ATC200717: Report of the Portfolio Committee on Higher Education, Science and Technology on the 2020/21 Special Adjustment Budget Vote 17: Higher Education and Training, Dated 17 July 2020

Higher Education, Science and Innovation

 REPORT OF THE PORTFOLIO COMMITTEE ON HIGHER EDUCATION, SCIENCE AND TECHNOLOGY ON THE 2020/21 SPECIAL ADJUSTMENT BUDGET VOTE 17: HIGHER EDUCATION AND TRAINING, DATED 17 JULY 2020

 

1.INTRODUCTION

The Portfolio Committee on Higher Education, Science and Technology (hereinafter referred to as the Committee), having considered the 2020/21 Special Adjustment Budget Vote 17 of the Department of Higher Education and Training(hereinafter referred to as the Department) on 14 July 2020, reports as follows:

Subsequent to the World Health Organisation (WHO) declaring the COVID-19 outbreak as a global pandemic, on 21 March 2020, the President of the Republic of South Africa, Mr Cyril Ramaphosa, announced measures to be implemented towards containing the spread of COVID-19. The measures included declaring the COVID-19 pandemic a national disaster, in terms of the Disaster Management Act, 2002(Act No. 57 of 2002). On 21 April 2020, the President announced an extraordinary COVID-19 budget amounting to R500 billion. The COVID-19 budget is a fiscal support package that includes spending towards COVID-19 response. The President said “the pandemic required an economic response that is equal to scale of disruption it is causing”.

The President stated that R130 billion of this R500 billion budget will come from reprioritisation within the current (2020/21) budget. The relief packages are meant to scale up capacity in the public health system and mitigating the effects of restricted economic activity for households and businesses. The President also announced tax relief measures for the companies, including a 4-month holiday for companies’ skills development levy contributions. On 24 April 2020, the Minister of Finance, Mr T Mboweni, during a media briefing to outline R500 billion Economic Support Package and what it would entail and where the funds would be sourced from. The Minister stated that the skills development levy holiday is expected to provide relief of around R6 billion.

 

For the post-school education and training sector, this meant that the Department and its entities would reprioritise their current funding to respond to the impact of COVID-19. Furthermore, the Sector Education and Training Authorities (SETAs) and the National Skills Fund will lose a four-month skills development levies income due to the holiday.

Section 30 (1) of the Public Finance Management Act, 1999 (Act. No 29 of 1999) as amended, provides that the Minister may table an adjustment budget in the National Assembly as and when necessary. Section 12 of the Money Bills and Related Matters Act, 2009 (Act No. 9 of 2009) as amended, provides that the Minister must table a national adjustments budget as envisaged in section 30 of the Public Finance Management Act. In accordance with the aforementioned legislative provisions, on 24 June 2020, the Minister of Finance introduced the supplementary budget.

The purpose of the report is to account for work done by the Committee in considering the Special Adjusted Budget Vote 17 of the Department.

2. THE IMPLICATIONS OF THE COVID-19 PANDEMIC ON THE MANDATE OF THE DEPARTMENT

Measures put in place by the government to contain the spread of COVID-19, which amongst others, included, declaring the COVID-19 pandemic a national disaster, in terms of the Disaster Management Act, and the national lockdown from 26 March 2020 have adversely impacted the PSET sector. Academic activities at contact institutions (universities, Technical and Vocational Education and Training (TVET) and Community Education and Training (CET) colleges), and skills development interventions programmes funded by the SETAs and the National Skills Fund (NSF) were disrupted. Similarly, the activities of other public institutions within the PSET sector, especially those that require on-sitevisits had to be halted.

