undertake the radical skills development reforms that are required by the private sector.

With African countries attracting a wide range of multinational companies, universities were urged to engage those organisations and stress to them the importance of corporate social responsibility contributing to the strengthening of higher education.

However, African universities are likely to find it increasingly difficult to cope with the demand for higher education sparked by an emerging youth bulge. There will be enormous pressures to maintain adequate student-teacher ratios in over-crowded lecture halls and buildings.

As Lagos vice-chancellor Bello pointed out, the higher education sector is fighting for survival and unless new funding strategies are put in place, African universities will not be able to lead the continent’s development agenda, now or in the future.

* The summit was hosted by the government of Senegal and organised by TrustAfrica. Other partners included the African Union Commission, Council for the Development of Social Science Research in Africa, UN African Institute for Economic Development and Planning, Association of African Universities, African Development Bank, South Africa’s National Research Foundation, Association for the Development of Education in Africa, Carnegie Corporation of New York, MasterCard Foundation and the World Bank.