Emerging Evidence on Student Funding: A Case of a South African Historically Disadvantaged Institution

Abstract Decreasing real value in fiscal allocations to higher education is crippling the sector’s ability to effectively respond to its broader social and economic transformation mandate enjoined in the South African Constitution. Improving student access, retention, and throughput rate are leading priorities of the Department of Higher Education and Training (DHET) to achieve this mandate. Student funding, therefore, has been a shared responsibility of both the private and public sector since the dawn of democracy. However, the COVID-19 pandemic has significantly changed the status quo, especially with eroded income bases for most businesses and households. Despite recovering financially, the priority of the private sector has been to maintain stability and regain market share. How sustainable is student funding for historically disadvantaged institutions (HDIs) in the post-COVID epoch? The study uses descriptive analysis of quantitative data of registered first-time entering students (FTENs) at Walter Sisulu University (WSU) for 2021 and 2022 to decompose the funding dynamics and further quantify the size of FTEN debt. The study shows that about 17 per cent of the FTENs do not receive funding and that 99 per cent of the funded population are catered for by the National Student Financial Aid Scheme (NSFAS). The remaining 1 per cent is catered for by non-governmental organisations (NGOs), local municipalities, and some government developmental entities. The study also shows that the size of FTEN debt incurred yearly is above R60 million and is likely to increase as the real value of government financial support decreases. The study proposes a stringent mobilisation of private sector participation, through policy commitment, to student funding to improve access.


Introduction
One of the most glaring legacies of the COVID-19 pandemic is a massive erosion of the income base for a considerable number of households and businesses across the globe.This follows the global implementation of strict lockdowns meant to curb the spread of the pandemic.It is now over a year since the lockdown regulations were lifted but the bruises of its devastation are still visible and felt in most sectors of the global economy.To this end, governments across the world have introduced drastic fiscal adjustments to prioritise the fight against the impacts of the pandemic.In South Africa, this has led to reduced budget allocations to some expenditure components.
The emergence of the COVID-19 pandemic coincided with government's reinforced efforts to respond to the twin questions of access and equity in the higher education (HE) sector as key pillars of the broader social and economic transformation mandate.Through the Constitution of the Republic of South Africa (1996), the democratic government committed to improve access to education as a fundamental weapon of transformation.Despite the significant improvement made with participation rates for previously disadvantaged groups, access to the HE sector remains low to meet the demands of a competitive global economy (Ayuk and Koma 2019).One of the leading factors affecting access to higher education is the lack of a comprehensive and adequate funding model that caters for the growing demand for higher education.The rising and exorbitant cost of education because of inflation and the decreasing real value of fiscal allocations to the education sector are also leading factors that contribute to the sector's inability to achieve its transformation mandate (Bozalek and Boughey 2012).Most universities have increased tuition and accommodation in 2023 by 5.1 per cent and 7.1 per cent, respectively, to match the figures proposed by DHET (McLean 2023).
The demand for student funding in the HE sector has grown exponentially over recent years.In 2021 the DHET reported to be funding 63 per cent of the registered undergraduate students in South Africa, up from 56 per cent in 2020.The significantly growing student debt also paints a glaring picture of a funding crisis that requires urgent intervention.Student debt was R16.5 billion in early 2022, and of the students eligible for graduation, 120 000 owed a collective R7 billion in tuition fees to universities (Banda and Lusengo 2023).
How sustainable is current student funding in HDIs in the post-COVID epoch and what are the alternatives?HDIs in South Africa refer to a cluster of universities that were established during the apartheid regime to cater for Africans and non-white populations.Although access for the marginalised population groups has opened in the former white institutions since the dawn of democracy in South Africa, HDIs continue to serve and cater for previously disadvantaged groups.This study applied a descriptive analysis of quantitative data of registered first-time entering (FTENs) students at Walter Sisulu University (WSU) for 2021 and 2022 to decompose the funding dynamics and further assess private sector participation and involvement in student funding.The study builds on and augments the cost-sharing framework discussed in Johnstone (2006).Trends in student funding for 2021 and 2022 are discussed against the total number of registered students from the respective period to show the funding gaps.These data are analysed and discussed against the National Student Financial Aid Scheme's (NSFAS) funding methods and subsequent limitations.The NSFAS is a government student bursary or loan that receives its funding bursary from and reports to the DHET.It is a loan and a bursary because 40 per cent the student's general loan is converted into a bursary if the student passes all modules registered for in a given year.The private sector's role in student funding is discussed and analysed.The private sector is the major beneficiary of university production and throughput; therefore, it ought to be a major player in funding university students.To date only well-resourced institutions receive significant support from the private sector in the form of grants, bursaries, and scholarships.

