The affordable education loan option
Johannesburg - South Africa’s top universities, especially the formerly white institutions, must tap into their reserves to ensure access to quality tertiary education for millions of youth.
This is according to students and education activists who believe there should not be a student who is financially excluded from university as long as they have performed well in their studies.
Most of South Africa’s universities have investment and endowment funds in their reserves, which are largely used for infrastructure developments.
Universities also have income from government subsidies and student fees, while many also get income from investments from their interests in wholly-owned private companies.
Institutions that own notable property include UCT, which owns the land on which Groote Schuur Hospital is built.
The institution has a 99-year lease with the hospital, of which 12 years are left.
Stellenbosch University also has business interests in media, technology, property and sports-related companies. Some of the companies are wholly owned by the university, while it holds shares in others.
The University of Pretoria owns at least three companies, some of which have subsidiaries abroad.
Wits University has interests in a number of commercial ventures, including the privately owned Mediclinic Hospital group and Bidvest Wits Football Club, among others.
According to its latest annual report, Wits had R1.7 billion in investments by the end of last year and R602 million in the bank.
Higher education institutions currently receive only 12 percent of the government’s overall education budget, with the Department of Higher Education’s task team on university funding recently confirming that if they were to be funded at the world average, they would be receiving about R37bn instead of the R22bn they received in the last financial year.
SA Students Congress president Ngoako Selamolela said it was “wrong” for universities to increase their reserves and investments without them impacting on the lives of poor students.
He said the student organisation has been proposing that universities increase their scholarships and bursaries, and augment the National Student Financial Aid Scheme (NSFAS) with the the profits they make from their investments.
“These are not profit-making institutions; they are there to serve,” he said.
The Higher Education Transformation Network (HETN), an alumni association, has also lambasted universities for their deep involvement in business ventures, saying it was in essence “a privatisation of higher education”.
“We know for a fact that a lot of these universities, especially those historically white, have billions in reserves that were gained during apartheid years because they received abnormally high subsidies from the National Party government.
“With the financial challenges facing many students in this country, the state should be able to tap into those reserves and investment profits to make higher education accessible to all,” said HETN executive director Reginald Legoabe.
A 2009 report by the Centre for Higher Education Research, Teaching and Learning at Rhodes University showed that the average South African university made a third of its income from sources other than government subsidies and tuition fees.
According to the report, on average historically white universities made as much as 53 percent of their income from these sources, which typically included entrepreneurial and commercial income, income and dividends from investments, and philanthropic funding.
But several universities told The Sunday Independent this week that they would struggle to survive if they did not look elsewhere to raise funds, with diversified investments being the most viable option.
With increasingly challenging economic times, raising student fees is an unpopular decision for universities to make as it may prove the difference between access to higher education for millions of the country’s young people.
Deputy vice-chancellor for finance at Wits, Professor Tawana Kupe, said universities had to thrive on various means of generating income instead of “sitting and waiting for handouts”.
“You can’t sit and say we are going to charge more fees or demand as much money as we can from the government, knowing that there are competing priorities (from the government),” he said.
According to Kupe, universities have to rely heavily on investments and use some of the profits they make to operate and fund their infrastructure projects.
He said there was a false perception, especially from students and labour, that universities could simply lower tuition fees and increase staff wages because of the monies institutions had.
“This cash is not just money idling at the bank; it does not work like that. Most of it is money tied up in long-term investments,” said Kupe. He said the costs of running universities were constantly on the rise, especially as some of their materials like books and journals had to be bought abroad.
Deputy vice-chancellor for finance at the University of Johannesburg (UJ), Jaco van Schoor, agreed with Kupe that the money institutions get from tuition fees and government was not enough to sustain universities.
According to the university’s annual report, the institution experienced a challenging year in 2012, with tight budgetary controls, rising utility bills and tough economic conditions.
But an increase in enrolment assisted in additional income. The university had an overall income of R1.16bn last year compared to R1.03bn in 2011.
He said the proceeds made from business interests help build more lecture halls, maintain the existing ones and also assist in other academic activities.
For example, Schoor said UJ had recently used the money from its profits to employ 500 tutors for the university.
“Universities need tuition fees, investments and state subsidies to be able to provide quality education and operate,” he said.
UJ had R10m in investments and joint ventures, while its available financial assets were R2.6bn.
But South African universities are not alone in looking elsewhere to raise funds and investments that can sustain them in the long-term.
Some of the US’s richest universities, including Harvard, are increasingly looking towards Africa and other emerging economies to widen their investment scale.
According to Harvard’s tax filings for the year ending June 30 2012, the university had investments of about $198m in sub-Saharan Africa, but this represented just 0.5 percent of its total investments across the world.
William McLean, who manages Illinois’s Northwestern University’s $7bn investments, was recently quoted saying that growth, consumer spending, improved governance and disposable wealth were major attractions for US universities to Africa.
Unconfirmed estimates in the US were that 10 percent to 15 percent of these institutions were already investing in Africa, and up to 30 percent may be seriously looking for deals.