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5

M U T

S P I R I T

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S E P T E M B E R 2 0 2 0

The COVID-19 crisis has severely disrupted the

global economy, with growth expectations of 3.3%

in 2020 being revised to a global contraction of

5.2%. In South Africa, the pandemic has significantly

worsened an already declining economy. Economists

and our government have warned that the country

will experience its biggest decline in Gross Domestic

Product (GDP) in 90 years, with the GDP growth

forecast being revised to -7.3%.

Disruptions to economic activities worldwide have

led to a sharp decline in per capita income as tens

of millions of workers have lost their jobs. In South

Africa, the unemployment rate increased to 30.1% in

the first three months of the year.

The Reserve Bank has cut interest rates again in order

to stabilise the economy and contain inflation over the

medium term, and the Minister of Finance presented

an emergency budget to Parliament on 24 June 2020.

The direct impact of the recession, worsened by the

arrival of the COVID-19 pandemic, has not left the

public higher education sector unscathed. The DHET

has cautioned public higher education institutions to

tread carefully with regard to financial matters and has

announced the following measures:

Block Grant funding and Infrastructure and

Efficiency (I&E) Grant funding for the2020academic

year is being reduced due to reprioritising funds as

a result of the COVID-19 crisis.

The Block Grant for next year is not expected

to increase significantly (if at all) and universities

must apply a zero-based budget for the 2021

financial year.

Efforts must be made to restrict the additional

costs of the extended academic year, including

spreading out the academic year costs over the

extended period.

2021 fee increments have not been confirmed

and will be advised later in the year, although any

increases are not likely to be more than current

inflation (2.2% in June 2020).

Student accommodation guidelines are being

prepared for approval and will be gazetted in August.

The Finance Executives’ Forum of Universities South

Africa (USAf) has also raised several matters impacting

the finances and financial sustainability of universities.

These matters include:

Going concern risk – the ability of the institution

to continue to operate into the foreseeable future

without any special funding being made available

to it.

Deferral of state subsidy payments – in July, the

Department of Higher Education and Training

(DHET) did not pay institutions the block grants

and fee gap grants, and the National Student

Financial Aid Scheme (NSFAS) also paid a

reduced amount to institutions.

State subsidy reductions – these have already

been announced by the DHET with respect to the

Block Grant and the I&E grant.

Reprioritisation of earmarked grants (no new

money) – unspent grants, together with interest

earned on such funds, have been reprioritised as

no additional funds are available from Treasury to

fund the COVID-19 crisis.

Steep decline in student debt collection, resulting in

an increase in student debt – a reality for universities

nationwide, putting major strain on their cash flow

as students struggle to settle their fees.

Investment in health and safety – a critical aspect

which requires more funds to be directed towards

protecting staff and students.

Investment in ICT, connectivity and related costs

– a vital resource to enable online and multi-

modal teaching and learning, which also requires

significant financial resources.

Revenue reduction from donors, state entities and

third stream income – this is due to organisations

and institutions not having excess cash available

to donate or to put towards funding projects.

Staff salary increments – the historical practices

of greater-than-inflation salary increments have

distorted pay scales and created unreasonable

expectations among management and staff.

These levels of increases are not sustainable

and salary costs and increments will have to be

curbed and be brought in line with inflation.

The financial impact of the above for MUT is obvious.

MUT is not self-sustainable and depends largely on

NSFAS and DHET for funding. The cohort of privately-

funded students (approximately 33%) poses a high

financial risk to the University, worsened by the

COVID-19 pandemic.

Our country, our economy and the higher education

sector are in crisis. We need to be very mindful of the

implications this has for MUT and to consider all decisions

very carefully. It is certainly not business as usual.

An overview by Professor Marcus Ramogale,

Acting Vice-Chancellor & Principal