• Institutions experienced loss of tuition, training and research time, especially during the early period of the national lockdown where movement was restricted;
• The extension of the 2020 academic year to 2021, especially for the TVET and the university sectors and the financial implications for the National Student Financial Aid Scheme (NSFAS), to support students for the additional months;
• Delays in the completion of current infrastructure development projects, especially student accommodation, which is a priority area for the Department and universities to alleviate the current shortage of accommodation. This has already caused significant budget overruns at many institutions;
• Delays in the completion of construction of new TVET college campuses and the refurbishments of the dilapidated colleges’ infrastructure. This will result in lower than projected spending on infrastructure and efficiency grants at the institutions.
• Reprioritisation of funding already allocated for specific purposes towards funding infrastructure for multimodal remote learning. This includes the purchasing of laptopsand data for staff to work remotely, personal protective equipment and to ensure campus readiness in terms health and safety;
• Reprioritisation of the NSFAS funds to purchase learning devices for students at TVET colleges and universities;
• Impact on international students who reside outside the country and would only be allowed to return to the during lockdown Level 1 due to the current travel restrictions;
• Loss of jobs will impact on the ability of self-funded students to pay tuition and accommodation fees and this will put the financial health of institutions at risk;
• Due to lockdown, universities may find it difficult to generate third stream funding for research and this will impact negatively on their research output for the current academic year;
• Operational instability at TVET colleges due to closure and opening of campuses as a result of increasing positive COVID-19 cases, and the high cost associated with the decontamination of campus facilities;
• Impact on quality of teaching and learning due to a large number of staff in some colleges falling under the category of comorbidities, and therefore cannot be on duty. Resultantly, managing classes is therefore difficult;
• Loss of revenue from income-generating services for the Quality Councils, including the South African Qualifications Authority;
• Loss of income for the SETAs and the National Skills Fund amounting to R8 billion due to the four months’ holiday skills development levies contribution. This will have an adverse impact on the skills training, especially for the youth who are not in education, employment and training; and
• The contracting economy will have a potential decline in the absorption of the PSET graduates in the labour market.

3. ANALYSIS OF THE REVISED BUDGET PER PROGRAMME

The Special Adjustment Budget thus supplements the February 2020 Budget by reallocating resources from programmes or activities that have already been put on hold during the lockdown period, from projects where implementation dates could be moved out to the next financial year or projects and from spending activities that are not critical to the core service delivery requirements of departments. Funds are moved to services and programmes which are critical in responding to the COVID-19 pandemic.

 

 

Table 1: 2020/21 revised programme allocations

R thousands	2020/21 Main budget	Downward revisions		Reallocations		2020/21 Total net change proposed	2020/21 Total allocation proposed
		Suspension of funds (COVID-19 purposes)	Virements from (COVID-19 purposes)	Allocated to (COVID-19 purposes)	Virements to (COVID-19 purposes)
Administration	491 228	-45 725	-1510	-	1510	-45 725	445 503
Planning, Policy and Strategy	214 476	-16 407	-	-	-	-16 407	198 069
University Education	80 083 350	-5 733 017	-	4 827 404	-	-905 613	79 177 737
Technical and Vocational Education and Training	13 813 565	-911 598	-	172 203	-	-739 395	13 074 170
Skills Development	318 512	-18 371	-	-	-	-18 371	300 141
Community Education and Training	2 552 862	-8 882	-	-	-	-8 882	2 513 980
Direct charges against the National  Revenue Fund	19 412 896	-8 122 380	-	-	-	-8 122 380	11 290 516
Total	116 856 889	-14 856 380	-1510	-	1510	-9 856 773	107 000 116

Source: National Treasury 2020

The Department’s initial allocation for the 2020/21 financial year as tabled in February 2020 amounted to R116.85 billion. The budget was made up of R97.44 billion from voted funds (Department’s programme budget) and R19.41 billion from Direct Charges against the National Revenue Fund, for the Sector Education and Training Authorities (SETAs) and the National Skills Fund (NSF). Due to the reprioritisation of the current budget towards responding to COVID-19, the budget is revised downwards, resulting in the reduction in baseline allocation amounting to R9.85 billion. The total budget reduction comprises of R1.73 billion from the voted funds and R8.12 billion from the Direct Charges against the National Revenue Fund. Therefore, the Department’s 2020/21 initial allocation decreases from R116.85 billion to R107.00 billion. This represents an overall reduction of 8.4 per cent. Voted funds decreases from R97.44 billion to R95.70 billion and Direct charges decreases from R19.41 billion to R11.29 billion. Of the Department’s total reduction of R1.73 billion, R157.31 million was taken from compensation of employees, R159.39 million from goods and services and R1.41 billion from transfers and subsidies.

 

 

Table 2: 2020/21 revised allocations per economic classification

R thousands	2020/21 Main budget	Downward revisions		Reallocations		2020/21 Total net change proposed	2020/21 Total allocation proposed
		Suspension of funds (COVID-19 purposes)	Virements from (COVID-19 purposes)	Allocated to (COVID-19 purposes)	Virements to (COVID-19 purposes)
Economic classifications
Current payments	10 989 443	-316 704	-1510		1510	-316 704	10 672 739
Compensation of employees	10 281 060	-157 310	-	-	-	-157 310	10 123 750
Goods and Services	708 383	-159 394	-1510	-	1510	-159 394	548 989
Transfers and subsidies	105 851 184	-14 539 676	-	4 999 607	-	-9 540 069	96 311 115
Departmental agencies and accounts	54 799 705	-10 632 473	-	2 500 000	-	-8 132 473	46 667 232
Higher education institutions	44 796 106	-3 210 000	-	2 327 404	-	-882 596	43 913 510
Foreign governments and international organisations	4 112	-		-	-	-	4112
Non-profit institutions	6 251 261	-697 203	-	172 203	-	-525 000	5 726 261
Payment for capital assets	16 262	-	-	-	-	-	16 262
Machinery and equipment	15 862	-	-	-	-	-	15 862
Software and other tangible assets	400	-	-	-	-	-	400
Payments for financial assets	-	-	-	-	-	-	-
Total	116 856 889	-14 856 380	-1510	4 999 607	1510	-9 856 773	107 000 116

