**2. The South African higher education landscape**

The focus of this chapter is on the public higher education system of South Africa. The post-school education system of South Africa can be divided into universities and Technical and Vocational Education and Training (TVET) colleges. The university

#### **Figure 1.**

*Composition of students in post-secondary education in South Africa according to institution type, 2020. Source: [2].*

*Perspective Chapter: The Role NSFAS has Played to Facilitate Poor Students in South Africa DOI: http://dx.doi.org/10.5772/intechopen.109664*

sector is divided into 26 public universities – 11 general academic universities, 9 comprehensive universities (an amalgamation of traditional universities and technikons), and 6 universities of technology. When we refer to HEIs in this chapter, we refer to the 26 public universities, unless noted otherwise.

In 2020 there were 2,005,408 students enrolled in post-school education and training in South Africa [2]. Of these students, 1,094,808 students were enrolled in the 26 public universities. There are also a further 132 accredited private universities attended by 219,031 students. This means that 83.3% of university students attended public institutions. There were 50 public TVET colleges with a total intake of 452,277 students. There were also 9 public Community Education and Training (CET) colleges with 142,538 students, while 96,754 students attended 126 private colleges (The numbers of the CET and private colleges were not audited.). This means that 84.3% of the total number of post-secondary students attended public institutions, and 77.2% attended public universities and TVET colleges. The percentage distribution of these students is portrayed in **Figure 1**.

## **3. Financing of higher education in South Africa**

To understand South Africa's education system, it is important to note that separate schools for different racial groups were introduced more than a century ago. Previously, South Africa was divided into four provinces – Transvaal, Natal, Orange Free State, and the Cape Province – and in 1907 compulsory education was introduced for white learners only [3]. This established a culture of learning among white learners, and they (or their parents) understood the value (especially measured in future earnings potential) of education better than the other racial groups. Because the government did not provide sufficient educational resources to *non-white* learners and because these learners' parents did not have the financial capacity to pay for additional resources, *non-white* racial groups did not receive the same quality of education. As a result of the introduction of compulsory schooling, the number of South African learners increased by 92% between 1910 and 1920 [3]. This increase was mainly driven by the increase in white pupils, which represented 57.9% of all learners in schools in 1921.

It is therefore no surprise that in the decades before the first democratic election in 1994, educational funds were spent very unequally between racial groups. One way to illustrate this is to use the total amount that was spent on education per racial group and divide it by the population numbers in the 5–24-year-old cohort groups.2 **Figure 2** clearly illustrates the unequal distribution of funds and the privileged position of whites. In 1920, for example, 97.9% of educational funds were spent on whites. Although per capita spending was still very unequal at the end of the period, the per capita spending on whites started to stagnate from around 1970. In 1970 74.9% of educational funds were spent on whites, but this percentage decreased to 37.2% by 1990. This unequal spending pattern is important to bear in mind when we look at how things changed after 1994 and why the introduction of NSFAS was necessary.

To evaluate the trends in public expenditure on higher education, three criteria are normally used, namely public financing of higher education in terms of total

<sup>2</sup> For the period portrayed in **Figure 2**, learners and students of different racial groups attended different institutions. Therefore one can compile a series of educational expenditure per racial group. After 1994 that is no longer possible as education at all levels is not provided exclusively on a racial basis.

**Figure 2.** *Per capita educational spending on 5–24-year-olds: 1910–1991. Source: [1].*

educational expenditure, in terms of total public expenditure, and in terms of Gross Domestic Product (GDP). All three ratios increased after the elections in 1994, reached a peak before the end of the previous century, and then went down until about 2010. In the years after that, there is an increasing trend in higher educational expenditure, especially since 2018 when President Jacob Zuma announced that all post-secondary education will be free (see **Figure 3**). Clearly, the disconcerting trend of a smaller percentage of educational funds or total state expenditure or in terms of the GDP being spent on higher education turned around over the last couple of years.