Literature Review
Education is a key driver of economic growth and sustainable development for both developed and developing nations.The role it plays in improving the productive capacity of human capital cannot be overemphasised.The transformation of the education sector, therefore, is important for social and economic development.The Constitution of the Republic of South Africa (1996), the White Paper on Higher Education (1999), and the Higher Education Act (1999) recognise a need to improve access to higher education as a fundamental point of departure for social transformation.Furthermore, empirical research suggests that investment in human capital improves a country's productivity levels and promotes entrepreneurship and technological advances (Ozturk 2001;Phiri and Mbaleki 2022).Phiri and Mbaleki (2022) established that education-induced government expenditure improves labour productivity.These findings align with theories that have guided the education policy in South Africa, namely Becker's (1993) human capital theory, Robeyns's (2006) human rights theory, and social justice theories.For this reason, equity and access to education have always been the central focus of the DHET's transformation agenda.The fundamental point of departure has always been to ensure that there is unlimited access to quality education for deserving students, especially those who come from previously disadvantaged communities.While significant progress has been made in fulfilling the transformation agenda in the HE sector, a lot of work is still required to improve not only institutional access but epistemological access (CHE 2022).
The historical evolution of the South African education system draws from the racialised nature of the apartheid system.During apartheid, black students entered the university in low numbers because of racialised access (Bunting 2002).The handful of students who accessed higher learning back then struggled to get funding to support their academic journey.Even though the democratic dispensation has made tremendous improvements in participation rates, access to education continues to be a major problem for most students coming from poor backgrounds (CHE 2022).Despite challenges such as the lack of adequate capacity of the HE sector to cater for the rising demand and the poor quality of basic education, a lack of funding because of decreasing fiscal allocation to HE is one of the leading barriers to access, especially for students coming from disadvantaged backgrounds (CHE 2022).The rising cost of education and the recurring decline in fiscal allocation to education have made education an exclusive commodity only enjoyed by those coming from an affluent background (Bozalek and Boughey 2012).While we found no empirical evidence on how lack of funding affects student success, it is well known that funding is only provided to academically deserving students.This means that if a student fails because of any of the factors that affect performance, they will not be eligible for funding in the following year (NSFAS 2021).Secondly, students who are likely to produce poor performance are those with poor socio-economic backgrounds, whose university preparedness is affected (Lemmens et al. 2011).
In 1996, the DHET developed the NSFAS, a student funding scheme targeted at improved access and participation for poor and deserving students.The scheme has registered significant progress since its inception, improving access to higher education for students coming from disadvantaged backgrounds.However, a decline in the real value of fiscal allocation to higher education, slow loan recovery rates, and increasing demand for funding have played down the success of the system (DHET 2018).In the main, the NSFAS is a loan that is distributed to students with a reciprocal responsibility to reimburse in the future.Part of it can be converted into a bursary only if students pass 40 per cent of their modules in each year they are registered for.In December 2017 the former state president, Mr Jacob Zuma, proposed a subsidised free fee education for all deserving students.This proposal came after a zero-fee increment implemented in 2016 as a response to the #feesmustfall campaign which brought the sector to a standstill.The campaign rose to challenge the student funding model in South Africa and the exorbitant tuition fees.Critics of the fully subsidised "free fee" education pointed out that this was a populist call fuelled by political infighting in the ruling party.The practicality of the call, or lack thereof, was never engaged or given attention.However, at the centre of the call's opposition was an argument of fiscal sustainability given the growing demand for student funding and the government's competing responsibilities (De Jager and Baard 2019).
