How to finance higher education in Africa

On-campus activities at Senegal’s Universite Cheikh Anta Diop (UCAD), one of Africa’s largest institutions of higher education, have been suspended since last June, when students protested violently against the jailing of the country’s main opposition leader. The prolonged closure has made life difficult for UCAD students, many of whom normally reside on campus, and disrupted operations, because online classes are not widely available.The learning gaps that have become visible are exacerbating inequities, fuelling social tensions, and threatening the reputation of Senegal’s higher-education system. Calls to reopen UCAD have grown louder, but worsening political conditions – led by the postponement of the presidential election – all but preclude it.UCAD is far from the only African institution of higher learning in crisis. Recent strikes by students and teacher unions have affected public colleges and universities in Nigeria, Ghana, South Africa, and other countries. These strikes reflect diverse agendas, from political activism to demands for better pay, higher cost-of-living allowances, improved working conditions, and more financial aid for students.The irony is that most students at public colleges and universities in Africa receive free on-campus housing and monthly grants, making them a privileged group, and the changes they advocate seldom address the biggest problems facing Africa’s colleges and universities. For starters, benefit-incidence analyses and public-expenditure reviews often show that students from the poorest families rarely enrol in tertiary education, implying a need to redesign admissions criteria.African colleges and universities also tend to be poorly resourced, saddled with colonial-era curricula, ineffective at monitoring the quality of learning, and subject to bureaucratisation and politicisation. Government interference in their management and pedagogical choices also diminishes their effectiveness.Perhaps the most important challenge facing African higher education, in the context of the continent’s rapid demographic growth, weak public finances, and low private incomes, is financing. There are three possible revenue sources, the most obvious being tuition fees. Moreover, governments can provide support in the form of land, capital grants for infrastructure, direct budget allocations for recurrent expenditures, subsidies for scholarships, and low-interest-rate loans. Lastly, colleges and universities can generate their own funding through endowments, fundraising campaigns, and income earned from research, patents, and consultancy services.The three main university-funding models correspond to these three revenue sources. A fees-based system like that in Australia, the UK, and the US, which depends on a mix of public and private student loans, could be justified in Africa on the basis of tertiary education’s high returns. While well-trained, highly skilled African workers often move to developed countries, the benefits of migration – namely remittances – would likely compensate for the brain drain.But, given high delinquency rates and the lack of reliable national credit-reporting systems, African financial institutions are reluctant to set up effective credit lines for students. Moreover, student groups (and parents of students) across the continent would likely balk at high individual and collective debt burdens and their attendant risks, exacerbating political instability and further weakening universities.Many Asian and European countries have effectively established free or very low-cost higher-education systems financed by high tax-to-GDP ratios and tax collection. The rationale for this government-funded model is the high social returns of tertiary education, which contributes directly to economic growth and structural transformation by supplying workers who can implement scientific and technological advances and innovation. Well-educated people in the labour force also generate positive externalities by providing opportunities for others.Africa has tried but failed to implement this model. As a result, such colleges and universities are often poorly equipped for teaching and learning – some even lack libraries – and many graduates cannot meet the increasingly technical requirements of the labour market. They end up underemployed or unemployed, which reduces the social value of higher learning and undermines Africa’s ability to build human capital.Looking to the future, the prospects of making the model work are low, despite its attractiveness. African taxpayers are already heavily burdened. While governments could manage existing resources more efficiently, the savings would not be enough to cover the cost of quality higher education for the continent’s growing youth population.A third option is for colleges and universities to tap into their endowment revenues to create a need-blind system. For example, many elite institutions in the US admit students on a need-blind basis and provide scholarships to those who cannot afford the cost.But need-blind admissions are feasible only when schools have large endowments, most often built from grants, capital gains from assets, research and consulting income, alumni donations, and philanthropic initiatives. An additional challenge for African higher education is setting a credible income threshold for financial aid and verifying family income when most of the workforce is in the informal economy.Given high demand for higher education, the rapidly growing student population, and most governments’ limited fiscal space, a mix of several funding streams represents the best chance to provide young Africans with access to quality colleges and universities. Such a hybrid model would combine public and private financing to ensure need-blind admissions.To complement these measures, national, regional, and international development banks – such as the African Development Bank Group – could establish and invest in educational endowments. Africa’s resource-rich economies could allocate a percentage of the revenues to university endowments. Besides signalling strong commitment to higher education, this would receive support from student groups, teacher unions, and other civil-society organisations, while assuaging concerns that revenues from natural resources could be hijacked by a corrupt elite. Rigorous management would be required to create and enforce a transparent, rules-based system for granting subsidies and to align teaching quality with the highest international standards.To compete in the 21st century, African economies must build, attract, and retain human capital. As economist L. Alan Winters of the University of Sussex put it, "The largest single contrast between developed and developing countries lies in the availability and use of highly skilled labour.” Drawing lessons from economic theory and experience, Africa can improve access to high-quality colleges and universities, and educate the types of workers and leaders the continent needs. – Project Syndicate

• Celestin Monga, a former managing director at the UN Industrial Development Organisation and a former senior economic adviser at the World Bank, teaches public policy and economics at Harvard Kennedy School. He is the co-editor, (with Justin Yifu Lin) of The Oxford Handbook of Structural Transformation (Oxford University Press, 2019) and the co-author (with Justin Yifu Lin) of Beating the Odds: Jump-Starting Developing Countries (Princeton University Press, 2017).