Source: National Treasury 2020

The initial allocation for current payments amounted to R10.98 billion, of which R10.28 billion was for compensation of employees and R708.38 million for goods and services. The allocation is reduced by R316.70 million to R10.66 billion. Allocations for compensation of employees and goods and services is reduced by R157.31 million and R159.39 million, respectively. Initial allocation for spending on transfers and subsidies in 2020/21 as per the February 2020 budget, amounted to R105.85 billion. This constituted 90.58 per cent of the Department’s total budget, including Direct Charges against the National Revenue Fund. The initial allocation of R105.85 million isreduced by R9.54 billion to R96.31 billion. Reductions are effected as follows: R8.13 billion for departmental agencies and accounts, R882.59 million for higher education institutions and R525.00 million for non-profit organisations. The largest reduction in terms of transfer and subsidies amounting to R8.12 billion, which represents 85.1 per cent of the total reduction is for the SETAs and the NSF. Original allocation for payments for capital assets amounting to R16.26 million is retained.

 

3.1. Overview and analysis of the 2020/21 revised budget per programme

The Department’s budget, excluding Direct Charges funds its six programmes.

 

3.1.1. Programme 1: Administration

The programme’s initial appropriation amounted to R491.22 million, which was adjusted downward by R45.72 million. Therefore, the adjusted appropriation amounts to R445.50 million. The reductions amounting to R33.59 million and R12.13 million are effected in compensation of employees and goods and services, respectively. Virements amounting to R1.51 million were effected in the programme towards reallocation for COVID-19 related expenditure.

 

3.1.2. Programme 2: Planning, Policy and Strategy

The programme’s initial appropriation amounted to R214.47 million. The allocation was reduced by R16.40 million to R198.06 million. The reduction amounting to R13.48 million, R1.70 million and R1.21 million are effected in compensation of employees, goods and services and transfers and subsidies, respectively. In terms of transfers and subsidies, the reduction amounting to R1.21 million is effected in the South African Qualifications Authority (SAQA) baseline funding. There were no virements and reallocation of funds in this programme.

 

3.1.3. Programme 3: University Education

The programme’s initial budget amounted to R80.08 billion, which represented 82.18 per cent of the Department’s total voted funds. Reductions amounting to R905.61 million are effected, reducing the initial allocation to R79.17 billion. Reductions are effected as follows: R14.47 million in compensation of employees, R1.59 million in goods and services and R889.54 million in transfers and subsidies.Included in the R889.54 million reductions in transfers and subsidies, is the baseline reductions amounting to R1.42 million from the Council on Higher Education (CHE) and R5.52 million for the NSFAS.

An amount of R4.82 billion has been suspended and reallocated towards COVID-19 purposes. Of this, R2.50 billion is from the National Student Financial Aid Scheme subsidy towards purchasing of student learning devices; R2.11 billion from University subsidies meant for the planned new five-year Historically Disadvantaged Institutions Development Programme and the implementation of phase 7 of the new Generation of Academics Programme will be delayed to 2021/22. The funds will be used by institutions to procure personal protective equipment (PPE) and several universities will be providing laptops and data to students for online learning. An amount of R210.00 million from universities infrastructure and efficiency grant towards providing an infrastructure to support online learning. Consequently, new university infrastructure projects will be delayed, but institutions will honour existing contractual agreements and spend on essential maintenance.

 

3.1.4. Programme 4: Technical and Vocational Education and Training

The programme received an allocation amounting to R13.81 billion during the initial appropriation in February 2020. The initial appropriation is adjusted downward by R739.39 million to R13.074 billion. Reductions are effected as follows: R73.68 million in compensation of employees. This will result in the suspension of filling of vacancies; R140.71 million in goods and services and R525.00 million in transfers and subsidies. Of this, R370.00 million is from the Infrastructure and Efficiency Grant: Subsidies for TVET colleges, R5.00 million from Operationalisation of new TVET college campuses: Subsidies and R150.00 million from TVET colleges: Subsidies. The budget cut in terms of TVET college subsidies will impact on the 2021 intake of the Centres of Specialisation Programme. The intake will be deferred to the 2022 academic year. The Institutions are procuring the required personal protective equipment. SomeTVETs will be providing devices and data to students for online learning and catch-up programmes.An amount of R172.20 million is reallocated towards COVID-19 purposes.

