28 August 2016

Dear colleagues, students and alumni,

The issues of fee increases for 2017 at tertiary institutions has become a nationwide discussion, with protests already happening on some campuses. We have been engaged in discussions in multiple forums – inside the University of Cape Town and externally – but unfortunately there is still huge uncertainty and no clear direction has yet emerged. I write to give you an update on the matter as I see it at present.

Let me first say that that education is a fundamental right. Higher education must be affordable and accessible. No student who is academically eligible should be turned away because of financial reasons. These principles have informed UCT's financial aid policy over many years and will continue to inform our policy moving forward.

UCT, in line with most other universities, as confirmed by a report of the Council for Higher Education, has determined that an 8% increase in revenue is required to balance the books. This is about 2 percentage points higher than inflation). It is higher because: the salary bill is going up above inflation (including the costs of insourcing); certain costs such as electricity (R76 million of our budget) and other utilities are increasing at nearly 10%; and all our imported purchases – such as library subscriptions, electronics and software, laboratory consumables – have been escalating at double-digit rates due to the weakening exchange rate. In short, we need an 8% increase in revenue if we are to conduct our activities at the same level in 2017 as we have in 2016.

The Minister of Higher Education called a meeting on Friday, 12 August 2016, with all the university vice-chancellors and chairs of council. Although he planned to announce a proposed fee adjustment following that meeting, the announcement was postponed and he agreed to engage with various stakeholders, including treasury, business, student organisations and civil society groups, to find a compromise with different parties helping to contribute to the increased revenue required. We also emphasised that it is councils that will determine the fee increase, while taking into account the minister’s recommendations.

Where should the increased revenue of 8% come from? The universities would certainly prefer the majority of this, if not all of it, to come from government, in recognition that there has been a chronic underfunding of higher education, which has resulted in the fees being increased over a number of years to what are unaffordable levels for many.

However, we also recognise the difficulty of the present economic situation, the risks of credit rating agency downgrades and the competing needs for public funding. Schools, for example, are not free; early childhood education is scarcely funded; technical and vocational education and training (TVET) colleges have greater backlogs than universities.

It should be noted that the funding that replaced the fee increase for 2016 was taken away from programmes for the TVET colleges, for development training programmes for unemployed youth, and from skills development.

Therefore we think that increased funding from government to universities should be complemented by increased funding from fees, where this is possible without reducing access to the poor and “missing middle” income students. We also believe that the business sector can and should make a greater contribution to funding higher education and should contribute towards the 8% increase required.

The student movements have proclaimed that they will not accept fee increases and have threatened to shut down the universities if fees are increased. This is argued on two grounds. First, university fees remain unaffordable, particularly to the missing middle who are not covered by the National Student Financial Aid Scheme . (This does not apply at UCT, which has, for six years now, implemented a financial aid system for what we call “Gap students”.) Nevertheless, it is a serious consideration on most campuses across the country. Second, it is argued that there should be a moratorium on fee increases while the Presidential Commission is considering a major review of policy, which could lead to reduced fees.

UCT suggests the following compromise

On affordability, ideally, government should find the full shortfall and fees should be kept at their current level. However, if the funding cannot be found from government and/or business, without doing too much damage to the economy and other government programmes, then UCT has suggested the following compromise: keep the fee at the same level for students from households earning below, say, R500,000 per annum, and allow universities to increase fees in real terms for students from higher-income households above that threshold.

There is no good reason why wealthy students should benefit from reducing real fees for a further year (in other words, when fees do not adjust with inflation, they become cheaper in real terms, since salaries go up at least with inflation, as do all other expenditure of a household).

The consequence of not adjusting fees for inflation for higher-income families is that the higher education system loses revenue which could be used not only to improve education quality but also to cross-subsidise poorer students. Remember that our financial aid does not only cover tuition fees: students also have to pay for accommodation, food, books etc. Whatever happens to tuition fees, those other costs go up, and so financial aid must increase to ensure that affordability for those students is maintained.

This compromise proposal will still require additional funding from government to compensate for the loss of the increase from those students below the threshold. But it will be less than would otherwise be required to cover all students, and will enable the universities that can charge higher fees to do so. This is needed so that they can supplement their more expensive financial aid systems. If there is no additional funding from government, we, the vice-chancellors collectively, see no way of proceeding without an inflation adjustment to the fees. However, the compromise suggested above can completely address the affordability issue.

The question of a moratorium until the Presidential Commission under Judge Heher reports is really a separate matter. The Commission is looking at long-term policy to fund higher education, the role of fees as one element of the funding, and whether universities should have the autonomy to set their own fees or whether this should be regulated by government. The Commission is not addressing the fee increases for 2017 or 2018.

The hearings began a month ago and the Commission is expected to complete its work by mid-2017. If the commission recommends fundamental changes to how higher education is funded, the development of new policy, consultation and budgeting required, means any policy changes will not be implemented in time for the 2018 fee determination, nor, in all likelihood, for 2019, particularly if there is a plan to move away from fees as a source of funding universities.

Clearly the universities could not sustain zero fee increases for three years in the absence of further allocations from the public coffers. By 2019, the state would have to be contributing an additional R8-10 billion annually to replace the lost inflation adjustments to fees.

I will be presenting UCT’s submission to the Commission on Higher Education on 6 September 2016. Read our written submission to the Commission. A supplementary submission will shortly be added. Anyone wishing to add comments or alternatives may email these to [email protected] and these will be added as annexures to our submission.

What’s next?

We anticipate a further indication of the minister’s thinking on 2017 fees before the end of August. The UCT Council will come to its decision independently on what the appropriate fee increase will be for our institution for 2017. The normal process will be followed: namely that the Student Representative Council (SRC) and management (after consultation) will bring proposals of fee increases (if any) to the UCT Finance Committee (UFC). The committee will consider the proposal/s and will then make a recommendation to Council.

Many students are engaged in constructive discussions on the issues. Read our own SRC members' specific position. If protests occur, we will, of course, respect all lawful protest action.

Some student groups have threatened to close institutions down and have threatened disruption and violence. We have taken this threat seriously and have put appropriate security measures in place. If there are significant disruptions to our work, and particularly to exams, or any other unlawful action including violence, we will act firmly in order to protect university operations. This may include private security or the Public Order Police if matters escalate beyond our capacity to manage them. We will do our best to ensure that the academic enterprise continues unhindered and that UCT remains open during the academic year.

Once we have greater clarity on the government’s position in regard to providing additional funding, the UCT Executive will embark on an engagement exercise in faculties, professional, administrative and support departments and with students to discuss and consult on the fees issue. This is aimed at enriching management’s perspective on fees, which will be captured in our proposals to the UFC and ultimately Council.

Much is uncertain. We will have to tackle the issues over the next months with thoughtfulness and in the best interest of our institution specifically and higher education in general. The issue of fees in 2017 may be settled over the next eight weeks, but the critical discussion on appropriate funding for the higher education sector in general and UCT in particular will continue.

Sincerely,

Dr Max Price

Vice-Chancellor

Issued by UCT, 29 August 2016