Department of Higher Education and Training Funding of the Post-School Education and Training Sector Standing Committee on Appropriations 4 November 2015

Presentation Overview Post-School Education and Training Funding of: -University Education -Technical and Vocational Education and Training -Community Education and Training -Department of Higher Education and Training 2

White Paper for Post-School Education and Training sets a target of 1.6 million students in universities, 2.5 million in TVET colleges and 1 million in CET colleges by 2030 The number of Grade 12 learners estimated to (academically) gain entrance into a university will increase from in 2013 to about by 2019, increasing pressure on universities to expand. Constitutes approximately 30% of NSC students each year The remaining school leaving students (70%) must be catered for through other public post-school opportunities, i.e. TVET and CET colleges, skills development opportunities The system currently caters for approximately 1 million university students, TVET college students and CET college students Post-School Education and Training 3

Higher Education Policy Context University Funding Implications for 2016 – No fee increase in 2016 (0%) – Outstanding NSFAS shortfall for 2013, 2014 and 2015 academic years Underfunding of NSFAS and implication for supporting all students qualifying in terms of NSFAS means test Underfunding of the University Sector in general – funding implications to ensure affordable higher education University Education Overview 4

The Constitution: everyone has the right to a basic education, including adult basic education; and, to further education, which the state through reasonable measures, must make progressively available and accessible Freedom Charter: … education shall be free, compulsory and universal for all children….higher education and technical training shall be open by means of allowances and scholarships, awarded on the basis of merit University Education Overview 5

The National Development Plan (NDP) – set a target of enrolments in Higher Education per annum by 2030 – all qualifying NSFAS students should receive Full Cost of Study loans (poor/ working class - means test threshold) – students who do not qualify should have access to bank loans, backed by State sureties (missing middle) 1997 White Paper 3 laid the basis for the current distribution of funding, according to a cost sharing model, recognizing higher education as both a public and private good The 2013 White Paper for Post-School Education and Training makes a commitment to progressively introduce “free education” for the poor in South Africa as resources become available Higher Education Policy Context 6

Based on actual figures from Universities, the shortfall in 2016 due to the no fee increase is R2.330 billion: – Tuition fee increment of R1.915 billion – Residence fee increment of R415 million After consultation with all parties it was agreed that the shortfall for 2016 will be shared between universities and government: -Universities will contribute R394.7 million -The Department in consultation with National treasury will secure the remaining R1.935 billion University Funding Implications for 2016 No Fee Increase (0%) 7

The baseline for university funding must be increased by a minimum of R2.4 billion in 2017 in order to offset the 0% increase in 2016, and maintain the current student population and programmes offered by institutions To ensure that fees do not increase at a rate higher than inflation in the future, the base line subsidy funding each year will have to increase in line with higher education inflation (on average 9.8% per annum) If funding for the baseline does not materialise, then growth of the system must be reduced – with dire consequences, particularly given the growing number of youth from basic education able to meet university entrance requirements Longer Term University Funding Implications of the 0% Fee Increase in

2015* Number of applicants who applied for NSFAS awards Number of successful NSFAS applicants Number of unfunded registered students (qualified but not assisted) The shortfall between the number of students that NSFAS was able to support in 2013, 2014 (audited) and preliminary figures for the 2015 academic year The total shortfall amounts to approximately R4.4 billion. The Presidential Task Team is considering this shortfall and other aspects linked to the start of the 2016 academic year * NB 2015 figures are not final and may be a significant undercount 2016 Implications due to the 2013 to 2015 NSFAS Shortfall 9

The National Development Plan (NDP) provides ambitious targets for the higher education sector: enrolments is set for all students who qualify for the NSFAS should be provided with Full Cost of Study (FCS) funding through loans and bursaries (FCS includes tuition, accommodation, food and books) Despite significant increases in the NSFAS allocation from government from R1.7 billion in the 2009 academic year to R6.6 billion in 2016/17, available appropriated funds are insufficient to support all qualifying students at FCS. If the NDP targets are to be met, significant additional funding will be required Underfunding of NSFAS 10

Note: this only includes DHET funds managed by NSFAS; NSFAS also disburses funds from other sources Underfunding of NSFAS 11

Increases of 4.6% (2015/16) and 5.3% (2016/17) to the NSFAS vote, compared with an average fee increase of 9.8% per annum (last 3 years), and growing student numbers (enrolment projected to grow at 1.8% per annum), means fewer students (as well as lower proportions of undergraduates) can be supported though NSFAS The Polokwane resolution in 2009, set the political expectation that students from poor and working class families should enjoy free higher education, and this was reaffirmed by the NDP This poses a significant risk to the higher education sector, and the possibility for further disruption / violence is high Institutions are vulnerable and their sustainability is at risk Underfunding of NSFAS 12

*Source: NSFAS audited financial statements (2014/15; 2014/13; 2013/12) **Assuming the average NSFAS award increased to R *** Assuming the average Funza Lushaka award is R Number of students funded through NSFAS 13

The table below shows what is required to fully fund 25.5% of the undergraduate population The NSFAS threshold is currently R family income per annum and is under review Adequate NSFAS Funding for the Poor 14

Currently the State provides on average 40% of university budgets, which is down from 70% fifteen years ago In 2014, South Africa spent 0.72% of GDP on direct subsidies to higher education, including NSFAS. If NSFAS grant is excluded, the figure reduces to 0.62% of GDP This is significantly lower when compared to 2011 figures of African countries at 0.78%, Organisation for Economic Cooperation and Development countries at 1.21% and the rest of the world at 0.84%. In 2011, SA’s estimated higher education expenditure as a percentage of education (including NSFAS) was approximately 12%. Significantly lower when compared to Africa at 20%, OECD countries at 23.4%, and for the world at 19.8% in 2006 Underfunding of University Sector in General 15

