7 / 40
5
M U T
S P I R I T
/ /
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