Leadership Development Programme - EXTENDED LEARNING

Leadership Development

Programme (LDP)

Saturday 2nd September 2017

Financing and Funding

in Higher Education

Some National … and Personal …

Perspectives on Financing and

Funding

in South African Higher Education

Hollie ClarksonCA (SA), B.Com (Rhodes), PG Diploma: Taxation (Natal),PG Diploma: Forensic Auditing & Criminal Justice (Natal)

EXTENDED

LEARNING

TVET Colleges: Sundry Information

(TVET: Technical and Vocational Education

and Training)

• There are 50 registered and accredited public TVET

Colleges in South Africa. They operate in more than

265 campuses in all nine provinces.

• Coastal KZN College is one of nine (9) TVET colleges

located in KwaZulu-Natal and comprises seven

campuses, +-15 000 students and 800 staff members.

• TVET Colleges are established and operate under the

authority of the Continuing Education and Training Act,

No.16 of 2006.

• Responsibility for TVET Colleges shifted from

Provincial Governments to the national Department of

Higher Education and Training (DHET) with effect from

1 April 2015.

• TVET Colleges are subsidised by the State to the

extent of +- R6 billion per annum (2017/18 Budget:

R9.3 billion).

• There are approximately 700 000 students enrolled in

the TVET Sector and the target enrolment for

2019/2020 is 1.238 million.

Universities: Sundry Information

• There are 26 registered and accredited public

Universities, including six (6) universities of

technology, in South Africa. They, too, are based in

all nine provinces, the most recent having only been

established in Mpumalanga and the Northern Cape

(Sol Plaatje University) in 2014.

• UKZN is one of four (4) universities situated in

KwaZulu-Natal and comprises four Colleges on five

campuses, more than 45 000 students and 3 280

members of permanent staff.

• The public Universities are established and operate

in terms of the Higher Education Act, No.101 of

1997, as amended. Although individually

autonomous, each University is accountable to the

DHET.

• Universities are subsidised by the State to the extent

of +- R39.1 billion (2017/18 Budget), comprising

block grants (R25.3 billion), earmarked grants (R6.2

billion) and NSFAS allocations (R7.6 billion).

• There are approximately 1 000 000 students

enrolled in the University Sector and the target

enrolment for 2019/2020 is 1.1 million.2

Welcome to this LDPFinance Session

What we aim to achieve . . . .

. . . . Today?

. . . . In the short-term?

. . . . In, say, the next 3 to 5 years?

“Together, Turning Every Workplace

into a Training Space!”EXTENDED

LEARNING

. . . Your expectations for this LDP session

. . . The DHET Vision and Mission

. . . Some of the Financing and Funding

Challenges facing SA Higher Education

Today we’ll hear and

share . . .

“Striving for Service Excellence!”

. . . Thoughts on how to achieve a more Effective

and Efficient HE System in South Africa

. . . Our roles and obligations regarding the

optimum utilisation of University and

TVET Finances

. . . Some Humour and the odd Conundrum!

Today we’ll also hear

and share . . .

Fine lines or fine lies?”

“Funding and Finance …

… Feuds Fuelled by A Few Dollars short Here and There?

… Assets or Asses?

… A Funding Plan or a Flash in the Pan?

6

Conundrum: A confusing and difficult problem or question

Alternatively, a question asked for amusement, typically one with a pun in its

answer; a riddle

English Oxford Dictionary

. . . Broaden our perspective on the multi-faceted and

complex nature of the challenges facing the Higher

Education (HE) sector in South Africa

. . . Reassess our fiduciary and functional roles as the

custodians of public finances, both at national (sector)

and local (institutional) level

. . . Demonstrate the requisite leadership and

capability to successfully manage the dynamics of the

HE sector

. . . Be motivated to strive for service excellence

In the short-term, we hope to . . .

. . . Build sound partnerships with those we serve

and with whom we interact, notably:

• Academic colleagues;

• Support Service senior managers;

• the University / TVET College Executive;

• Council;

• Students;

• External stakeholders

. . . Strengthen relationships with major sponsors,

funding partners and advisors, e.g.

• Department of Higher Education and

Training (DHET);

• Donors;

• Public financial institutions (e.g. PIC, DBSA)

• Commercial banks

In the long-term, we intend to . . .

. . . Achieve a financially stable University/ TVET

College; and

. . . Make a positive contribution to a more efficient

and effective Higher Education system;

. . . Inspire confidence amongst all our stakeholders

In the long-term, we also intend to . . .

“Personally, I’m always ready to learn,

although I do not always like to be taught.”

