It gives us great pleasure, on behalf of the Education sector, to make this presentation to the Joint Budget Committee. We in Education, as an integral part of the social grouping of government, welcome the 2003 Medium Term Budget Policy Statement. We recognise that this budget statement is geared towards employment and skills development and that, in-spite of the lower than target growth figures, the government and the Minister of Finance have taken bold steps in adding an additional R37 billion Rand to the MTEF baseline. We believe that this bold step will assist us in our fight to push back the frontiers of poverty. We accept that this is not a total review of government's policy but is a carefully costed policy statement by the Department and National Treasury, in consultation with our provincial colleagues. I need to stress that the needs and concomitantly the demand from education was much greater than what the policy statement indicates we understand that there are even greater pressures in our country. I will for now remain satisfied.

We are convinced that the gains we have made in education cannot be sustained if we do not at the same time attend to the issues of economic growth and employment. The performance of the education sector are both crucial and critical factors in achieving Government's key goals of increased employment, and stronger economic growth. The policies of the education sector are strongly geared towards these key objectives, as are the current priorities of the sector. In practice, there have been major strides in the right direction within education. Government is improving its understanding of why in certain areas change and transformation seem more difficult to achieve, than in other areas.

A sore point for us has always been the infrastructure backlog we inherited from Apartheid. I am pleased to state at least no child is now learning under trees, this was a promise we made to the President, and which we kept. However we will now be turning our attention and priority to building more classrooms and eradicating unsafe and dangerous infrastructure conditions at our schools.

One of the key challenges for education remains the inter-governmental fiscal terrain. We believe that, often in the past, provincial education departments (PEDs) did not receive the necessary attention from their provincial treasuries. The Department of Education (DOE) was often not in a position to ensure that national priorities in education were articulated in PED budget allocations. We should however point out that we have considerably improved our priority setting processes among the PEDs, Provincial Treasuries and National Treasury. The DOE will be setting up a budget monitoring and support office to ensure greater alignment between national priorities and provincial allocations in the coming years. Officials from the DOE are in the process of undertaking visits to the PED's to ensure that provincial budgets receive the necessary attention in terms of the national priorities. These officials as well as officials from National Treasury are also participating in the provincial medium term expenditure committee hearings currently being held in the provinces

Although the 2003 policy statement indicates a decline in education's share of Government expenditure on services, from 23.9% in 2002 to 22.0% in 2006, the expenditure trend is nonetheless one of real growth. The latest figures indicate that over the 2002 to 2006 period, the real increase for education is 35%. This is a substantial increase over a four-year period. The policy statement figures also indicate that public education expenditure as a proportion of the GDP increases slightly, from 5.3% to 5.4%, over the same period. This is encouraging, as some months back it had seemed that this ratio would actually decline.

The challenges facing the education sector are momentous, and the financial constraints will be felt, even with these real increases. However, there is enough fiscal space for the education sector to bring about noticeable improvements in the coming years, so that the country's citizens, in particular the most disadvantaged, will be better prepared for the world of work, and in a better position to improve their lives.

The demand for education is high in South Africa, and South Africans on the whole understand the importance of education for the realisation of a better life. In many parts of the system, the demand outstrips what Government can supply. It is thus the Government's to ensure that constitutional obligations to provide a decent basic education to all are fulfilled as effectively and efficiently as possible, and to provide other forms of education in as targeted a fashion as possible, so that poverty is alleviated, and ability of learners and students to participate in the economy is maximised.

The education departments and treasuries went through a lengthy process during this year of prioritising expansions to service delivery in the provincial education systems. Essentially, there are five priorities, in order of importance indicated below. These priorities will be briefly mentioned at this point, and expanded on further on.

1. Increases to the non-personnel recurrent school allocation, within a nationally pro-poor resource-targeting framework.
2. Expansion of the FET college sector, through funding of higher enrolment and recapitalisation of the fifty newly merged institutions.
3. An incremental and poverty targeted move towards the universal offering of Grade R in all public schools by 2010.
4. Expansion of the ABET sector, through funding of higher enrolment within a new funding framework.
5. Expansion and better targeting in the Primary Schools Nutrition Programme.

In addition to the above, the Department of Education has prioritised systems development at a national level to support provincial implementation.

