1. Moving the Higher Education Fees Debate from Ideology to Evidence Nico Cloete, Charles Sheppard & Francois van Schalkwyk UWC Institute of Post-School Studies

2. In the media and the press most of the commentators (VCs and students) have displayed a disconcerting lack of knowledge about international funding and fee systems. The aims of this package are: 1.To provide data and research evidence so that there can be a more informed discussion than “free higher education” versus “it is not affordable”. 2.To draw attention to the fact that for sustainable funding, certain endemic problems in the HE system have to be addressed – particularly the shape of the system and the undergraduate university system. 3.To show the consequences, and often unintended consequences, of different funding regimes, and who benefits from different kinds of investment. 4.To highlight the importance of trade-offs, and how different political interests affect choices. 5.Not to spell out policy options and to enter the arena of interest-driven demands. 6.To tell a story based on evidence. (the story is separate) 2 Aims of this package on funding and fees

3. 1.Higher education has a major effect on both economic development and private returns – it is a public and a private good. 2.The “engine of development in the new knowledge economy theorists argues that the new modes of economic production are increasingly dependent on knowledge and information technology. Knowledge and ‘informationalism’ have become central to development in the global economy.” (Castells, 1991) 3.“if knowledge is the electricity of the new informational international economy, then institutions of higher education are the power sources on which a new development process must rely” (Castells, 2001). 4.According to the Harvard-led World Bank study (Bloom 2005), a 1-year increase in the stock of Africa’s tertiary education would boost the annual rate of economic growth by a sizable 0.63 percentage points. If the current stock of tertiary education in Africa increased to the level of Egypt (0.59 years/person), the annual rate of GDP growth would increase by 0.28 percentage points. Higher education and development 3

4. 1.Factor-driven economies (agriculture, mining) have relatively high primary school attendance, lower secondary school and very low tertiary participation rates. 2.Innovation economies have high schooling participation, high economic competitiveness ratings and very high tertiary education participation. 3.In the more productive, efficiency-driven stage (South Africa, Egypt, China, Mauritius) there is high primary and secondary participation but low (20-30%) tertiary participation and mixed global competitive rankings. 4.South Africa’s tertiary participation rate is too low, partially because it does not have a post-secondary college sector, which means too much pressure on the university system as the “only ladder out of poverty”. 5.SA real colonial heritage is the structure of the higher education system, (World Economic Forum 2014/5) 4 Higher education and stage of development

5. 5 Primary educationSecondary EducationTertiary educationGCI Gross enrolment ratio Quality Rating Gross enrolment ratio Quality Rating (+Maths & Science) Gross enrolment ratio Rate of Return Global Competiveness Ranking Stage 1: Factor-driven Ghana 891046776 (72) 12 29119 Kenya 84 6736 (78) 4 2299 Mozambique 8713826119 (133) 5 18133 Tanzania 841243398 (130) 4 19120 Uganda 921132781 (111) 4 -115 Transition from 1 to 2 Botswana 90858277 (95) 20 -71 Stage 2: Efficiency-driven Egypt 9513986139 (131) 30 -116 South Africa 90127111138 (140) 20 4049 China 98558956 (49) 26 2128 Transition from 2 to 3 Chile 921088986 (107)751835 Costa Rica 903910928 (55)482052 Brazil 8713299132 (134)261775 Malaysia 9715716 (12)372218 Mauritius 98489649 (50)412246 Turkey 951008692 (103)701551 Stage 3: Innovation-driven Finland 9911084 (2)94108 South Korea 98369766 (30)991326 Norway 1001711111 (24)741011 Singapore 10031083 (1)94112 United States 91299418 (44)83153 Higher education and stage of development

6. 6 1.Globally, and in Africa, there are considerable benefits to HE. 2.In Sub-Saharan Africa, private returns to HE are higher than returns to primary and secondary education. 3.The region with the highest private returns to HE is Sub-Saharan Africa. 4.South Africa has the highest private returns to HE in the world:  South Africa 39.5  Argentina 12, Brazil 17, Mauritius 21, Mexico 20, Norway 10, Portugal 14, Turkey 14, Spain 11, US 14 5.Higher education also has numerous private benefits such as higher salaries, savings, professional mobility, life expectancy and quality of life. Public benefits include greater productivity, increased consumption, workforce flexibility, reduced crime rates, greater appreciation of diversity and improved ability to new technologies. 6.SA high returns to tertiary education and high levels of inequality (Gini coefficient 0.70) mean that free higher education will proportionally privilege the privileged (Patrinos 2015). Private/public returns to HE

7. Private returns to education by level and region (2014) 7 Source: Montenegro & Patrinos (2014). Graphic by CHET/Francois van Schalkwyk.