Winston Churchill

Transformation and Restructuring of Higher Education2002-2004

10

DHET’s Vision . . .

“. . .a South Africa in which we have a differentiated and fully-inclusive [HE] system that allows all South Africans to access and succeed in . . . to fulfil the economic goals of participation in an inclusive economy and society”

DHET’s Mission . . .

To develop capable, well-educated and skilled citizens

• Who are able to compete in a sustainable, diversified and knowledge-

intensive international economy,

• Which meets the developmental goals of our country, by

• Reducing skills bottlenecks . . .;

• Improving low participation rates in the post-school system;

• Correcting distortions in the shape, size and distribution of access to

post-schooling education and training; and

• Improving the quality and efficiency in the system … and its institutions

DHET Annual Report Extracts. . .

Message from the MinisterSome National Developments highlighted by the Minister during the past three years

Two new universities established and launched: Sol Plaatje University,

Northern Cape, University of Mpumalanga

A National Institute for Humanities and Social Sciences established

Sefako Makgatho University of Health and Allied Sciences inaugurated in April

2015 (incorporates the former Medunsa Campus)

Shift of responsibility for TVET Colleges and Community Education and

Training sectors from Provincial Governments to DHET from 1 April 2015

Launch of the White Paper for Post-School Education and Training

Strong emphasis on career guidance services, including development of a

national Career Advice Portal

DHET Annual Report Extracts. . .

Message from the MinisterSome National Developments highlighted by the Minister during the past three years

Report of the Ministerial Committee for the Review of Funding of Universities

released and a Technical Team and Reference Group established to draft a

new funding framework for comment

Appointment of a Presidential Commission in January 2016 to enquire into and

report on feasibility of making HE fee free

Publication of Policy for the Provision of Distance Education in SA Universities

National Student Financial Aid Scheme (NSFAS) undergoing review to “ensure

that there is a good return on our investment in this respect.”

Central Applications Clearing House successful for several years

Second National HE Transformation Summit held in October 2015

14

… But, of course, there were flashpoints and many setbacks

as well.

Imperatives Affecting Higher Education

National perspectives

Steering mechanisms to

achieve National Higher

Education Goals

Planning Funding Quality Assurance

1997 White Paper on Higher

Education Transformation

15


National and institutional perspectives

The Higher Education “Funding Conundrum” . . .

. . . . Four major constraints

16





1. Decline of state subsidies and yet no increase in tuition fees

17






2. A tuition fee model that is no longer appropriate in a context where vast disparities exist between income and participation in Higher Education

18







3. Inadequate State funding for NSFAS

19








4. Escalating student debt

20








4. Escalating student debt

21


National, institutional and personal perspectives


. . . . The Minister’s Concerns --

1. The levels of tuition fees charged by Universities vary widely

2. Before “#FeesMustFall”, fees increased at a higher rate than Government’s contribution to NSFAS

3. Higher education is both a public good and a private benefit, hence the financing of HE should obtain an appropriate balance between the public and private contributions to the cost of Universities, i.e. the State and individuals

4. How much from each and who pays for what?

A vexed question that remains unresolved to date

22

Free Fees . . . or

Fee Freeze?

The Changing Shape of SA Higher Education FundingAnalysis of Government Grants by Major Type

2007 – 2017

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

50 000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

R M

ILLIO

N NSFAS

Earmarked Grants

Block Grants

Source: Report of the Ministerial Committee for the Review of Funding of Universities (October 2013)

Ministerial Statements on University Funding, (2007/08 to 2017/18)

23

The Changing Shape of SA Higher Education FundingAnalysis of Government Grants by Major Type

2007 – 2017

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

50 000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

R M

ILLIO

N NSFAS

Earmarked Grants

Block Grants

Source: Report of the Ministerial Committee for the Review of Funding of Universities (October 2013)

Ministerial Statements on University Funding, (2007/08 to 2017/18)

24

Income of SA Higher Education Institutions

Analysis of Income by Major Sources2000 - 2010

49% 46% 43% 40% 40% 41%

24%26% 29%

28% 28% 30%

27% 28% 28%32% 32% 30%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2002 2004 2006 2008 2010

Other Income

Student Fees

State Funds

Source: DHET Audited financial statements of the [South African] universities for the period 2000/01 to 2010/1126




. . . . Views of the HE Sector

Ministerial regulations regarding tuition fees will undermine institutional autonomy and flexibility of individual HEI’s. This may impact negatively on the quality of educational delivery

