South Africa Is Said to Assess Free-Education Cost at $970 Million

JOHANNESBURG (Capital Markets in Africa) – South African Finance Minister Malusi Gigaba told the ruling party’s top leadership the government will need 12 billion rand ($970 million) to fund President Jacob Zuma’s plan to scrap tuition fees for students from poor homes, according to a person with knowledge of the matter.

Gigaba told the ANC’s National Executive Committee this week that the Treasury will cut from existing spending programs and won’t announce a special tax or an increase in the value-added tax rate to finance Zuma’s plan, according to the person, who asked not to be identified because he is not authorized to speak on the matter.

The Treasury is still exploring ways to fund the plan and will only give further details about the amount needed in the Feb. 21 budget, spokesman Mayihlome Tshwete said by phone.

Zuma unveiled the free-education plan on Dec. 16, two days before Cyril Ramaphosa replaced him as leader of the African National Congress. The party’s NEC met on Jan. 10 in the southern city of East London to prepare for its anniversary celebrations on Saturday.

South Africa will have a revenue shortfall of 50.8 billion rand in the fiscal year that ends in March, Gigaba said in the October mid-term budget. In November, Zuma told the Presidential Fiscal Committee to cut spending by 25 billion rand in the 2018/2019 budget and to find ways to add 15 billion rand to the nation’s revenue to help stave off further debt downgrades. Cutting expenditure could stunt growth in an economy that went through its second recession in less than a decade last year.

South Africa will increase subsidies to universities to 1 percent of gross domestic product from 0.7 percent now over the next five years, according to Zuma’s plan. The Treasury allocated 76.7 billion rand to higher education for the year through March 2018, and estimates this will increase by an average of 8.2 percent in each of the following three years, the fastest-growing spending item after debt-service costs, it said in the mid-term budget.

Source: Bloomberg Business News