Should we be deflating the social grants budget for higher education?

2015-10-28 11:58

There are many ideas and models that are currently being discussed for funding higher education in South Africa, as a consequence of the recent “Fees Must Fall” protests. I think it is healthy to consider all options and perhaps the best approach at the end of the day would be a mixed model that combines funding from the private sector, government and the individuals themselves. But in this short piece, I want to focus on one of the many options –to deflate expenditure on social grants. This may sound insensitive but it is open to debate and the richer our debates, the better our decisions. While training a group of researchers a few months ago in Johannesburg, I had a chat with two of the course participants from the Department of Social Development. One of my questions to them was whether the Department has empirical or simulation evidence showing the impact of what would happen if the state diverted a slice of the social grants budget for increased educational funding. Note that I asked this question long before the recent student protests, because in the past two decades tertiary education funding has not grown at the same rate as social grant spending. Since the start of democratic South Africa, the number of South Africans on social grants has grown by leaps and bounds; from about three million people in 1990s, to 16.7 million people (30% of the population) currently. On the other hand, South Africa’s budget for universities as a percentage of GDP is only 0.75%, which is lower than the 0.78% for African countries and the global proportion of 0.84%. It also falls short of the proportion of 1.21% spent by Organisation for Economic Co-operation and Development (OECD) countries. A recent government report showed that between 2000 and 2010, government funding per full-time equivalent student fell by 1.1%

Of course, social grants are imperative because a progressive society is one that carters for those who cannot cater for themselves – for example orphans, vulnerable children and the elderly – especially in a country where the majority were previously disadvantaged. But overdoing it can mean stealing from the future to take care of the present. Indeed social grants is the most direct intervention for addressing poverty, but we must remember that for the most part, it is supposed to be a temporary intervention.

We should therefore be thinking of how to lift many social grants beneficiaries out of the states that qualify them for the grants, and more importantly, how to ensure that few people will rely on social grants in the future. Education is the best way to do that. While social grants may solve some problems temporarily, prioritising education is what will solve most problems permanently. So while using social grants to address poverty, we have to make sure that we do not use them to perpetuate poverty. The quickest and surest link between the rich and the poor, blacks and whites, remain education – especially quality tertiary education.

One aspect of the grants that warrants this discussion is the child support grant (CSG). First, of the over 16.7 million people on social grant, about 11 million (70%) are on child support grant which is given to the main caregiver of a child who earns less than R38,400 annually. Second, the government is expanding access to the child support grant to those who are 23 years old from 18 years old, raising the question of whether this is absolutely necessary and what the opportunity costs are. Third, many of the conditions that qualify individuals for the child support grant are social issues that can rolled back through educational development. So while treating the symptoms, we should be asking ourselves if we are paying enough attention to the root causes. If we are paying enough attention to the root causes, why then is tertiary education funding currently at R62 billion while social grant budget is currently over R150 billion? Why is former dropping and the latter rising?

The National Treasury data shows that that the current social grant budget of about R150 billion was up from R118 billion spent in 2013/14. Another pertinent question would be: Is the increasing social grant burden sustainable? Well, only if the economy keeps growing. According to the Treasury, “The current level of social spending will be sustainable as long as the economy grows by 3% a year.” Mind you the current revised rate for 2015 is actually 2.1%. The next question then is: Will the economy keep growing without expanding access to higher education? Probably not. The most developed countries are those whose citizen have higher education. Countries like Japan, Canada, United Kingdom and Australia have over 40% of their 25 to 34 years old population having a tertiary qualification. The average for OECD countries is 39% and for South Africa, it is about 13%.

So let’s consider a scenario. What would happen if, say, 20% of the social grants budget were spent on higher education? The total annual social grant budget is currently about R150 billion and 20% of that translates to R30 billion which is more than the current R9 billion available to NSFAS. Now assuming the annual cost of training an undergraduate student at a university is R150, 000 (probably less). With R30 billion, we can train 200,000 students annually. In 2015 the number of students admitted into South Africa’s 24 universities was about 200,000. This is just a rough consideration, a more detailed modelling and sensitivity analysis is needed to arrive at more correct projections.

It is true that unemployment and poverty is high among beneficiaries of these grants. Although, the annual income threshold needed to qualify for CSG, it can be argued, is not so low. It would be useful to know what percentage of the beneficiaries actually have some income? Do not get me wrong, R100, for example, is a lot for money for anyone in a low income bracket. But to continue to have a functional social grant system in the long run, we need to increase the number of working people who pay their tax and one sure way to increase that number is through more funding for higher education. Surely, it makes sense to teach me to fish rather than to continue to give me fish. When teaching me to fish, you and I will both need to make sacrifices during the training period. But in the long run, I will be able to feed myself without having to bother you another day. And I will also be able to help those who maybe hungry.

There is a flipside side to cutting down the expenditure on social grants. First, it is likely to precipitate another set of protests. Second, it may leave some families more vulnerable leading to an increase in school dropout – the very problem we are trying to solve. Although there might be a way around this – for example, through tighter targeting. If that cannot be achieved, at least for now, the numbers should be maintained and not expanded.

The perspective in this article does not attempt to undermine the conditions of the beneficiaries of social grants. Scientific evidence clearly shows that social grants have health, education and civic benefits to the beneficiaries as well as economic benefits to their local economies. However, we should not focus on today only without thinking of tomorrow. South Africa needs to urgently look into multiple ways of funding tertiary education and almost everyone will have to play a role – the private sector, government and individuals.

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