Capping of tuition fees will not necessarily improve access, but might have the reverse effect by constraining universities’ financial resources and limiting financial support for poor students

Capping tuition fees will discourage institutional differentiation

Consequently, Universities will introduce additional student-related charges that are notionally optional, e.g. lecture notes, Internet access fees, transport, sports fees

Curtailing fee increases will impact negatively on equity and compromise the goals aimed at increasing access to higher education

27



Funding Challenges

National Funding Framework

• Introduced in 2003• Migration Strategy : Triennium 2004/05 to 2006/07• Annual Ministerial Statements

Issues raised

• Implementation of Student Enrolment Targets• Reviews of Teaching Input Grid (Revision of CESM System?)• Differential Funding between Research and non-research graduates• Teaching and Research Development Grants• Multi-campus factors• Infrastructure and Efficiency funding• Funding for clinical training of health professionals• Research outputs and weightings 28

FINANCE . . . Holding on tightly to the University Purse Strings!

Fun … and Funding for one and all … or so we thought!

29



Funding Challenges

Block Grants

• Teaching input grants• CESM category weightings by funding group and course level• Review and possible revision of CESM categories and funding grid• Enrolment targets and growth rates (Ministerially approved)• Teaching output grants : incentives to improve success, throughput and graduation rates

Earmarked Grants (Ad hoc grants)

• NSFAS• Interest and Redemption of Loans• Improving infrastructure and output efficiencies• Clinical training of health professionals• Foundation provisioning (access funding)• Institutional restructuring

30

31

The funding of “Zero percent” fee increases was not

without its problems in 2016 … and again in 2017.

The Times 27 October 2015

… Where to from here?

MEDIA STATEMENT

TO ALL MEDIA/NEWS EDITORS

14 January 2016

PRESIDENT ZUMA ANNOUNCES COMMISSION OF INQUIRY INTO HIGHER

EDUCATION FUNDING AND OTHER ISSUES

On the 23rd of October 2015, President Jacob Zuma met with vice-chancellors,chairpersons of university councils, presidents of student representative councils and the representatives of student organisations to discuss concerns with regard to fee increases and funding of higher education.

The President announced thereafter, that government would lead a process that will lookat broader issues affecting the funding of higher education, cognisant of otherendeavours in this regard.

The President has now appointed a Commission of Inquiry in terms of Section 84(2)(f)

of the Constitution of the Republic of South Africa, 1996.

The Commission will be chaired by Honourable Justice Jonathan Arthur Heher, a former

judge of the Supreme Court of Appeal. Judge Heher was appointed as a Judge of the

High Court in 1993 and as a judge of the Supreme Court of Appeal in 2003. He retired

from the bench in 2013. Judge Heher will be assisted by. Adv Gregory Ally and Ms Leah

Thabisile Khumalo as Commissioners.

Adv. Ally was admitted to the bar in 1990. Ms Khumalo is a practising attorney and is a

founder and Director of Mngoma–Mlaba Khuloa Inc.

The Commission shall enquire into, make findings, report on and make

recommendations on the following:

1. The feasibility of making higher education and training (higher education) fee-free

in South Africa, having regard to:

1. the Constitution of the Republic of South Africa, all relevant higher and basic

education legislation, all findings and recommendations of the various Presidential and

Ministerial Task Teams, as well as all relevant educational policies, reports and

guidelines;

2. the multiple facets of financial sustainability, analysing and assessing the role

of government together with its agencies, students, institutions, business sector

and employers in funding higher education and training; and

3. the institutional independence and autonomy which should occur vis a vis the

financial funding model.

2. The Commissions Act, 1947 (Act No. 8 of 1947), shall apply to the Commission, subject to

such modifications and exemptions as may be specified by proclamation from time to time.

3. The Commission shall submit interim reports and recommendations to the President

whenever it is necessary.

4. The Commission must complete its work within a period of 8(eight) months from the date

hereof and must submit its final report to the President within a period of 2(two) months after

the date on which the Commission completes its work.

5. Regulations will be made in terms of the Commissions Act, 1947 and will apply to the

Commission to enable the Commission to carry out its investigation properly and to facilitate

the gathering of information by conferring on the Commission such powers as are necessary

including the power to enter premises, secure the attendance of witnesses and compel the

production of documents.

6. The terms of reference may be amended at any time in consultation with the Commissioners.

7. All organs of state, institutions and stakeholders are required to cooperate fully with the

Commission.

