Student protests put added pressure on South African budget

Friday October 23 2015

Students from the University of Johannesburg

Students from the University of Johannesburg clash with campus security officers, as they attempt to enter inside the university, on October 22, 2015, in Johannesburg, during a protest against university fee hikes. University activism has been increasing this year as students vent their anger over the limited racial transformation in education since racist white-minority rule ended with Nelson Mandela's election in 1994. AFP PHOTO | MUJAHID SAFODIEN 

By Reuters

The line between government finance and the politics of the street in South Africa has seldom been as thin as this week when the next budget was unveiled in parliament and students clashed with police outside.

Finance Minister Nhlanhla Nene stressed his commitment to fiscal consolidation as he presented the interim budget in a bid to convince ratings agencies that he has spending under control in a stagnating economy.

Unlike in previous years, though, the backing soundtrack to his remarks was the crash of broken bottles and boom of stun grenades as riot police surrounding parliament battled hundreds of students demanding lower university fees.

It was a telling symbol of the growing public anger at the inequalities that persist in South Africa two decades after the end of apartheid.

President Jacob Zuma was due to meet student leaders on Friday to address the demands of the demonstrators, whose protests have spread across the country in the past week.

But given the parlous state of the economy - now forecast to grow just 1.5 per cent this year and 1.7 per cent next - and the limits that puts on government spending, there is precious little Zuma or his African National Congress (ANC) can do.

The higher education budget this year is 62 billion rand ($4.6 billion), just over 5 per cent of total spending. Of that, just over half goes to South Africa's 17 universities, with the rest being spent on vocational and other training.

Throwing money at the students, who are objecting to a hike in fees of as much as 11.5 per cent - over twice the rate of inflation - might assuage the immediate problem.

However, it would also risk unleashing copycat protests elsewhere, with serious consequences for government's credit rating, which is hovering one notch above junk status.

"There would be limited room for the government to absorb extra expenditure without fiscal deterioration," said Gardner Rusike, ratings agency Standard and Poor's main South Africa analyst.

"It could be that acceding to the student fees demands could potentially result in other sectors thinking along those lines, which could put pressure on the public finances."

Student activism

The Twitter hashtag for the protests - #FeesMustFall - has already attracted an anarchic cousin, #EverythingMustFall.

Student activism occupies a prominent place in the South African psyche, dating back to a 1976 uprising in Soweto schools that elicited a brutal response from the apartheid government and hastened its international ostracism.

Politically, the ANC cannot ignore the demands of thousands of young South Africans, most of them post-apartheid 'Born Frees' driven by a desire for a degree.

Education is one of the few tickets out of penury in a country saddled with 25 per cent unemployment.

The government has committed to boosting university enrolment to 1.5 million by 2030 from 1 million now to meet an objective of ensuring that South Africans have access to "education and training of the highest quality".

To meet that, higher education spending is growing at over 7 per cent a year, which is above inflation but well below the 10 per cent growth in the government's debt servicing costs, the fastest-rising component of its spending.

Furthermore, whatever wiggle room it might have had - for instance, in the form of a 65 billion rand 'rainy day' fund budgeted for the next three years - has already been eaten up by an above-budget civil servant wage increase this year.

"There is no room left," Nomura emerging markets economist Peter Attard Montalto said. "Nene was very clear: there is simply no money for government to do new things."