Budget cuts? HE funding is moving in the wrong direction

At first, some higher education grants were being reduced to cover costs related to the COVID-19 pandemic, but it now seems that South Africa’s universities may be facing more widespread budget cuts.

The current cuts target various earmarked grants. Earmarked grants are based on specific proposals by universities, mainly focused on student and staff capacity development.

The call for the next round of University Capacity Development Grants has not yet come out, despite projects that start in January 2024, but early signs are that this important work will be reduced in scale.

The South African Department of Higher Education and Training (DHET) is also clawing back interest that universities earned on certain invested grants.

This method of balancing the books echoes historical funding processes whereby those universities and technikons (now called universities of technology) designated for black population groups were forbidden from earning interest on investments. ‘Use it or lose it’, fiscal dumping, short-term planning and poor financial management followed.

Many of these problematic behaviours are still in evidence in the sector and are arguably reinforced by DHET claiming back interest from project fund investments, making late payments, relying on short-term project grants, and making ad hoc funding cuts.

And it is in this context that the Minister of Higher Education, Science and Innovation, Dr Blade Nzimande, has promised two new universities to be built “in the next year or two”. The lack of policy coherence that plagues all sectors of the government is, thus, also starkly evident in the university sector.

What about quality?

There are concerns that budget cuts may spread to the annual block grant paid by the state to public universities. The formula for calculating the national block grant has been widely criticised. For example, I have been among many arguing that the formula’s direct payment for publications drives unintended consequences and should be revised significantly or dismissed.

But there is a very real worry that such critiques might be appropriated to justify cuts in the higher education budget.

The effects of budget cuts on the quality of higher education will be profound. While the 2015-16 student protests in South Africa led to a capping of fees followed by carefully managed increases, fees will undoubtedly be increased to make up the shortfall, making a fee agreement extremely difficult to implement.

All of this begs the question, why is there a need for such budget cuts?

NSFAS

A major explanation of the financial shortfall is the National Student Financial Aid Scheme (NSFAS), the government’s bursary scheme aimed at supporting access, in particular for students in financial need.

NSFAS cost about ZAR5 billion (now about US$272 million) in 2015 but had jumped to ZAR31 billion by 2021 and will be ZAR42 billion (US$2 billion) in 2024.

In 2024, more DHET funds will be allocated to student financial aid than to the block grant used for the running of the entire public higher education sector.

This is entirely unsustainable and comes at the cost of the sector’s well-being. Add to this the corruption within NSFAS, and the entire system is brought into question.

It is impossible to argue against NSFAS in an unequal society where such financial support is the only means by which most students access higher education. But, taking funds from the higher education budget to pay for this social grant has deleterious effects.

It important to note that NSFAS is a social grant as much as it is an educational one, with only some portion of the funding going to the university sector in the form of fees.

The remainder is allocated to students’ living expenses, though this is often stretched to support whole families, given that NSFAS funding far exceeds what unemployed citizens can access through the South African Social Security Agency, or SASSA, social relief of distress grant and other social grants.

If NSFAS provides access to short-staffed universities with crumbling infrastructure, then there is little point in this investment.

Austerity measure?

Should the public accept budget cuts in the higher education sector as a necessary austerity measure in the face of a failing economy? Recent research suggests not.

Ahmed Bawa and Anastassios Pouris present the first comprehensive analysis of the economic impact of South Africa’s universities. Looking at only four of multiple university activities and looking only at the public higher education sector, Bawa and Pouris calculate that, in 2018, the public higher education sector received ZAR66 billion from the state and, in the same year, had an economic impact of ZAR513 billion.

This cost-benefit ratio of 1:7.7 suggests that we need to see higher education as a crucial national investment rather than another expenditure item.

Such considerations of the economic benefits of the sector can reduce recognition of the sector’s many non-economic benefits and so they need to be interpreted as a very partial account of higher education’s worth to society. But these numbers are damning evidence that as far as funding of higher education goes, South Africa is moving in the wrong direction.

Sioux McKenna is the director of the Centre for Postgraduate Studies and a professor of higher education at Rhodes University in South Africa.