UCT insourcing: Not squaring the circle

You can chose your friends but you can’t choose your family. For the University of Cape Town this means including non-core staff at costs you cannot afford, while excluding existing family that enhance the core function of the family.

Dr Max Price, vice-chancellor, used the tired and twee cliché of the “UCT family” to employ the previously outsourced, non-core staff as employees of UCT. These new employees previously employed by six contracted companies to provide services such as cleaning, grounds maintenance, transport and protection.

Cynicism suggests that becoming members of the “UCT family” has more to do with much improved benefits than a feeling of not being family.

Price says in his letter to staff and students of 21 June 2016: “The insourced employees have been an integral part of UCT’s functioning for some time already, through the long-term services they have provided to UCT … But they have not been UCT employees, and often expressed the view that they have felt excluded from the UCT family even though they feed our students, clean the intimate spaces we work and live in, protect us, advise visitors who approach them about where to go, and have always felt enormously proud to be working at UCT.”

As of 1 July 2016 1 000 new employees will be employed by UCT.

The inevitable question is what is this going to cost UCT over and above what it is currently paying the contracted companies?

Price adds: “There is no doubt that the insourcing project has added to the university’s challenge of financial sustainability. We have budgeted for a once-off capital expenditure of R 40 million from our reserves and an annual recurrent operational cost of approximately R 68 million.”

In other words, insourcing is going to cost UCT far, far more than outsourcing.

Price explains why the university can’t really afford insourcing. “It is worth repeating that the key driver of our current austerity measures has been the declining level of the state subsidy allocation to UCT over the past five years. In each of those years, the government subsidy fell short of our cost increase by approximately R 50 million; thus cumulatively we are now approximately R 250 million short annually. We partially compensated for these deficits by increasing fee income well above inflation, but we remain with an ongoing shortfall. In addition, the 0% fee increase for 2016 has created further financial challenges.”

In other words, in a time of increasing and worsening austerity, UCT is going to employ non-core staff on a basis that is much more expensive than is currently the situation.

The 2014 Report on Outsourcing at UCT was commissioned by the UCT Council. The report estimates that the total additional costs of insourcing all services at the university would be R 58 million a year, with additional upfront asset purchase costs of R 68 million. The university will not be able to absorb this cost without raising student tuition fees significantly, and this would impair student access to UCT.

In addition, the report found that the efficiency of the services is a strong argument for retaining the outsourcing policy, as it allows the university to concentrate on its core focus of teaching and research.

It bears reminding that the government subsidies to universities fell further after 2014 and students succeeded in getting a 0% increase on fees for 2016. The opinion expressed in the 2014 report is even more pertinent now.

However, UCT succumbed to the ongoing demands of students, outsourced workers (people who were not UCT employees) and trade unions. We know what changed, and it wasn’t the rationale or the numbers.

Contrary to this, however, on 19 May 2016, Price announced that staff (including academics) could face retrenchment, if a set of austerity measures being carried out by the university fail. The latest measures are incentivised early retirement and incentivised voluntary separation or resignation. (Groundup, 26 May 2016, UCT Aims to Shed Staff by Ashleigh Furlong).

“We do not yet know whether it will be possible to achieve all required savings through natural attrition and voluntary processes. If it becomes necessary at a later stage to restructure to achieve efficiency and meaningful savings, we will then follow due HR process in consultation with the unions,” said Price.

Business has learnt a very harsh lessons when trying to reduce costs by offering early retirement and voluntary retrenchment as an austerity measure: the people you want to lose least are the first ones to volunteer. They are the staff who are employable elsewhere. Suddenly the most able disappear together with the institutional memory.

The three unions representing staff have expressed their “deep concern” with the process offering the two voluntary option. They claim that the “impression of consultation” given by Price is incorrect as the input that the unions provided “appears largely to have been ignored”.

“Other initiatives are under way to address financial sustainability” and that these have not yet had time to be fully realised nor have “other creative ways of saving without reducing staff numbers” been fully explored.

Dr Kelley Moult, the vice president of the Academics Union, explained that these other initiatives were being implemented by each faculty.

Academic staff morale is at an “all-time low”. It was “hard to know” how many of the staff would apply for voluntary retirement or separation.

The unions also take issue with the lack of guidelines on who should be considered for the options as well as how staff should know if their department is particularly in need of making cutbacks.

Other issues raised by the unions include a lack of time for staff to consider the offers and “the impact of redistributed work on staff workloads”. The cut-off date for taking packages was 30 June.

One of the three unions is the National Education Health and Allied Workers Union (NEHAWU). NEHAWU fought to have the outsourced workers insourced. Members of NEHAWU facing the possibility of retrenchment are well within their rights to feel bitter about NEHAWU effectively working against them. Clearly what NEHAWU gives with one hand it takes away with another.

Offering early retirement and voluntary retrenchment to the core skills of your business, while adding non-core employees to your staff when costs are rising and revenue failing, is economically illiterate.

A university is not a family; it is a complex institution whose prime function is to provide society with graduates in a vast number of disciplines, and to keep alive robust and meaningful debate on the issues affecting society.

It is a pretentious fantasy to regard a massive educational institution as a family. Anyway, most families are, more or less, dysfunctional.

Sara Gon is a Policy Fellow at the IRR, a think tank that promotes economic and political liberty. Follow the IRR on Twitter @IRR_SouthAfrica.