On Twitter yesterday, there was this great chart doing the rounds from ETM Analytics:

And it feels like such pertinent timing (I’m almost sure that it wasn’t an accident). While I don’t believe that the #feesmustfall movement should be dismissed out of hand (I think their points are valid), there is a practical reality here:

1. Skills shortages result in salary premiums.
2. This exacerbates inequality.
3. South Africa has a serious skills shortage.
4. Universities are meant to address that by up-skilling students.
5. But if the Universities are forced to stop operating in the pursuit of unreasonable demands, then the problem can only get worse.

And the demands do seem unreasonable. “Free education for all” is a great slogan, but I wonder if we can’t do better than that. Some less-snappy alternatives:

1. “Reform the student loan system so that it is possible for students to get the loan funding when it’s needed rather than months down the line!”
2. “Put in place a grant program for students that come from underprivileged backgrounds!”
3. “Give the universities more discretion with their existing university subsidies, so that they don’t have to return hundreds of millions of rands to the Treasury unspent and then pass those losses on to students through fee increases!”

The ways and means to deliver what is needed exist, and probably without too much extra cost for the fiscus.

But we are running out of time.

About that though…

To be honest, my concern/suspicion is that this ‘time’ has already come and gone, and Higher Education in South Africa is now doomed to decline. And that’s not because of “lost academic years” or “burned buses” – those are all temporal costs that can be dealt with.

The problem is one of continuity.

Basically, universities rely on two sources of funding:

1. Government subsidies; and
2. Fees.

Those fees come from three places:

1. International students;
2. Privileged students;
3. Student loans and scholarships.

Now whatever the #feesmustfall movement is saying, it’s highly doubtful that they intend to have free education for international students and the privileged. There is still an underlying assumption that those two types of student will continue to pay fees, while the government picks up the bill for everyone else.

Two questions though:

1. If you were an international student, and you could afford to study elsewhere, would you choose to enroll at a South African institution for the next three to four years – especially now that we’ve had two consecutive years of protest action over the final exam period?
2. If you were a privileged South African student, with the means to study elsewhere, would you still choose to study at a South African university, when the campuses are plagued by petrol bombs every October?

Both of those questions have easy answers. And my guess is that the answers are already being given – the future students that would have the ability to stomach the fee increases are not going to come to South African universities. They’ll find alternatives in Australia and Europe and the USA.

If that is already happening, then it might well have already sparked a damaging spiral: one in which the Universities are losing access to their private sector revenue streams, and are thus forced to become increasingly reliant on the public sector. And if the public sector continues as it has, then the protests will become an annual thing. At which point, the Universities will have to start cutting costs – and their main costs are teaching staff – and if you spin this out to its logical conclusion, it’s a dismal one.

Let’s hope that the Finance Minister has better news on this front in his Medium-Term Budget Speech this morning.

Rolling Alpha posts about finance, economics, and sometimes stuff that is only quite loosely related. Follow me on Twitter @RollingAlpha, or like my page on Facebook at www.facebook.com/rollingalpha. Or both.