Lesedi Education Endowment Fund

1. Lesedi Education Endowment Fund

2. 11_89 Executive Summary • SA higher learning environment characterized by escalating costs, declining subsidies and inadequate funding solutions • Current state interventions are inadequate to address the underlying issues • Situation is critical and requires holistic examination to formulate a sustainable solution • 2 critical questions need to be addressed in formulating a suitable solution • How big is the funding gap to be filled? Free for all or for some? • How do we fund the higher education funding gap? • We propose a multi-pronged solution drawing on state and corporate participation, but ultimately driven by the creation of the Lesedi Education Endowment Fund • The proposal has benefits for all stakeholders therefore everyone participates • Funding to be rolled out in phased approach, prioritizing students facing greatest affordability challenges • Success will be achieved through the creation and efficient administration of a system with the committed buy-in from state, students, corporate SA and society Lesedi Education Endowment Fund

3. 3_89 Agenda Lesedi Education Endowment Fund • Review current South African higher education situation • Present our proposed solution and benefits to South Africa • What we ask of you

4. State funding for higher education has not kept pace with the cost of study and growth in student numbers University enrolments Total cost of study Government subsidy Lesedi Education Endowment Fund

5. University costs outstripped inflation from 2009 - 2015 Lesedi Education Endowment Fund No increase in tertiary education fees, result of Fees Must Fall Protests in 2015 Source: Stats SA 2008 - 2016

6. Despite growing enrolments, the system has not proportionally increased black student participation % white students with university access % black students with university access University enrolments Lesedi Education Endowment Fund Student enrolment 2000 – 500 000 2015 – 980 000 2030 – 1.6 million (NDP target)

7. NSFAS designed in 1997 as interim mechanism but has not been adapted to meet increasing fee burden High burden on qualifying families NSFAS funding not enough to cover fees Lesedi Education Endowment Fund Source: NSFAS recovery as quoted by Minister for Higher Education and Training Blade Nzimande

8. 3_85 Current state interventions do not provide required level of financial support, therefore rejected by students intervention Challenges & concerns Lesedi Education Endowment Fund Longer term, holistic solutions are required to address the underlying challenges Source: 2016 Medium Term Budget Policy Statement:

9. Current funding gap of R25B needs to be filled to ensure higher education access to all students in the system Lesedi Education Endowment Fund Funding gap could grow to R90bn by 2025 if state and Corporates maintain current funding levels Success would be a system that would ease the country’s educational funding burden now and into the future Note: Total cost includes tuition in all institutes of higher learning including UNISA based on weighted average cost per student, accommodation on and off campus, books & catering allowances; state subsidy assumed to remain at 38% of cost,

10. 3_89 Agenda Lesedi Education Endowment Fund • Review current South African higher education situation • Present our proposed solution and benefits to South Africa • What we ask of you?

11. 11_89 Designing the solution: Lesedi Education Endowment Fund • Understanding the system – How does its current design feed into inequality issues? • Free for all – Does an ‘ability to pay’ exist? • Free for some students – The rich paying their own way into social services gives them an incentive to create parallel societies • The rich are being funded by the poor • The black tax issues – Only black, poor students ever get presented with loan statements • The students are responsible for highlighting the problem – The solution crafted needs to talk to their issues and include them Lesedi Education Endowment Fund

12. 4_85 26_85 Lesedi Education Endowment Fund will be created from four major funding sources, funding initially classes 1 & 2 funding uses NSFAS Lesedi Education Endowment Fund Corporate infrastructure contributions R10bn every 5 years Tier 1 & 2 students Corporate SDL Education Levy Tier 3 & 4 Tier 5 • Annual contributions into endowment fund until fund self-sustaining through interest income • Growth in number of students covered driven by increase in class 1 & 2 growth (to a lesser extent class 3 & 4 growth) as student body becomes more representative of national demographics • Phased funding of students start with Class 1 & 2, subsequent increased coverage of Class 3 & 4 and lastly inclusion of Class 5 once fund self-sustaining Note: Skills Development Levy (SDL)

13. Parallel societies created through privatising social goods Lesedi Education Endowment Fund • Free for all vs free for the poor? – Healthcare system • South African approach – the rich pay their own way into a parallel system • Tax incentives based on 2 questions • Are you a member of a medical aid? • Did your expenses exceed 7% of your taxable income? • If yes – you get a tax benefit • Such tax benefits end up in the profits of private medical aids

14. 4_85 12_84 We propose a multi-pronged solution ultimately driven by creation of self-sustaining Lesedi Education Endowment Fund Focus of this discussion

15. 16_85 Proposed solution benefits all stakeholders; incentivizing all to participate State Corporate Family Graduates Lesedi Education Endowment Fund

16. FEES The rollout – 2017 possibilities FALL • 2017 fee increases – the R400 million shortfall conversation and the 8% problem • Current students – evaluate current students under new qualification rules (R300 000 test) • New intake 2017 – subsidy funding across the board subject to the family contributions matrix (i.e. students below R25 000 per month do not pay) • Rollout of centralised application platform – enable students to link academic status (including ranking) and funding status in advance (2018 intake) Lesedi Education Endowment Fund

17. FEES Student population split MUST FALL Lesedi Education Endowment Fund

18. Funding to be rolled out in phased approach, prioritizing students facing greatest affordability challenges More students funded over time Lesedi Education Endowment Fund

19. 4_89 11_89 16_89 3_85 Comparison – Lesedi Model vs alternatives NSFAS LESEDI Lesedi Education Endowment Fund

20. FEES Cost implications – how much can we do? FALL • Assumptions – 2017 intake; projected for 2017-2020 • Cohort size – 100 000 (out of 175 000 new intakes) • Cohort split – • Certificates – 17% (17 000) • Diplomas – 33% (33 000) • 3-year degrees – 30% (30 000) • 4-year degrees – 20% (20 000) • Average tuition cost – R40 000 – inflate at 8% to 2020 • Average full cost of study – R80 000 (2016: R74 820) – inflate at 8% to 2020 Lesedi Education Endowment Fund

21. 3_89 Agenda Lesedi Education Endowment Fund • Review current South African higher education situation • Present our proposed solution and benefits to South Africa • What we ask of you

22. 3_89 12_89 19_84 Contribution from all stakeholders is critical for success Government and national treasury have to commit towards the process… Corporate SA and civil society also have a role to play… Lesedi Education Endowment Fund • Corporate SA to • Contribute to the capital infrastructure fund • Ensure absorption of qualifying students into the working world • Civil Society to engage in driving policy change (i.e. use available channels or media) • Restore state subsidy to 50% of education costs • Abolish NSFAS and redirect current NSFAS funds to Lesedi Fund • Set up structures to ensure the education endowment fund becomes self sustainable • Incorporate the corporate/education levy within the current tax structures • Increase the skills levy from 1% to 2 % Success will be achieved through the creation and efficient administration of a system with the committed buy-in from state, students, corporate SA and society