 

3.1.5. Programme 5: Skills Development

The programme’s initial appropriation amounted to R318.51 million. The allocation was reduced by R18.37 million to R300.14 million. The reduction amounting to R13.93 million and R2.51 million are effected in compensation of employees and goods and services, respectively. There were no virements and reallocation of funds in this programme.

 

3.1.6. Programme 6: Community Education and Training

The programme’s initial appropriation amounted to R2.52 billion. The allocation was reduced by R8.88 million to R2.51 billion. The reduction amounting to R8.13 million and R744 thousands are effected in compensation of employees and goods and services, respectively. There were no virements and reallocation of funds in this programme.

 

4. NATIONAL STUDENT FINANCIAL AID SCHEME

The NSFAS’s initial total revenue amounted to R38.45 billion. The budget was made up of R1.4 billion in entity revenue (R47.3 million from administration fees, R1.3 billion in interests and R32 million recovered funds for related costs), R37 billion (i.e. R34.7 billion in DHET Loans and Bursaries; R299.1 million from the DHET Administration Grant, R1.5 billion from other Government units, R332.8 million from Department agencies and accounts and R70.7 million from Higher Education Institutions).

The initial DHET – Admin funding allocation to programme 1: Administration amounting to R275.44 million decreases by R5.52 million. Despite this reduction, the NSFAS reported additional funding approved by the Minister of Higher Education, Science and Innovation as follows: additional grant for the Administration extension to August 2020 amounting to R7.8 million, additional grant for cost associated with disbursement to TVET colleges (R10.3m), Contact centre consultants (R10.8million), forensic investigation (R5.0 million), Court Road renovation (R10.0 million). The total revenue of the NSFAS increased to R38.50 billion.

 

An amount of R2.50 billion is suspended and reallocated towards purchasing of student learning devices. However, NSFAS objected to the onerous conditions place on it by National Treasury. The NSFAS indicated that the R2.50 billion suspension of student grant funds and the earmarking of that for student devices cannot be implemented because the full original student grant funds is required for the normal 2020 academic year disbursements.

 

5. COMMITTEE OBSERVATIONS

The Committee, having considered and deliberated on the 2020/21 Special Adjustment Budget of the Department of Higher Education and Training (DHET) made the following key observations and findings:

 

5.1. Department of Higher Education and Training

5.1.1.    The Committee notes that the Department of Higher Education and Training has not been categorised as a frontline department, despite education being an apex priority of government. Additionally, the Committee notes education plays a critical role in the socio-economic development of the country and the citizenry.

5.1.2.    The Committee notes the budget cuts amounting to R9.85 billion, of which R1.73 billion is from the voted funds and R8.12 billion from Direct Charges against the National Revenue Fund and the impact this will have on the ability of the SETAs and the National Skills Fund (NSF) to implement skills development interventions as per their 2020/21 Annual Performance Plans. Compounding the situation is that the reduced collection of skills levies (R8.12 billion) due to the four month’s payment holiday for companies would not be recovered.

5.1.3.    The Committee notes with concern that the Department did not receive additional funding to respond to the impact of COVID-19. Besides, the Department’s budget is already constrained, and the proposed cutswill compound the current financial strain.

5.1.4. The Committee notes with serious concern the looming reduction in the number of targets in the Department/s APP, especially on programme 5: Skills Development. Of grave concern is the reduction in the work-integrated learning opportunities, which is a critical component of the TVETNATED programme qualifications. Accordingly, half of the learners who have completed the theory part of their programmes would not be placed for work-integrated learning(WIL). This will result in low diploma graduation rates as well as the increase in the number of unemployed youth.

5.4.5.    The Committee notes with grave concern the impact of SETAs and the NSF budget cuts on the production of artisans.

5.1.6.    The Committee notes the budget cut amounting to R739.39 million in programme 4: TVET. Of great concern is the cut in infrastructure and efficiency development grant meant to address the backlog in maintenance and refurbishment of the TVET infrastructure.

5.1.7.    The Committee notes that the 2020 academic year would spill into the first quarter of 2021 and the financial implications for the universities and TVET colleges in terms of payment of fees.

5.1.8.    The Committee notes with concern the inadequate funding for goods and services, which include funding for software for the TVET examination system even though the sector is still experiencing challenges of certification backlog.

