1 Briefing by the Reference Group and Technical Team on the development of the Funding Framework following the Ministerial Report on University Funding Portfolio Committee on Higher Education and Training 25 February 2015

INTRODUCTION 2  Reference Group and Technical Team appointed to:  consider all recommendations in Funding Review Report  do further modelling for Minister’s consideration, and  draft a revised funding framework for public comment and further sector engagement, before final Ministerial approval and publishing in the Government Gazette for implementation.  Reference Group and Technical Team – chaired by Acting Deputy Director General: University Education (UE); comprising Chief Directors and other officials in UE Branch; Department of Higher Education and Training’s (DHET) Chief Financial Officer; 2 Higher Education South Africa (HESA) representatives, one sector representative; and two technical experts.

INTRODUCTION 3  Technical Team – 3 experts (Dr Sheppard; Dr Steyn; Dr Cilliers)  Recommendations already finalised for implementation by Minister in 2015/16:  HDI development grant;  Foundation Provision funding grid; and  Acceptable variation in enrolment targets set.

HISTORICALLY DISADVANTAGED INSTITUTIONS (HDI) DEVELOPMENT GRANT 4  New Historically Disadvantaged Institutions (HDIs) Development Grant prioritised  Report of the Ministerial Committee for the Review of the Funding of Universities, October 2013, identified 7 contact universities as HDIs:  The universities of: Fort Hare; Limpopo; Venda; Walter Sisulu; Western Cape and Zululand; and Mangosuthu University of Technology  Sefako Makgatho Health Science University, which incorporated the Medunsa Campus of the University of Limpopo, is also recognised as a HDI institution

HISTORICALLY DISADVANTAGED INSTITUTIONS (HDI) DEVELOPMENT GRANT 5  Additional funding from the fiscus secured  No adverse impact on budgets of other universities  Development funds allocated for a 5-year period: 2015/16 to 2019/20  R 410,734 million for 2015/16 and an indicative amount of R 433,532 million in 2016/17  Purpose:  Put in place systems to develop and sustain financial health at these universities;  Strengthen academic enterprise; and  Realise potential.

HISTORICALLY DISADVANTAGED INSTITUTIONS (HDI) DEVELOPMENT GRANT 6  Earmarked grant based on approved plans  Continuation on basis of detailed progress report and satisfactory audit reporting of the use of the funds  At end of 5 years (2019/20) Minister will determine:  Need to continue HDI Development Grant;  If continued, which institutions should continue to be supported; and  How phasing out of the grant should be implemented from 2020/21 onwards.

HISTORICALLY DISADVANTAGED INSTITUTIONS (HDI) DEVELOPMENT GRANT 7  Business plans should address financial sustainability by the following measures:  Systems to ensure financial sustainability;  Improve the debt/liability situation;  Improve second stream income (student fees);  Increase third stream income;  Reduce overheads; and  Reduce total personnel costs as a percentage of total expenditure.

HISTORICALLY DISADVANTAGED INSTITUTIONS (HDI) DEVELOPMENT GRANT 8  Plans should also strengthen & streamline academic, management and administrative systems, through the following measures:  Reduce student over-enrolment;  Improve the student experience, especially at first year level; and  Develop niche academic and research areas.

Historically Disadvantaged Universities – Improvement in Infrastructure Allocations 9 For the period 2012 – 2015 infrastructure allocations to HDIs amount to more than R2.5 billion of the available R6 billion. This represents 42% of the total funds whilst the HDIs only represented 15% of the actual teaching input units in 2013.

Total percentage increase in the block grant for the HDIs over the period 2004/05 to 2014/15 10 All the HDIs have received much higher increases in their block grants compared to the average for all universities over the period 2004/05 to 2014/15 as a result of the introduction of the current funding framework

Differentiation in the Higher Education System 11  Modelling suggests that the funding framework caters adequately for differentiation in the higher education system and that there is no need for different funding frameworks for different university types. The mandate and goals of each university is negotiated with the Ministry as part of the enrolment planning process and the annual performance plans of universities.  Each and every university will participate in research albeit at different levels and universities should develop niche areas appropriate for the context and community within which they operate.

Differentiation in the Higher Education System 12 Group 1: High per capita Research Outputs Cape Town Fort Hare Pretoria Rhodes Stellenbosch Western Cape Witwatersrand Group 1: High per capita Research Outputs Cape Town Fort Hare Pretoria Rhodes Stellenbosch Western Cape Witwatersrand Group 2: Medium Research Outputs Free State Johannesburg KwaZulu-Natal Nelson Mandela North West Group 2: Medium Research Outputs Free State Johannesburg KwaZulu-Natal Nelson Mandela North West Group 3: Low Research Outputs Cape Peninsula UT Central UT Durban UT Limpopo Mangosuthu UT South Africa Tshwane UT Vaal UT Venda Walter Sisulu Zululand Group 3: Low Research Outputs Cape Peninsula UT Central UT Durban UT Limpopo Mangosuthu UT South Africa Tshwane UT Vaal UT Venda Walter Sisulu Zululand

13 Differentiation in the Higher Education System

14 Differentiation in the Higher Education System  It is evident from the graph that the universities with low research outputs have increased their share (performance) with regard to teaching outputs (45% to 50%) as well as research outputs (13% to 16%). There is thus huge improvements made in terms of their outputs and therefore no further differentiation in funding is needed.  The shares in teaching input units for the three groups have remained more or less the same.  The huge drop in the institutional factor for Group 2 is the result of the phasing out of the multi-campus grant.

