The more business owners emigrate, the worse the consequences for job creation, says Solly Moeng.
Sprinkles late. More clouds than sun. Cool.
As students and police gear up for a third week of protests, a group of students at the University of the Witwatersrand have formulated a model for free education which they say is no longer negotiable.
On Friday afternoon, City Press met with the team, who had for the past two weeks been working on a model for free education for all. They plan to present it to Treasury this week.
The group is adamant that free education is feasible, without affecting other government programmes. “To say that free education compromises programmes such as health divides the solidarity of the working class,” say team members.
They have scoured through submissions made to the fees commission and used much of that data as a starting point.
“We can tell you how many students are at University of Cape Town, for example, and what the cost [there] is – because we have been trying to figure out the entire cost of running the system,” says Khaya Sithole, a chartered accountant and social activist who is working with the students.
“Take this example: If the university costs R100 to run and government contributes R30 and companies R20, it means that the remaining R50 will be allocated to students on the basis of enrolments. That is how we are calculating this.”
The cost of the system
According to the team’s calculations, a conservative estimate of what it would cost to run the tertiary education system for a year – based on 2014/15 figures, plus what government needed to top up last year – is R60 billion.
Sithole explains that in real terms, government’s contribution has declined over the past 15 years.
In 2000, it contributed 50% of the budget, whereas currently the state pays in 40%.
“Whatever corporates and government do not pay becomes a burden to students by way of tuition fees. If, over a 15-year period, government reduces its contribution, institutions must allocate a greater share of the burden to the students. That is what has escalated tuition fees.
“As a social imperative, government needs to get back to the 2000 level of contribution. If it does so, already the cost burden falls.”
Why free education for all? The group says that currently, those who can afford to pay fees do so only for as long as they or their offspring are students.
“But if you tax the wealthy [by means of a wealth tax], and they too benefit from free education, they will pay via this tax for an extended period. It makes sense to say free education for all because then we don’t have a limitation that allows rich people to escape their contribution.”
How this can be done
The members of the group have broken down the cost of the system into three streams of income: from government; from third party or discretionary corporates; and the residual, which translates into tuition fees.
Government contributes 40% or R24 billion. Corporates contribute 30% or R18 billion. The residual is 30% or R18 billion.
The first action, according to the model, is to split the R60 billion into recurring expenses (salaries and other ongoing costs) and capital expenses (building residences once off).
“Since universities see it as their responsibility to build residences, they factor this into the cost. From this R60 billion, you say 10% is infrastructure costs – that is, non-recurrent expenditure. We have a company on the JSE which says I have money on the balance sheet but I don’t know how or where to invest it,” according to chartered accountant and social activist Khaya Sithole, who is working with the students.
“A company like Murray & Roberts then builds the necessary infrastructure, valued at R6 billion.
“Spend the R6 billion if you need to, and then the government – because it was always its responsibility to build those residences – will pay you back your money over a 15-year period through a tax rebate system, which facilitates an immediate injection of cash into the system. And the government never has to write out a cheque.”
At this stage, the R60 billion has already been reduced to R54 billion, and the cost to students is already declining. The next step would be for government to restore its contribution to at least 50%, making their bill R27 billion.
The way to raise the shortfall would be through one of these options:
1. Skills development levy. “Already being paid. People on behalf of whom the levy is paid are the graduates. We are saying, why is it going to some random Seta? We say, let’s create an endowment fund; put in R7 billion, and the levy for graduates must come back into the system,” Sithole said.
“We prefer this because, instead of telling you that you have a loan, we say we will fund your studies with the understanding that when you get a job, we will collect from you for as long as you are employed.
“People are not paying back Nsfas [National Student Financial Aid Scheme] loans. This causes massive leakage. With this [option], I don’t need to tell you how I am going to get the money, I just pay your tuition and then I go to corporate and say this is the new normal. With a person entering the system, that 1% goes straight to a university fund instead of to Setas. So it comes off their salary one day. Alternatively, you say the levy is 1%, let’s move it to 3%. Just moving the levy from 1% to 2% is already an injection of R13 billion.”
2. Corporate taxes. “They are at 28%; they are the chief beneficiaries. So we can say we are in trouble. If we move taxes from 28% to 30%, we raise R6 billion (conservatively).”
3. Wealth tax. “Currently, you pay tax 41% on the highest level. Now move that up to 42% or 43%.”
4. Windfall tax. “Place this on all the apartheid beneficiaries. To corporates like Naspers, we say pay a windfall tax because you in effect stole money. This would be more of a political ploy than anything else. We say we need R100 billion. All the companies which operated in 1989 must cover the shortfall.”
5. VAT. “The minister will say: If I increase the VAT, poor people are going to pay. VAT is an option, it can increase. Our rate is 14%, our competitors are at 20%, so we can move from 14% to 20%. This is disruptive: It does not discriminate between people who are already struggling and those who are not.
“We are ranking our options in terms of impact on the poor; you can decide that you will go up 1% in one option and 0.5% in another. Everybody should contribute to an endowment fund. Funding now is all over the place, nobody knows where it’s coming from, you have a bursary, another person has Nsfas. But all money can be in one place. As soon as universities know how many students there are, you give them the money.”
FEES MUST FALL
Do you think this proposal is workable? Do you have other suggestions for overcoming the current fee impasse?
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