Return to Contents1 Like all other aspects of public administration, the process of budget preparation is in transition from the old pattern to the new.
2 This chapter provides information on these matters. It discusses the prospects for education in the 1995/96 budget, and indicates the direction of the Ministry of Education's thinking on relations between the national and provincial departments of education in the present and future budgetary dispensation.
The 1995/96 budget process
3 The budget for 1995/96 is truly transitional, in that its process has spanned both the old system and the new provinces, and it has not incorporated all the budget arrangements laid down in the 1993 Constitution.
4 The budget cycle for 1995/96 began in February 1994. In April 1994 a general estimate of the minimum amount needed for education for 1995/96 was submitted by the inter-departmental function committee on education to the Department of State Expenditure. Cabinet decided on a guideline amount for education in August 1994. This provisional amount was divided among the provinces, the universities and technikons by the Ministry of Education. The final amount for education for 1995/96 was determined by Cabinet at the end of November 1994. The Minister of Education then made the final allocation to universities and technikons and the provinces.
5 The final allocations are not necessarily to the liking of the university and technikon authorities or to the provincial authorities, or (for that matter) to the national Ministry of Education, since the overall budget allocation for education falls considerably short of the country's educational needs. Moreover, the necessity to shift budgetary allocations on to an equitable basis of provision, has undoubtedly created severe pressure, especially in some provinces.
or by a top-down, non-participatory process. The provincial authorities have been consulted at all stages of this process. The issues and the possible solutions have been workshopped collectively before deliberation in the Council of Education Ministers. An intense effort has been made by all concerned to achieve a result which does justice to the complexity of funding educational transformation against the inheritance of extreme disparity of provision, and within a funding envelope which necessarily compels the education authorities at both national and provincial levels to make extremely painful choices.
7 As previously announced by the Minister of Finance, a figure of R5 billion to finance the RDP Fund was deducted from the total government expenditure guideline for 1995/96 before departmental guideline figures were allocated. The government's intentions in applying the RDP Fund mechanism are to leverage government spending to the new priorities of the RDP, to re-deploy civil servants in line with the new priorities, to launch Presidential Lead Programmes (such as the programmes for Primary School Nutrition, ABET and the Culture of Learning) and long-term development programmes, to help shift government spending from consumption to capital investment, and to change the budgeting process. Faced with budgetary shortfalls in carrying out their RDP obligations, departments are at liberty to apply for "bridging finance" from the RDP Fund, submit strategic management plans and business plans for consideration by the government's RDP Allocation Committee, and indicate how they propose to incorporate in their succeeding years' budgets the downstream recurrent costs of programmes assisted by the RDP Fund. Since virtually all educational investments involve substantial recurrent personnel and other operational costs, the implications of these measures for education programmes, are evidently serious.
8 The 1995/96 guideline figure for Education is roughly 1,5 per cent more in real terms than the 1994/95 budgetary appropriation for Education. This is substantially less than the annual rate of increase of the learning population served by the education system. The fact that education is a major spending priority of the government emphasises the severity with which overall state spending targets are being applied, and the necessity for strategic analysis of education spending so that the system is able both to cope with its present obligations, including major reorganisation, and to meet its developmental targets.
Constitutional provisions on the budget process
9 At current levels of allocation, without possible adjustment according to new policy priorities, around 85 per cent of the total public funding of education will be spent by the provincial Departments of Education. The 1993 Constitution specifies in broad terms the procedures which will apply in due course to the construction of provincial budgets.
10 Each province has a Provincial Revenue Fund, into which will be paid the proceeds from provincial taxes, levies and duties, and loans raised by the provincial government for capital projects, and also the funds allocated to the province from revenue collected nationally. The latterwill be constructed from percentages (fixed by Parliament) of personal national income tax, national VAT revenue, any national fuel levy; the total proceeds of nationally collected transfer duties on property deals in the province concerned; and "any other conditional or unconditional allocations out of national revenue to a province". (section 155 (2)(e))
11 The Financial and Fiscal Commission (FFC) is charged with advising on the respective percentages which are to be applied to national revenue sources to make up the appropriation for each province, and the conditions to be applied to the conditional or unconditional allocations out of national revenue. The percentages and conditions are to be fixed "reasonably in respect of the different provinces after taking into account the national interest" and FFC recommendations. In arriving at the allocations to provinces, the government (advised by the FFC) is required to pay due regard to the national interest and national needs, and ensure that the provincial shares are equitable and reasonable, taking into account the province's developmental needs, capacity to spend, fiscal discipline, and its relative economic disadvantage compared with other provinces. (section 155(4))
12 Provincial governments will construct their own budgets in relation to their total revenue estimates and spending requirements. Education will almost certainly claim the largest share of provincial budgets, but the question is how adequately the various financial needs and priorities of the provincial departments of education will be assessed under this complex revenue-sharing and priority-setting arrangement.
