Nobel laureate Stiglitz backs fees commission findings

Johannesburg - Nobel laureate Professor Joseph Stiglitz has thrown his weight behind the Heher Commission's education proposal. 

He told government, business and labour leaders at a multi-sector discussion at Wits University on Saturday that income contingent loans - the model proposed by the Heher Commission of Inquiry - have the highest potential to increase access to higher education. 

Zuma released the Heher Commission report on Monday which recommended that banks create income contingent loans, backed by government, for students who can’t afford to pay university fees.

Stiglitz, a former economist at the World Bank, was invited the speak at the Wits discussion focused on how to generate an inclusive economy.

“Income contingent loans given the constraints are the best way of ensuring opportunity,” he said.

The renowned economist believes income contingent loans are a fair way to lower the barriers to entry in universities, as graduates who earn higher incomes will pay back more. He said this can be done “without taking other resources away from development”.

However, he warned that South Africa shouldn’t pin its economic hopes entirely on allowing more people into the higher education system. 

“You can’t correct problems of inequality, from the beginning, at the university. It needs to be throughout society.”

The economist gave the example of Ivy League universities in the US, such as Columbia University, where he is a professor.

He said that despite the prestigious intuitions making use of ‘needs blind admissions’ (students from households earning below a defined ceiling receive free tuition), only about 8% of all students' parents are in the bottom income category.

Stiglitz's address was heard by prominent business leaders and politicians.

Wits vice-chancellor Adam Habib opened the discussion up by telling government, business and labour leaders that universities should enable conversations across divides.

“We need to have difficult conversations, because we are at the precipice; if we don’t fix this problem [higher education], all individual stakeholders will lose out”.

The inter-ministerial committee on higher education and Treasury are still studying the Heher proposals. The Presidency denied reports that Zuma is circumventing budgeting protocols to reallocate R40bn to provide free higher education in 2018.

Manufacturing

Stiglitz also cautioned against manufacturing being seen as a silver bullet to address South Africa’s weak economic growth rate, which is projected at 0.7% in 2017.

“The growth strategy that worked in East Asian countries is not going to be the sole basis of growth in Africa”.

Deputy President Cyril Ramaphosa placed the manufacturing sector at the centre of his economic vision to create one million jobs in five years when he unveiled his plan in Soweto last week.

Stiglitz explained that manufacturing has been a victim of its own success.

“Productivity has overtaken demand, globally employment in manufacturing is declining… if you’re going to have inclusive growth, (you) need to have a broader strategy than manufacturing.”

He said Africa will need 500 million jobs in the next 20 to 25 years, and demonstrated how manufacturing as a percentage of GDP has declined in Africa from 15% in 1981 to 10.5% in 2016.

Stiglitz advised that manufacturing should instead form part of a “multi-pronged development strategy”, which should include modern agricultural methods and a focus on the services industry which he described as the “growth sector of the future”.

He pointed to neighbouring Namibia as an example of a country which modernised its economy through tourism. 

Commenting on Stiglitz's address, Trade and Industry Minister Rob Davies said the presentation is “challenging us to view manufacturing as not the only show in town”. 

His department is trying to improve beneficiation of raw minerals to reduce SA’s reliance on primary commodities - one of the key aspects of Zuma’s Nine-point Plan announced in 2015.

Several participants also raised the issue of South Africa’s political climate with Stiglitz, describing it as a stumbling block to policy direction and economic growth.

Economic Development Minister Ebrahim Patel chaired the discussion and said the varied inputs from Stiglitz and participants showed the importance of creating “a new social construct”.

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