Johnnesburg - The zero percent student fee hike announced this week is already causing a headache about where the money will come from, with the trade union movement calling for a wealth tax to fund university education while the government considers a surplus in the sector education and training authorities.
This after President Jacob Zuma on Friday caved in to university students’ demand for a zero percent increase in student fees.
Cosatu spokesman Sizwe Pamla says they have always supported a wealth tax. The high net-worth individuals who can afford luxury goods such as yachts obviously have enough to give away, he says. These people owe their lifestyle to the country and it is only fair that they plough that back, he adds.
Pamla is of the view that parastatals need to be reconfigured so that the money owed to Eskom, for example, by universities and hospitals, can be discounted and the surplus made by these institutions diverted to other needs.
“Universities are sitting with cash reserves that some of them have invested elsewhere. These accounts must be audited in a transparent process so that it is not just the vice-chancellors and university councils who are privy to this information.”
Pamla was echoing the view of the SA National Civic Organisation (Sanco), which on Friday proposed a wealth tax to fund education, saying statistics indicate that there are 530 000 high earners who earn on average R1.2 million a year.
The organisation’s spokesman, Jabu Mahlangu, said: “If a wealth tax of 2 percent of their salaries can be taxed‚ it will raise an amount of R12bn to fund free education.”
The ANC appeared not sure where the money would come from. “There is a process that has been set in motion to explore that issue further,” said spokesman Keith Khoza.
SA Students’ Congress (Sasco), for example, has proposed an educational levy. They argue that graduates fill up the ranks of business and contribute to their knowledge base but private business has been very slack in terms of contributing to the tertiary education fund.
SACP spokesman Alex Mashilo called on business to come to the party. He said: “The private sector is the single largest consumer of our education and skills output. It controls 70 percent of the economy. If you compare their contribution to their consumption of the ills, it is quite disproportionate.
They must come to the party, failing which political pressure must be brought to bear on them to do so.
“Treasury can then work out how the rest of the money will be raised because the budget allocated to the Ministry of Higher Education and Training is never enough to fund all their urgent programmes.”
Khoza said: “Treasury is also looking into ways of raising money for this cause. We cannot pre-empt the discussions until all the stakeholders come together.”
According to Khoza, some universities are making a profit and put these in reserves. “These reserves must be spread evenly to help other universities (in need).”
The DA does not think a wealth tax is the way to go, given that the tax base is already small.
“Wealth tax is not the only solution,” according to DA national spokeswoman Refiloe Ntsekhe, who says they have proposed a raft of measures as solutions to the money problem.
The money lost in the Vodacom shares, the budget for VIP Protection, the Russian nuclear deal and “the money we keep dumping into Brics” are just some of these, Ntsekhe says.
She laments the fact that SAA is continuously being bailed out by the government instead of being allowed to compete with its peers globally. All the non-performing parastatals should be privatised and the money raised be pumped into funding tertiary education, she says.
However, government officials believe the money can probably be covered by a surplus in the sector education and training authorities – sitting at more than R5bn – but any move towards free tertiary education would have to come at the expense of other government programmes or a tax hike.
That was the word from Treasury officials who briefed MPs after Finance Minister Nhlanhla Nene had delivered his medium-term budget policy statement (MTBPS) on Wednesday while students taking part in the #FeesMustFall protests clashed with police inside the parliamentary precinct.
In normal circumstances Nene would have been able to draw on the contingency reserve – funds sitting in the fiscus that have not been allocated to any government programme, precisely to deal with unforeseen eventualities like this.
But the R5bn that Nene had in the kitty this financial year has been swallowed up by the public sector wage increase and, whereas he had pencilled in reserves of R15bn and R45bn for the following two years, this has been slashed to R2.5bn and R9bn respectively.
Nene made it clear that the country’s finances were stretched as it is resulting in a slippage in debt consolidation targets which has triggered concerns that – despite valiant efforts to rein in spending – he might struggle to meet even the revised time frames to stabilise debt, especially if economic growth disappoints once more.
For now there is a short-term problem – how to fund the deficit created by the zero percent increase in fees, bearing in mind that university expenses will have risen since the last increase, thanks to inflation and wage increases for staff.
Cutting costs, where possible, would help. But the figures are not that daunting in the context of a projected R1.3 trillion total government expenditure for 2016-17.
Business Report columnist Pierre Heistein calculated a zero percent increase would leave Wits University short of about R136m, so the total requirement for all the universities is unlikely to run deep into the billions.
Briefing MPs on the MTBPS on Thursday, Treasury officials noted that funds from the national skills levy were being left unspent by the sector education and training authorities, standing at about R5bn at the time of the February Budget.
A task team had been set up even before the #FeesMustFall protests to seek ways of unblocking this “imbalance” in the system.
It would require a change to the Skills Development Levies Act, which earmarks 80 percent of skills levy funding for the Setas.
Much harder to accommodate would be a permanent free tertiary education dispensation, which would result in a structural increase in the allocation to Higher Education.
That would require either a significant reshuffling of budget allocations, at the cost of other programmes, or a commensurate in-crease in revenue collection.
This would probably take the form of a tax increase rather than a hike in the skills levy.
As things stand, the Treasury has instituted a new fiscal “rule of thumb” that limits growth in government spending to the long-term trend for GDP growth.
This is intended to keep it on an even keel and smooth out the peaks and troughs of the economic cycle.
Head of the Treasury’s budget office, Michael Sacks, said if the principle was applied correctly, government expenditure as a share of GDP would remain stable over time.
“So if we say now government spends about 30 percent of national income, the application of this principle would mean that remains stable,” Sacks said.
This would imply that an increase in the allocation for Higher Education would have to come at the cost of other programmes, or, as Nene put it in his briefing to MPs, items that had been priorities might have to be put on the backburner.
However, Sacks said the fiscal guide would be flexible enough to accommodate policies prioritised in the National Development Plan (NDP), which included the expansion of access to tertiary education.
The most likely source of a permanent increase in revenue would be a hike in VAT, considered by the Davis Tax Committee to be the most efficient form of tax.
But Nene has sounded a cautious note on tax hikes in the face of the weak economy.
That leaves the NDP as the state’s long-term strategy to meet the growing demands of the society, with Nene saying the country needed to unite behind its rapid implementation in order to accelerate growth.
If the #FeesMustFall movement is anything to go by, it has become a race against time.
Political Bureau
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