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The silent tax on SA’s middle class

The cost of education.

One of the biggest challenges facing South Africa is arguably its inability to keep pace with the international advancement in technology, Sasfin deputy chairperson David Shapiro recently argued during a panel discussion.

While there was a lot of excitement around developments on the political front, one had to be “very, very worried” about the structure of South Africa’s economy when some of its peers were educating hundreds of thousands of engineers and its own maths pass rate was 30%, he said.

“I think that if this country does want to change, it has to change direction.” 

South Africa had to adapt, embrace a new technological world and align the education system accordingly, he argued.

Shapiro is not the first to highlight this issue. Newly-appointed joint-CEO of Investec, Hendrik du Toit, also noted his concern that South Africa was a quarter-century behind with regard to education and the development of its people during an interview in 2017.

In a world where computers and robots are reducing job opportunities, it is important to ensure that the population is competitive, he said. The issue is not about race or redistribution but about growing the economy to the benefit of all South Africans and ensuring that the poor and previously disadvantaged also reap the rewards.

Part-time NPC commissioner, Elias Masilela, also previously warned that South Africa feared to deal with its real issues including how it could provide good quality services like education.

Policy

There is concern that South Africa may be using business models and theories that applied to an industrial-era economy, while the world around it is rapidly changing. Would it be competitive if it stayed on this course, particularly without also taking radical steps to improve the quality of its education system?

Given South Africa’s mineral deposits and significant number of unskilled workers, it is not difficult to see why there have been on-going efforts at reindustrialisation. And while such programmes have merit, one has to ask whether the current scope and trajectory of policy implementation can lead the country to a place where it could still compete competitively on the world stage in ten or 20 years’ time.

Unfortunately, as the country has moved from one crisis to the next, efforts to truly transform the quality of the education system have fallen by the wayside. Instead – arguably to appease young voters – free tertiary education has been announced.

In a recent Moneyweb radio discussion, a market commentator argued that if new ANC-president Cyril Ramaphosa replaced president Jacob Zuma, another cabinet reshuffle would follow. The first three portfolios that needed new hands were Finance, Public Enterprises and Mining, he said.

It is difficult to argue with that. Asking for changes to the education portfolio while South Africa is on the verge of another credit rating downgrade, Eskom about to default and the mining industry in the doldrums, is arguably akin to phoning a civil engineer to inspect the foundation of the house while there is a fire at the backdoor and a leaking pipe in the bathroom.

On-going efforts to put out the most recent fire or leak (think Nenegate, cabinet reshuffles, junk status, state capture, Eskom, SAA) have taken up so much capacity that quality education has become an after-thought. While access is an issue that has to be addressed, the introducing of free tertiary education is putting a roof on a property with significant foundational deficiencies.

The World Economic Forum’s Global Competitiveness Report 2017/18 ranks the quality of the country’s primary education 116th out of 137 countries. The quality of the higher education and training system is ranked 114th while the quality of maths and science education is placed in 128th position.

Will South Africa still be in a position to undo the structural damage caused by a dysfunctional education system in ten or 20 years from now?

In the meantime, as South Africans gear up for significant tax hikes to be introduced in the upcoming budget, there is a silent “tax” quietly finding its way into the homes of many South Africans. It is the cost of providing a quality education.

Listen to the podcast: The staggering cost of education

While there are numerous public schools where the quality of education is at least on par with private schools, if not better, many South African families don’t have access to these schools and places may be limited. The number of private schools that have sprung up around Johannesburg in recent years, suggests that there is a significant appetite for private education in certain areas of the country. This is presumably – at least in some cases – an effort to overcome the shortcomings of the public education system.

But it comes at a significant cost – one middle- and even upper-middle-class families may struggle to afford. Moreover, it leaves low-income families at a disadvantage.

According to Old Mutual, the cost of education is expected to increase by around 9% per annum. The expected cost for one year of education is shown below.

According to Statistics South Africa’s General Household Survey, almost two in every ten potential learners cannot attend an educational institution due to a lack of money to pay for fees.

While a lack of funds should not keep any child from receiving a quality education, the sad reality is that as long as government neglects to address the quality issues inherent in the education system, it creates a vicious cycle which reinforces unemployment, poverty and inequality.

And it renders the country increasingly uncompetitive in a world where technological advancement continues to baffle the mind.

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COMMENTS   37

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I truely believe that the present Zupta & related corruption issues is small & short-termed in comparison to our growing educational one. To become the leading force in Africa again & to be competitive on the world stage – we need to seriously develop an educational and competition driven focus akin to the Southeast Asian Tigers (Do yourself a favour and Google the school kids’ academical commitment and work ethic in South Korea – there was a brilliant BBC documentary last month about it).

