A solution to the student fees funding crisis at hand

New model for tertiary education funding

“We have a solution to the student fees problem,” says the former CEO of FirstRand Siswe Nxasana, now the driver behind a public-private partnership working around the clock behind the scenes to create a new funding model to resolve South Africa’s tertiary education funding crisis.

With students rioting across the country and arson the order of the day, few problems are more pressing but with a new solution in sight the mayhem and destruction is becoming all the more senseless.

In an interview with our sister site Moneyweb, Nxasana, who is also currently the chairman of the National Student Financial Aid Scheme (NSFAS), says this new funding model will be piloted at six to eight universities and a number of technical education colleges next year and will offer free education to those that currently cannot afford it.

Discussed with stakeholders

It has been discussed in a series of meetings involving all of South Africa’s stakeholders, including student groups.

In a nutshell the model aims to provide funding for students whose parents or caregivers earn less than R600 000 a year. This is considerably more than is currently available through NSFAS and would include students that fall into the so-called “missing middle”.

Like NSFAS, this funding will be designed to cover tuition and living expenses. However, the model goes further in that it will provide students with academic support as well as life-skills and social skills.

Skills shortage will be addressed

It is also designed to address SA’s acute skills shortage – there will be increased focus on funding those qualifications that are in demand, as well as scarce skills, says Nxasana in the Moneyweb interview.

“What we are trying to do is resolve the skills supply / demand imbalance that exists in the country.”

Strong relationships between business and institutions of learning

Business will build stronger relationships with institutions to ensure that the students produced are employable. This means ensuring that curricula are relevant and of high quality.

“With a few exceptions mainly in professional qualifications, this has hardly been done before,” says Nxasana.

Behind the scenes, the private sector has seconded people who are working to ensure the model is financially and economically robust and sustainable.

A team of actuaries, seconded by the banks and insurers and managed by the Association for Savings and Investment SA, is crunching the numbers to determine a viable funding model. The model, which seeks to offer fully subsidised education to the very poor, will include both loans and grants for the “missing middle”, with the amount to be repaid determined by income after students graduate.

Funding will come from existing and new streams

Ultimately it will include NSFAS funding, as well as private sector funding, donations and debt funding. The new B-BEE codes suggest that private sector firms voluntarily contribute 6% of payroll, up from 3%, to skills funding. On the debt side, the model envisages various levels of debt funding including social bonds, DFI funding and commercial funding from long term investors such as pension funds.

Nxasana is loath at this stage to put a figure on the size of the funding pot, or the number of students that the system will be able to fund – although he has a rough estimate in mind.

Public policy, tax and legislative requirements

A team from Webber Wentzel is working to fulfil the public policy, tax and legislative requirements that such a model will demand.

Systems requirements

Software developers are busy with the systems that will allow the financial scheme to run efficiently and reach across all of South Africa’s universities and colleges. Nxasana reels off at least five systems that require development. For instance, means testing which is a manual process and open to fraud and abuse needs to be automated. A student management system is essential. “We need to link with university and college portals to monitor student academic activity. If we are going to provide support, we need to know immediately that a student is not coping.” Call centres, debtor management systems – these all need to be developed.

“These are massive undertakings,” says Nxasana. “They cannot be completed in a few weeks.”

Rollout 2018

Assuming all goes well with the pilots, Nxasana is hopeful that the full funding programme can be rolled out in 2018. Initially it will run parallel to NSFAS and as and when NSFAS is capacitated, the two will merge.

Read the original article on Moneyweb