Scrap BEE for subsidised private schooling - BizNews

25 February 2019 - Rather than squabbling over the best way to implement a failed system of BEE, South Africans should start thinking out of the box on the empowerment challenge. As 85% of black South Africans have signalled, tax-funded schooling vouchers would help them far more than BEE.

Anthea Jeffery

Sound schooling is the foundation for upward mobility, which is why last week’s budget allocated some R263bn to basic education. This is roughly 68% of total spending on education, which rises to R386bn in this financial year and makes up a hefty 7% of GDP. Yet the country is once again unlikely to get much bang for its extensive schooling buck.

Pupils have little chance of doing well at school – let alone gaining useful qualifications at universities or TVET colleges – when 78% of South Africa’s Grade 4 pupils cannot read for meaning in any language, and 61% of Grade 5 pupils are unable to add and subtract whole numbers.

With so many public schools failing to impart the basics of reading, writing and ’rithmetic, many parents are voting with their children’s feet by sending them to independent schools. The number of independent schools has doubled since 2000 and now stands at some 1,995, many of which offer relatively low-cost options.

Spark Schools, for instance, which charges R23,000 a year for primary school and R30,000 a year for high school, has recently expanded into Protea Glen in Soweto. Children in the area, who used to spend long hours travelling to independent schools in distant suburbs, are now spared the exhaustion of this daily commute. Parents save on travel costs, and applaud the fact that high-quality schooling is now locally available.

Though this kind of choice is currently confined to the middle class, there is a tried and tested way to expand that choice to poorer parents, too. This can be done by redirecting much of the present schooling budget into tax-funded schooling vouchers to be provided to all parents below a certain income level.

This shift would do far more to help the disadvantaged climb the economic ladder than BEE will ever manage. The truly disadvantaged will never benefit from BEE ownership deals, management posts, and preferential tenders. Inevitably, these will continue to go to a relatively small group – and often to those with the strongest political connections.

By contrast, once low-income households are equipped with tax-funded schooling vouchers, all schools will have to vie for their custom. Poorly performing public schools will have to up their game. Many more independent schools will spring up to meet burgeoning demand. Non-profits and community groups will step up to the plate as well. The resulting competition for pupils will push up standards, promote innovation, and hold down costs – as has happened in many other countries that have embraced a voucher system.

Parents will also have a keen interest in ensuring their vouchers are used to best effect. Hence, whereas much of the schooling budget is currently frittered away, a voucher system will provide real bang for every buck.

There is also strong support for the voucher idea from South Africans all across the colour line, as the IRR’s most recent opinion survey has again showed. This was carried out in December 2018 among a representative sample of 1,010 respondents, all of whom were interviewed by phone in their language of choice by experienced field operators.

Asked if they would like a tax-funded schooling voucher so they could send their children to the schools of their choice, 91% of all respondents – and 93% of black people – said ‘Yes’.  Asked if this would help them more than BEE, 85% of black respondents agreed.

Read also: The BEE-sting that kills – analysis of a policy gone horribly wrong – Anthea Jeffery
This schooling voucher system should become an integral component of a new empowerment strategy being developed by the IRR and called ‘Economic Empowerment for the Disadvantaged’ or ‘EED’.

Under an EED system, business would earn EED points for topping up the vouchers of the poorest households, or for using their R&D capacities to find innovative ways to improve the quality of schooling.

Most EED points would come, however, from the core business of business: from what the private sector does to attract investment, grow the economy, and generate millions more jobs.

Jobs are what most South Africans want most, as the IRR’s December 2018 field survey once again confirmed. Business is uniquely capable of fulfilling that need. But current BEE rules hobble companies in a host of ways and undermine investment and expansion.

Under an EED system, however, this would change fundamentally, for businesses would earn EED points for:

- capital inflows attracted,
- fixed investments made,
- jobs sustained or created,
- tax revenues paid,
- contributions made to export earnings, and
- spending on R&D and the up-skilling of employees.

With private sector expansion incentivised in this way, South Africa could soon start to match the growth rates of other emerging markets. The potential benefits are illustrated by recent research showing that, if the country had managed this since 2010, GDP could be R1trn greater, 2.5m more jobs could have been generated, and tax revenues could be R1trn higher. The current burden of public debt could have been significantly reduced, cutting down on the roughly R1bn per working day that currently goes to interest payments – and allowing more revenue to be re-allocated to schooling vouchers and other vital needs.

Rather than squabbling over the best way to implement a failed system of BEE, South Africans should start thinking out of the box on the empowerment challenge. As 85% of black South Africans have signalled, tax-funded schooling vouchers would help them far more than BEE. These vouchers should become an integral part of an EED empowerment strategy that incentivises private-sector investment, growth, and jobs – and will do far more to help the disadvantaged get ahead than BEE will ever achieve.

Dr Anthea Jeffery is the Head of Policy Research at the IRR, a think tank promoting political and economic freedom. If you would like to take a stand with the IRR, SMS your name to 32823 (SMSes cost R1, Ts and Cs apply).