We are angry about the present bad apples…..whilst our roots are not strong enough to ever create export quality “fruits” across the board! The present focus on universities is also short-sighted – as the schools is where the real problem lies.

To add salt to the wound – according to the 2018 edition of the Times Higher Education (THE) World University Rankings, our universities are ranked in shocking spots:

SA Rank World Rank University
1 171 University of Cape Town
2 251-300 University of the Witwatersrand
3 351–400 Stellenbosch University
4 401-500 University of KwaZulu-Natal
5 601-800 University of Pretoria
6 601-800 University of Johannesburg
7 601-800 University of the Western Cape
8 801-1000 University of South Africa

The lack of investment in education by the criminal clique of the leadership of the ANC is probably the most devastating mess that they have created for the future. The world is rapidly moving towards an era of high tech, maths/science types and we in SA have either the most useless education system or dumbest students-probably both!

Look at the South Koreans/Israelis/USA-the innovation originating from countries where Education is key! Here the gangsters retrenched experienced teachers because they were not black enough! In 20 years time we will be what Africa was set out to be in George Orwells book-1984-cheap, untrained labour and consumption of the excess capacity of the real world.

There is no lack of investment. SA spend on education is 6 % of GDP, compared to the world class system of Finland at 5.4%. Finlands teachers are also among the best paid with a very low child to teacher ratio.

@ Beeshaas

Spending is not investment!

We will not be able to replicate the Asian Tigers. Look up Average IQ by country on Google.

IQs
Hong Kong: 108
Singapore: 108
South Korea: 106
Japan: 105
Taiwan: 104

South Africa: 77

This is the elephant in the room. I rest my case.

Have you got that SA IQ by ethnic group?

@pacaratac: You can find that info online. I don’t want to be the one to share that here.

Whilst anyone spending time in SA will soon recognize the average citizen is a bit on the slow side…it’s far from obvious how much of that is nurture, rather than nature.

For instance expat Indian communities are famous for being successful doctors, lawyers and business people within a generation or two of arriving in any country …and are the top-performing (academically) group in SA today.

Yet India’s IQ in the same ranking is 82, only marginally better than SA. The India home and expat people are genetically the same, the difference is development.

I suggest that under the right conditions, SA can really lift its (brain) game much closer to the global average.

Are those IQ tests renormalised for South Africa? Also all the countries you listed are known for cramming, and for gaming -and cheating on- tests. IQ tests are not designed to be practiced for, yet that’s exactly what happens in parts of East Asia, rendering a lot of results useless. That’s also why many students from those countries, with stellar standardised test scores, struggle when they travel to study in western universities, and have to be “helped along” (foreign students are cash cows for universities, so standards are lowered for these students).

The interesting thing about “IQ realists” is that they claim that everyone else is ignoring the elephant in the room, but they discount the methodological flaws in their own evidence, so that they can score their ideological points (and, let’s be frank, most are deeply wedded to the idea that certain races of people are genetically cognitively inferior to others).

Do South Africans show deficits in the sort of abstract thinking that is measured in IQ tests, even if tests can be shown to not have any bias? It is possible, even likely. But the problem is that this is assumed to be genetic deficit, rather than something correctable with better education, nutrition, and healthcare…and evidence for that remains slim.

@Dss

– The fact that they study hard for IQ tests show that they are willing to work hard to do well, which is a foreign concept to a lot of South Africans.

– The Asian students you talk of actually go on to earn the highest average salaries of all race groups in the USA. They are definitely not being “helped along”.

– I specifically left race out of this and only focused on the average IQ in SA.

– Better education, nutrition and healthcare do have an effect. Some studies show that those factors can contribute up to 10 points in IQ. That brings us up to 87, still 20 points behind the Asian Tiger countries…

If you were a black person and you read your comment how would that make you feel? Would that give you a warm and fuzzy feeling and make you more tolerant of white people or would this want to make you want to vote EFF and chase all white people into the sea.

Studies like this does not take into consideration the impact of early childhood development. Mothers that need to commute 5 hours a day, looking after the madams children till she gets back from yoga at 8pm does not have sufficient time to spend with their young children and give them the needed stimulation.

Really we need to show a bit more compassion than comments like this

“I specifically left race out of this and only focused on the average IQ in SA.” – Black people make up 80% of the population, what do you think the average reflects then?

