South Africa relies on new taxes to fund fee-free higher education

Ujuh Reporter

The South African government is setting out to raise an additional R36 billion in 2018/19 financial year through new taxes partly to serve the fee free higher education promise while trying to push back a widening budget deficit.

This came out of the national budget presented by finance minister Malusi Gigaba. He said the fiscal position has been on an unsustainable path due to rising debt-service costs which threatened to crowd out social spending.

Gigaba said R57 billion has been allocated towards fee-free education.

He said government will phase in fee-free higher education and training to students from poor and working-class families.

He said all new first-year students with a family income below R350 000 per annum at universities and TVET colleges in the 2018 academic year will be funded for the full cost of study. This will be rolled out in subsequent years until all years of study are covered.

Returning NSFAS students at university will have their loans for 2018 onwards converted to a bursary.

Gigaba said “This is an important step forward in breaking the cycle of poverty and confronting youth unemployment, as labour statistics show that unemployment is lowest for tertiary graduates. Higher and further education and training is being made accessible to the children of workers and the poor.”

He added that basic education remains a key focus in the 2018 Budget. “Over the medium term, R3.8 billion allocated to the School infrastructure backlogs grant will replace 82 inappropriate and unsafe schools, and provide water to 325 schools and sanitation to 286 schools. The Education infrastructure grant is also allocated R31.7 billion over the medium term to build new schools, upgrade and maintain existing infrastructure, and provide school furniture.

“Meals will be provided at 19 800 schools for about 9 million learners each school day through the National school nutrition programme grant, which is allocated R21.7 billion over the medium term. 39 000 Funza Lushaka bursaries, disbursed via the National Student Financial Aid Scheme, at a cost of R 3.7 billion for prospective teachers in priority subject areas such as mathematics, science and technology will be provided over the next three years.”

Gigaba said new tax measures raise an additional R36 billion in 2018/19, mainly through a higher VAT rate and below-inflation adjustments to personal income tax brackets. Secondly, the expenditure ceiling has been revised down marginally from what was presented in October. However, the small revisions are underpinned by large reductions and reallocations.

Over the next three years, the spending framework includes:

  • Expenditure reductions approved by Cabinet amounting to R85 billion.
  • An allocation of R57 billion for fee-free higher education and training.
  • Additions to the contingency reserve amounting to R10 billion.

Taken together, and supported by a strengthened growth outlook, these interventions will stabilise public finances. The consolidated deficit is projected to narrow from 4.3 per cent of GDP in 2017/18 to 3.5 per cent in 2020/21.

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