13 Since the national Department of Education will not be responsible for allocating funds to the provincial departments once the constitutional provisions are fully implemented, it is clearly important for close consultation to take place between the national and provincial departments on the detailed inter-locking relationships of many components of the education budget, including the financial implications of norms and standards set at the national level, and strategic planning decisions in relation to national human resource development goals.
14 It is likely that the new budgetary system will come fully into operation in the preparation of the 1997/98 estimates. However, the national and provincial Departments of Education will need to make adequate preparations in order to ensure that the new system is used to the best advantage of the nation's learners, and the specific interests of the respective national and provincial departments. The following steps are considered essential:
(1)The Heads of Education Departments Committee (HEDCOM) will need a professionally serviced Finance Sub-Committee in order to plan collectively. The budget process is inherently competitive, but the provinces and the national department have a mutual interest in ensuring that the claims of the education and training sector as a whole are well-argued.
(2)The new national Education Management Information System (EMIS) must be set up on the basis of new and functioning provincial EMIS as soon as possible, subject to agreement in HEDCOM, in order to provide relevant data for analysis and planning.
(3)Agreement must be reached between the HEDCOM Finance Sub-Commiftee, the Education Function Committee (see paragraph 16 below) and the FFC on the categories of information and indicators of need which the FFC will take into account in establishing its criteria.
(4)The national Department of Education should be ready and able to provide technical support, if required, to provincial Departments of Education in preparing their budget submissions.
The 1996/97 budget process
15 The above measures will also need to be harnessed to the processes of the 1996/97 budget, preparations for which have already begun.
16 The national budget process within a "function" such as education will be undertaken through "function committees". The process starts with the development of policy (as in this document) through collaboration between national and provincial levels. It proceeds to the development of strategy, based on defined RDP and sectoral criteria, the capacity of the sector, an assessment of affordability, and the identification of performance indicators which can be used to measure progress in achieving targets.
17 Departments are then required to rebuild their budget votes from a zero base, translating the new strategy into appropriate programmes, sub-programmes and activities, with appropriate resources and personnel. A process of re- prioritisation across functions is then to take place, involving the development of long-term expenditure guidelines which must meet the tests of affordability and sustainability, and the weighting of functional priorities by the government in the light of the RDP. At this point decisions will be taken on whether expenditure on particular functions should go up or down.
18 This ambitious procedure compels departments to undertake highly technical work of extreme importance within very tight deadlines. The Ministry of Education is aware of the danger that the process could become insulated from necessary consultation. Since the work requires a fundamental re-assessment of budget priorities and sectoral allocations, and will involve diff icult choices, it needs to be undertaken by the national Department of Education in the closest collaboration with the provincial departments through HEDCOM and the CEM, and with the university and technikon sectors through their representative bodies and the AUT. The engagement in the process of representative bodies of other education and training sectors, including the schools, ECD, ABET, the colleges, and teacher education will be extremely important. The Ministry of Education will also require the services of specialist advisers and international expertise.
19 It is clear that the developmental initiatives and other programmes discussed in this document will be subjected to rigorous analysis in this process of strategic planning, and the performance targets will need to be spelled out over the five-year planning period and beyond, in relation to the state's capacity to fund, and the potential of other funding partnerships.
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The main function of the national and provincial education budgets is to maintain fully functional, cost-effective services and institutions in line with the policies of the Government of National Unity, the national Ministry of Education, and the provincial Ministries of Education, respectively. As the previous chapter made clear, the restructuring of the national budget is an urgent priority of the government. The restructuring of the education budget will therefore be undertaken according to the national process. Several linked pressures are operating simultaneously:
(1)The provincialisation process means that the procedure and decision structure of education funding are being transformed.