Growth in enrolments has increased at a much higher rate than available funding increases which has resulted in the Full Time Equivalent subsidy per student decreasing in real terms by 1.3% The decrease in subsidy funding, together with increasing pressure to enrol more students into higher education, means that the burden of ensuring that universities are able to function effectively, provide the service required and maintain the quality of education, is increasingly displaced towards student fees, especially for undergraduate study where third stream income, i.e. income other than university subsidies and student fees, is limited Underfunding of University Sector in General 16

Year Block grant for universities in nominal terms (R 'million) (A) Growth in nomina l terms (%) Inflatio n (CPI)* deflato r (B) Block grant for universities in real terms (R 'million) ( C) = (A/B) Growth in real terms (%) HEMIS Student FTEs (D) Per capita in real terms using FTE students (Rands) (C/D) Per capita growth in real terms (%) 2004/ % / %3.6% % % 2006/ %5.2% % % 2007/ %8.1% % % 2008/ %11.2% % % 2009/ %6.9% % % 2010/ %3.8% % % 2011/ %5.6% % % 2012/ %5.6% % % 2013/ % % % 2014/ %5.6% % % Net % change in nominal terms in block grant from 2004/5 to 2014/ %Net real change in block grant30.5%Net change in per capita FTE student allocation -1.35% Block Grant Allocations to Universities 17

To ensure an appropriately funded higher education sector, in terms of international comparable benchmark funding levels, an additional R19.7 billion per annum is required in the baseline for university subsidies (excluding NSFAS) with an annual increment for inflation and enrolment growth to meet the National Development Plan targets However, this will not be sufficient to meet the needs of the PSET sector more broadly. The pressure on the TVET and CET sectors to grow and provide free education for the poor is even greater than on the university sector High level political decisions need to be made regarding the investment in the PSET sector generally – this investment is an investment in the youth and the country’s future Appropriate Funding of the University Sector 18

PSET sector needs to provide appropriate education and training opportunities for all South African citizens who are not in school The Constitution emphasizes that technical training, like university education, should be made progressively available and accessible TVET sector needs to expand significantly to provide these opportunities In addition the CET sector, which incorporates Adult Education and Training, also needs to be significantly strengthened Both the TVET and CET sectors must not be ignored – these sectors are also significantly underfunded and must service even greater numbers of youth and adults than universities Appropriate Funding of the PSET Sector 19

DHET Challenge: Achieving TVET enrolment targets in line with the White Paper and NDP as well as Annual Performance Targets without the required Government funding White Paper and Annual Performance Plan targets: -2.5 million TVET students by Envisaged system expansion of 14% per annum until 2019/20 followed by a reduced expansion rate of 6.6% until Headcount enrolment 2018: (Ministerial programmes: ) -Headcount enrolment 2015: (Ministerial programmes: ) -Current 2015 baseline shortfall of R7.2 billion (R30.8 billion over MTEF period) TVET Funding Shortfall 20

Progress Update on CET Interim funding norms and standards have been developed to deal with the transition of PALCs to CET colleges which is a new institutional type in terms of the CET Act, 2006 The interim funding norms was approved by the Minister on 4 August 2015 and concurrence was received from the Minister of Finance on 26 October 2015 and is in process of being published in the government gazette The funding norms are an interim measure until comprehensive funding frameworks are developed by the Ministerial Committee that will ensure a more equitable distribution of funding to the CET colleges The main purpose of the Ministerial Committee is to develop the CET colleges funding framework and review TVET colleges funding norms. This will be completed during

The Department acknowledges the current fiscal constraints of Government This has numerous challenges in itself, but also has a serious impact on the service delivery of the Department The Auditor-General has also noted the funding constraints of the Department and the resultant impact on service delivery The Department implemented the cost containment regulations by National Treasury Additional cost containment measures have also been approved by the Director-General in order to ensure that key service delivery receives priority The Department is also looking into ways in which effectiveness could be improved to reduce costs but meeting the same objective Key Budget Pressures Facing the Department 22

The current budget constraints makes it difficult for the Department to attain the growth requirements within the post-school education system in terms of enrolments, infrastructure development (including student accommodation), increased operations and student support services A key shortfall is student financial assistance through NSFAS Limitations are placed on Departmental operations due to the capping of compensation of employees and the inability to roll out the new proposed staff establishment and a regional presence due to the finalisation of the function shift of the TVET and CET sectors. This includes key IT expenditure for the required connectivity of all staff Key Budget Pressures Facing the Department 23

Institutional monitoring and evaluation is limited to most critical areas Reliance on NSF project support, such as the funding of the activities of the National Artisan Moderation Body An immediate pressure is the management of the TVET and AET function shift as well as cost implications for examination services Some activities critical to the integrity and approval of release of results have had to be downscaled or eliminated due to budget constraints. Increasing TVET enrolments is also impacting on the examination budget and service delivery in this area Key Budget Pressures Facing the Department 24

The Higher Education Aids project has proven to be very successful. The current subsidy by the Department is limited to the university sector, while roll out started in the TVET sector. Additional financial support for the project is critical to ensure the effective roll out to the TVET sector Higher education, while being underfunded in relation to its growth, is the best funded sector in the post-school education and training sector Key Budget Pressures Facing the Department 25

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