Government debt has escalated over R2 trillion with rising debt service costs crowding out expenditure on priorities such as infrastructure and education.

This is one of the concerns highlighted in South Africa’s mid-term budget policy statement on Wednesday which was tabled by Finance Minister Pravin Gordhan.

The statement noted that government spending per capita has doubled in the first two decades of democracy. Moreover, since 2009, a growing portion of spending has been funded by borrowing, resulting in the current alarming government debt.

Seemingly, the call from protesting university students for free education for all is a far cry as the mid-term budget statement has highlighted two concerns:

–          First, despite massive increases in allocations to the National Student Financial Aid Scheme (NSFAS), the enrolment of academically deserving students from poor communities has grown faster than available funding.

–          Second, there is no clear national framework for financing students who – although not affluent – are above the modest threshold established by the NSFAS means test.

R16 billion was added to higher education in the February budget. With the MTBPS, Gordhan announced a further R9 billion to go to the National Student Financial Aid Scheme over the period ahead, raising its funding by over 19 per cent a year. Over R8 billion is earmarked to meet the costs of fee increases for students from households with incomes up to R600 000.

Addressing the media just hours before he delivered the mid-term budget policy statement, Gordhan said he hears the concerns raised by various parts of the schooling community.

“There is however no room for violence…we’ve been receiving well thought through technical proposals from various people,” said Gordhan.

Higher Education Minister, Blade Nzimande, was also in attendance at the briefing. He alluded to FET’s and Colleges being prioritised over universities in the future.

“I am happy about the allocations that are signalled… Many of the problems we face are not going to be resolved by directing our focus in universities only. We need a college sector that’s 3 or 4 times bigger than the university sector,” says Nzimande.

The mid-term budget statement also pointed out the realty of a low-growth trap, which will be caused by the further deterioration of the country’s economy. In this scenario, weak GDP growth produces less tax revenue, which is likely to lead to South Africa’s economy being downgraded to junk.

In avoiding a low-growth trap, National Treasury’s proposals include a combination of tax policy measures that will raise an additional R43 billion over the next two years, and a reduction in the expenditure ceiling of R26 billion.

While the long term average rate of GDP growth has fallen from 4 per cent a decade ago to 2 per cent today, National Treasury maintains that South Africa will emerge from a period of economic weakness.