Actuaries working to find a solution to the problem of education costs in South Africa just don’t see free tertiary education as viable.

The Actuarial Society of South Africa has cautioned that while all students should be able to access funding to meet the costs of their tertiary education, a zero-fee tertiary education is unlikely to be feasible given South Africa’s fiscal and social challenges.

Actuaries are assisting key stakeholders develop a robust and sustainable tertiary education funding solution by modelling the demographic, financial and resource implications of optional policy directions.

Mike McDougall, the Actuarial Society’s CEO, says the solution to the funding crisis must take into consideration the country’s complex economic and educational environment and not be devised in isolation.

He points out that despite South Africa having one of the worst secondary education standards in the world, universities still provide some of the most sought-after and highly regarded professionals, including accountants, actuaries and engineers.

“It is these highly qualified professionals together with high-quality teachers, doctors, lawyers, artists and other specialists that are needed for South Africa to achieve the infrastructural development, economic growth and cultural relevance to avoid becoming a failed country.”

He adds that this position has been placed under severe strain as universities are expected to deal with critical funding constraints, while also having to provide many first year students with additional secondary school level education as they are simply not equipped to cope with the rigours of university education.

Although it is rarely acknowledged, says McDougall, the reality is that the gap between matric and first year university maths, for example, has widened significantly over the years.

“As a result we see some 50% of first year university students who achieved ‛A’ symbols for matric maths failing first year university maths. Without costly support from universities and private institutions, these students would not be able to progress.”

McDougall states that tertiary education is very expensive and must be paid for. “Any discussion on education funding should therefore not focus on the provision of free education, but rather on who pays for it and why.”

Three sources of funding

Tertiary education is currently funded from three sources: government funding, fees paid by students, and private funding through sponsorships and commissioned research.

An analysis of “Funding of Public Higher Education Institutions” by PWC shows that since 2000, government funding of universities has reduced from 49% to 40% and the contribution from students has increased from 24% to 31%.  The balance, which increased from 27% to 29%, is sourced from sponsorships, bursaries from university resources and funded research.

McDougall acknowledges that for many students, meeting the costs of being educated while at the same time providing for reasonable living costs ranges between difficult and impossible. This, he adds, impacts on the academic performance of these students and their prospects of ever graduating.

“It is this desperation that is driving the #feesmustfall movement. It is most unfortunate, however, that this movement has now escalated beyond raising awareness for the plight of students and has instead started hurting students by reducing teaching and learning time as well as placing examinations at risk. The senseless destruction of property will only lead to increased costs for already cash-strapped institutions.”

According to McDougall, student-led proposals often appear to focus on what is needed now to solve immediate problems without regard for the long-term sustainability of the solution.

Long-term sustainability

He cautions against knee-jerk solutions that would create expectations that cannot be met over the long term and weaken the capacity to solve the problem in a sustainable manner. These would include the tapping into capital reserves possibly accumulated over many decades by universities, once-off government allocations, or a private sector special levy.

“All financial solutions would need a sustainable capital base combined with a guaranteed flow of new money. Sustainability could come from a high-performing student loan portfolio or through generating funds from licencing patents and other research-generated funding. New money would flow from fees, donations, government subsidies and grants.”

According to McDougall, a tertiary education system requires the following elements to be sustainable:

• A robust secondary education system
• High-quality learning institutions capable of providing world-class education
• Adequate and sustainable funding that can be accessed by all students
• Incentives for students to complete their studies
• Obligation for graduates to provide a return on their education
• No perceived punishment of success through additional taxes on successful professionals
• The cost of education not be a disincentive for top-quality graduates to follow vocations in low-paying fields like education

McDougall is confident that such a solution can be achieved in partnership between government and the private sector.

“We are looking forward to working further with key stakeholders to contribute to the work being done to develop a robust funding solution for tertiary education in South Africa,” says McDougall.

This press release was issued by the Actuarial Society of South Africa.