Banking Association SA’s Coovadia warns free education is an empty promise

PUBLISHED: Sat, 16 Dec 2017 17:21:15 GMT
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By Cas Coovadia, MD, Banking Association of South Africa

The announcement by President Jacob Zuma of free higher education lacks substance and is deliberately vague on what is needed to implement. In light of the state of public finances announced by Minister Gigaba in October, it is difficult to reach a different conclusion than that it amounts to nothing less than a further empty promise and another failed delivery. While a response to the commission can be welcomed, the President has failed to provide any clarity on how the entire scheme will be funded from what is an already stretched fiscus.

While embracing the idea of supporting the poor, we must ask what will this do to South Africa’s budget deficit and overall debt burden announced by the Minister of Finance two months ago. A number of questions come to mind:

  • What will be the total additional funding required to meet this commitment?
  • How will the funds be raised?
  • How much more borrowing will be required?
  • Taking this into account, how much more will South Africa pay in servicing the debt as a % of GDP given our unfavourable credit rating?
  • Which vanity projects will be discontinued or abandoned in order to make this noble policy affordable?

This is unfortunately a way of fooling South Africans by adopting unaffordable populist policies in the name of the poor without the ability or even the political will to deliver.

The impact of this policy on public finances, requires that it should have been presented to the Standing Committee on Finance in parliament and ultimately tabled in the National Assembly before adoption. Sneaking it in as the President has done can only be viewed with suspicion.

The President clearly lacks any understanding of South Africa’s economic predicament. Given the lack of economic growth, a growing fiscal deficit, ongoing falls in tax revenues and increasing demands on the fiscus from other pressing social needs it is not clear how promises will turn into action. We call for the President to make these plans available for public scrutiny.

The Presidents promises must be accompanied by significant detail or they amount to nothing more than painting his successors into a corner and an attempt to manipulate popular opinion in the process.

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