Apartheid Was Costly - Now Education Must Free

2016-10-21 09:20

Students Storm Parliament Precinct


In South Africa, 71 753 university students were unable to get NFSAS loans between 2013 to 2015. This made student organisations rethink their approach on the subject of funding. They increased pressure on the ANC to re-look at free education policy. The ANC did in Mangaung conference declaring free education - only to be realistic at its NGC 2015 stating that such free education would have terms and condition.

The ANC is ready for a 100% coverage of free basic education already closing in on 90% of all public schools. Higher education institutions will receive subsidies of R93.1 billion over three years from 2014.

In 2015, President Zuma established a task team to explore how the challenges could be addressed and provide sustainable solutions. This year he created another commission to examine free education.

Since 1991, NSFAS has assisted 1.5 million students from poor backgrounds with R50 billion in loans and bursaries. Higher Education is running on a budget deficit of R22 billion for 2018/19 already and due to yet another Zuma zero fee increase concession, there is likely to be a further R5 billion deficit bump.

Over 75% of South Africa's budget is spent on what could be termed Social Budget (free services). Already, poor nationals and residents receive up to R4000 pm of free services, these include free schooling, feeding schemes, free housing, free basic electricity and water, free hospital and clinic services (any medical operation including cancer treatment) and so forth.

Although South Africa's constitution is hailed worldwide as one of the most advanced in human rights and social development, no countries have adopted it ever since 1996. The main arguments are that it created a society without responsibilities and was extremely expensive to almost unaffordable on its demands to the state. This refers to rights to food, water, health, shelter, education, legal aid and many others including creation of many more state bodies with duplications and confusion especially under chapter 9.

South Africa pays old age pension, disability wage, foster care grant - which is huge due to HIV Aids delayed ARV intervention, all these are at R1500 per month. Add child grant at R350 per month. There are now almost 18 million social wage recipients in a 55 million country with only 17 million working adults. South Africa since 1930 has run a 25% unemployment rate today that is some 6 million people of which 51% are youth and 90% African.

The ANC spends R170 billion on Social Safety Net per year, another R170 billion is spent on Health, Higher Education receives R70 billion, Basic Education gets R230 billion and R183 billion for Human Settlements. A total of R823 billion of "free" services budget is yearly.

South Africa's tax revenue averages at about R900 billion per annum. The "free" services do not cover police, military and other crucial state systems like justice and so forth.

WHAT IS THE SITUATION INTERNATIONALLY? CASE STUDIES 

IN America: Student Loan Book sits at $1.26 trillion in total. This is about 4 times South African GDP. About 43.3 million Americans have student loan debt, this is about 85% of South African population. More than seven million borrowers are in default, and millions more are behind on their payments.

IN Germany: A judgment of the Federal Constitutional Court in 2005 prohibited Universities in Germany to demand students to pay registration and tuition fees, all 16 regions have free education now and Germany covers both citizens and international students free education. This is only for tuition and registration. Life costs like food and lodging are for students, including books and material. This has caused for Germany to also have a high student loan market.

IN Sweden: Higher education is free but like Germany, students borrow to pay living expenses. The overwhelming majority of students borrow to cover these living costs.

Here is where I identified a massive social difference between these countries and why the debt strain is not similar even though employment and mobility is comparable; American students are required to pay their loans within 10 years after studies completion. In Germany, students pay their loans over 20 years; in England, it’s 30 years, in Sweden its 25 years and get a 4 year debt repayment holiday after first employment.

If education was to be financed properly, its life span should be taken into account and financed in according with its worth. With human lifespan averaging at close to 60 years old in South Africa, students should be able to start repaying their loans after 5 years of finding a job. This relieves kickstarting once life and generally reduces industrial strains like demands for higher inflationary wages

IS UNIVERSAL FREE EDUCATION VIABLE TODAY?

The simple answer in terms of our politics and history is that, NO. Free education should be for students who truly come from poor or lower middle class families. Others must self fund or seek government loans. Already, there are thousands of car parking demands in universities across South Africa. This demand doesn't come from staff but students, rich students.

Countries with free education generally have higher standards of living but students still go out to get student loans to cover their living costs, books, transport, food etc. Our students have some of these included in their NSFAS offer.