(2)The education budget structure, which is still essentially a legacy of the past, must be reconceptualised for the new democratic education and training system.
(3)Constitutional requirements, reinforced by government policy, require that equity becomes a basic principle of budget strategy.
(4)The government's development programme in education and training makes substantial claims for a re-ordering of budget priorities and a significant number of new initiatives.
(5)The education budget is under severe pressure from government's overall fiscal policy.
(6)The national and provincial Departments of Education must continue to develop their strategies for effective access to the RDP Fund.
(7)All government departments and provincial administrations are required to re-orient their strategies, improve their efficiency, enhance their use of resources consistent with the RDP, and in particular re-conceptualise their budgets from a zero base, and their priorities in terms of multi-year performance targets.
2 This chapter marks the beginning of the analysis, which must be deepened, broadened and quantified before the end of 1995. The Department of Education is not yet in a position to give guidelines on re-allocation between programmes or sectors, although some are implied in the analysis of cost factors.
3 Instead, the analysis here puts the entire education and training budget in a developmental perspective, examines the nature of the demand factors operating upon it, the extreme importance of budget reform and its implications, the scope for off-budget funding of the sector, and the case for a temporary increase in public and other sources of support.
4 The analysis treats the education budget globally. In carrying the discussion forward, the provincial education departments are key players.
Background
5 Education is a key to the realisation of the personal aspirations of individuals and the socioeconomic programme of the government.
6 The people of South Africa rightfully entertain high expectations that their long-standing education and training needs will be recognised and acted upon by their government. They also have a highly realistic appreciation of the constraints operating upon the new Government of National Unity, and equally the necessity to deliver tangible results in the short-term, and set up credible, participatory processes for phasing in the longer-term achievement of development targets.
7 The Constitution requires the government to make adequate provision to satisfy the fundamental right of all persons to basic education and to equal access to educational institutions. A better educated and skilled workforce is a prerequisite for enhanced productivity in the domestic economy and competitiveness in international markets, and significant growth in entrepreneurship and small-business development. As the RDP White Paper puts it:
"Human resource development, education and training are key inputs into policies aimed at higher employment, the introduction of more advanced technologies, and reduced inequalities."
8 A better educated and skilled child, youth and adult population is the only sure guarantor of democratic freedoms, environmental protection, public health, and reduced crime and violence.
Demand factors
9 The current pressure for additional spending on education arises from four sources:
(1)Redress and rehabilitation. The shortfall of school classrooms at the end of 1994 is estimated in the range 50,000 to 65,000. These are merely to provide for the current enrolment. Rehabilitation costs (arising from underfunding for maintenance, violence, and vandalism) are being investigated through the School Index of Need exercise, and are expected to be high.
(2)Extended and new services. The government's human resource development programme involves major extensions of educational services and new services. Among the most important of these are: the phased introduction of free and compulsory general education (to Std 7), the Culture of Learning programme, launching the national Adult Basic Education and Training programme, launching the Early Childhood Development programme, expanding training capacity in technical colleges, community colleges and technikons, an adequate special education needs programme, enhanced pre-service and in-service teacher education to cater for the foregoing, enhancing the quality of university and technikon programmes, and a tertiary student loan/bursary facility.
(3)Demographic factors. The total population is currently growing at around 2,0 per cent p.a., though the rate of growth of the school-entry cohort may be somewhat less. Urbanisation and improved access to schools increase demand in excess of the normal growth rate in impact areas. More than a million new learners have been entering the system at Grade 1 annually, without a concerted effort to implement free and compulsory education. Nevertheless, the estimated backlog in provision amounted to 1,8 million children aged 6-18 who were not enrolled in 1994. Enrolment figures for 1995 were not available at the time this document was prepared for publication.
(4)Rationalisation. Reorganising the previous 14 ethnically-based departments and services into nine provincial departments involves massive management and service changes. This creates costs for infrastructure and logistical support, plus an element of redundancy payments. Estimates of such costs are inherently unreliable but are becoming less so as the provincialisation process gathers pace.