5.1.9.    The Committee notes that the process by the Department to comprehensively assess the impact of the budget cuts on the approved Strategic and the Annual Performance Plans (2020/21) which was underway. As a result, this could not be presented to the Committee.

 

5.2. National Student Financial Aid Scheme

5.2.1.    The Committee notes the NSFAS’s concern about the National Treasury’s onerous condition to suspend and reallocated R2.50 billion of student grants towards purchasing learning devices and the position taken by the NSFAS to utilise funds from loan recoveries and accumulated TVET college funds.

5.2.2.    The Committee notes the need for additional funding of R4.30 billion for university students and R360.86 million for TVET college student allowances for the extended academic year to the first quarter of the 2020 academic year.

5.2.3.    The Committee notes with concern the increase in the administration grant while funding for student loans and bursaries remain the same, despite the fact that the demand for financial assistance is increasing.

5.2.4.    The Committee notes with concern that the current DHET: Amended Rules and Guidelines for the Administration of the Department of Higher Education and Training Technical and Vocational Education and Training College Bursary Scheme for 2020 does not provide for the learning materials allowance for TVET college students.

5.2.5.    The Committee expressed its concern that the entity could not find a suitable candidate that meets the criteria for the advertised position of the Chief Executive Officer (CEO).

 

6. SUMMARY

The consideration of the special adjustments budget 2020/21 of the Department was necessitated by the tabling of the supplementary budget by the Minister of Finance on 24 June 2020. The special adjustments budget sets out government’s initial economic and fiscal response to the COVID-19 pandemic. The pandemic has profound impact on the country and the economy is expected to contract by 7.2 percent in 2020.

 

The Committee acknowledged the difficulties experienced by the Department in particular the decision by Cabinet not to declare the Department of Higher Education and Training as part of the frontline departments which were spared from the budget cuts. The Department is already being underfunded and is also expected to cater for young people and adults that are not in education, employment and training. The budget cuts will impact on the ability of the Department and its entities in fulfilling their mandates and will also hinder the achievements of the Department’s National Development Plan (NDP) and the Medium-Term Strategic Framework (MTSF) targets.

 

7. RECOMMENDATIONS

The Committee, having considered and deliberated on the Special Adjustment Budget of the Department of Higher Education and Training recommends that the Minister of Higher Education, Science and Innovation consider the following:

 

 

 

7.1. Department of Higher Education and Training

7.1.1.    Education is an apex priority of government and it is critical to ensuring the economic participation of the citizenry. Therefore, Cabinet should reconsider its decision of excluding the education departments from the category of frontline departments.

7.1.2.    The Department should ensure that mitigation strategies are put in place to encourage companies and government departments and entities to place TVET and Universities of Technology students for work-integrated learning so that they could complete their qualifications.

7.1.3.    The Department should strengthen its monitoring and evaluation function to ensure that TVET colleges are able to spend the available infrastructure and efficiency grants to refurbish and repair the dilapidated infrastructure as well as purchasing modern workshop equipment for students to do their practicals.

7.1.4.    The Department should develop a framework to guide institutions on fees for the extended academic year.

7.1.5.    The Department should engage National Treasury on the potential need for additional funding for institutions to cater for the extended academic year.

7.1.6.    The Department should ensure that the budget cut in goods and services in programme 4: TVET does not derail progress in terms of addressing the certification backlog and the plans to reach day zero backlog in 2021.

7.1.7   The Minister should undertake further engagements with Treasury with respect to the need for the Department to be allocated additional funding in response to the COVID-19 pandemic in the PSET system.

1. The Department should consider allocating learning material allowances to TVET college students so that they could purchase learning devices.
2. The Department should present on the impact of the budget adjustments on the PSET sector in the current financial year. The Department and entities should table the revised Strategic Plans and Annual Performance Plans 2020/21.

 

7.2. National Student Financial Aid Scheme

7.2.1.    The Minister should engage National Treasury regarding its onerous condition to suspend and reallocate R2.50 billion of student grants towards purchasing learning devices. National Treasury should allow NSFAS to utilise the recovered funds for university students and accumulated TVET funds for TVET colleges students.

7.2.2.    The Minister should engage National Treasury on the additional funding for the extended academic year to cater for students’ allowances.

7.2.3.    The Minister and the NSFAS Administrator should expedite the appointment of the new Chief Executive Officer (CEO) and Chief Financial Officer (CFO) before the term of the Administrator comes to an end.

7.2.4.  The procurement of digital devices to students should be expedited to ensure that all the NSFAS eligible students are able to access remote/online learning strategies and are not left behind.

The Democratic Alliance reserves their right to an opinion on the Special Adjustment Budget Vote 17: Higher Education and Training.

 

Report to be considered.