I said to my neighbour , who is black and still have kids at school, that Govt should stop the grant payments and instead pour those millions into education.His comment: that will never happen because the ANC will lose 15 million voting cows and then have to deal with an educated citizenry.

Chet, Florida

Where is Rhodes University, let alone Nelson Mandela University in Port Elizabeth?

I don’t think we are doing too bad on the university rankings.

South Africa only has 50 million people, that is around 0.7% of the world population. We should have 7 universities in the top 1000 given our small population. We have 8. Sounds about right.

Moneychief

UCT currently ranked 171. Just a few years ago it was in the top 100. We’re going backwards.

University rankings don’t deal necessarily with quality of teaching, especially undergraduate teaching. A lot of top universities have undergraduate students being taught by post-grad teacher assistants, rather than professors, for example, since the professors are more engaged in research. The benefit to students of this teaching approach is somewhat dubious, when compared to lower ranked universities, where the same skills and knowledge are taught.

A country like South Africa needs skilled graduates…to the extent that teaching correlates with rankings, it’s disheartening, but it definitely doesn’t tell the full picture.

South Africans love self-pity and putting ourselves down, but perhaps it would be worthwhile looking at the methodology of these surveys before we glibly jump to conclusions (a similar problem exists when opinionated people read too much into the 30% matric pass mark and use it is impugn our entire education system).

As for South Korea, the kids don’t have much quality of life, going to school till midnight (perhaps it’s the South Korean version of Kim’s totalitarianism). Asian tiger children, who cram for tests, don’t seem to do exceptionally well in the workplace..it’s almost as if, once the parents stop cracking the whip, and they face the messy real world, rather than gaming test scores, they revert to the mean.

History will judge the successive ANC governments since 1994 harshly on what they did and did not do in the field of education. They are throwing massive amounts of money at it without any consequence management of poor performance. A lot is said about where the education system had been when the ANC took over. A lot of that is true. How the successive Ministers of Education failed to see and give direction, and lead the education system into the new world of knowledge and work will never be recognised until it is way too late. Add to this the attitude of “the world owes us jobs” and one begins to understand the mindset of teaching people obsolete skills while the world has gone through two or three further “industrial” revolutions (think information, bio-technology, robotics).

This article hits the nail on the head.

In the short term, it is no doubt great news that Zuma will be shown the door in the coming months. Ramaphosa is quite obviously a better alternative. But structurally, the economy is disaster.

Looking long-term, there are 2 major challenges (and I am no economist). First, our education system is an embarrassment and even if by some miracle, Ramaphosa prioritised and fixed the mess, it would take minimum 20 years to manifest material positive change. Secondly, we need to grow our tax base. We have too few people paying tax and too many people on welfare. You can’t grow the tax base without incentivising investment but you can’t incentivise investment with the current overly regulated, heavily taxed and populist environment.

I’m grateful that there are people who fight the good fight every day. But I am not one of them. I’m one of the fortunate few who have managed to find a better life elsewhere where one is safe, you earn a currency that will not depreciate long-term and where you actually get services for your taxes. It’s obviously not all roses but on the balance, it is the best thing for my family.

– Statistically South Africa is just as safe as the world average, as long as you stay out of the informal settlements which skew the statistics heavily. In fact, the biggest risks to your life (96%+) followed you to your new country, heart disease, cancer, infections and road accidents.

– Depreciation of the currency is irrelevant, purchasing power is what matters. The Rand has very good purchasing power. Want proof? How big is your house overseas compared to what it was here?

– Sure service delivery is better in the best countries, but is it really worth it to leave all your friends and family behind to be a stranger in a foreign land?

You are spot on. For most people living in South Africa the biggest risk to their well-being in not crime, but the biggest threat is themselves. The statistics for the amount of violent deaths in South Africa is 80 per 100 000, which is higher than in any war zone on earth. The amount of people living with diabetes are 7000 per 100 000 of the population. The cook in your kitchen is a 100 times more dangerous for your health than the stranger jumping over your wall.

@Moneychief, yeah Australia.

RE Depreciating rand, it certainly matters. We live in a globalised world and when our currency is weak, it impacts our cost of living – if you like electronics, vehicles, travel and some luxury goods (ie Helmanns Mayonaise) then it definitely does matter. When the rand is 30 to the USD, where other than East Asia and Africa can you enjoy a reasonable quality of life or is the assumption you are in Africa forever

RE Crime, @Sensei hit the nail on the head saying 80 per 100,000 is higher than any war zone. Yes it is well known that things like cancer, road deaths etc are a greater overall risk but those are things I can largely control. A guy with a gun to my head (like happened last year) is not. Violent crime will not shift until people are uplifted/educated – what are the odds of that changing in 20 years?

