Blanket university fee reduction benefits the wealthy – slows change

BY JOHAN FOURIE - OCTOBER 20, 2015

I recently sat on an appointment committee at South Africa’s Stellenbosch University where two candidates were being interviewed for a tenure-track position in economic history within the Department of Economics.

The candidates, both Masters students in the department, were passionate, eloquent and thoughtful in their answers. There was no reason not to appoint both. Several members of the appointment committee suggested we do so.

But we couldn’t, because of something called the “budget constraint”.

This week, on campuses across South Africa, students are continuing their protests against higher tuition fees.

Proposed fee hikes are viewed by some as a sinister way to exclude poor students, almost all of them black, from South Africa’s elite universities. This is simply not true: universities are desperate to attract the best talent and to ensure their success.

But it is also true that a 10.5% hike, such as the University of the Witwatersrand is proposing, is close to double inflation. And attending university is already incredibly expensive. By my estimates, at least 95% of South Africans cannot afford the approximately R100,000 a year that’s needed for tuition fees, accommodation, textbooks and spending money.

To give some context, only 4% of South African households earn R500,000 per year or more. Most students need a bank loan, as did I and almost all of my friends. We were the lucky ones. Many students' parents simply don’t have the collateral to get loans.

So how should universities balance fee increases with the need to grow their talent pools, specifically of black staff? There are only three other alternatives.

1. Cut budget items elsewhere

The first item on any budget – whether for a university, country or household – that is usually slashed in the face of financial pressure is new infrastructure and the maintenance of existing infrastructure.

But many campuses across South Africa already struggle with dilapidated facilities. Infrastructure construction has not kept pace with student enrolment, meaning that students often have to sit on the floor in lectures. There is very little scope in university budgets for further fiscal restraint.

2. Raise income from third-party sources

Raising third-stream incomes is a better alternative. But this type of income is often a consequence rather than a cause of excellence. Only the top universities will be able to attract third-stream incomes, either from donors or in collaboration with the private sector.

Donor money is also incredibly contingent: donors want to add their names to new buildings, see their donations spent on sport teams, or pay for bursaries.

Few want to donate money to pay salaries. Third-stream incomes through collaborations with the private sector can provide additional capacity in some industries – like engineering – but even here the effect on the total budget is limited.

3. Greater transfers from national government

The only alternative is to increase government funding, which in South Africa lags behind what other countries spend on tertiary education. To make things worse, the core subsidy for universities has consistently fallen in real terms in relation to student numbers. These have, in turn, risen dramatically and this has skewed the entire model.

Meanwhile economic growth is slowing and tax income is falling. Against this backdrop, South Africa’s Finance Minister Nhlanhla Nene is unlikely to suddenly increase higher education funding.

A different approach

The budget constraint is a reality that we cannot wish away. It is a challenge faced by universities across the world. In the South African context it is labelled elitist, racist, capitalist, colonialist and neoliberal. But it won’t disappear. We must find solutions within this constraint.

I don’t think we can afford to relax spending on maintenance while running university facilities into the ground. If we do, we also lose the ability to collect third-stream incomes and this deepens the problem.

Many students are calling for the reduction or total abolishment of fees across the board. But I would argue for better targeted support for poorer students, instead of a blanket reduction in student fees. This is because reducing student fees will benefit wealthy South Africans more than poor South Africans.

How is this possible? Because the wealthy are more likely to access tertiary education. In other words, a blanket reduction in university fees is like a subsidy for the rich (or a tax on the poor). So I would take a different approach and advocate for an increase, not decline, of student fees, say to 25%.

Yes, 25%! This will allow universities to allocate the additional 15% income from these fee increases to provide bursaries for students from poor backgrounds. A multi-tier or sliding scale system – where, for example, those whose parents earn above R500,000 per annum pay R150,000 and those earning less than R50,000 pay R15,000 – is a far more equitable option than scrapping fee increases for all.

And there will be additional funds to appoint black staff, paid for by those who can afford to do so. This will allow universities to transform their staff profile faster. A fee reduction, on the other hand, will in all likelihood stall this process of transformation.

A blanket reduction in fees won’t solve the twin problems of slow transformation and access for poor students. In the job interview I spoke about, both candidates were black South African women. The candidate we could not appoint because of limited resources was as brilliant as her fellow interviewee. I say, let’s get a more equitable fee system – and appoint her too.


This article is based on a piece that originally appeared on the author’s blogJohan Fourie, Associate Professor, Department of Economics, Stellenbosch University. This article was originally published on The Conversation. Read the original article.

Image: Students at Rhodes University in Grahamstown protest against the institution’s minimum initial payment, a one-off fee to secure an academic place.Madeleine Chaput/Activate.