Although the abovementioned indicators initially show an increasing trend in public higher education expenditure after 1994, this expenditure did not keep up with the increase in student numbers. This resulted in a decrease of 36% for universities and 43% for technikons (before technikons and certain universities merged into comprehensive universities in 2003) in the real state appropriation per weighted full-time equivalent (FTE)3 students between 1987 and 2005 [7]. This trend continued during the period 2000–2009, when real state appropriations decreased by 1.1% per annum per FTE student [8]. Due to the decrease in the real value of per capita state subsidies to universities, these institutions were forced to increase tuition fees to still be financially sustainable. Between 1987 and 2003, tuition fees increased by 49% at universities and 85% at technikons in real terms. During the decade 2000–2010, class fees per FTE student increased by 2.5% per annum in real terms [7]. Calitz and Fourie [9] also

<sup>3</sup> The aggregation of the standardised credit values of the different modules for which a student is supposed to enrol in a particular year is the full-time equivalent value. A full-time student taking all the prescribed modules of a course for a specific year will have an FTE value of 1.0. A student taking all the prescribed modules, but is also repeating some failed modules or doing some extra modules, will have an FTE value of more than 1.0. A student taking only a few modules will have an FTE value of less than 1.0.

*Perspective Chapter: The Role NSFAS has Played to Facilitate Poor Students in South Africa DOI: http://dx.doi.org/10.5772/intechopen.109664*

#### **Figure 3.**

*Public expenditure on higher education in terms of total educational expenditure; total public expenditure and in terms of GDP: 1994–2019. Source: [4–6].*

indicated that higher education fees consistently increased by between one and five percentage points more than the headline inflation rate for the period 2009–2015.

While universities were expected to become more inclusive in terms of attracting more diverse students, the inevitable cost increases became a prohibitive factor for poor students to enter the system. Those who did became saddled with huge debts, and a solution had to be found to relieve the financial situation of poor students.

### **4. The National student financial aid scheme (NSFAS)**

#### **4.1 Background**

Since the early 1990s, when South Africa embarked on a reform process towards becoming a democracy, the problem of outstanding student debt has been threatening the survival of some HEIs. Because many students from poor communities struggled to afford higher some form of financial assistance had to be given to those students. This was also an effort to create equal access to higher education and to prevent finances to be the stumbling block that kept poor students out of the system. This was also an effort to eradicate the racial imbalances that characterised the student body of South African university students (which was the result of legal restrictions as well as the unequal division of educational funds, as illustrated in **Figure 2**).

The National Commission for Higher Education advocated for a national financial aid scheme in its report of 1996 [10], a view that was fully endorsed in the Education White Paper 3 [11]. The Tertiary Education Fund of South Africa (TEFSA), established in 1991 by the Independent Development Trust, was contracted by the Minister of Education to administer this new scheme. The first NSFAS awards were made in 1995, but they could not satisfy the huge demand. For example, in 1996, only 70,000

of the 223,000 students that applied for loans received NSFAS funding. The NSFAS was formally established by an Act of Parliament in 1999 (Act no 56 of 1999) and in 2000, TEFSA was formally changed to the NSFAS. The NSFAS was also allowed to collect donor funding that then could be distributed to needy students through loans or bursaries.

The goal of NSFAS is to ensure that all South African citizens will be able to afford higher education. The state is the main financial contributor to NSFAS, but they also receive funds from local and international donors. It is the task of NSFAS to distribute these funds to needy students in the form of loans or bursaries. Only South African citizens registered at a South African university and that is studying towards a first qualification are eligible for NSFAS awards. They can receive NSFAS awards if they are studying for a second qualification only if that qualification will enable them to practice a chosen profession. In the past, only households earning less than R130 000 per annum qualified for NSFAS awards, but since 2018 this has been extended to include households with an annual income below R350 000.

To ensure that the correct poor students receive NSFAS funds a means test must be completed. The gross family income must be calculated as well as the number of dependents in a household, whether it is a single-parent household and whether any other dependent in the household is currently studying at a higher education institution. It must also be calculated whether that household will be able to contribute anything towards the costs of study of the student. An interview with the student must be undertaken to further determine the potential of the prospective student.

These criteria demand high levels of administrative capacity, and because TEFSA/ NSFAS had trouble handling this administrative burden, they requested the financial offices at the HEIs to handle it on their behalf. The universities were then responsible to report on the progress of NSFAS students and to inform the NSFAS board if students discontinued their studies. This changed in 2018 when the process was centralised, and all applications are now centrally handled by NSFAS itself.

The spread of NSFAS funds was determined by the demographic profile of the student body at each university as well as the cost of study (for each programme) that differs between HEIs. To calculate the average full cost of study (FCS) the tuition fees, as well as the boarding fees, are taken into account. When calculating the weighted number of disadvantaged students (WDS) at each institution, black students had a weight of 3, coloured students a weight of 2, and Indian students a weight of 1. White students did not enter this formula. The WDS and FCT at each institution were used to calculate each institution's NSFAS allocation. This means universities with more *non-white* students (especially black students) received more of the funds than universities where the majority of students were white. However, once an institution received the NSFAS funds, race played no role in determining who gets the NSFAS awards. The poorest students should receive the NSFAS awards, irrespective of race.

