Abandoning all fees would be financially reckless and in fact subsidise the rich, writes Nic Spaull. Rather give grants to those students in need.
Across the country, student protests have shut down universities with demands for "free higher education for all", prompting a fees commission and more recently a presidential task team of cabinet ministers to help solve the crisis.
At the root of the issue is righteous indignation about the fact that academically deserving students are excluded from university (either initially or during studies) because they cannot pay their fees or living expenses.
After overcoming countless barriers to simply get to university, the students are then excluded simply because they are poor.
This is unacceptable.
I wholeheartedly agree with the underlying principle that no student should be excluded from university on financial grounds, which is unfortunately the status quo.
Note that this is not the same as saying I think we should have "free higher education for all". I think that subsidising the richest 10% of South African households is unconscionable and unjustifiable, and "free education for everyone" is exactly that: a subsidy for the rich.
Let me explain why.
First, we have to ask: who makes it to university?
A study published last month by my colleagues Dr Hendrik van Broekhuizen and Professor Servaas van der Berg shows that of 100 children who start school, only 14 will qualify for university, 12 will actually enrol and only six will get some kind of undergraduate qualification in six years.
So when we speak about university students we are really speaking about the 12% of pupils that actually make it to university.
And who are the students that qualify? In a recent matric cohort, about 60% of those who qualified came from the wealthiest 30% of high schools (quintile 4 and 5), most of which charged fees.
And who attends fee-charging schools? Largely those wealthier students whose parents can afford the fees.
We can also look at this by race; about half (47%) of white matriculants go to university compared to less than a fifth of black (17%) and 20% of coloured matriculants.
This explains why blanket fee-free education is considered to be highly regressive or anti-poor, in contrast to a free-for-the-poor system, which is pro-poor.
The fact that children from the wealthiest households are many times more likely to get into university means they would benefit disproportionately from a blanket fee-free system.
It should thus come as no surprise that the World Bank (2014) and Van der Berg (2016) both estimate that as much as half (48%) of the university funding in South Africa accrues to the richest 10% of households. And two-thirds (68%) accrues to the wealthiest 20% of households.
As Van der Berg notes, this constitutes an "extreme bias towards spending on the rich if all students are equally subsidised".
What is the point of raising revenue by additional taxes on the richest 20% only to give two-thirds of that money straight back to them in the form of indirect subsidies to their children?
No, instead we should use all the revenue raised from the additional taxes - however much that might be - to properly fund the poorest 80% of students who manage to qualify against all odds and who really need the funding.
The next question then becomes what the best modality is for ensuring that no student is excluded from university on financial grounds.
While, ideologically, students may be demanding "free education for all", the economic environment of depressed economic growth and fiscal consolidation means that it is not easy to find an additional R60-billion of recurrent expenditure.
It is not a cop-out when the National Treasury says that it cannot simply find an additional R60-billion every year. To put this in perspective, the entire government budget of the Western Cape is R55-billion. Health, housing, education: everything.
We also need to grapple with the issue that additional money allocated to higher education is likely to crowd out other budget items like the progressive realisation of other constitutional imperatives such as universal healthcare (national health insurance) or universal housing.
Personally, I am in favour of raising taxes (the skills tax and capital gains tax) to fund poor and working-class students who are financially excluded from university. Yet we need to go further than that to cover the "missing middle".
I think a hybrid system of grants, subsidised loans and fees would lead to the largest reduction in financial exclusion, irrespective of how much is raised.
The poorest students would receive "free" education in the form of adequate grants that cover fees and living expenses. The missing middle would qualify for government-backed loans whose repayment is contingent on graduating and earning above a certain threshold (income-contingent loans), and the wealthy would pay fees, as they are currently doing.
Those students who get government-backed loans would carry little financial risk, receive subsidised interest rates and capped loan repayments that would revert only in the event that they earn above a certain threshold.
The leveraging effect of using the existing financial markets and banks means that, for example, R15-billion of additional revenue could stand surety for loans of up to R60-billion. So while it might only be possible to raise an additional R15-billion - through a 1% rise in the skills levy, for example - one could ensure that no students are excluded on financial grounds.
This is not politically sexy or glamorous, and doesn't have a catchy hashtag (yet), but it does grapple with the budgetary realities we face as a country.
It is not at all clear to me why the different student movements are insisting on free education for everyone (including the rich) in spite of all the evidence that this would be fiscally irresponsible and socially regressive. Subsidising the rich wastes precious tax income that could otherwise have supported more poor and working-class students.
Furthermore, if we can shift the conversation from an ideological (but unworkable) "free education for all" to a pragmatic "funding for all", we will be taking a big step in the right direction.
Dr Spaull is an education researcher at the universities of Johannesburg and Stellenbosch and is the Thomas J Alexander Fellow at the OECD. He is on Twitter @NicSpaull