The rationalisation process also involves disposing of accumulated debts on educational services rendered by the DET to some former TBVC and SGT administrations, and paying off interest on the current bank overdrafts incurred by the same administrations.
By 1996 it will be possible to undertake a thorough analysis of personnel requirements in the administration, with a viewto reducing the number of posts to a sustainable level. This is a requirement of government policy, and a key strategy of the RDP.
Current budget level
10 There were in 1994 nearly twelve million students, at 27,500 educational institutions, including 330,000 students at the 21 universities and 137,000 students at the 15 technikons. These learners were served by a staff complement of about 470,000 of whom 370,000 are educators.
11 The budget forthis service for 1994/95 amounted to just under R30 billion, which represented 22.5 per cent of the government's budget and nearly 7 per cent of the estimated GDP.
12 It is well known that this level of public funding for education is at the high end by international standards. Under normal circumstances it would be expected to stabilise at lower proportions of national budget and GDP. However, the circumstances are not normal.
Essential budget reforms
13 The education budget must be radically reformed, in four dimensions.
(1)Equity. The South African education budget has always been inherently inequitable. This presents two problems. The first is to achieve equity, especially in respect of educator/pupil ratios on which staff provision scales are based. This is being done, starting in 1995. Moreover, all educational administrative and professional services will be deployed for general, not sectional, benefit from 1995, as a consequence of provincialisation.
The second problem is to deal with the skewed profile of teacher qualifications, which is itself the historic legacy of past inequity, and which perpetuates a skewed distribution of teacher costs. Most white teachers are better qualified, and therefore more expensive, than other teachers. This is more complicated to deal with but it must be tackled in close consultation with the organised teaching profession.
(2)Unit costs and productivity. Much expenditure on education is wastefully used and yields poor, if not abysmal returns. New educator/pupil and class size norms must ensure both effective learning and efficient use of teaching staff. Space utilisation (occupancy rates) must be improved in order to make optimum use of expensive learning facilities. Systematic preventive maintenance of buildings and equipment must become routine. Absenteeism of students and staff must be cut to negligible levels. Full working hours must be observed throughout the system. The causes of student dropout and excessive repetition of grades must be identified and vigorously tackled.
Less labour intensive teaching and learning strategies must be systematically and vigorously introduced, where their educational value can be demonstrated.
It is also of the utmost importance that the structure of teachers' remuneration is radically changed, in order to prevent an unsustainable spiral of salary costs. The number of salary grades must be compressed, the lowest salary levels must be raised, and the automatic link between salary level and qualification-acquisition must be broken. These are clearly matters for negotiation.
The second stage in the rationalisation process, beginning in 1996, will result in lower unit costs for administration, as the new national and provincial departments trim their establishments to sustainable levels.
(3)User charges. The system inherits a completely unsystematic pattern of user charges, from school through to university, which is linked to the former ethnic organisation of provision. This must be reviewed from top to bottom and re-designed in an equitable, sustainable, market-related and publicly acceptable way. The urgent priority has been to begin meeting the commitment to free and compulsory general education in a way that is seen by the people as both fair and necessary, even if this involves the encouragement of voluntary contributions by parents to school development funds to supplement the state provision.
(4)New funding partnerships. The immense goodwill towards the RDP expressed by all organs of civil society, including organised business, community-based and non-governmental organisations, development agencies, and religious bodies, offers scope for new funding partnerships for human resource development, especially in such fields as: Adult Basic Education and Training, Early Childhood Development, Special Education Needs, school rehabilitation, community colleges, and the tertiary students' loan/bursary fund.
International development assistance agencies have already expressed their wish to participate in these areas. While very welcome and potentially strategic in some areas, this source cannot provide more than a very small proportion of national requirements.
These opportunities for establishing new funding partnerships are being vigorously explored with a view to giving them a proper institutional form. It is essential to be able to anticipate, if not plan, the level of extra- budgetary support which will enhance the provision of essential human resource development services
Implications of budget reform for funding levels
14 All these measures are of major significance for the level of budget support required by the national education and training services, as well as for enhancing the quality, coverage and effectiveness of these services. Quantification exercises will be undertaken and revised as the provincial database improves, especially in relation to ex-TBVC and SGT areas.
