Universities must tighten belts after 3.5% subsidy rise

Kenya’s public universities are set for another rough year after a government decision to raise subsidies by a measly 3.5% for the coming year. Inflation has averaged over 10% in the past decade. Without adequate resources to finance higher education, government called on universities to up income-generation activities.

Public universities will receive US$646 million in state funding for the 2016-17 financial year, which begins in July – up from the current US$624 million.

While this is better than last year, when allocations were cut by 6%, state universities – which rely heavily on public funding – will have to tighten their belts further with the real terms decline and as student numbers continue to rise.

This also means that the Higher Education Loans Board, the agency that disburses student loans on behalf of the government, will not receive a much-needed increase in funding to cater for a rising number of loan-seekers.

Government data shows that the number of both public and private universities has grown to 68 – up from 58 in 2011. There are 22 public chartered universities including three technical universities and nine public university constituent colleges; the rest are private institutions.

Student enrolment increased to 470,152 from 443,783 the previous year, while the number of students receiving loans rose to 167,803.

Need for funding criteria

The funding news was contained in the Budget Policy Statement released by the Treasury last week, which also laid out plans for a comprehensive review of the way state universities are funded.

Kenya’s Treasury Cabinet Secretary Henry Rotich said concerns had been raised about the lack of clear criteria for funding universities. A committee had been created to come up with university funding criteria “and to look into the arbitrary allocations that bring up inequities”.

The committee, said Rotich, was expected to structure the funding needs of public universities to guide the government in budget decisions and to look at the adequacy of tuition fees.

Money problems

The government plans to announce yet another expansionary budget of US$20 billion in June, 9% over the US$19 billion for the current fiscal year, with a projected budget deficit of US$5.2 billion or 8.1% of gross domestic product.

But Kenya faces challenges in financing key programmes due to revenue collection shortfalls.

The taxman, for example, missed its half-year tax collection target by more than US$470 million, setting the stage for a wider budget deficit with far-reaching economic consequences. This outlook, Rotich said, explained the university funding crunch.

State House has raised a red-flag over the funding deficit. “Cabinet calls upon all ministries, departments and agencies to desist from bursting their ceilings through additional resource requests considering the light funding scope for the budget,” said President Uhuru Kenyatta in a statement two weeks ago.

Universities must earn income

With nearly stagnant government capitation, state universities will have to turn more focus on commercial activities to finance their budgetary needs – a call made by Education Cabinet Secretary Fred Matiang’i last Wednesday.

“It is clear the country doesn’t have adequate resources to fully fund the financial needs of public universities. We are asking them to be meticulously transparent and expand their commercial base,” said Matiang’i.

“Only universities which plan into the future will be competitive.”

Last Wednesday Kenyatta University – the biggest in terms of student numbers – announced that it would grow its commercial model in the coming years.

“For a university with over 70,000 students, we are expanding our investment scope into hosting a mall, a gas station and other enterprises as we seek more investors to invest in available business opportunities,” said Vice-chancellor Olive Mugenda.

The university is building what is billed to be the biggest modern referral hospital in East Africa, which will be up and running in the next two years. It has also set up a mini-mall that will host an outlet of Kenya’s third largest retail chain, Uchumi.