HEIs were supposed to use the formula below to determine the size of the NSFAS award (although most HEIs experienced that the maximum amount available through the NSFAS scheme was not enough to cover all the costs of a student):

NSFAS award costs bursaries expected family =− − contribution. (1)

One of the disadvantages of this system was that because the HEIs with the most *non-white* students received the most NSFAS funds, students were forced to follow the money. Hence, affordability was a problem for poor students who wanted to attend

#### *Perspective Chapter: The Role NSFAS has Played to Facilitate Poor Students in South Africa DOI: http://dx.doi.org/10.5772/intechopen.109664*

the historically advantaged institutions, because these institutions received less of the NSFAS funds than their historically disadvantaged counterparts. In 2003, before the higher education landscape changed with the merging of several HEIs, more than 60% of academic research in South Africa was done at five of the previously advantaged institutions (the University of Cape Town, University of Pretoria, Witwatersrand University, Stellenbosch University and University of KwaZulu-Natal) [7]. Attending the previously advantaged institutions carries with it a certain prestige and certain courses like medicine were only taught at these institutions. Even in 2020, the five institutions mentioned were responsible for more than 50% of accredited journal articles [12]. With the distribution of NSFAS awards now being centrally determined, the money can follow the students. In other words, once a student receives NSFAS funding they can attend the institution of their choice. South African universities have different tuition fee structures, with the previously advantaged institutions having the highest fees. A drawback of this new centralised approach is that students from poorer backgrounds may still find it unaffordable to enrol at these institutions.

Some events in recent years quite dramatically increased the funds that the government channelled to higher education via NSFAS payments. At the end of 2015, unrest broke out on virtually all university campuses as part of the *#FeesMustFall* campaign. Students protested about the high tuition fees and demanded free education. The government then announced that HEIs were not allowed to increase tuition fees for 2016. After renewed protests in 2018, Jacob Zuma, the then-president of South Africa, announced that higher education will be free. In practice, however, this was an empty promise because free higher education is not possible for a developing country like South Africa, and this policy was never fully implemented. Regardless, based on the number of students helped financially via NSFAS awards and the amount of money spent on NSFAS payments, it becomes clear that a renewed effort was made to make higher education affordable to a broader spectrum of students.

#### **4.2 Number of students helped, and amount of funds spent on NSFAS**

**Table 1** provides a breakdown of the number of university and TVET college students that received financial support from the first recipients in 1995 until 2020. We will not focus on the TVET students, but they are included for greater accuracy. It is clear from the table that the number of university students that received financial NSFAS support increased substantially over time. It started with a meagre 40,000 students in 1995 and expanded to more than 500,000 in 2020. However, the trend can be broken up into phases that are clearly illustrated in **Figure 3**. There was an initial increase in the number of university students receiving NSFAS funding from 1995 until 2011 when 216,874 received funding. After that, the number of university students receiving NSFAS funding decreases until 2015, when only 178,961 students received NSFAS awards. It is therefore not surprising that the *#FeesMustFall* campaign started that year.

The funds paid out in NSFAS awards increased from R154 million in 1995 to R7.2 billion in 2015 (see **Figure 4**). Although this seems like a huge increase, one must consider that these are nominal values and do not take into account the huge increase in educational costs during this time period. It is also clear from **Table 1** that more emphasis was placed on the financing of TVET students (who receive 100% bursaries) rather than university students, and in 2015 no less than 235,988 TVET students received NSFAS financial support. However, one may get the wrong impression by just looking at the student numbers. In 2015, the average NSFAS award size was R40 199,


*\*Until 2007 no distinction was made about the recipients of NSFAS awards, but it was almost exclusively university students that received the awards. Then another category FET and agriculture college recipients was created. Currently it is classified as TVET payments. Source: [4, 13–17].*

#### **Table 1.**

*NSFAS awards paid out: 1995–2020.*

but on average only R8 878 was paid per TVET student. About 80% of NSFAS expenditure in 2015 was still spent on more expensive university education.