8. 8 The array of higher education benefits PublicPrivate Economic Social Increased Tax Revenues Greater Productivity Increased Consumption Increased Workforce Flexibility Decreased Reliance on Government Financial Support Higher Salaries and Benefits Employment Higher Savings Levels Improved Working Conditions Personal/Professional Mobility Reduced Crime Rates Increased Charitable Giving/Community Service Increased Quality of Civic Life Social Cohesion/Appreciation of Diversity Improved Ability to Adapt to and Use Technology Improved Health/Life Expectancy Improved Quality of Life for Offspring Better Consumer Decision Making Increased Personal Status More Hobbies, Leisure Activities Source: The Institute for Higher Education Policy, “Reaping the Benefits: Defining the Public and Private Value of Going to College”, March 1998.

9. 9 Access to tertiary education is regarded by the ‘haves’ as a means to maintain privilege, and by the ‘have‐nots’ as a means to get out of poverty. In 1970 in the US, 10% of students from the lowest income quintile went to university in contrast to 40-50% from quintiles four and five. Forty Forty years later (2010), still only 10% of quintile one went to university, but for quintiles four and five the percentage had increased to 80-90%. Higher education in the US has thus become part of the ‘iron cage of privilege’ (Piketty, 2014). The Hamilton Project in the US: “Why more education wont fix economic inequality” shows more education increases income for everybody, but does not reduce overall inequality (Leonhardt, 2015). While HE offers a ladder out of poverty for a limited few it is not a efficient mechanism to reduce inequality. Higher education and inequality

10. 10 More education does not reduce inequality Simulation* shows that a big increase in educational levels would increase incomes, but not change measures of overall inequality by much (The Hamilton Project in Leonhardt, 2015). * Simulation assumes 10% of working-age men without advanced education receive a college degree, and begin earning wages typical of college students. Source: The Hamilton Project (2015).

11. 11 1.After controlling for a range of variables, education does bring rewards, but below matric very low with very little gain in benefits between grades 1 and 12. But it improves after matric, and returns for degrees are extremely high; both in wages but especially in employment probability. 2.“The large differentials in earnings and access to jobs between the highly educated and the less educated lies at the heart of income inequality. The high wage premium to educated workers derives from a combination of a skills shortage at the top end of the educational spectrum, driving up wages of the educated, and a surfeit of poorly-educated workers competing for scarce unskilled jobs, thus dampening unskilled wages.” 3.Of particular importance is certificates; matric (validated by a national exam) and tertiary certificates that signal to employers reliable cognitive gains. (Van den Berg, 2014) Higher education, employment & wages in SA

12. Conditional probability of employment and conditional log of wages by years of education Source: Van den Berg (2014). Graphic by CHET/Francois van Schalkwyk. 12

13. Notes: Own estimates from Labour Force Surveys, 2010. The gap between a diploma and degree course is left so that the values on the horizontal axis also show years of education. Source: Van den Berg (2016). Expected monthly wage for 30-year-old black male by level of education, 2010 13

14. South Africa the best HE system in Africa 1.SA has the most diverse and differentiated HE system in Africa. 2.In 2008, SA HE system ranked by Shanghai as between 27-33 along with the Czech Republic, New Zealand and Ireland. 3.Times Higher (2015) rated BRICS and developing countries. In the Top 12 BRICS: SA 3 universities (UCT 4th; Wits 6th; SU 12th) Brazil and Russia 1 university each India with a billion people has 0 China 6 (massification with 30 World Class) 4. PhD transformation from 1996-2012: Proportion of black graduates increased from 13% to 58% African women graduates increased by 960% No increase in white male graduates for the same period In 2012, more African than white graduates (Cloete, 2015) 5. The reputation of SA HE is based on the postgraduate system. It is crucial for development in SA, and Africa, that SA maintain and strengthen the new knowledge producing subsector of HE. 14

