CAPE TOWN – A key message of recent Medium-term Budget Policy Statements (MTBPS) has been that we must do more with less. This is because of weak economic growth that has impacted on tax revenue collection.
The February 2019 Budget estimated that the revenue shortfall in the previous fiscal year was R42.8 billion. Some economists expect the revenue shortfall in this fiscal year to be near R60 billion, so a possible target for belt-tightening may be the funding of the National Student Financial Aid Scheme (NSFAS).
“Weak economic performance and residual problems in tax administration have resulted in large revenue shortfalls,” the Budget Review stated.
Dr Adrian Saville, the chief executive of Cannon Asset Managers said the government is quickly running out of time and options to address the country’s challenges.
“At the time of February’s Budget, real growth in gross domestic product (GDP) was projected at 1.5%, up from 0.8% in 2018. However, the economy unexpectedly shrank by 3.1% in the first quarter of 2019, and although a rebound was recorded in the second quarter, we now expect real GDP growth for the year to come in at an underwhelming 0.6%. The difference between the forecast and actual economic growth figure translates into a tax receipt shortfall of some R60 billion for the tax year ending March 2020,” he said.
The NSFAS's purpose is to subsidise the tertiary education of poor South Africans who cannot afford the fees at one of the 26 public universities or 50 technical and vocational education and training colleges (TVET), although only 10% of applications for NSFAS help is for TVET places.
The government has set aside R80 billion for NSFAS for the next three years to fund applicants who can prove they come from a family with a combined household income of not more than R350 000 a year, or not more than R600 000 a year if the applicant has a disability.
The NSFAS was put under administration in August 2018, and higher education, science and technology Minister Blade Nzimande has extended this to August 2020.
Professor Jannie Rossouw from the Economics Department at the University of Witwatersrand said belt-tightening had to take place across the board and tertiary education funding could not escape this fiscal reality.
“There are so many demands for increased expenditure on the fiscus that it is difficult and problematic to single out one sector for a differentiated treatment. All government departments will have to cut expenditure in line with the National Treasury's guidelines of 5, 6 and 7%, respectively, over the next 3 years,” he said.
Without addressing the weak foundations at the primary and secondary school levels, the government’s policy of free tertiary education is likely to deliver disappointing results according to a working paper from the International Monetary Fund (IMF).
This is the conclusion by Montfort Mlachila and Tlhalefang Moeletsi in their paper entitled: "Struggling to Make the Grade: A Review of the Causes and Consequences of the Weak Outcomes of SA’s Education System".
"The central message is that throwing money at education problems does not unconditionally lead to better outcomes," the authors stated.
Dawie Roodt, the chief economist at Efficient Group said that he favoured spending more on the foundation, rather than the apex of education.
“I think revenue targets will be reduced. I think revenue will be R60 billion below budget. I would prefer that the allocation to tertiary education be cut while more emphasis should be put on primary education. But the MTBPS is not the forum for this to happen anyway. Such changes only happen in the actual budget in February,” he said.