After 2015 the number of university students receiving NSFAS funding increased substantially – from almost 179,000 in 2015 to more than 504,000 in 2020 (an increase of 181%), while the funds paid out to university students increased from R7.2 billion to R30.8 billion over the same period. In 2020, 83.2% of NSFAS funding was spent on university students and the average size of an NSFAS award was R61 562, while the corresponding amount for TVET students was only R23 825 (This TVET

*Perspective Chapter: The Role NSFAS has Played to Facilitate Poor Students in South Africa DOI: http://dx.doi.org/10.5772/intechopen.109664*

**Figure 4.**

*NSFAS students and amount (millions) paid out 1995–2020. Source: [4, 18–23].*

amount is artificially high due to the unexplained decrease in TVET students that received NSFAS funding in 2020).

In total, 4,172,650 university students received NSFAS funding to a total value of R144.5 billion over the period 1995 to 2020. From 2007 to 2020 an additional 2,428,148 TVET students received NSFAS funding of R28.1 billion. In total, about 84% of NSFAS funding was paid out to university students over the period 1995 to 2020. As stated before, further analysis will be done for the situation of only university students.

**Figure 5** provides a clear picture of what happened to state funding for NSFAS. When the scheme started in 1995 it budgeted a mere R40 million for NSFAS. This increased steadily over the years and by 2015 (when the *#FeesMustFall* campaign started) the state contributed R9.2 billion towards NSFAS. From then on there was an almost exponential increase in the state's budget for NSFAS. The amount of R14 billion that was budgeted for NSFAS in 2016 was an increase of 51.8% from 2015. In 2022, R46.1 billion is budgeted towards NSFAS, translating to an annual increase over the period 2015 to 2022 of 25.8%. In total, R248.7 billion was paid by the government towards NSFAS since its introduction in 1995, with more than 82% of that amount being paid since 2016. The government's intention to make higher education more affordable for needy students through NSFAS awards is indisputable.

Although the percentage split between racial groups and sexes differed between years, on average about 54% of NSFAS recipients were women and 46% were men. Approximately 93% of recipients were black, 5% coloured, 2% white, and 1% Indian (NSFAS website). This is hardly surprising, as this distribution closely correlates with the demographics and poverty distribution in the country.

#### **4.3 Repayment of NSFAS loans**

The NSFAS functioned as an income-contingent loan (ICL) and bursary scheme. Loan recipients only started repayments once they were employed, and their earnings

#### **Figure 5.**

*State budget for NSFAS 1995–2022 (R million). Source: [4, 18–23].*

were above a certain income threshold. The principle is simple: It is a student that gets the loan/bursary, but a working person (mostly graduates) that repays the costs. A NSFAS recipient only starts repaying a loan once they earn more than R30 000 per annum, and then only 3% of the income. This percentage increases on a sliding scale to a maximum of 8% once their income is R59 300 per annum. The initial award that a student received was regarded as a 100% loan. For every 25% of the courses passed a student can convert 10% of the loan into a bursary. If students are successful with all their courses, 40% of the loan is converted into a bursary. Interest accrued on loans at approximately 2% above the previous year's consumer price index, but since 1 April 2008 it has been pegged at 80% of the repo rate as determined by the South African Reserve Bank. This policy changed in 2018 and most NSFAS awards are now – after President Zuma announced in 2018 that higher education will be free – given as bursaries.

The repayment of loans after recipients left the HEIs seems to be the biggest problem that ICL schemes experience internationally and NSFAS is experiencing the same problems. Once students leave the higher education system, NSFAS has great difficulty linking these debtors to their first place of employment. It is even more difficult to track students that fail and drop out of the system. These problems have persisted even though employers are obliged by law to report when they employ NSFAS students. In theory, linking ex-NSFAS students to NSFAS headquarters and the South African Revenue Service should be a simple procedure to monitor the repayment of loans. However, theory and practical experience are very different, and as experienced elsewhere in the world, this is a much more complicated process than in theory.

Despite these problems, **Figure 6** shows that the payments received from former recipients of NSFAS awards increased substantially over the years from R30.3 million in 1998 to R719.4 million in 2011. However, it is not clear whether NSFAS'

*Perspective Chapter: The Role NSFAS has Played to Facilitate Poor Students in South Africa DOI: http://dx.doi.org/10.5772/intechopen.109664*

#### **Figure 6.**

*Repayment of NSFAS loans (R million). Source: [13–17, 24–34].*

records are up to date and whether they know exactly who owes them what. It is thus unclear whether South Africa's experience is better or worse than with other ICL schemes. NSFAS revised its debt book, which may explain the decrease after 2013. They made improvements to collect more repayments on loans after 2015, but that dropped again after 2018. The latter decrease in repayments may be explained by the fact that the majority of current student funding is provided as bursaries, along with an unwillingness of students who previously received NSFAS awards as loans to repay them.