Enquiries: Bongani Majola on 082 339 1993 or [email protected]

Issued by: The Presidency

Pretoria

www.thepresidency.gov.za 32

mailto:[email protected]

http://www.thepresidency.gov.za/

The HE … or Heher? …Funding Conundrum

The Times: 20 September 2016

33

University fees: Free higher education is possible

in South Africa

Photo: 0% is spray-painted on one of the outer walls of a Parliament building, indicating the level to which protesters want fees to increase. Cape Town, 21 October 2015. (Photo: Shaun Swingler)

34

BLADE: FEE INCREASE MUST NOT EXCEED

8%

Politics / 19 September 2016, 11:56am / Ntando Makhubu

Minister of HIgher Education Blade Nzimande File picture: Werner Beukes

Pretoria - Universities are to be allowed the decide on their on fee increases for the 2017 academic year.

However, Higher Education Minister Blade Nzimande said the increase had to be transparent, reasonable and linked to inflation. “It must not not go beyond 8%,” he told journalists in Pretoria.

“We have looked at it from all sides and decided to let universities decide on increases with caution to take affordability. Universities cannot operate on less funds as things had gone up.”

Those who can pay, must pay, Nzimande said.

He said, however, that the government would continue to look to support the “missing middle” students, who cannot afford to pay but do not qualify for NSFAS funding.

“To ensure that such inflation-linked fees adjustments on the 2015 fees baseline are affordable to financially needy students, government is committed to finding the resources to support children of all poor, working and middle class families – those

35

BLADE: FEE INCREASE MUST NOT EXCEED 8%

19 September 2016, 11:56am / Ntando Makhubu

Pretoria - Universities are to be allowed the decide on their on fee increases for the 2017 academic year.

However, Higher Education Minister Blade Nzimande said the increase had to be transparent, reasonable and linked to inflation. “It must not not go beyond 8%,” he told journalists in Pretoria.

“We have looked at it from all sides and decided to let universities decide on increases with caution to take affordability. Universities cannot operate on less funds as things had gone up.”

Those who can pay, must pay, Nzimande said.

36

BLADE: FEE INCREASE MUST NOT EXCEED 8%

19 September 2016, 11:56am / Ntando Makhubu

He said, however, that the government would continue to look to support the “missing middle” students, who cannot afford to pay but do not qualify for NSFAS funding.

“To ensure that such inflation-linked fees adjustments on the 2015 fees baseline are

affordable to financially needy students, government is committed to finding the

resources to support children of all poor, working and middle class families – those with

a household income of up to R600 000 per annum – with subsidy funding to cover the

gap between the 2015 fee and the adjusted 2017 fee at their institution,” said

Nzimande

37

Breaking News … 31 August 2017

Long-awaited Presidential Commission Fee Report

completed

President Jacob Zuma announced this morning that the long-awaited finalreport of the Commission into the Feasibility of Fee-Free Higher Educationand Training in South Africa has been completed.

The Chairperson of the Commission, Judge Jonathan Heher, presented thereport to the President at his Genadendal residence in Cape Town today (31August 2017), almost twelve months since it was originally requested.

Zuma says that he will study the report and its recommendations as well asmake it available to the public in due course.

The Commission was established in January 2016 and was expected tocomplete its work within eight months.

However, following the amendment of its terms of reference, theCommission was granted an extension to complete its work by 30 June2017.

Zuma expressed his thanks to the Commission and the witnesses,stakeholders in higher education and Commission members for theircontributions.

38

Blade on a Knife Edge …?

The Star: 31 August 2017

39

Report of the Ministerial Committeefor the Review of the

Funding of Universities

Your Challenge …

Context

The Report recommends, inter alia, that a Technical Team be established by DHET to furtherdetermine the exact financial implications of the various recommendations for individual universitiesand the sector as a whole, and the most cost-effective ways to implement several of the recommendations made in the Report, including a migration strategy, as appropriate.

Scenario and Group Task

As nationally acknowledged experts in University funding, you have been appointed to serve one of two separateFunding Technical Teams. You have been mandated to perform the tasks detailed on one of the next two slides.Red or Blue? It’s up to you . . . but please ensure that you conclude in no more than 20 minutes!

Assumptions and Report Back

Please feel free to make any reasonable assumptions about the current Funding Framework, the status of the aboveReport, and to share your own experiences or knowledge of recent developments in this respect. Each of the two(Blue and Red) groups should nominate a spokesperson to report back on behalf of their respective groups.

40



Your Challenge … Blue Group

Scenario and Group Task : Blue Group

As nationally acknowledged experts in University funding, you have been appointed to serve on theFunding Technical Team and have been given a brief to perform the following tasks …

. . . Remember, you have no more than 20 minutes!

