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South Africa Economic Update: Increasing South Africa’s tertiary enrollment requires rebalancing resources


South Africa Economic Update: Increasing South Africa’s tertiary enrollment requires rebalancing resources

South Africa Economic Update: Increasing South Africa’s tertiary enrollment requires rebalancing resources
Photo credit: ITU

Reforming tertiary education in South Africa could reduce inequality of opportunity, boost growth

Enhancing South Africa’s socio-economic inclusion through increasing equitable access to the country’s tertiary institutions in a weak economic environment will require comprehensively improving the country’s post school education and training system, according to a World Bank report released today.

While South Africa’s new education policy aims to equip poor and working-class citizens with the skills needed for today’s job market, the latest economic update for the country shows that its implementation could negatively affect the national budget.

Announced in December 2017, the policy offers free tertiary education to 90% of academically eligible students, to meet the national goal of doubling Post School Education and Training (PSET) enrollment by 2030. However, the 12th edition of the South Africa Economic Update: Tertiary Education Enrollments Must Rise asserts that this will put a strain on the budget, and examines how it can be achieved without compromising education quality and fiscal sustainability.

“There is general consensus in South Africa on the need for a skills revolution, which will enable its youth to participate in a skills-hungry economy and make the country’s economy more competitive in a world that is constantly being reshaped by technological progress,” said Paul Noumba Um, World Bank Country Director for South Africa.

“Notwithstanding the long term need to fundamentally improve the basic education system, investing in human capital by enrolling more students in universities, TVET and community colleges as well as improving the quality of educations is a major imperative.”

“The importance of acquiring skills to enable South African’s youth to find jobs and earn higher wages thereby alleviating poverty, income inequality and joblessness, makes the policy to enroll more students in tertiary institutions a must, but in an environment of weak growth this is a challenging proposition which requires making some difficult trade-offs,” he continued.

The report reviews the impact of the new National Student Financial Aid Scheme (NSFAS), a plan to provide grants instead of loans to pay for education and all associated costs, such as accommodations, transportation and books. With nine out of 10 prospective students eligible for support, the report notes the tertiary education plan will exert pressure on an already stretched fiscus, limiting South Africa’s ability to both expand enrollment in institutions of higher learning and improve the quality of education.

As South Africa strives towards fostering economic growth, and addressing its most pressing development challenges of poverty, inequality and unemployment, the update predicts South Africa’s growth to accelerate to 1.3% in 2019 and 1.7% in 2020, driven by the implementation of the structural reforms announced in 2018. For the country to grow sustainably faster, it will be key to address its skills gap, which perpetuates inequality and fuels policy uncertainty, according to the report. This requires enrolling more students in PSET, the report says, as well as raising graduation rates and improving the relevance of skills taught to labor markets’ needs.

The study finds that the previous student financial aid system was insufficient to cover the financial risks and costs faced by many students pursuing PSET studies, especially Technical Vocation Education and Training (TVET), discouraging enrollments and academic performance. Under the new policy, the report notes that the demand for PSET and TVET could increase the demand for university studies by 23% and for TVET by 88%.

“We see that more than 90% of potential PSET students could benefit from the new National Student Financial Aid Scheme, making it progressive as it would reduce income inequality but would also put a huge strain on the fiscus, equivalent to about one  percentage point of GDP, leaving fewer public resources to increase admission capacity without compromising education quality, said Sébastien Dessus, World Bank South Africa Program Leader.

Simulations done for this report highlight the mixed impact of the new financial scheme for implementing the free higher education policy has on inequality, as well as its high macroeconomic cost, making it unlikely for South Africa to meet its national goals of doubling PSET enrollments by 2030. The report argues that South Africa will have to make trade-offs between allocating budgetary resources to support more students to enroll in tertiary institutions on one hand, and expanding tertiary admissions capacity and improving the quality of education on the other to meet this goal.

“Our analysis shows that spreading enrollment growth across a variety of PSET institutions and delivery modalities both public and private can achieve higher enrollments in a financially manageable way from a public resources perspective,” says Dessus. “Non-university institutions such as TVET, community colleges, and distance education institutions usually have lower per-student costs than universities, especially research-intensive ones”.

The report suggests that South Africa could increase enrollments more rapidly and reduce inequality faster by rebalancing budgetary resources and policy reform attention towards interventions that improve the quality of education, while simultaneously expanding PSET admissions capacity.

It also suggests comprehensively improving South Africa’s PSET system by strengthening the quality of education in TVET, community colleges, distance education institutions and historically disadvantaged universities. It points to international experience which shows that countries that face acute public resource constraints cannot achieve rapid growth in enrollment by following the traditional model of building and funding new public universities with budgetary resources.

The report offers internationally tested policy options that have sustainably increased PSET enrollments through: i) diversifying the PSET sector from a mostly government funded-university centric model; (ii) encouraging private sector participation through the adoption of simpler accreditation rules similar to that for public institutions; (iii) strengthening quality assurance mechanisms; (iv) improving resource mobilization; and (v) ensuring greater equity in supporting students.

Implementing such options would be fiscally possible, the report says, by progressively targeting financial support to the poorest students, while extending income contingent loans to more affluent students. As the quality of TVET and community college education improves, the report notes that the high private rate of return to PSET would make such proposal equitable, sustainable, rewarding and safe for new students’ cohorts to enroll in universities, TVET and community colleges.

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