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Free Higher Education requires multi-stakeholder collaboration

Budget 2018/19 - Deloitte Expectations

Stakeholders can collectively pioneer initiatives for alternative funding sources for higher education, while also identifying efficiency

With the recent announcement by President Jacob Zuma to provide free education for students from poorer households, there have been growing calls for clarity on how the funding gap can be bridged.

Over the past decade, our institutions of higher learning have grappled with a rapidly changing landscape. They have faced decreasing government funding, increase tuition costs, rising student debt and little or no increases in fees. To further exacerbate the above challenges, students are demanding fast access to information and services,and there is more competition from international institutions and enhanced reporting requirements.

These pressures, coupled with the recognition that the status quo is unsustainable, are fuelling innovation across the higher education sector. This is because every institution in the sector has a stake in making higher education more accessible, affordable, and relevant.

Whilst government is investigating alternatives on how free higher education can be funded, universities, the private sector and individual taxpayers can together explore innovative ways to reduce the cost burden on the fiscus. Apart from identifying efficiencies that can immediately reduce the cost of higher education, stakeholders can collectively pioneer initiatives for alternative sources of funding.

One Western Cape higher education institution has focused on increasing its own revenue source, known as a third stream income, in order to keep tuition fees at a more affordable level. This is an income source that comes on top of the government subsidy and student fees. It consists of income from research grants, consultancy fees, donations and other revenue generated from engagements with broader society that are not traditionally part of the core academic streams of teaching.

Additional income can also be generated by better utilising university infrastructure such as renting out sportsgrounds and lecture halls for entertainment and sporting events. Internationally, universities boast tremendous intellectual resources which typically generate income streams by selling research and short courses, on top of traditional government subsidies and ever-increasing tuition fees.


The benefits of focusing on third stream income can be observed in the disparity in tuition fees as a percentage of total income. According to university financial statements, the institution mentioned above was able to reduce tuition fees to 20% of total revenue because the university substantially increased its third stream funding. This is low compared to other local universities whose tuition fees range from 28% to 32% of total income in 2014.

In 2015 there were 2.2 million students enrolling in post school education and training, half of whom attended higher education institutions. Institutions of higher learning do not have sufficient student places for the volume of prospective learners or enough accommodation.

According to the report of the Commission of Inquiry into the Feasibility of making Higher Education and Training Fee-free in South Africa (Heher Commission), released in November last year, there is a severe shortage of student accommodation across the higher education and training sector. The commission recommended that a public-private partnership approach be adopted by government in order to address this dire infrastructure requirement.

The infrastructure challenge can be tackled with more innovative means than bricks and mortar alone. Stanford University has piloted a blended learning initiative offering online videos combined with classroom based learning. Innovations such as these can accommodate more students and reduce the dependency having bums on seats in classrooms, thus offering more cost effective and accessible channels of learning. With blended learning, student performance can be effectively monitored and teaching personalised for students. Early interventions can be offered to students who are not coping with either the workload or the material.

This can positively influence the very low graduation rate of 15 percent among undergraduate students in South Africa. At Purdue University in the United States, students who enrolled for blended technology had a 21 percent higher graduation rate. For innovations like these to bear fruit, internet connectivity must be ubiquitous and affordable.

Universities may also reconsider their service delivery models, with many functions duplicated across faculties and schools, functional areas and departments. Serious consideration should be given to shared services where cost benefits will immediately be recognised. A simple move away from paper based administration and assignment submissions will mean a significant saving in paper, printing and postal costs too. For instance, one of South Africa’s largest universities reportedly spent R240 million on printing and R80 million on delivery - a cost that could be dramatically reduced through digitalisation.

Just as iTunes®, Netflix, Kindle, and other innovations have disrupted the music and media industries, new developments are starting to impact higher education at its core. In much the same way these technologies and business models changed the way we interact with and consume everything from books and television to movies and other media, so, too, can we expect them to disrupt education. Deloitte University’s “Reimagining Higher Education” report in 2014 found that 70% of US students were already undertaking tertiary education through a non-traditional, digitalised or online source.

The Heher Commission recommended a cost-sharing model of government guaranteed income-contingent loans (ICL). Through this model commercial banks issue government guaranteed loans to students and it is repaid after graduation once a specific income threshold is attained.

However, with student debt levels of over R700 million at eight of our largest universities alone, it is untenable for the most vulnerable youth to be caught in a cycle of debt at the very starting line of their careers. With the excessively high unemployment rate, the risk to the government who bears the secondary liability in the recommended ICL model is extensive.

If private citizens elect to contribute to free education - which does not take the form of a loan - in their personal capacity, an option exists to co-ordinate collections through SARS. Cognisant of the ostensible trust deficit that exists between the public and private sector, this fund would need to be independently managed and transparently administered by a board composed of competent public and private sector individuals.

For example, the income tax rate has recently increased by three percent for the highest earning individuals. Private citizens might elect to donate a portion of their income to this external fund. If all 19 million individual taxpayers opt for a similar contribution ranging from between R550 – R1000 a year, this would equate to a pot of over R10 billion that can be contributed towards the cost of higher education. Similarly, if the one million tax paying companies donate just R1000 per year, they will contribute a further R1 billion to this independent fund.

Another avenue that can be explored is crowd funding and this can be achieved thorough utilizing a trusted platform where people across the world could fund students. We should consider afore-mentioned best practices, as we are not alone in seeking ways to provide affordable education. This will bring us a step closer to realising free higher education without negatively impacting economic growth. Free education needs a collaborative effort.

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