15 However, even in the absence of figures, some budgetary consequences of the above measures can be anticipated with confidence. These are presented for analytical purposes, not as a prediction of government decisions.
(1) Equity. The equitable educator/pupil and class size norms which will be phased in will be significantly above the historic norms in the former HOA, HOR and HOD systems, but below the former DET and homeland norms, so that a definite increase in the quality of service for the majority of learners will be made possible. However, the budgetary effect of reducing unit costs in the smaller ex-HOA, HOR and HOD systems will be more than offset by the effect of reducing class sizes (and therefore increasing the requirement for teachers) in most of the Black system.
Making administrative and professional services (subject advisers, inspectors, administrators) available across the board within provinces will be far more cost-effective. However, it will not reduce budgetary outlays in the short- term.
Achieving more equitable non-salary expenditure for essential items such as teaching materials, upkeep and maintenance, requires increased budgetary provision in the largely Black parts of the system.
(2) Unit costs and productivity. The equity measures described above will reduce unit costs overall and should significantly increase productivity in terms of educational outcomes. Eff iciency measures, such as curbing absenteeism of students and teachers, reducing dropouts, and achieving higher professional standards of teacher conduct, will dramatically increase both qualitative outcomes and numerical outputs (more matriculants, better results). However, none of these measures is likely to reduce budgetary requirements, especially in the short term.
Five measures will achieve significant savings over time:
(3) User charges. The rationalisation of user charges will increase public confidence in the system but in itself may be of valuable but limited budgetary significance. This does not imply that they should be subject to uniform controls, but that the regulations under which they are applied should be transparent, equitable and adopted after full consultation.
Internationally, user charges offset a small proportion of the public cost of total educational provision, exceptin highereducation. Thegovernment'scommitmentto phasing infree and compulsorygeneral education ensures that parents of students in state schools will not be required to pay for the basic acceptable provision for which the state is responsible, but will be encouraged, through legitimate school governance structures, to contribute what they can to the school development funds.
Fees in the post-compulsory system will need to be modest at senior secondary level and substantial at higher levels. However, public subsidy in the form of income-related bursaries for high school students and a national student loan/bursary scheme for tertiary students (capitalised partly by the state) will be essential on equity grounds.
(4) New funding partnerships.The new sources of off- budget revenue which will become available will apply largely to new services, but could offer valuable marginal budgetary relief in some currently under-funded areas such as school rehabilitation and tertiary student funding.
16 The following conclusions can be drawn. The restructuring of the education budget will be highly beneficial in terms of public acceptability and educational performance, with major payoffs into the quality of the workforce and social well-being.
17 The benefit in terms of public finance and planning will be a rational and defensible educational cost structure, with tremendously improved efficiency, cost-effectiveness and productivity levels.
18 However, the net effect of these measures will not be to reduce budgetary outlays, even on present services, in the short term. There will be significant gains in terms of unit cost reduction in the medium to long term. Thus the rate of increase of the education budget per unit of input (student enrolment) will have substantially reduced, even as productivity rises. The cost of expanding the system will therefore be substantially less burdensome to the budget than would otherwise have been the case.
Findings and implications
19 The findings of this analysis are that:
(1)Essential budgetary reforms, linked to the enhancement of systems and institutional management
and the improvement of professional practice, will bring major equity, efficiency and productivity gains, amounting to a massive improvement in the effectiveness of the public investment in education services, but no net reduction in budgetary requirements, especially in the short term.
(2)Rationalisation of the education departments will require increased budgetary provision in the short term, but will bring significant infrastructure and personnel savings in the medium term (2+ years).
(3)Population growth, urbanisation, and mobility exert a strong upward demand on education services, which the government's commitment to phasing in free and compulsory general education will accelerate.
(4)The commitment to redress past inadequacies, including rehabilitation of school infrastructure, entails additional budgetary provision.
(5)The new services required in terms of the government's commitment to human resource development, will need additional budgetary provision, though strongly linked to the RDP Fund and off-budget support through new funding partnerships.
(6)The increased social and economic benefits of the above improvements will have a dramatic indirect and direct effect on the budget (since crime, prison, health and welfare caseloads should reduce) and the fiscus (in terms of enhanced economic growth arising from improved educational, motivational and skill levels, and a stabilised social environment).
