ANTHEA JEFFERY: What universities need to ensure SA has a productive workforce - Business Day

Anthea Jeffery

The stated priorities of the government of national unity (GNU) that was formed after the May elections are growth and jobs  — precisely what SA most requires. However, neither goal can be achieved without a better skilled and more productive workforce.  

Universities should be steadily expanding the pool of professional and other crucial skills, but most have dismal throughput rates. What reforms should the GNU be making to overcome this important barrier to growth? 

Much of the problem lies in the current university funding formula. This was cavalierly announced by former president Jacob Zuma in December 2017 as part of his bid to beat Cyril Ramaphosa to the ANC and national presidencies.   

Zuma’s announcement of “free” university education for all students with annual household incomes below R350,000 brushed aside the National Treasury’s concerns about rapidly rising public debt. It also contradicted what justice Arthur Heher and his commission of inquiry into the funding of tertiary education had recommended earlier that same year.  

In 2018 the Treasury nevertheless allocated about R57bn to free tertiary education over three years. A good part of this revenue was obtained via a one percentage point increase in the VAT rate, introduced in April 2018. This required all South Africans, including the poor, to pay a significant price for the fee-free university education of the relative elite. In addition, millions of young people were encouraged to believe that free access to university would bring them credible degrees and well-paying jobs. Those hopes have largely remained unmet. 

“Free” education for hundreds of thousands of poorly prepared students — most of whom drop out without graduating — increases classroom sizes and erodes academic standards. It is also costly and wasteful. 

Student numbers have risen from 575,000 in 1995 to 1-million in 2023 and are set to rise to 1.6-million by 2030. But state subsidies have lagged behind increasing numbers, which helps explain why only 5,000 permanent new staff have been appointed to meet the needs of 500,000 new students.  

In addition, state schools are generally so dysfunctional that they fail to equip most students for the rigours of university study. As a result, only 18% of students graduate with a three-year undergraduate degree within three years (the “regulation period”). Completion rates within regulation periods for three-year undergraduate degrees in science, technology, engineering and maths fields are particularly low — 14% in physical sciences, 15% in computer and information sciences, 19% in engineering, and 11% in mathematics and statistics.  

Jonathan Jansen of the University of Stellenbosch commented some years ago that “the low standards of the school system had infiltrated universities. It was inevitable, for students who have to scale a low passing hurdle [can easily] obtain a so-called bachelor’s pass. It should not surprise therefore that more than half of first-year enrolments fail or drop out, and only a third of ... students graduate in five years. The main reason for this state of affairs is the poor academic preparation of incoming students.”

To compensate for this, Jansen says overburdened academic staff commonly use multiple-choice questions instead of asking students to write essays. Some disclose too much about the scope of examinations, allowing students to focus on relatively small portions of their curricula. Students unable to analyse or write coherently are consequently often pushed through.  

Solution

Instead of trying to overcome these challenges, the government has focused since 2017 on providing “free” university education for all poor students. What can be done to change the rules and help the country’s universities provide much-needed skills?  

Much of the solution lies in what the Heher commission recommended: that all university students should be funded via income-contingent loans (ICLs), to be repaid by those students when their earnings reach specified levels. However, some important modifications of the Heher proposals are needed for maximum benefit.

Requirements for university admission (the “bachelor’s pass”, as the government calls it) must be tightened up to exclude poorly prepared students with few prospects of success. Matriculants with less than a suitable university entrance pass must instead find sound training through reformed technical vocational education & training (TVET) and other colleges. This would provide most of them with more valuable skills that are in far greater demand. 

Prospective university students should obtain their ICLs from commercial banks. Loans must be sufficient to cover the full costs of study, including tuition, accommodation, subsistence and travel. No means test would apply.   

Bank loans should be made available to students in the form of vouchers that follow them to the public and private universities of their choice. Universities would then have to compete for the custom of students equipped with ICL-funded vouchers. This would help keep fees down and performance up.  

The government must guarantee the loans provided to students to reduce the risks to banks. Repayment of capital and interest, set at commercial rates, will begin when the earnings of former students reach specified thresholds. The repayments due should be collected over 20 years or so by the SA Revenue Service and paid over to relevant banks. As loans are repaid the government guarantees on them will be reduced. Loan amounts still outstanding after, say, 30 years should be written off.  

Similar ICLs work well in several other countries, according to Heher. The ICL approach is also widely seen as fair because university education is both a public and a private good. Sound university education increases productivity and economic growth, which is a public good. But graduates with skills in high demand benefit from increased earnings throughout their careers, which is a private advantage for which they should pay as their incomes rise.

Changes to government subsidies to universities are needed too. As Heher recommended, these subsidies should be increased to 1% of GDP, closer to global norms. This increase will be affordable for the fiscus once the government is no longer paying tuition fees and the like. However, this increased subsidy should be available to private universities as well as public ones, as at present. The voucher idea should also be brought into play.

Instead of the government paying subsidies directly to universities — with little regard for how well or badly they perform — state subsidies should be divided among all university students and paid to them in the form of tax-funded vouchers. Like ICL-funded vouchers, these tax-funded ones would follow students to the universities of their choice. Again, this will increase competition, encourage innovation, and give all universities strong reason to enhance their efficiency and contain their costs.   

Other reforms are needed too. All racial quotas and “decolonisation” pressures should be removed. Instead, all universities should regain the “four essential freedoms” intrinsic to their autonomy. In the classic words of US supreme court judge Felix Frankfurter in 1957, independent universities must be able to “determine for themselves on academic grounds who may teach, what may be taught, how it shall be taught, and who may be admitted to study”. 

With GNU support, those fundamentals should be restored to all SA universities.   

Jeffery is head of policy research at the Institute of Race Relations and author of the recently published paper ‘Generating Jobs and Skills for Growth and Prosperity’.

https://www.businesslive.co.za/bd/opinion/2024-11-19-anthea-jeffery-what-universities-need-to-ensure-sa-has-a-productive-workforce/