Each additional year of basic education adds not only to the economic well-being of the individual but also to that of the nation. Increased access and success to a basic education is not just a Constitutional imperative, but also a matter of better chances in life, including better chances of employment. Therefore, for every year that dropping out of the schooling system is delayed for a learner, and for each additional ABET year that is offered to an adult, the system scores a small victory in terms of the well-being of South Africa's citizens. International research confirms these economic returns of education, to quote recent work in this regard:

• For every year of schooling, there is a 3.7% increase in long-term economic growth and an increase in GDP of 6%
• On an individual level, every year of additional schooling can increase the wage of a worker in a poor nation by 10-20%
• Agricultural productivity increases for every 4 years of schooling
• A mother's education has been demonstrated as one of the greatest determinants of a child's education (a better predictor than income level and father's education)

The Department of Education's Review of the financing, resourcing and costs of education in public schools indicates that the net enrolment rate, or the percentage of young learners who are enrolled in school, has been improving, despite it already being at, internationally compared standards, high levels. The challenge is to push further, so that we achieve not 97%, but 100% net enrolment rates in the compulsory age cohort. Moreover, plans to universalise Grade R across all public schools by 2010, through a process of targeting the poor first, has the effect of adding an extra school year to the compulsory GET band.

The policy statement notes that the Early Childhood Development (ECD) and the Financial Management and Quality Enhancement conditional grants are being transferred to the provincial baseline figures in 2004/05. The ECD grant, whilst it was partially used to extend Grade R services, constituted less than 15% of provincial expenditure on ECD. Even without the grant, provincial expenditure on ECD is expected to increase slightly in real terms. However, for the 2010 target of universal Grade R to be attained, funding of this service will have to become more efficient, and more poverty-targeted, than is currently the case. Our provincial education and treasury colleagues have been alerted to the fact that we expect that the conditional grant business plans linked to these grants continue to receive attention.

A new draft funding and institutional policy for ABET is in the final stages of approval, and will facilitate expansions to this service. Demand for ABET has been relatively low, given the levels of educational disadvantage and illiteracy amongst adults. The new proposed funding policy is strongly geared towards bringing about ABET institutions that are more responsive to student needs.

It is a positive sign that levels of repetition are on the decline. In particular, a historically high Grade 1 repetition rate of around 30% has been more than halved over the last few years. This declining trend is also evident in the other grades.

The demand for FET college training amongst youth has been particularly strong, and significant college enrolment increases have occurred over recent years, in tandem with the merger and transformation process. Since 1998, enrolment has increased by 17%. The Department of Education believes that the increases to the baseline currently envisaged allow for provinces to increase full-time equivalent enrolments from the current level of around 150,000, to 400,000 by 2006. This translates into an increase in FET college expenditure from just over one billion Rand to more than four billion Rand.

It should be kept in mind, however, that even with an FET gross enrolment rate of 80%, South Africa is still ahead of many other developing countries, including countries such as Malaysia, in secondary school coverage.

The decline in head count enrolments in higher education between 1998 and 2000, with head count enrolments decreasing by about 20 000 (or 3%), i.e. from 608 000 to 588 00 has been reversed. In 2002, the latest year for which data is available, head count enrolments stood at about 675 000, that is, an increase of just under 15%. This increase, which partly reflects the increased matriculation pass rate, is to be welcomed given the continued shortage of high-level skills, which adversely impacts on economic growth and development.

However, graduation rates, which continue to be rather low in relation head count enrolments are clearly a course for concern. The improvement in student performance, in particular, throughput and graduation rates, was identified as a key priority in the National Plan for Higher Education. This is critical to ensure the success of the Government's human resource development strategy, in particular, in relation to high-level skills and research to underpin economic growth and development. The National Plan developed benchmarks for graduation rates, which institutions would be expected to meet in the short-to-medium term. In this regard, institutions as part of their institutional plans, which have to be submitted on an annual basis to my Department, would have to indicate the strategies and steps that they are putting in place to improve student performance in line with the benchmarks.

In addition, a range of measures is in place or in the process of being introduced to address the problem of poor student performance. These include the following:

• A new funding framework for higher education institutions, which will be implemented from the 2004/2005 financial year. The framework encourages improved throughput and graduation linking funding to outputs, that is, it provides incentives for institutions that are able to raise their undergraduate pass rates, and lower their student dropout rates.

• The new funding framework also provides funds for foundation programmes, which are targeted at addressing the problems faced by black students whose schooling has not prepared them adequately with the skills necessary to pursue higher education. In 2004/2005, it is anticipated that about R80 million would be allocated for this purpose.

• The establishment of a National Higher Education Information and Applications Service is currently under consideration. The service is designed to ensure that all school leavers have the full benefit of knowing exactly what programmes are offered by public higher education institutions, and of making, as a consequence, informed choices about their future careers. This service will lessen the chances of first year failures resulting from incorrect programme choices by students.

In terms of access, the single most important intervention by the democratic Government has been the introduction of the National Student Financial Aid Scheme, which ensures that academically able but poor students are not denied access to higher education. This is critical as the evidence suggests that lack of financial resources to support their studies is a contributing factor to the high failure rates in higher education. To date the Government has contributed just under R3.4 billion to the NSFAS. In 2003, the total allocated to the NSFAS, that is, Government's contribution plus re-injections from loan recovery was about R850 million. This by any account is impressive.