20 The most serious implication of the analysis is thatwhile there is massive scope for restructuring the budget and improving efficiency and productivity in the system, which must be done, these measures will not reduce absolute budget requirements in the short term. The short and long-term demand factors are unavoidable, given demographic realities, constitutional obligations, and government's public commitments to phase in free and compulsory general education, launch a national adult basic education and training programme, and in general radically improve the quality of the nation's human resources.
21 A major capital works programme in education is essential, to meet the government's constitutional and RDP commitments. It is needed to cover the most serious requirements for school and college rehabilitation. Learning space of acceptable quality must be provided, based on a thorough survey and systematic mapping of requirements, so that significant progress can be made towards free and compulsory education, and new service requirements for human resource development. Costs must be carefully controlled through tight design specifications for new construction, and by carefully planning the multiple use of facilities. Elements of this programme have already drawn support by the RDP Fund in the form of the Presidential Lead Programme on the Culture of Learning. Other funding partnerships with local and international agencies will be sought. The specific requirements of the higher and further education sectors will be reported by the respective national commissions.
22 Most capital investments in the education sector have associated recurrent cost implications, particularly personnel costs. In principle, the education budget can absorb these only up to the limit set by minimum national norms and standards for the maintenance of a service of acceptable quality.
23 While ways must be found to reduce government consumption expenditure in the education sector, as in others, it is important to emphasise that educators are the vehicles for the public investment in human resource development. Just as investments in labour force training in the general economy must be lifted if workplace productivity and national competitiveness are to rise, the state as the monopoly employer of teachers and other educators must invest in their professional development if any improvement in education and training quality is to be achieved.
24 There is an unanswerable case for investing in research and development on the appropriateness of distance education strategies for different learning goals, including the use of study guides, videos, computers, newspapers, audio-casseftes, experimentation kits, broadcasting, charts and resource packs, coupled with student support services. There is a vast potential demand among educators, youth, women, workers, self-employed persons, and students in institutions. The unit cost and cost-benefit factors are highly favourable as demand grows and development costs are absorbed.
25 The Ministry of Education recognises that the most secure source of additional public funds for education will accrue from real economic growth and increased revenues. There are two other potential sources. One is internal savings and re-allocations, which the government's RDP strategy requires. This chapter examines these options seriously, and explains their limitations. The second is re-allocations from other functions to education. This is a matter for Cabinet's decision on developmental priorities.
26 The Ministry of Education, in the face of extreme budgetary pressure, requests recognition:
(1)of the significant social and economic payoffs accruing from a well- functioning education and training system which is responsive to social and economic demands
(2)for its goal of budget restructuring and associated reforms in education management and professional practice: to stabilise overall capital and recurrent cost factors in the system at lower levels in the shortest possible time, while substantially improving equity, productivity and quality, in order to achieve a sustainable long-term basis for growth and development in the education and training sector
(3)for the conclusion that the education budget f rom all sources needs to increase by a suff icient margin in real terms over the population growth rate for two to three years, in order to absorb the bulk of the essential capital cost programme for rehabilitation and development, the consequent operational expenses, and the costs arising from rationalisation, and that strategic, "cufting edge" parts of the programme for human resource development be planned and executed by the government in conjunction with local and international funding partners.
27 This preliminary analysis will be critiqued and deepened as the Department of Education, in consultation with the provincial departments and stakeholder organisations, makes preparations for the multi-year transformation plans which the RDP Office has requested.
Summary and conclusions
28 Education is a key element in personal aspirations, in satisfying fundamental human rights, and in national reconstruction and development. The anticipated demand for increased short-term and long-term funding for education involves four components: redress and rehabilitation, extended or new services, demographic factors, and rationalisation.
29 The current level of budget provision for education is high, but it is skewed inequitably, and the productivity of the system is unsatisfactory. The education budget must be restructured (1) to achieve equity, (2) to reduce unit costs and enhance performance, (3) to rationalise user charges, and (4) to develop new funding partnerships. These measures, while significant, will not generate sufficient budget capacity to cover additional funding needs in the short term.
30 The national education budget from all sources must be enhanced for the next few years, until demand stabilises, rationalisation costs are absorbed, and other measures generate significant structural savings or new revenue.
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