In a recent statement, Higher Education Minister Blade Nzimande lauded the National Student Financial Aid Scheme (NSFAS) as “one of the most progressive efforts by the government to break the legacies of intergenerational poverty.” But is it? NSFAS, despite its noble intentions to democratise higher education and break generational poverty, is becoming a well-intentioned disaster.
As South Africa’s tax base is shrinking, the financial burden of the NSFAS has seen a fivefold budget increase to R47.6 billion since 2015. This is primarily due to the policy changes implemented by former President Jacob Zuma, following the #FeesMustFall movement. With the aim of the National Development Plan (NDP) to increase tertiary education enrolment to 1.85 million by 2030 in both universities and Technical Vocational Educational and Training (TVET) colleges, and with the 2024 elections around the corner, an increase in the NSFAS budget is anticipated.
Tax base not growing
Keith Engel, CEO of the South African Institute of Taxation, emphasised earlier this year in an interview with Kaya Biz that the tax base is not growing, and alternative options are few. As commendable as it may be to provide broader access to higher education, the funding source for this ambitious social programme is drying up. With tax revenues unable to keep up, the government is draining a shrinking tax base. This increasing fiscal gap threatens the long-term viability of the programme itself.
The government’s response to this shortfall has been to borrow a lot of money. With national debt set to reach R5.5 trillion by the 2024/2025 financial year, it becomes clearer that today’s educational grants are tomorrow’s burden. As the programme stretches its resources to cover living and personal care expenses for students, it’s worth noting that the costs continue to escalate. This is not merely due to the growth in the number of university and college students, but also because of the rising cost of living.
Add to this, the reported R5.1 billion lost to improperly awarded grants over a three-year period (2018 to 2021), the 157 980 “ghost students” still receiving funding, and the recent notice received by NSFAS CEO Andile Nongogo for nepotism (and the subsequent cancellation of payment service contracts), and it is clear that what we have is not a solution, it is a time bomb.
The Scheme itself is fundamentally flawed. Far from being a prudent investment in the country’s future, NSFAS is proving to be a case of bad investment, where despite the significant funds channelled through NSFAS, the quality of education remains markedly uneven. While there are pockets of excellence, the system is burdened by underfunded schools, outdated curricula, and a lack of qualified teachers. The disparities are particularly stark when rural and urban settings are compared.
However, it is critical to recognize that these issues are not the result of insufficient funds. Instead it’s the outcome of a misdirected financial strategy. Funds that could be allocated for improving educational infrastructure, updating curricula, and training teachers are instead being diverted to sustain the NSFAS model and associated corruption. As a result, educational institutions themselves are starved of the resources needed for effective teaching and maintenance.
Consequences
The consequences of this flawed approach spill over into the labour market. The result is a saturated labour market with graduates who find themselves both unemployed and unemployable. The National Minimum Wage (NMW), although intended to protect workers, inadvertently creates barriers to employment for new graduates who lack experience, thereby locking them out of the job market and perpetuating a cycle of dependency and poverty. New graduates find themselves in a Catch-22 situation: overqualified for low-paying jobs but underqualified for roles that demand experience.
Employers are now cornered into making unfavourable trade-offs. On one hand, they can hire a new graduate at the minimum wage, effectively paying a premium for inexperience. This puts strain on a business, as the productivity of a novice is rarely commensurate with that of a seasoned worker. On the other hand, they can opt for experienced individuals, leaving the inexperienced graduate jobless. Either way, the labour market suffers, as does the broader economy.
It is a noble cause to want to provide education to every South African: even more so, to see education as the way to ultimately overcome generational poverty. However, schemes like the NSFAS and policies like the NMW, instead of operating in isolation, perpetuate the cycle of generational poverty they aim to break, by leaving future generations to foot the bill while being unable to get employment. What emerges in the end, is a new generation of graduates, who despite their certificates and degrees, face increasing taxes and a high unemployment rate. They remain trapped in the very cycle of poverty that their education was supposed to help them escape. Their expectation that education would be their pathway to a better life, when coupled with other policies such as the NMW, leads to unemployment and distress.
The NSFAS, in its current form, is perpetuating rather than alleviating poverty. With fiscal constraints already central to discussions, a thorough reassessment of the NSFAS, particularly its funding and formulas for allocation, is imperative.
The question is not whether the NSFAS is well intentioned, but whether its current trajectory is sustainable. It is certain that noble causes demand more than just good intentions, they require sensible planning and effective execution.
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