If poor students were to demand universal free education, the economic inequality  patterns would be prolonged as these car driving students would proceed to have extra financial capacity cash on hand to advance more, take further classes or have other support for their studies including purchasing of immovable property to use as their student days accommodation. Inequality will remain with education rising. We will be stuck as the one graduate sells accommodation to his graduate co-students after graduation as they find jobs.

It appears the government needs to raise extra R50 billion revenue elsewhere to make up for universal free education and this figure is R70 billion if its focussed on the poor and lower middle class.

There is no way to raise this under current economic circumstances. Those who talk about re-imagining the budget are also wrong on the bases of what prevails.

Even if all corruption was eliminated, it will only raise no more than R2 billion per annum. Efficiency in government could save another R1 billion and perhaps retrenchments to public service could save another amount but undercut the economy elsewhere making matters worse.

Selling SAA or Eskom would also create social strains and joblessness including retrained services to the poor. Besides that, these are once off unsustainable solutions which raise limited amount of money whilst creating social issues.

So, zero corruption, privatization and extra government efficiencies combined would still not be enough for free education but would assist other aspects of governing where government already falls short. Let us once and for all debunk the notion of a R30 billion per annum corruption, it does not exist and it is impossible for it to exist.

South African students dropout in huge numbers for various reasons, this could be related to tough living conditions but dropping out with a NSFAS loan puts pressure on it and it is a wasted investment.

FREE EDUCATION REQUIRES EXTRA R50 billion REVENUE

In the main, 37% of government revenue comes from PAYE. 17% comes from Corporate Income Tax, VAT contributes 27% to fiscus income.

South Africa is largely funded by employees or working people who earn mainly above R100 000 per annum. Corporates contribution is lower which is why their profits remain very high and they continue to hoard over R1 trillion of these profits in South African banks and abroad.

NSFAS should re-arrange its loan book to allow for flexible repayments that are more reliable. NSFAS should stick to its 40% grant and further reforms including making it easier to repay the loan perhaps taking in some of the case study findings.

RAISE TAXES

In 2018 budget, Corporate Tax should be increased by 2% to 30%. 

India's corporate tax is 34.6%, US 39%, Argentina 35%, France 34.4%, Brazil 34%. Belgium 34%, the weighted tax average for G20 is 31%. South Africa is at 28%.

Government has already increased its from R673 billion in 2009/10 to about R2 trillion. This means education can not be funded via debt. Raising of corporate tax by 2% is the most practical and sensible way.

In 1994, PW de Klerk announced an increased of 1% once off rise in PAYE he called a Solidarity Tax. It was aimed ay shoring up apartheid government state pensions they could not afford, they masked this as a white people's way of saying sorry for black oppression. This Solidarity Tax must be returned every fifth year once starting from 2018 and five years again thereafter.

Both these increases one permanent (corporate tax) and the other periodical (once every 5th year 1% PAYE) could raise over R300 billion in 10 years. This would supplement NSFAS a great deal and relieve poor families whilst making sure we continue to have quality higher education.

Cash Hoarding Tax must be introduces to encourage corporates to reinvest cash and make it more productive. This could be in a form of legislating bank interest on cash held by corporates. Equally, domestic corporates must be discouraged from moving money abroad as this is inflationary. This tax is urgent not only for students sake but for entire economy where a large cash stockpile remains unproductive. This money could be paid to shareholders, increase wages or reinvested in capital equipment and research.

Lets us be honest, had apartheid not occurred, there would not be this crisis and the students are righteous in this struggle. Easy access to education is a must delivery, easy ways to settle loans and not having these if any impact on credit worthiness for new job seekers will go a long way to address the strains in solidarity.

It is not about freebies, students are demanding to be enabled to contribute to their society. The only way to do so is through easier access to education. Make it as easy as possible if you truly and honestly can not have it totally free.

Those who argue that there is nothing free in life and students will pay harsher income tax in future are missing the point. Redress is owed to the poor, and we have not even began yet. Students are not free loaders. They are not demanding to be free loaders either. Educating a child is a national investment and not a waste. Students want to pay taxes in the future whatever they are, this is the pay it forward principle.

Universities must re-imagine themselves as centres of tradeable research and development so that they could create traceable knowledge and be of commercial use to neighbouring industries.

Bo Mbindwane is on twitter @mbindwane

(figures used are rounded off)

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