15. Growth in the SA tertiary system is too slow 1.South Africa, like other developing countries, is faced with financial constraints and backlogs in tertiary education as a result of extraordinary growth and wider participation in the higher education sector over recent years (World Bank, 2010). 2.The World Bank (2010) in its report “Financing Higher Education in Africa” concludes that in most Sub-Saharan African countries, enrolment in higher education has grown faster than financing capabilities, reaching a critical stage where the lack of resources has led to a severe decline in the quality of instruction and in the capacity to reorient focus and to innovate. 3.But SA’s participation rate in tertiary education at 20% is too low, both the university and the post-secondary sector of tertiary education must grow (Cloete, 2015). 15

16. 16 1.On the opening morning of the National Commission on HE (NCHE, 1995) Prof. Reddy (chair) said that the biggest problem facing HE in SA is the shape of the system. 2.The shape problem was an inverted pyramid: too large a proportion of students in universities, too small a post-secondary college sector, and too small a private PSE sector. 3.From 2010 a major shift has occurred: TVET college enrolments have increased from 404 000 in 2010 to 781 000 in 2014 (107% % growth). In contrast, university enrolments are stagnant at around 1 million. 4.A major problem for SA, and a serious investment issue, is that while SA has 2 million students in post-secondary education, there are 3 million 18-24 year-olds not in education, employment or training (NEETS). What is preventing growth? The shape of the system & inefficiencies

17. 17 South Africa post-school system, 2010 vs 2014 Source: DHET HEMIS 2012. Compiled by Charles Sheppard. Graphic by CHET/Francois van Schalkwyk.

18. 18 1.Fast expanding (massifying) education systems all over the world have inefficiencies as capacity cannot cope with demand. In SA this starts in the school system and runs through the undergraduate system. 2.Of the 1 million kids who enter Grade 1, only 100 000 will enter university, and 53 000 will graduate after 6 years (Van den Berg, 2015). 3.Very poor graduation rates – 30% graduate in 3 years, 56% in 5 years (if UNISA included it drops well below 50%). National diploma even worse: below 50%. 4.2006-2013: 1.7% growth for new entrants; average annual growth for returning undergraduates 4%. Too many students stay in the undergraduate system for too long. 5.All or nothing system: drop out or graduate. With high premium on tertiary certificates, associate degrees (after 2 years) must be considered. 6.The Honours degree is not funded by NRF or NSFAS, and is a major blockage for black students to masters and PhD study. 7.There are too many academically “poor” students in the university system. 8.The current university undergraduate system is inefficient and unsustainable and needs to be restructured. Inefficiencies in the best HE system in Africa

19. Cumulative completion rate of the 2008 first-time entering undergraduate cohort (Unisa excluded) 19 Source: CHE & DHET (2015) Cohort studies.

20. Source: S. Van der Berg (pers. comm.). Graphic by CHET/Francois van Schalkwyk. Progression from Grade 1 to Bachelors Degree (current estimated figures) Enter Grade 1 1 million Write matric 550 000 Pass matric 400 000 Enter universities 100 000 Graduate after 6 years with first degree 53 000 1 in 20 school entrants obtain a first degree Only 30% graduate after 3 years 20

21. 21 The substantial growth of this sector and the importance given to it by the DHET is currently undermined by:  The completion (certification) rate in this sector is even poorer than the university system: NC(V)4 = 34.5%, NATED N3 = 47.9%, NATED N6 = 42.3% in 2014.  It is more expensive to produce a NCV diploma than a degree.  A tracer study of NCV students found that most do not complete, that the employment pathway is difficult, only around 50% were employed and often in temporary positions (JET 2015).  The TVET colleges have a mixture of pre- and post- matric students, so they are not yet perceived as post-secondary institutions by the prospective students, nor by the general public nor by the employers. The college sector should be clearly differentiated between a NATED (NCV level 4) and a post-secondary system – with clear articulation to universities. A fast growing college sector with poor completion rates and in need of a new identity