RE Service delivery – I was discussing with a mate in Sweden what we get for our taxes. In the end it turned out to be…roads. I would love to hear what else we get because we sure don’t get security, education and health care.

Leaving SA is no doubt incredibly tough – to be a stranger in a new land. But IMHO the benefits far outweigh the costs. I’m 33 and still have a life to live. If I were 60, I would continue to internationalise all my assets and stay put in SA somewhere secure with a large hound.

@TheOwl: Australia is a good choice. Enjoy.

PS: I have two large hounds (two boerboels specifically bread for the South African, em, market) and an international portfolio.

@MoneyChief, @TheOwl

The whole “big house” thing is a bit overblown IMO. Yes, you sell your SA house and the same $ buys you a much smaller one in the first world. But that only makes sense as a comparison if you are retired and your SA house is paid off and thats what you cash in.

If you are working you will generally earn more take home in the first world, sometimes much more. Good gov services mean you effectively keep more of it rather than paying for school/security/2+ cars. Interest rates are much lower (mortgage 1.7%, personal loan 5%) meaning its much easier to buy that relatively expensive big house overseas than it might look initially.

Australia has the biggest houses in the world and if you buy at the city edges there are quite affordable house-and-land packages. Its quite normal for Aussie tradesmen there to have enormous 5 bedroom houses which are better than those of the SA middle/professional classes. The land they’re built on will be smaller though, but there are parks that are safe to play with your family so its no big deal.

Even in going Durban -> London, a worst case emigration scenario isnt as bad as it looks initially. Yes London Zone 1 is insanely expensive and Zone 2 and 3 are expensive with little Victorian terraces that you cant swing a cat in. But Zone 5 and 6 (only 20km to the city centre) has houses as big as SA middle-class houses with garages and big back gardens that are quite affordable on professional salaries. The state schools are fine. Into the home counties its even cheaper. Remember that London has FAR more big houses than Johannesburg…someone is living in them, and they can be affordable.

@Sensei Humans are terrible at quantifying risk. This is why people jump red traffic lights at busy intersections at night, “because of hijackers”, but the risk of a crash that they create, is far higher than the risk of a criminal being at a particular intersection. I guess causing a crash feels “better”, because it’s under the control of the person initiating the action, but being a victim of crime is a passive experience.

“Its quite normal for Aussie tradesmen there to have enormous 5 bedroom houses which are better than those of the SA middle/professional classes”

You’re probably about 20 years out of date on that one…

“South Africa was a quarter-century behind with regard to education and the development of its people”…ANC has been in power for 24 years…no correlation here whatsoever.

The problem is not just the anc; it is too much brandy and coke.

… gin and tonic, Klipdrift, Castle, Black label et al … never mind the meths

Firstly, any payments made towards education should be a tax deduction.
Secondly, The Department of Education needs to pay its Electricity andTelkom bills to be reconnected to the real world, before it can do anything about its policies!

A large part of the problem is that the ANC is treating the public school system like the rest of the civil service – it is a conduit for directing tax money to incompetent cadres who have no interest in teaching whatsoever. It is pointless to discuss the work ethic of children when teachers are not in the classroom to teach.

I have to take issue… education is only of many ‘silent’ taxes. What about security and the massive cost of healthcare? Or the inflated costs of cars and other imported goods due to the ludicrously high import duties and the weak state of the rand.

We have a two pronged problem in SA, and education is one of them. Health-care is also non-existent. You combine the extra tax we pay for sending kids to ridiculously expensive schools and the ridiculous health costs, you realize that the working class here hasn’t got a chance to save for anything. I avoid the term “middle-class” because it assumes people have managed to save some money in the bank. We are just working slaves, finish and klaar. The only way you could be in a position to save significantly is to not have kids and you relatively have good genes and don’t consult doctors that much. The ANC, since 1994, has been the masters of rot and neglect of the state resources.

Quite surprised that one can send your child to university locally for less than half the price of their private school or is it perhaps that kids all now go to universities overseas!

University has always been cheaper than private schools and it will get worse. More telling is the fact that Black people are quite willing to pay for a decent education. My 10 year old attends a private Christian school. Six years ago the pupil ratio was 7:1 (W:B) but now it has swung the other way 4:6 (W:B) – black middle class parents want what is best for their children too and are quite prepared to pay for it.

At the academic awards black children do pretty well too which just goes to show that race does not determine ability – hard work does.

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