Because of issues highlighted with the NSFAS such as a constrained budget and a growing demand for funding, it is becoming clear that universities need to devise alternative means of funding.The literature contains a number of proposed funding models that can be used to supplement the existing set-up.Chief among them is strengthening the use of third-stream income sources (Massy 2004).This includes bringing the private sector on board to improve access to higher education (Ntshoe and de Villiers 2013).Proponents of this view have suggested an entirely market orientated approach where the price of education is determined by market forces.However, South Africa is a largely unequal society with a significant portion of its population dependent on social security measures, hence this funding model cannot be a suitable one (Pouris and Inglesi-Lotz 2014).Ayuk and Koma (2019), on the other hand, propose government-guaranteed student study loans targeted at indigent students who are demonstrating academic potential.These loans should be contingent on students' future incomes.However, in this proposed payment model, there are no suggested mechanisms on how to overcome the slow recovery rate, for example, which is one of the major problems bedevilling the NSFAS.
The consensus is that the NSFAS has been the only mechanism through which government can improve access to higher education especially for indigent students.However, the decreasing real value of fiscal allocations to the HE sector and low recovery rates are stifling the NSFAS's efforts to meet the growing demand for education.How has the recent COVID-19 pandemic changed this situation?
Demand for Funding and Access to Higher Education The pressing economic conditions have forced the government to reprioritise and cut back on its overall expenditure.This includes the allocation to the DHET.This expenditure decreased from R107 billion in 2018/19 to R106 billion in 2020/2021 (National Treasury 2022).This decrease is 7.5 per cent of non-interest expenditure and 2 per cent of gross domestic product (National Treasury 2022).As of 2022, the overall expenditure on education constituted 19.9 per cent of the total government expenditure, of which 5.2 per cent went to tertiary education (Statistic South Africa 2022a).Figure 1 presents a breakdown of education expenditure by sector. Figure 1 shows that higher education received 27 per cent of the overall education expenditure in 2022.This represents a slight increase from R106 billion in 2020/21.This condition has forced universities to shift to alternative streams of income, hence the dominance of tuition fees as a major source of most universities' revenue (Statistics South Africa 2019).However, tuition fees are proving to be an unreliable source of revenue.The rising tuition fees in South African university threatens not only access to higher education but retention and throughput rates.In 2021, university tuition and accommodation fees jumped by 4.7 per cent and 6.7 per cent, respectively (Statistics South Africa 2022b).In 2022, this increased to 5.1 per cent and 7.1 per cent, respectively.This situation not only puts pressure on non-funded students, but also on the NSFAS's ability to cater to students accepted for funding, with constrained budgets owing to the dwindling value of allocations.On the other hand, demand for higher education has overwhelmed the NSFAS, especially with the increased expenditure responsibility exacerbated by inflation, the rising cost of accommodation and infrastructure, as well as prices of data and laptops since the migration to e-learning platforms.In 2021, 537 687 matriculants qualified for post-school education and training.Overall enrolments were projected at 1 110 361, 208 299 of which were expected to be first time enrolments (DHET 2022).The NSFAS, as a major source of student funding, especially in HDIs, battles with many issues that threaten its long-term sustainability.In 2022, the NSFAS was facing a R10 billion shortfall, up from a R6 billion shortfall in 2021.The 2021 shortfall was financed through budget cuts on infrastructure grants.The second major problem at the NSFAS has been an inability to develop a comprehensive funding model that will also cater for the "missing middle." The missing middle, according to the NSFAS, refers to students who do not qualify for funding because of their parents' salary scale, but still cannot afford tuition fees.On innumerable occasions, the minister of higher education has promised to consult with stakeholders for a revised mechanism that will seek partnerships with the private sector to fund this category of students.These students have grown proportionally to the growing demand for funding.Garrod and Wildschut-February (2020) estimated that the size of the missing middle in 2019 was 343 000 students in a post school education and training (PSET) population of 1.4 million.The cost of funding full bursaries for these students, estimated at 2019 prices, is R19.2 billion.This size has obviously increased especially looking into the number of registered FTENs for 2022.The involvement of the private sector remains very low across most institutions, especially HDIs (Statistics South Africa 2019).This alone reveals the root of the student funding crisis in South Africa and calls for public-private sector partnerships.