22. 22 1.The so-called knowledge economy requires a great diversity of skills programmes, and differentiation in the levels of skills and performance. 2.Broadly this means:  high percentage of labour with post-matric qualifications for people to work in jobs that require higher than matric-level information processing and problem- solving: “In the coming years, jobs requiring at least an associate degree are projected to grow twice as fast as jobs requiring no college experience.” (Obama 2010)  A strata of a university system that offers solid general and vocational-orientated education, mainly, but not exclusively, at the undergraduate level to produce what Castells (2001) calls ‘self-programmable labour’, meaning skills that enable workers to adapt to and change working conditions.  A group of universities that concentrate on high-level professional training and new knowledge production with a high percentage of staff with doctorates (70%), and with more than 40% of students in postgraduate programmes (currently 7 universities produce 70% of all PhDs; 6 universities 1%) (Cloete et al. 2015). A diverse and differentiated HE system

23. 23 1.“To maintain a competitive edge in a rapidly transforming knowledge economy, countries need to invest more in quality education. Not even minimum wage schedules can multiply wages by factors of five or ten: to achieve that level of progress, education and technology are the decisive factors.” (Piketty, 2014) 2.But historically SA has not invested enough in HE, nor has it reached its own target of 1% of GDP on R&D. 3.Treasury officials may say that with the latest injection of funding SA is now well over 1% over GDP for HE; but this is “bailout” money. No clear new target for HE expenditure has been set yet. 4.Stagnation in growth and more expensive borrowing means there will not be substantial additional money, which means for greater investment in HE there will have to be budget reprioritisation in the treasury 5.International research is clear: the question is not just MORE investment because investments can have different outcomes in different countries as the slides on the trilemma of trade-offs show. Invest in higher education

24. Expenditure on higher education as % of GDP, 2012 Francois China 3.5% Compiled by Charles Sheppard Source: OECD (2010) 24

25. SA university and state revenue 2007–2014 25 Source: Bunting, MB. 2016. The financial condition of South African public universities: A framework for nonprofit financial analysis in a small-N context. Rhodes University Department of Accounting Working Paper Series 2016/01. Available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2790758; downloaded 14 June 2016. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2790758

26. Chart analysis Three distinct periods are discernible: From 2007 to 2009, prior to the transmission of the full consequences of the recession into the broader South African economy, fees, subsidy and taxes increase at roughly equivalent (and therefore sustainable) rates. In 2010, tax revenues decline sharply, but the state offers an economic shield to the universities, maintaining the historical growth rates in its subsidy transfers into 2011. Despite the financial crisis, fee revenue also continues increasing at broadly historical rates during this period. After 2011, there is a clear breakpoint in the rates of growth of both fees and subsidies. Fee growth visibly accelerates, while subsidy growth slows down. (Bunting, 2016: 28) 26

27. 27 1.While government contribution increased from R16 billion (2000) to R21 billion in (2013), as a percentage of the budget it decreased from 49% to 40% (and at some universities close to 30%). 2.Third-stream income almost doubled (R9 billion to R14 billion), but remained at the same proportion (27%) of budget. 3.Student fees compensated for government decrease; in 2000 fees contributed 24% but by 2013 they contributed 33%. Over the same period, the proportion of students on NSFAS increased from 2% to 13%. 4.Rise in fee income: 9% p.a. increase of 42% from 2010 to 2014, but considerable institutional differentiation: UCT (44%) in comparison to Fort Hare (23%). 5.National inflation over same period 5-6%. The 9% annual increase is similar to the increases in medical aid and private school education. Increasing cost of public higher education is similar to the increases in private social services. 6.Fees debt in 2015 was R15 billion to NSFAS and R5 billion to universities (Bunting, 2015). 7.NSFAS recovery took a dramatic downturn from 2009 (Cloete, 2015). Decrease in government subsidy and increase in fees

28. Streams of university income (ZAR bn), 2000 and 2013 NSFAS 13% (6.73) Private 20% NSFAS 2% (0.51) Private 22% Source: DHET – Annual Financial Statements of universities & DHET – Annexure 3, 2 nd National Higher Education Summit 15-17 October 2015. 28

29. Different increases in student fees 29 Increases in tuition fee income per student* % increase in tuition fee income per student (2010-2014) * The tuition fee income per student is calculated by dividing the total reported tuition fee income with the total number of full-time equivalent students Source: Charles Sheppard. Graphic by CHET/Francois van Schalkwyk.