• Advise the Minister whether, in your opinion, it is feasible to continue to retain student fees constant at theirexisting (2015) levels – or to introduce a “fee-free” system – and for Government to subsidise the resultantbudget shortfalls for all Universities and TVET Colleges?

What reasons inform your answer?

• Given that the various earmarked grant funds have been increasing, there has been a steady decline in theproportion of the Block Grants to total State funding since 2004. Despite annual increases in block grantsexceeding CPI, many Universities have been compelled to implement budget cuts and consequential austeritymeasures.

How do you propose to eliminate this anomalous situation?

• The 2017 allocation to NSFAS of R7.55 billion accounted for almost 20% of the total State allocations to allUniversities (compared with R578 million in 2004, or 5.9% of the total HE Sector budget).

Do you agree with this situation and, if not, why?

41



Your Challenge … Red Group

Details of Group Task : Red Group

As nationally acknowledged experts in University funding, you have been appointed to serve on theFunding Technical Team and have been given a brief to perform the following tasks …

. . . Remember, you have no more than 20 minutes!

• Should the new Funding Framework be based purely on a formula-based determination of the attributablecomponents of the current Block Grants, i.e. Teaching Inputs, Teaching Outputs, Research Outputs andInstitutional Factors, or on some other basis?

• It has been suggested that Universities should be funded on differential bases. How can this be donepractically and on an equitable basis?

• The three new Universities (Sol Plaatje, Mpumalanga and Sefako Makgatho) were collectively allocatedcapital grants and start-up operating funds of R2.4 billion during the past three year funding cycle (2013/14to 2015/16). A further R1.3 billion was allocated for each of the 2016 and 2017 years. This amounts toapproximately 17% of total earmarked funds (excluding NSFAS) for the past three years and, in 2016/17, theirallocations accounted for 21% of total earmarked grants for the HE Sector as a whole.

Is the establishment of these three institutions justified – academically and financially?Give reasons for your answer.

42

University fees: Free higher education

is possible in South Africa

43

The question that has been raised this week is whether it is possible to increase funding for universities. Most mainstream analysts,

commentators in the media, and the higher education minister have suggested it is not. However, analysis by the South African Institute of

Race Relations suggests it is, if government spending priorities can be adjusted.

Contrary to prevailing opinions, and despite current fiscal pressures,

estimates produced by the South African Institute of Race Relations this week suggest that free higher education for all undergraduate students is affordable for South Africa.

44

Currently, levels of public spending on universities sit at around 0.8% of gross domestic product (GDP), which is low by global standards. A more appropriate

number would be 2.5% of GDP. In addition, data we have produced on household spending levels suggests that only 5% of South African families

could comfortably afford to pay university fees for their children. Ensuring access to children from less prosperous backgrounds will require a significant degree of subsidy or grant funding.

The question that has been raised this week is whether such levels of funding are possible. Most mainstream analysts, commentators in the media, and the higher education minister have suggested that it is not. However, our analysis suggests that it is, if government spending priorities could be adjusted.

Currently there are just over 800,000 undergraduate students at university. Our own experience of funding tertiary education, through our bursaries

department, is that an amount in the region of R100,000 per annum is generally sufficient to cover the annual tuition, accommodation, and related costs of an undergraduate student. This cost is over and above the current

amount of approximately R25-billion that taxpayers spend on funding universities. In other words our estimated average unit cost per student –

once the cost of the existing taxpayer subsidy is taken into account – is closer to R120,000 per annum.

For the sake of argument, our analysis is ignoring the amounts fee-paying students and other private sources of funding contribute to universities.

If higher education was to be funded solely through taxpayer subsidies then

a further R71-billion, over and above the existing R25-billion, would be necessary. Our analysis suggests that, with sufficient prioritising, that R71-billion could be raised.

“If you have built castles in the air,

Your work need not be lost;

For that is where they should be.

Now put the foundations under them!”

Henry David Thoreau

46

EXTENDED

LEARNING

“What lies before us, and what lies behind us,

Are tiny matters compared to what lies within us.”

Oliver Windell Holmes

THANK YOU

EXTENDED

LEARNING

“UKZN Extended Learning’s aim is to capacitate individuals and

organisations with critical knowledge, skills and resources to

achieve their full potential. Our continuing education courses

improve productivity and performance, and contribute to South

Africa’s ability to compete successfully in Africa, and globally.”’

Simon Tankard: CEO

Hollie Clarkson

11 June 2016

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Leadership Development Programme - EXTENDED LEARNING