Sources of University Revenue: An Overview of HDIs
As mentioned previously, following the dwindling government allocations to the education sector, universities have had to shift to different income streams for funding.The visibility of this shift varies from one university class to another depending on several factors.In the main, universities receive funding from three streams.Figure 2 below presents the sources of university revenue highlighted in Ntshoe and de Villiers (2013) "First stream" refers to fiscal allocations from the national government to the education sector.These allocations vary from one university to another depending on the population of full-time students, the number of FTENs, and the university throughput rate.There is no guarantee on how much the sector will receive each year because of changing fiscal allocations and government priorities.
"Second stream": Universities also receive a significant portion of their income from student tuition fees.These can be direct payment from students, bursaries, or loans intended to cover student tuition.As things stand, the NSFAS remains the major government contributor to tuition fees, catering for about 623 386 tertiary students (NSFAS 2022).Obviously, this varies from one university to another.For example, traditional universities (formerly white) are largely funded through private sector contributions and academic entrepreneurship (Statistics South Africa 2019).
"Third stream": Through philanthropic means, universities are expected to broaden their funding base.This includes engaging in entrepreneurship and business enterprises.An example of this is research innovation and business partnerships.Ntshoe and de Villiers (2013) argue that the ability for universities to devise third-stream income largely depends on their history, geopolitical location, and proximity to industry.All these factors should allow the university to engage in research that will increase its thirdincome stream.2019).The report reflects on various sources of funding for all higher education institutions in South Africa.However, for the purpose of this article, only HDIs are depicted in Figure 3. Figure 3 shows that most universities receive a large share of their revenue from government transfers and student tuition.Notably, WSU and Mangosuthu University of Technology receive most of their revenue from tuition fees (55% and 50%, respectively).WSU receives most of its revenue from tuition fees and gets only 2 per cent from third-income streams.Noting the NSFAS-related issues, the largest source of student funding in most HDIs, this outlook represents a crisis waiting to explode for the universities and requires urgent attention.It is a crisis because the NSFAS is often faced with budget constraints and administrative issues that lead to either shortages on allocation or late payment.Secondly, some transfers from the fiscus are for specific purposes such as infrastructure or scarce skills development and may not be used for operational purposes.Therefore, shifting from over dependence on both first and second income streams to devising alternative sources of funding will guarantee universities alternative means of funding to carry out day to day operations.Further worrying consequences related to lack of funding or issues related to funding are rising financial exclusions and dropout rates.It has been established that students with insufficient financial resources struggle to afford escalating student fees, accommodation, meals, books, and erratic transportation costs (Budlender and Woolard 2006).The NSFAS pays for students' meals, transport, and accommodation.This reflects as a single bill in each student's account.As Figure 4 shows, 59 per cent of the total population come from rural villages, while 22 per cent come from townships.These data have helped the university predict the ability of FTENs to pay for their tuition fees and other related costs.Similarly, students from farms and informal settlement may also be adding to the number of indigent students.Indigent students are those who come from low-income areas with relatively low or no access to basic services.The survey went on to assess financial support received by students from home and the subsequent ability to pay tuition fees (Figure 5).Specifically, Figure 5 shows that a majority of students indicated that they do not have enough money for various education related costs such as books, transport, rent, and food.All these necessities have become expensive following the surge increase in inflation.South Africa has experienced severe price hikes in most products and services as a result of fuel price increases caused by the Russia-Ukraine war and the rationed supply of electricity in the country (Statistics South Africa 2022c).It is for this reason that tuition fees have been increasing, pushed mostly by accommodation, transport, and food.Figure 5 also shows that a considerable number of FTENs are contemplating taking paid employment to supplement their university-related liabilities.Overall, the statistics display a picture of financial desperation as a major characteristic of WSU FTENs for 2021.On average, first-year tuition fees at WSU are approximately R60 000.This is a heavy burden especially considering that most HDIs are host to students who come from impoverished backgrounds (Willemse, Smith, and Padmanabhanunni 2018).