30. 30 1.There is broad agreement amongst economists of higher education funding that government subsidies are “regressive”, meaning subsidies favour the rich (Garritzmann, 2014). 2.In OECD countries, public universities consistently argue that low or no tuition fees provide greater equality of educational opportunity by providing greater access... But the overwhelming subsidy in public universities accrue to students from the middle and high income families (Barr 2004). 3.Blanket university fee reduction benefits the wealthy – and slows change (Fourie, 2015). 4.Not uncommon for tertiary education spending to benefit the rich: “Our findings for South Africa are not unique, since WB research shows much of tertiary education spending in Armenia, Bolivia, and Brazil benefits higher income groups as well” (Van den Berg, 2014). Who benefits from university subsidies?

31. 31 Using a range of South African databases, such as Stats SA Community Survey, SA Conditions of Schooling (SAQMEC), National Income Dynamics (NIDS) and World Bank Data, Van den Berg concludes that: 1.From a matric class of 100 000 students from deciles 1-5 about 90% do not even qualify for university. 2.The total number from deciles 1-5 who gain exemption and attend university is just over 10 000. 3.In contrast, around 75 000 of the class who have exemption and attend university come from deciles 8 and 9. 4.Those who qualify and attend university come from a small elite, the majority come from the affluent middle class and the elite. 5.The reason there are so few students from deciles 1-7 is not that they don’t have funding, but because they don’t qualify – and that is a global trend. 6.Next slide is a graphic illustration of the incidence of university attendance according to family income. Evidence from SA household surveys

32. Approximate distribution of university attendance for a recent matric cohort Source: Van den Berg (2015). 32

33. 33 1.The effect of government investment in HE depends on distribution of private and public benefits. 2.All fee regimes are a triangle of trade-offs: public (government) investment – enrolment – private costs 3.Low public investment – mass enrolment – high private cost (US, Australia). High private costs ameliorated by direct loans (US) or deferred payments (Australia). 4.High public investment – mass enrolment – low private (Finland, Norway). High employment, high tax. 5.High public investment – lowering enrolment – low private (in Germany student is enrolment is declining). 6.If private benefits (returns) are concentrated in upper half of income distribution, high level of investment will increase income inequality. If private benefits outweigh public benefits, government investment increases income of well educated, but not necessarily stimulate economic growth (exactly SA). Ansell (2008); Busemeyer (2015) Trilemma of trade-offs

34. Source: Busemeyer (2015). Graphic by CHET/Francois van Schalkwyk. 34

35. 35 Before the WW II, HE was a rite of passage for the elite. 1.1988 Education Act tried to end binary system and double enrolments; Tories were split between the rich (high fees and elite system) and emerging middle class who wanted a mass system with low fees – paralysed the Tory party reform. 2.Decision to massify was driven by Thatcher due to fears of British uncompetitiveness in the coming open Euro labour market. But the system was unaffordable, so contradictorily Labour introduced fees to accommodate expansion. 3.Lib Dems campaigned on revoking fees, with an increase in public spending. With the 2010 coalition government, Tories refused to increase public spending. Breaking their election promise was the beginning of the end of Lib Dems. 4.Contradiction: Thatcher and Cameron (Oxford) vs Clegg (Cambridge). Difference was not their education (all elite), but the interests of their different constituencies. 5.Trade off: Medium: Government spending – mass – private (income contingent loans – same advice given by UK to NCHE on NSFAS in 1996). Ansell (2008) Politics & higher education systems: England

36. 36 1.Equality in education: “In education, there is no distinction between classes of men.” (Confucius [500 BC]) “HE increasingly stands out in the stratification of the society.” (Jingyi, 2004) 2.Economist Tang Min: “Higher education enrolment expansion will turn out to be a measure that entails less state investment, stimulates domestic consumption greatly and satisfies the urgent demand from the masses.” (Jingyi, 2004) 3.Three principles: 1.High tuition to increase investment in higher education and to spur consumption 2.Large-scale loan systems to help poor students – Rural Credit Cooperatives (10-15 year pay-back) and China Development Bank 3.Increased scale of scholarship (30 world-class universities) 4.Trade-off: High: Government spending (3.5% GDP) – mass – private 5.Resulted in the fastest expansion of HE in history. From 18 000 PhDs in 1978 to 50 000 in 2008. (40% STEM). China is distorting the global high-skills labour market. Politics & higher education systems: China