The current restructuring process, which would result in the consolidation of the institutional landscape of higher education, and in support of which the Minister of Finance has announced a financial package of R3 billion over the next few years is a key element of the broader transformation agenda. It is intended to lead to the development of a more effective, efficient and sustainable higher education system that is responsive and contributes to the national reconstruction and development agenda.

The entrenchment of quality in the schooling system, from Grade R to Grade 12, is a challenge that cannot be over-emphasised. Since 1994, South Africa has made huge strides towards correcting the apartheid inequalities in the funding of schools. Within each province, school funding is essentially equitable, with certain aspects of funding being pro-poor. The challenge is to translate better funding for the poor, into better quality education for the poor. This challenge is a daunting one, given the enormity of the remaining human capital and infrastructure backlogs inherited from the apartheid era. However, progress is being made through curriculum transformation and better learner assessment systems. We also welcome the acceptance of the Integrated Quality Management System by all our stakeholders. The IQMS integrates whole school evaluation, educator performance evaluation and career-pathing into a single system. All our partners have committed themselves to fully implement this system in the medium term.

Attaining quality schooling in the poorest areas also means providing these learners with more than the average level of educational material resourcing so as to compensate the poor for the general lack of materials in the home. The School Funding Norms are currently being amended in order to ensure that the school allocations, which cover LSMs and other non-capital school supplies, are more equitable across provinces. The Department of Education's Plan of Action for schools has committed the sector to ensuring that the poorest learners in the country, regardless of the province they find themselves in, receive a minimum of R450 in 2004, R563 in 2005 and R703 in 2006. The education departments have made the attainment of these funding levels their number one provincial priority for the coming year. The increases to baseline for provinces outlined in this policy statement make this goal attainable for all provinces, though implementation in 2004 may be uneven due to the disjuncture between the school year and the financial year. By 2005, however, the desired funding levels should have been fully realised.

With regard to the Primary School Nutrition Programme, it is encouraging to note that an increasing allocation is being transferred to education as from 2004/06 for the schools programme.

The merger of the 150 FET colleges into 50 new colleges is a remarkable example of co-operation between the Provincial Education Departments and the Department of Education. To strengthen this process, the prioritisation of the FET colleges would involve an investment of at least R300m per annum over three years in the recapitalisation of the colleges. Improvements in the FET sector are already noticeable. A recent evaluation reported that there was an increase in after-hours programmes for adults, increased focus on quality and flexibility, and some alignment of programmes with industry practices. The 2002 audit of the colleges provides a solid body of knowledge about the financial, institutional and other capacities of the institutions. We will be using the results of this audit to finalise the FET college funding policy. The Ministerial Awards Programme, launched in 2002, has also assisted in promoting innovation and alignment to industry needs in colleges.

The new FET curriculum, which is innovative, progressive and responsive will ensure that our youth are armed with relevant and necessary skills to tackle the challenges of our economy and improve their employability.

A major challenge currently is for the Department of Education and the Department of Labour to work together to improve the institutional arrangements governing the SETAs and learnership programmes, partly with a view to making the FET colleges more geared to serving industry directly in this training market and also to begin to utilise the skills levy fund to further increase FET coverage.

The education sector employs close to half a million men and women in South Africa. The education departments and institutions thus have a responsibility to recruit new employees, and develop existing ones. A gap between educators demanded and educators that can be supplied by the labour market is predicted for the coming years. However, the Department of Education is actively seeking to step up pre-service training, and make teaching a profession that sufficient numbers of the youth will be attracted to.

Making Grade R universal in public schools involves the employment of approximately a further 20 000 educators. This is a special challenge, given the expected under-supply of educators, but Education White Paper 5 has proposed ways of bringing existing ECD practitioners, who may not currently comply with all formal educator qualifications, into the formal sector through a process of development and upgrading. The Department of Education has also committed itself in ensuring that childcare receives attention through the expanded public works programme. We will be working very closely with our colleagues in the Department of Social Development in ensuring that "child minders" are trained to provide essential educare to our young and at the same time providing skills to a considerable number of marginalized and unemployed women.

We are also in discussions with the Department of Public Service and Administration to ensure that those educators who took the voluntary severance package would be allowed to return to teach in out townships and rural areas in "scarce" subjects such as Mathematics, Science, History and English as a second language.

Capital investment of around R3.5bn in the provincial education systems means that education accounts for some 18% of public capital investment in the provinces. The education sector thus plays an active role in job creation through public works programmes. Because the infrastructure of the education sector is so widely distributed across the country, capital investment in this sector is particularly suitable for taking jobs to more remote areas of the country.

Access to education in South Africa is relatively good by international standards. However, there is a strong need to improve access to certain sectors of the education system, in particular vocational FET. Improvement of quality in the basic education system should be regarded as a priority, both as a pre-requisite for effective FET and HE, and in order to build a better society.