Zuma's fee free call slated as cheap politics, hailed as bold

Johannesburg - President Jacob Zuma's announcement on fee free higher education on Saturday has been met with shock and slated as cheap politics.

In an extensive statement Zuma announced that the government will subsidise free higher education for poor and working class students.

He said in the statement that the definition of poor and working class students will now refer to "currently enrolled TVET Colleges or university students from South African households with a combined annual income of up to R350 000" by the 2018 academic year.

Old Mutual economist Tinyiko Ngwenya said the announcement came as a shock and questioned its timing. "It seems to be his swan song," she said.

"We are in a very difficult position where we have to plug the R50bn deficit in the February Budget Speech, while trying to cut expenses by R25bn. It’s going to be very difficult to raise taxes, especially when tax compliance was low.

"This decision certainly does not help us with Moody’s who have already placed us on a credit watch. It is quite early to say too much about this, as this decision first needs to go through various inquiries and Parliament before it is implemented."

Cosatu's Matthew Parks called Zuma's move "cheap politics", saying it's "a tragic, last minute, desperate attempt at popularity in the hope of swaying delegates towards Nkosazana Dlamini-Zuma".

He told Fin24 by phone that Zuma made the announcement without knowing where the money would come from.

"By the looks of things and from Finance Minister Malusi Gigaba’s responses it is clear that even he does not know where the money to fund this is going to come from," said Parks.

Parks said if Zuma was serious about fee free education, he would have called a meeting between the stakeholders - government, universities, businesses, student associations and unions. Instead he made this rushed announcement on the eve of the elective conference.

Parks warned that this knee-jerk reaction has consequences.

"For example, universities still have to pay lecturers and staff. They still have to cover residence expenses. They still have to pay for text books. So making this announcement without proper consultation and planning is a very rash thing to do."

He said Gigaba can possibly find the money through raising income and company tax; by adjusting the tax bracket to lower than inflation, etc…but right now, it’s obvious that there is no definite plan.

"This decision should have been open, inclusive and free of politics. It is important to note that this plan also becomes more affordable when there is the political will to cut the 78 member cabinet and to stop corruption and looting."

Managing director and partner of Goldman Sachs in South Africa, Colin Coleman also questioned the affordability of fee free education.

“Given the huge fiscal constraints on South Africa, one questions the ability of the State to make room within the fiscal ratios set out in the medium-term budget statement which need to be evidenced in the February Budget Speech."

Coleman explained there is “very little space” in the Budget without considering free education. This announcement means there will be significant trade-offs.


Reprioritising budget

On the other hand, Professor Malegapuru Makgoba, deputy chairperson of the National Planning Commission (NPC) said  the country can afford free higher education, it is just a matter of reprioritising the budget.

The NPC made presentations to the Fees Commission earlier this year where it highlighted the importance in investing in the future of South Africans, especially the youth.

"Free higher education is important in ensuring a credible democracy. It is a step to ensure South Africa’s children can be competitive in the 21st century," he told Fin24 by phone on Saturday.

Makgoba said that government’s Inter-Ministerial Committee will have to make the calls on which areas in the budget should be reprioritised.

Noting Gigaba’s mini budget in October, Makgoba explained that both health (NHI) and higher education should be top priorities.

“A developing democracy is underpinned by a healthy and educated population. These two areas are non-negotiable especially given that the South African population is mostly youth. The youth must not be relegated to second-class citizen [status].”

When asked how investors and rating agencies may view the announcement, Makgoba said: “I don’t think that rating agencies and investors can deny investing in people is what will drive the economy.”

He congratulated Zuma for making a "bold announcement" on Reconciliation Day.

Zuma's announcement of free higher education lacks substance and is deliberately vague on what is needed to implement it, Cas Coovadia, managing director of the Banking Association of SA (Basa).

"In light of the state of public finances announced by Minister Gigaba in October, it is difficult to reach a different conclusion than that it amounts to nothing less than a further empty promise and another failed delivery," Coovadia said in a statement.

"While a response to the commission can be welcomed, the president has failed to provide any clarity on how the entire scheme will be funded from what is an already stretched fiscus."

In his view, it is unfortunately a way of fooling South Africans by adopting unaffordable populist policies in the name of the poor without the ability or even the political will to deliver.

UPDATE: National Treasury said in a statement issued late on Saturday afternoon that it notes the announcement by the Presidency and is in the process of reviewing the details of the higher education proposals, as well as possible financing options.

Treasury said the proposal will also be considered by the Ministers' Committee on the Budget (MinComBud) and the Presidential Fiscal Committee. Any amendments to existing spending and tax proposals will be announced at the time of the 2018 Budget.

* SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.