37. 37 1.“The purpose of post colonial flagship universities was to train a tiny elite on full scholarships which included tuition, board, health insurance, transport and personal needs”. Makerere was described as a “devaluation of higher education into a form of low-level training with no research” (Mamdani, 2008). 2.For government “free higher education is highly visible and populist, and encourages the perception that the state is providing something people want... free higher education in Africa was built on inequitable social structures. It reproduced these inequalities... free higher education in highly unequal societies mainly benefits the already-privileged (new political and business elite), who have the social, cultural and economic capital required to access, participate and succeed in education. (Langa et al., 2016) 3.Trade-off: Low: Government spending – mass (elite) – private 4.Dual system: Private colleges high private spending – low quality. Politics & higher education systems: Africa

38. 38 1.Currently SA has a system that could be characterised as low government investment, low participation and high private cost. 2.England with almost 50% participation has what appears to be medium private cost, but it is actually high (around £9000) but with a very good deferred payments scheme it is almost free for UK students and very expensive for foreigners. This scheme has boosted the income of universities. 3.In Africa universities with free public HE have tried to introduce fees, but politicians are scared of a political backlash and have not supported it, leading to a disastrous, ‘free by day and pay by night’ schemes. 4.Cuba used HE as part of reducing inequality and has very high government investment, medium enrolment (25%) and low private costs. But the system is very low on postgraduate enrolment and new knowledge production. 5.China has high government investment, medium (fast-growing) participation (30%) and high private costs (with high loans-availability). China has driven the fastest expansion of HE in history. Along with the highest economic growth rate in the world, they have driven HE expansion (with selected excellence), the building of a middle class, but an increase in inequality. Trade-offs for South Africa

39. Trilemma of trade-offs: England, China, SA & Africa Source: Busemeyer (2015). Graphic by CHET/Francois van Schalkwyk. 39

40. 40 1.Very few of the poor (deciles 1-5) ever get to university. 2.A government committee (Swartz) recommended free higher education for this group. The unanswered, but very important question is where the poor income-line is drawn. 3.There is considerable evidence that poor students on NSFAS grants are passing courses, but completion rates are very low. The implication is that the poor are in a “revolving door” situation: admitted to HE but don’t graduate which leaves them “poor with debt” – and some are clearly angry (Cloete, 2016a). 4.Barr (2004) advised the UK government that poor students should not get loans; to pay back loans keep them in a disadvantaged position. 5.There must be a much larger range of reputable post-matric alternatives (TVET college, employment/internships) so that university is not the “only” path out of poverty. If this pressure is not relieved it will destabilise the whole university system. 6.Poor students must be better selected, and when admitted, better supported, not only financially and academically, but also socially (for example REAP). 7.If HE is totally free, SA will have an exacerbated European problem: students linger in HE and do not complete their studies. Almost free higher education for the poor

41. 41 1.The middle class can be conceptualised as the “actual” middle class which is between R20 000 to R60 000 p.a. (about 31% of households) or the “relatively affluent” middle class (R200 000 000 - R500 000) (Visagie 2013). 2.To qualify for NSFAS (less than R120 000) means that most of the actual middle class could be classified as “poor” – and they account for 75% of the population. 3.The “missing middle” consist of one group who are not poor enough for NSFAS but not affluent enough to qualify for bank loans and the Relatively Affluent who qualifies for bank loans, but they can often only afford one child at university – SA’s own one child policy. 4.Worldwide, the children of the working class (artisans, teachers, nurses, police) have a strong aspiration to, and considerably greater success at university than the poor. Neither the economy nor the ruling party can abandon this group. 5.With parents in employment, middle class students have a better success rate, and better labour market opportunities. This group needs loans or deferred payments which, in addition to UK and Australia, is under serious discussion by a number of OECD countries (Bakarat 2015). The different middle classes