Theoretical Framework
This study adopts and augments Johnstone's (2006) cost-sharing funding framework.The primary tenet of the cost-sharing framework is a supplementation of higher education revenue by non-governmental sources such as family contributions to overcome the overwhelming demand for student funding.This recommendation emanates from an understanding that public education carries both public and private benefits for students, and as such its costs should be shared.However, acknowledging the inequalities that characterise South African communities, especially those catered for by HDIs, it becomes a futile exercise to call for families to cover tuition fees (Wangenge-Ouma 2012).We therefore include private sector entities in the model as key role players in funding higher education because the private sector enjoys the benefits of higher education because of the skills it adopts to boost its productive capacity.

Empirical Framework
The study used descriptive analysis of quantitative data relating to FTENs obtained from the university information technology system (ITS) and funded FTENs received from the financial aid bureau (FAB) at WSU.The data are available upon request but its usage is subject to strict ethical considerations.The data range from 2021 to 2022.FTEN background characteristics, including financial support needs, is discussed using data obtained from the university's Student Readiness Survey (STARS).The data are used to build a year on year (YoY) comparison of enrolled and funded FTENs for the two successive years to establish the varying dynamics between the NSFAS and bursary funding.To estimate the size of FTEN debt, average first year university fees are used against the non-funded FTENs.

Results and Discussion
WSU is one of the perceived poorer universities in South Africa, receiving most of its revenue from tuition fees and grants from the DHET.About 55 per cent of the university's revenue comes from tuition and 43 per cent from government grants (Statistics South Africa 2021).Adding to this is the reality that the university receives the majority of its students from impoverished areas of the Eastern Cape and KwaZulu Natal.Despite the issues engulfing the NSFAS, our findings show that 99 per cent of the university's 6008 funded FTENs is catered for by the NSFAS.This means that the NSFAS is responsible for a greater portion of the university's operational budget, and any issues that may cause delays in payment will directly affect the university's functioning.The remaining 1 per cent is covered by NGOs, university subsidy, local government, and private sector institutions.Figure 6 is a representation of how funding is distributed in WSU by sources across the institution.The 6008 funded FTEN students represent 83 per cent of the total registered FTENs as shown in Figure 7.This means that a total of 1210 (17%) FTENs were out of funding for 2022.Included in the 17 per cent are students who fall in the missing middle category, who do not qualify for the NSFAS funding but cannot afford the tuition fees.It is possible that a greater portion of the unfunded students will add to the 2023 student debt, provided that the department is able to finally come up with a plan.However, a very important aspect about the statistics is that the number of funded FTENs has grown consistent with the number of registered students, leaving a proportional gap between funded and unfunded students when comparing the two years.As university quotas increase each year, so does the demand for funding; if things remain as they are with regards to funding, so will student debt.The major issue with the increase in intake is that there has not been a significant and real increase in funding support from the NSFAS or alternative sources of funding.This has resulted in a corresponding increase in the number of non-funded FTENs from 2021 to 2022. Figure 9 below presents a distribution of the number of unfunded FTENs across the university's four campuses.The numbers reflect each campus's intake, except for Komani campus which has recorded the highest number of unfunded FTEN as a percentage of the total population.Across the university, 17 per cent of the total registered FTENs did not receive funding for the 2022 academic year.This information is represented further in Figure 10 as a percentage of the campus's respective populations.Overall, the number of unfunded students as a percentage of the total FTENs is significant and concerning, especially considering the students' financial situation and background.More than the number of funded students shown above is a greater possibility of an increase in student debts.Because of the socio-economic background of FTENs presented in this study, it is unlikely that all the unfunded students will be able to settle their tuition.Table 1 below depicts a possible size of FTEN debt that is likely to roll over to 2023.The total cost is based on the average tuition fees of firstyear students at WSU.The cost, therefore, is related to the number of FTENs who did not receive funding for the 2022 academic year.The overall number of nonfunded students will obviously be larger if consideration is given to a broader student populace than the FTENs.The university registers approximately 29 000 students per year across its four campuses.Unless alternative means are devised to address funding shortages, the university is likely to inherit in 2023 a student debt of more than R60 million, and that is only FTENs.The estimated size of debt is based on randomly selected tuition fees of a first-year student, against the total number of unfunded students.Obviously, tuition fees vary from one student to another and may be influenced by a vast number of issues such as whether the student has accommodation or not, or whether they have a transport allowance or not.NSFAS funding for needy students covers all university-related expenses such as tuition, accommodation, transport (for off-campus residences), and catering.These expenses are revised every year subject to inflation.

