#feesmustfall: The Hurricane Matthew solution

Events of the last week have shown that the #feesmustfall is not going to go away.

Perhaps what students have not yet learned is that in a dispute, a good settlement is where both parties walk away in some pain but ready to engage again in the future. And SA’s universities have taken far too much pain already. And the time has come to stop. At least for 2016.

The last hope for 2016 is that perhaps finance minister, Pravin Gordhan, can pull a rabbit out of the hat in the Medium Term Budget Framework Speech ‘MTBF” on 26 October 2016.

Some say that the MTBF is just a ‘mini budget’ that reports on the first 6 months of tax collections. No ways! In the context of the #feesmustfall crisis the MTBF is perhaps more important than the main budget speech in February.

The MTBF provides a detailed projection of how government is going to spend its money in the medium term. So, if we go back to MTBF 2015 an additional R16billion was allocated to higher education over the MTBF period. That’s about R5billion a year.

The R5billion has been allocated primarily to NSFAS and we can only hope that will make a meaningful difference to the poorest of the poor, some 300 000 students, by 2017. But not even national treasury maintains that this is nearly enough.

The prospects for 2016/17 MTBF are not good. There is not a hope in hell that tax collections for the 2016/17 will make the target back in the 2016/17 budget tabled in the February 2016 national budget speech. There will have to be a downward revision in the MTBF 2016/17. And probably an upward projection in debt forecasts.

I have little hope that the downward revision will be contained at R10 billion as has happened in nearly every MTBF since the 2009 financial crisis. We are probably looking at R20 billion at least in the 2016/17 MTBF!

The rating agencies are not going to applaud. And all this will be added to the list of reasons to justify downgrade to junk status being considered for South Africa’s 2016 Christmas present.

The bottom line is that the current tax base cannot come to rescue the #feesmustfall crisis. Not without a tax increase for 2017. But who is going to pay?

Currently personal tax collections are increasing by less than 10%pa, and that’s less than the budgeted 12%. So a personal tax increase in 2017/18 is already almost inevitable.

Similarly VAT collections are behind target. And COSATU has ruled out any possibility of the rate being increased beyond 14%. Not even for the  #feesmustfall cause!

Corporate tax collections are looking a bit better. But the SA headline rate of 28% is already too high by international standards. And corporate tax rates will probably fall internationally once BREXIT is finally implemented.

The rest of the tax base is to0 small to carry the load of #feesmustfall. Maybe.

Hurricane Matthew: My short-term solution

Watching the aftermath of Hurricane Matthew in the USA we see emergency measures kick into action, importantly with immediate emergency funding.

Well, if we do not have an emergency on our hands in the #feesmustfallcrisis you can call me Alfons.

Allocating funding to the department of higher education will only result in a bottleneck and another year of #noprogress. In the current climate universities could burn by the time they sort it out.

National Treasury needs to intervene by making emergency funding available directly to the universities during 2017.

But how would this proposal be funded?

Skills Deevelopment Levy ‘SDL’ is currently levied at 1% of payroll an collects R17 billion per annum. SDL collections, unlike other taxes, are earmarked for spend on skills development only. Today the spend is administered through the SETA systems and NSFAS.

The SETAs are in desperate need of review if their mandate is to be extended beyond 2018. But that’s another story.

By increasing te SDL rate to 1,5% from 2017 the State could raise another R9billion. The receipts should bypass the department of higher education and be paid as emergency funding directly to the universities, prorata to student numbers or some other simple equitable and transparent model.

This would allow universities to immediately get going on the #feesmustfall crisis. And the emergency funding could continue until the department of education and NSFAS have got their act together.

Thus the private sector could make an immediate contribution through an already established and efficient SDL collection system. That’s fair enough and better than an increased corporate tax rate. The private sector is after all the biggest beneficiary of our graduates.

NSFAS and the department of education would be given the time to find a sustainable solution.

And students on every campus can immediately determine the priorities of how the emergency funding package is to be applied according to their differing priorities an subject to guidelines established by National Tresury.

QED? I doubt it!

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