SA’s finance minister squanders R15 billion of taxpayer funds – why are we celebrating?

A contribution by Khaya Sithole (Wits Lecturer)

The Finance Minister’s 2016 Medium Term Budget Statement was one of the more challenging ones of his tenure. The statement was delivered under the backdrop of political uncertainty involving the minister himself and the ongoing standoff regarding higher education funding. In a rare sign of leadership in times of crisis, the Finance Minister spent time interacting with student leaders outside Parliament prior to delivering his address in the National Assembly. The memorandum of demands handed to the Minister had at its core – the call for free tertiary education. In responding to the crisis, the Minister has indeed made the best of the situation – using the instruments of intervention that are currently available to him. Unfortunately, this is simply not enough.

The day before the budget speech, the Minister of Higher Education was on Cape Talk and commented that the National Student Financial Aid Scheme has a disastrous 4% collection rate on all its funding advanced to students. The Finance Minister’s commitment to pour more taxpayer funds into this scheme was shocking to the student movement. In increasing his commitment to NSFAS, the Minister has failed to acknowledge that the scheme itself is the most dysfunctional part of the funding problem – especially for poor students. The problems with NSFAS are well known and have been repeatedly highlighted by students. More shockingly, NSFAS’s 2009 report explicitly illustrates their poor loan recovery rates as well as their limitations in being able to fund all poor students.

Firstly, the rollout of NSFAS is based on a model that has no correlation with the economic reality of our students. NSFAS is still only available to students from families that have an income of up to R122 000. In other words, it operates under the implicit assumption that students from families earning R125 000 for example can afford university education. The average cost of a single academic year at UCT in 2017 will be R130 000 (after the introduction of the Minister’s 8% increase). The NSFAS announcement does nothing to address this problem. A large number of students have been subjected to this exclusionary tactic over the past 10 years where their ability to gain access into the system has been gradually eliminated. These students have been forced to seek commercial loans – which are usually denied or offered at exorbitant interest rates. In some unfortunate circumstances, students who have been forced to parade their poverty in order to gain access into the system have had to misrepresent their economic circumstances just to obtain funding. This is a direct consequence of the scheme’s strange fixation with using parameters that are becoming less relevant every year.

For a long time such students were referred to as the missing middle. Their plight was highlighted during the #FeesMustFall campaign in 2015. Remarkably, the state’s response seems to be that such students are now permanently able to pay fees at 2015 rates. The Finance Minister has made an additional R2 billion plus commitment to cover their fee increases for 2017 – but nothing has been said about the fact that most of them still cannot afford the fees at 2015 rates. From being the missing middle, they are now the ignored middle.

The rollout of such funding is nothing more than a stop-gap measure that does nothing to provide a concrete roadmap of fixing the funding issues in the long term. It is also quite important to note that the nature of such interventions is difficult to articulate to students on the ground. In other words, students who fall outside the NSFAS funding net (R122 000 income levels) are expected to pay fees at 2015 levels – which remain unaffordable. The Minister’s proposal would have been better served by a statement which indicated a change in the NSFAS qualifying threshold. In the absence of such an amendment, the missing middle students have been reduced from a group that cannot afford fees to a group that cannot afford fee increments. This is not what the students struggle is about. The continued inability to amend the funding structure using currently available instruments is a testament to the rigid and unimaginative nature of such instruments. It is clear that a new series of intervention tools need to be developed as part of a wider restructure of the higher education funding model.

Given the issues already identified with NSFAS itself, it remains a tool limited in its reach and inefficient in its execution. In light of the increase of 8% that universities are allowed to implement in 2017, the Minister’s statement does nothing to address the key socio-economic challenge posed by the NSFAS model. Until NSFAS is in a positon to guarantee the coverage of the full cost of study for its students, it remains a scheme that inadvertently exposes its own beneficiaries to undue difficulties. Students at the more expensive universities still need to find top-up funding to cover the costs that NSFAS doesn’t cover. Even at the cheaper institutions, there remains a lack of direction regarding how the scheme will increase its efficiencies when it comes to individual student interaction.

The reasons students are not in favour of the NSFAS scheme is also related to the legal and social justice issues that NSFAS still hasn’t resolved. Historically, NSFAS has operated as a rogue element whose practices were illegal in terms of the National Credit Act. In implementing garnishee orders to collect from struggling graduates, the scheme was in fact acting against the law. This problem associated with garnishee orders was reinforced in the Western Cape High Court ruling in 2016 which once again reinforced that such orders are illegal. Judge Siraj Desai explicitly stated that the practice of attaching such orders to individual’s emoluments is in fact unconstitutional. Back in 2010, in its initial response to this legal hurdle, NSFAS had tried to lobby for an amendment of the National Credit Act in order to make such a practice legal. Thankfully such a process was defeated from inception. It is therefore concerning to note that NSFAS recently pronounced that it will be working with SARS to trace debtors through the SARS database. We would like to caution NSFAS against any pursuit of struggling graduates that is unconstitutional.

It is also important to highlight that NSFAS needs to understand that its position in society is as a tool for facilitating access to a public service for the poor. The continued practice of charging interest on such loans is more in line with a commercial mandate which is not what NSFAS was designed to do. The fact that such interest calculations are sometimes computed incorrectly and illegally is another issue that has yet to be resolved.

A lot of the comments are focusing on the fact that the Minister has allocated another R9 billion to NSFAS. However, such funding is actually for the 3-year budget cycle – which means it is actually just around R3 billion for each year. This is simply not enough to firstly facilitate proper coverage for returning students and universal coverage for all poor students.

A statement that fails to address the structural and operational issues associated with NSFAS is highly disappointing. Moreover, we remain concerned about the actual implementation of the assistance to students up to R600 000. Historically only poor students have ever been forced to parade their poverty in order to be assessed for funding. Universities therefore do not have data relating to students in the missing middle bracket. It therefore becomes problematic to talk about an increase an NSFAS using the narrative that it represents a solution when the core problems have not been addressed.

The sum of all the issues associated with NSFAS are key to its poor collection rates. In extending additional funding to a system that has a 96% loss rate we have simply taken valuable public resources and allocated them to a system that is incapable of managing the funds properly. This cannot be right.

A lot of the students that have been legitimately protesting on the grounds for the past 2 months are indeed on the NSFAS scheme. A lot of such students are now expected to write exams under militarised conditions. Some of these students are simply not able to write exams under such conditions. It is unknown whether NSFAS has incorporated this reality into its promise of additional funding. Given that our universities have always regarded NSFAS students as poor inconveniences in a system that focuses on catering for the wealthy students, we remain concerned that such a scheme remains the only instrument of intervention used by the state.

We therefore reiterate the call of students on the ground. NSFAS needs to be reformed immediately. The loan system is nothing more than an instrument of keeping black students on the economic backfoot – they are expected to spend the first 15 years of their working life repaying NSFAS loans. With a collection rate of just 4%, the scheme makes no business sense. The fact that NSFAS has not changed its threshold from R122 000 is by far the most glaring indication of this government’s ongoing paralysis in dealing with this national crisis. We can only watch in despair.