Heightened concerns over sector’s financial sustainability

Concerns over the sustainability of South Africa’s tertiary education sector in the face of declining funding, below-inflation state subsidies and rising student enrolment dominated discussions when higher education leaders gathered in Pretoria under the umbrella of Universities South Africa (USAf), the representative body of South African universities.

The challenges in the tertiary system, including addressing the mismanagement in the National Student Financial Aid Scheme (NSFAS), exposed tensions in the sector amid fears over the future of public universities, the conference, themed, ‘The Future of the University’, from 9-11 October heard.

NSFAS and its challenges

During a session on the financial sustainability of higher education institutions, Professor Stan du Plessis, the chief operating officer and economics professor at Stellenbosch University (SU), described NSFAS as “poorly designed and badly implemented”.

He said one of the main criticisms of the NSFAS system was its model of providing free education without expecting students to contribute financially.

“It is reasonable to expect students to shoulder some of the costs of their education, as they benefit personally and financially from their degrees,” he said.

Expressing concern about the financial future of public universities, fuelled by the ongoing uncertainty over NSFAS, Du Plessis said NSFAS’ food allowances could not cover meals for an entire year. At SU, NSFAS-funded students are given one free meal a day, which the university pays for.

Thus, Du Plessis said, universities face numerous challenges in becoming financially independent while higher education funding declines.

Echoing the concerns raised by Du Plessis, USAf Chief Executive Dr Phethiwe Matutu reiterated the significant challenges facing higher education in South Africa, among them:

• The declining state subsidies placing the financial sustainability of universities precariously at a significant risk;

• Mismanagement of the NSFAS, which has severe ramifications for the stability of the higher education sector, growing student debt and the diminishing prospects of providing equitable study opportunities for our youth; and

• The poor state or even neglect of funding for postgraduate studies.

In recent years, Matutu said, the block grant subsidies, which fund the day-to-day operations of universities, including learning materials and personnel, had fallen below inflation.

In 2023, the difference between the NSFAS accommodation cap and universities’ set accommodation fees were more than ZAR600 million (about US$34 million).

Matutu noted that, this year, the state subsidy had declined in absolute terms, warning that if it grows slower than the rising student enrolment, the higher education system will experience serious sustainability problems.

Furthermore, she was of the view that the ministry of higher education and training’s proposal for fee regulations – essentially guidelines on tuition fee increases – was another measure to compensate for the NSFAS shortfalls, as the department had repurposed and rerouted funds meant for higher education infrastructure to NSFAS.

However, Matutu said this worsens the crisis rather than contributes to a solution, as the NSFAS model’s unsustainability is passed on to universities.

According to her, there is a growing view that if the trends continue, universities in South Africa will face significant financial pressure and risk their financial sustainability over the medium term and even their existence over time.

“For instance, enrolment numbers will need to be reduced, and operational expenses will have to be cut, which will have serious implications for infrastructure maintenance and growth. These will result in staff losses in institutions and, ultimately, a decline in the quality of programme offerings,” she said.

Questions of trust

Former University of the Witwatersrand vice-chancellor Professor Adam Habib, now the director of the School of Oriental and African Studies at the University of London, said the relationship and broader trust between universities and the public has become a global challenge.

Firstly, Habib said, politicians have started attacking universities, particularly in the United Kingdom and many parts of the United States – for short-term political gain.

Secondly, universities have become very expensive. A masters degree in the US costs between US$70,000 and US$90,000; students owe about US$200,000 when they qualify, even before they start working.

“Many are burdened with that debt for decades. We’ve marketised higher education to the point where people ask if it’s worth the cost. Yet, every elite family sends their children to elite universities as it is the pathway to the future,” he pointed out.

Habib said that the government is allowing inflation to erode the NSFAS grant in South Africa, just as it did between 2002 and 2015, when it exploded.

“Do this for another five years, and you’ll be back at #FeesMustFall. We need to figure out a sustainable solution to finance higher education because, if you want to achieve social mobility, higher education is one of the pathways,” Habib said.

In a heated but respectful exchange, Professor Thandwa Mthembu, vice-chancellor and principal of the Durban University of Technology, dismissed Habib’s notion that historically black universities (HBUs), which provided education to black students under apartheid, and universities of technology have had their bank accounts “swollen by NSFAS money”.

“All that has happened is the change of the source of student tuition fees, from parents to the state,” he said.

Mthembu said HBUs charged a third of what historically white universities charged. Their only resource is the government; they did not get additional money.

The government subsidises the resources of parents, the private sector, and everyone who contributes to the education of black children at HBUs. “I don’t see how we could call that [receiving] more funds,” Mthembu said.

He added that the funding formula which advantages historically white institutions was the same. “I don’t even know why we are engaging in these kinds of arguments about the traditionally white or black universities.

“You [Habib] have always preferred the elitism of the research-intensive universities. You contradict what you are saying about other levels of discrimination by suggesting that South African institutions treat institutions elsewhere on the continent similarly to how institutions in the Global North treat universities in Africa.

“I wish you could tame down this very discriminatory approach between historically black and research-intensive universities, especially since you are a product of such a university, just as I am. Your attack on these universities and their quality begins questioning the quality of your education and mine.

“I am a graduate of the University of Fort Hare – and so are many people here. Without saying their quality is the best in the world, those universities have produced excellent graduates, including yourself.”

Replying to Mthembu, Habib admitted: “Thandwa, you are right. I’m a product of – and spent most of my early career in – what would be seen as an HBU, but I wouldn’t be where I am today without being nurtured in that system. I’m committed to ensuring that more resources go into HBUs. The question is, what are we getting back in return?”