Finance Alone Won't Solve Our Higher Education Crisis

This is South Africa's bigger education risk: finding clever ways to pump yet more money and people into a failing education system.

31/03/2017 03:58 SAST | Updated 31/03/2017 03:58 SAST
Kgomotso Neeto

The problem with South African higher education is not funding, it's quality and cost. Financial solutions alone may aggravate rather than solve the problem. Lorenzo Fioramonti's article in the Business Day (Monday 20 March) promoting income-contingent loans (ICLs) as a panacea for our higher education crisis, is an example. He argues that compulsory student loans, linked directly to graduates' earnings, are an elegant funding solution. From a purely financial perspective, his solution may work. But narrowly pursuing financial innovation, and ignoring the quality of the underlying investment, is very dangerous.

Let's test the logic of better loans in another context: houses. Leading up to the global financial crisis, residential property in the United States, and many other geographies, became outrageously expensive. It became almost impossible for first time buyers to "get onto the property ladder". Unfortunately, Wall Street had a solution: bigger, longer, supposedly lower-interest rate loans, available to almost everyone. We all know the result. Further, unsustainable increases in house prices, the eventual popping of the housing bubble, and a near catastrophic collapse in global markets.

This is South Africa's bigger education risk: finding clever ways to pump yet more money and people into a failing education system, without fixing its underlying problems, risks amplify the crisis. Why is our current higher education a poor investment? It's overpriced and high risk. Fioramonti says that should current learners benefit from his loans, they will graduate after four to five years with R200,000 - R250,000 debt, excluding living costs, which will take them 10 years to repay. Even this low estimate is a lot of money. Tuition doesn't include living expenses and forgone income (of say getting a job instead of studying).

I run Umuzi. We're an alternative to university, focussed on providing access to creative careers. Since 2014, we have run a one-year learnership which offers naturally talented, but unqualified 20 to 25 year olds, from low-income backgrounds, a bridge to employment as designers, copywriters, videographers, and digital marketers. These are highly conceptual, and technically demanding roles in a competitive industry. Creative agencies, and corporates pay R106,000 per learner for our one-year programme. This includes a R1,500 per month stipend paid to each learner. Yes, not only is the programme free for young people, we pay them to learn. The employers benefit from this talent, tax-breaks, and earn BBBEE points.

Our learners come out with a job after one year, R18,000 earnings towards their living costs, and no debt. Umuzi graduates start paying tax in their second year! That's a better deal for the learner and society. Traditional models are very expensive by comparison. And Umuzi is below an efficient scale. In 2017 we aim to train 120 learners. Clearly there's still room to grow and become more efficient and cost effective.

Traditional education is also risky. Dropout rates are astronomical (widely reported as 50 percent, or more, nationally) and even completing a qualification doesn't reliably lead to a job. The South African Qualifications authority recently reported a surplus of qualified people who cannot be absorbed into the economy. This isn't just a factor of slow economic growth. Higher educators aren't measuring success correctly (they measure the number of qualifications, not jobs) resulting in too many courses being out of date or poorly suited to current labour demands. Employers will tell you, even graduates of esteemed institutions seem unprepared for the demands of today's economy.

Pumping more learners, and more debt, into an overpriced and risky system, will produce more failures, anger, and social unrest.

How do Umuzi's outcomes compare to traditional higher education? In 2016, 80 percent of the young people who joined our programme not only completed it, they got jobs in the creative industry before they graduated. We achieved this by integrating work experience into the one-year learnership. We measure our success by the number of economically active graduates, not by the number of qualifications conferred.

Why is this important? Finding more innovative ways to finance an overpriced, risky investment, like South Africa's current, traditional higher education, is illogical and dangerous. It fails to address the underlying problems. Pumping more learners, and more debt, into an overpriced and risky system, will produce more failures, anger, and social unrest.

This is the national education equivalent of the global financial crisis we need to avoid. Financing solutions shouldn't be confused with true, value-creating innovation. Alternatives like Umuzi illustrate the potential for radically improving the underlying education offering, a much more powerful lever to make education affordable, while increasing its impact.