42. 42 1.Traditionally the banks are involved in this sector, but the US has abandoned the banks (even the Republicans supported Obama on this) for direct loans (NSFAS). In the US the high costs of bank loans could pay for more than a million extra students. Most interesting is China: Rural Credit Cooperatives (middle class invest at higher interest rates and poor borrow for 10-15 years) This system is supported by the China Development Bank which is not a commercial but an economic development bank (Jingyi 2004). After Tiananmen Square, China linked universities and students tightly into economic liberalisation and the development model. 2.Which of the groups receive the most government investment depends on the economic model. Investment in the affluent middle class will increase the high skill pool faster and drive growth through consumer demand, but would increase inequality and political instability. Favouring the poor and non-affluent middle class will decrease inequality and promote a broader social and economic development, but reduce new knowledge production. This is the difference between Cuba and China. The banks and the middle class

43. Inadequate revenue supplementation: Between 2010 and 2014 the collapse in NSFAS debtors repaying their loans has cost NSFAS (and government) an estimated R3.7 billion in uncollected recoveries. (Treasury 2015) 43 NFAS: Actual loan recoveries vs normal growth trajectory

44. 44 1.Only 4% of households earn more than R500 000 p.a. 2.Contrary to popular belief, in countries like Norway and Germany, it is not the rich who pay for free HE, it is the middle class with more than 95% employment and almost 100% pay taxes. The combined wealth of Motsepe, Rupert and the Gupta’s will not fund NSFAS for more than a few years. 3.It is this elite group who are “born” into HE (over 80% attend) and is most successful – free HE will advantage them even more. 4.In SA, HE fees are a bargain for the elite; only affordable for the relatively affluent middle class with loans and debt, and totally unaffordable for the actual middle class and the poor. 5.Fourie (2015) proposes a fees sliding scale that ranges from R150 00 for the elite to R15 000 for the poor. 6.An important question to be determined is what percentage of their budgets the government, business and civil society must contribute to HE. Differentiated affordability (Elite)

45. 45 1.In SA competing models of functions/roles for HE:  Redress (race and poverty) vs development  Undergraduate access vs knowledge economy skills 2.In the deteriorating economic climate, HE is increasingly seen as individual mobility, not as key to economic growth 3.In a study on HE systems that have successfully linked HE to development, the main feature was a PACT that link HE to the economic development model (Pillay 2011). 4.Politically in SA there is conflict between modernisers who push the development agenda and traditionalists who see HE as redress 5.In government there is a similar divide between DST and DHET  DST focus: development, knowledge economy, postgraduate  DHET focus: redress (institutional, individual), undergraduate (Cloete 2016b). 6.During the crisis many VCs acted like competing spaza shop owners during township protests: protect your own shop, call the police and try and get the government to sort out the problem. 7.Currently both government and university leadership seem too fragmented to form a PACT. Leadership and a pact

46. 46 1.In an overview of 8 flagship universities in Africa, it was concluded that thee interrelated factors need to be in place in order for universities to make a sustainable contribution to development: 1.agreement amongst the major actors (pact) about the role of universities in development; 2.academic core capacity in universities; and 3.coordination between the policies and activities of government, universities and external groupings (Cloete et al., 2011). 2.Braun (2008) in an international review concludes that ‘policy coordination of knowledge policies across ministries and agencies requires a minimum agreement amongst key political actors across ministries involved in HE, science, technology and innovation and those responsible for economic development and planning. 3.In SA the lack of coordination in knowledge policies have been lamented by a number of studies (Stumpf 2011) Currently there are at least four different (independent) groups investigating the fees crisis. 4.The structure most strategically placed for this key coordination function is the National Planning Commission in the Presidency. Pact

47. 47 1.Cloete N, Mouton J & Sheppard C (2015) Doctoral Education in South Africa. Cape Town: African Minds. View online.View online 2.Cloete N (2015) Flawed ideology of free higher education. View online.View online 3.Cloete N (2016a) Free higher education: Another self-destructive South African policy. View online.View online 4.Cloete N (2016b) For sustainable funding and fees, the undergraduate system in South Africa must be restructured. South African Journal of Science (March/April). View online. View online 5.Langa P, Wangenge-Ouma G, Jungblut J & Cloete N (2016). South Africa and the illusion of free higher education. View online.View online 6.Pillay P (2011) Linking Higher Education and Development. Cape Town: CHET. View online.View online Selected CHET publications

48. Nico Cloete | ncloete@chet.org.za Charles Sheppard François van Schalkwyk www.chet.org.za