Conclusion
This study has provided insights on student funding dynamics for an HDI in the post-COVID-19 epoch.It also shows that, following decreasing fiscal allocations to the sector, universities have been forced to shift to tuition fees for operational budgets.In the selected case study, the NSFAS is responsible for a significant portion of FTEN tuition fees (99%).The remaining 1 per cent is catered for by local governments, NGOs, and government-initiated entities.Despite the lack of a comprehensive funding model that will cater for the growing demand for higher education, the NSFAS has a growing issue of funding the missing middle.This issue leads to an increase in the rolling over of FTEN debts.
The current student funding model is proving to be incapable of meeting the growing demand for higher education.This places a strain on the sector's transformation mandate.The NSFAS is currently overwhelmed by funding demands from across universities and is a risky source to rely on because of ongoing administrative issues that often causes delays in payments.This adds to ongoing funding gaps experienced as a result of the missing middle category.In innumerable instances the DHET has promised to work on developing a working model to address issues relating to the missing middle with no success.This category has had to be catered for with budgets often cut from infrastructure and other grants transferred from the fiscus.The low private sector involvement, as an equal beneficiary of university throughput, in student funding is conspicuous and a cause for concern.Historically disadvantaged institutions have attracted relatively low funding from the private sector despite efforts to improve the quality of education and throughput.This situation has become worse after the COVID-19 pandemic as most businesses were forced to reprioritise their expenditure.Consequently, this article recommends the extensive use of third income streams as sustainable avenues to improve student funding.

Figure 2 :
Figure 2: Sources of revenue Figure 3 below displays a statistical representation of the sources of university revenue for HDIs as reported by Statistics South Africa (2019).The report reflects on various sources of funding for all higher education institutions in South Africa.However, for the purpose of this article, only HDIs are depicted in Figure3.Figure3shows that most universities receive a large share of their revenue from government transfers and student tuition.Notably, WSU and Mangosuthu University of Technology receive most of their revenue from tuition fees (55% and 50%, respectively).WSU receives most of its revenue from tuition fees and gets only 2 per cent from third-income streams.Noting the NSFAS-related issues, the largest source of student funding in most HDIs, this

Figure 7 :
Figure 7: Funded FTENs (2022) Figure 7 above shows that the total number of registered FTEN is 7218 for 2022.This represents a slight increase from 7100 population for 2021.

Figure 8
Figure 8 below displays a YoY comparison of the number of funded students between 2021 and 2022.This information is distributed by the universitiy's four campuses.The number of funded FTENs has significantly grown by 1001 overall, from 5007 in 2021 to 6008 in 2022.This growth has been registered in all the campuses.

Figure 9 :
Figure 9: Unfunded Students (2022)Figure10displays the number of unfunded FTENs as a percentage of the total population.The Komani campus, which is the smallest campus, has the highest percentage with respect to its FTEN population for 2022.Mthatha campus, with the highest number of FTEN population because of its size, has the second highest percentage of unfunded students.NSFAS is also responsible for 99 per cent of the funded students in the highlighted campuses.

Figure 10 :
Figure 10: Unfunded FTEN (a percent of the total population)

Table 1 :
Estimated size of debt for FTENs (WSU)