15 Teaching Input Grid  The recommendations on the Teaching Input Grid in the Ministerial Committee Report were based on the data of too few universities (5 universities). Therefore further modelling has been done by the Technical Team and considered by the Reference Group.  Modelling was done which showed a high correlation between the annual remuneration of academic staff and the full-time equivalent academic staff per full-time equivalent student. Based on this fmoddeling a normalised average cost was calculated for all Classification of Education Subject Matter (CESMs), and used as a proxy for the differential cost of offering courses in the various CESMs.

16 Proposed Teaching Input Grid (based on assumptions):

Teaching Input Grid ….  The Reference Group is in the process of analysing the recommendation from the Technical Team. Further modelling has been requested, specifically linked to professional programmes.  Various permutations of this proposed grid and the subsidy implications for individual universities are therefore being modelled before a final grid is recommended.  It has been recognised that programmes requiring work integrated learning may be more expensive, but funding for this element should be linked to SETA funding. 17

18 Teaching Input Grant, Over and Under enrolment  The Teaching Input Grant is linked to the enrolment targets negotiated with universities. The size of the grant to an individual university is linked to calculated Teaching Input Units, based on Full Time Equivalent (FTE) enrolments.  It was recommended that institutions should manage their enrolments with a 2% variation on their targets and that funding would be linked to this. To ensure that institutions take this seriously, funds would be withdrawn in cases where institutions do not lie within this range. The Minister approved that to begin with a 5% deviation is acceptable (moving towards 2% over time).

19 Balancing quality, growth and accountability  The Technical Team and Reference Group will recommend to the Minister:  If quality at a university is shown to be poor through monitoring and evaluation, then the institution should not perpetuate growth in order to secure more funding through their teaching input shares. There must be a mechanism to direct an institution to stop growing (and even shrink its size) and concentrate on quality improvement, without destabalising its financial sustainability.  In such instances, the DHET would enter into an agreement to maintain the funding of such a university, for a limited period of time, from the University Development Grant, to enable the university to deal with its challenges and move to an acceptable level of quality before migrating back into a growth path.

20 Foundation Programmes  The Technical Team and Reference Group will recommend:  Existing form of foundation programmes to continue;  Not to be funded as 4 year degrees or diplomas; and  Funding from 2015/16 on the same grid as the Teaching Input Grid.  More funding has already been allocated from 2015/16 for foundation programmes

21 Accountability  The recommendations to set up additional committees and units in the DHET to improve accountability are not supported.  It will be recommended that the DHET budget an amount annually for sector monitoring and evaluation. This will enable the DHET to expand its capacity in-house as well as to contract in additional capacity for monitoring and evaluation as and when needed. The Minister has already approved this in 2015/16.

22 University Development Grant  It is recommended that there is only one grant instead of separate teaching and research development grants. The method of calculation of shares are currently being modelled.  Grant will focus on:  implementing the Staffing South Africa’s Universities’ Framework: The Nurturing Emerging Scholars Programme (NESP); The New Generation of Academics Programme (nGAP); The Existing Academics Capacity Enhancement Programme (EACEP); The Staffing South Africa’s Universities Development Programme (SSAU-DP); The Supplementary Staff Employment Programme (SSEP)  Funding of new initiatives (e.g. new medical school)  Special directives for balancing quality and growth

23 Other Strategic Recommendations  African Languages to be developed on a project basis  Different weighting for research outputs depending on where the articles are published to enhance quality  SETA Pivot Grants to fund work integrated learning  Multi-campus grant fully phased out by 2015/16  Establishment of a national digital library (funding mechanism to be developed)

24 Other Strategic Recommendations …  Infrastructure and efficiency grant: Changed methodology recommeded for allocation of grants going forward. National macro infrastructure plan developed on the basis of individuall university integrated planning frameworks (campus master plans/mainainance plans/ disability plans/ Enrolment plans) and national priorities (NDP; New Growth Path etc).  Prioritisation of projects will be based on a balance of national priorities and and institutional needs. The immediate critical needs for the system are deferred maintainance and student housing.  Articulation cannot be specifically funded. However it is recommended that a project be developed requesting funds from the NSF to promote and develop designed articulation routes in the system and to develop university staff to understand how articulation works.

25 Timeline for implementation  Draft Revised Framework by end of March 2015  Gazette for comments by June 2015  Final Gazette by March 2016  First reforms implemented in 2015/16 (HDI fund; enrolment targets; foundation grid)  Full implementaion of new framework by 2017/18  Migration strategies will be applied as necessary

26 Thank You