As South Africans digest the latest matric results and look ahead to tomorrow’s state of the nation address (Sona) and the budget speech, a familiar concern resurfaces: how do we deploy our education spend to deliver real, internationally comparable outcomes?
More pointedly, can education policy and funding meaningfully close the skills gap that continues to undermine growth, employment and competitiveness?
At one level, the problem is not the quantum of education spend, either in basic or higher education. South Africa allocates a significant share of public expenditure to education by international standards. The deeper problem is how that expenditure is allocated, prioritised and evaluated. South Africa does not have an education funding problem; it has an education capital allocation problem.
The weaknesses in basic education are well documented. Poor reading-for-meaning outcomes in the foundation phase, low bachelor pass rates, weak maths and science performance, high dropout rates and the growing dependence on costly supplementary interventions all point to systemic inefficiencies.
These failures do not remain confined to the school system. They surface directly in higher education in underprepared students, extended completion times and high attrition rates. Higher education institutions are increasingly expected to remediate problems they did not create, at considerable cost and with limited success.
However, higher education has outcome failures of its own too. Too many tertiary qualifications do not align with the needs of the labour market, whether in technical, vocational or academic domains. This mismatch contributes to the paradox of high graduate unemployment alongside persistent skills shortages.
These structural issues are compounded by South Africa’s weak economic growth. Low growth intensifies socioeconomic pressures — food insecurity, housing constraints and unreliable electricity — that further erode educational outcomes at all levels. Without growth, education reform becomes harder; without education reform, growth remains elusive.
Align educational outcomes to labour market demand
Against this backdrop, a critical question is what can realistically be done in higher education to better align educational outcomes with labour market demand and, by extension, with jobs. The first step is conceptual rather than technical. South Africa must stop trying to fix too many things at once.
The country is rarely short of policies, strategies and frameworks. What it lacks is focus and effective implementation. The state consistently overestimates its own capacity and underestimates the cost of implementation. Even allowing for corruption and poor appointments, which must be addressed, most public servants want to perform well. But without clear priorities, effort dissipates and outcomes converge at a very low common denominator.
From this perspective, four priorities stand out not so much as generic reforms but as areas in which marginal education funds should increasingly be concentrated: strengthening the former technikons (now called universities of technology); properly engaging employers; funding real results and embracing the digital and AI transition.
Unless the former technikons are politically, financially and socially repositioned as first-choice institutions for large segments of the labour market, particularly in manufacturing, infrastructure, public services and small business development, they will continue to underperform, regardless of incremental improvements.
Strengthening the former technikons has long been an article of faith in recent South African policy discourse, yet progress remains slow and uneven. The issue is not only quality but also institutional identity and status. The former technikons sit in an ambiguous space between universities and training providers, often judged by academic criteria that are poorly suited to their mandate.
Teaching and learning remain overly theoretical, with insufficient emphasis on hard technical, trade and applied skills. Unless the former technikons are politically, financially and socially repositioned as first-choice institutions for large segments of the labour market, particularly in manufacturing, infrastructure, public services and small business development, they will continue to underperform, regardless of incremental improvements.
Regarding employer engagement, one of the enduring strengths of the highly successful German dual system is the deep, structural involvement of employers in education and training. In South Africa, the sector education & training authorities (Setas) and universities of technology (with some notable exceptions) have largely failed to replicate this model.
Significant discretionary funding is thus channelled into fragmented, low-value programmes that often benefit providers more than learners. A sharper accountability principle is required: no public funding for vocational or applied programmes without demonstrable employer endorsement, co-investment, or absorption pathways.
Without this discipline, alignment with labour market demand will remain rhetorical rather than real.
Fund real results
South Africa must fund real results. There is little evidence that tertiary education funding, whether through block grants to public universities, National Skills Fund allocations or the National Student Financial Aid Scheme, is systematically linked to meaningful outcomes. Meaningful outcomes should include credible employer endorsement, high employment rates, and demonstrable contributions to critical skills needs in the public and private sectors.
This is not an argument in favour of the private sector at the expense of the public, nor an argument that privileges science and technology over the arts. It is an argument for gainful employment in an economy where over 40% of working-age adults are unemployed and many qualified graduates cannot find work.
This logic also challenges the maintenance of parallel public and private systems. In sectors such as healthcare, energy and logistics, there is a growing recognition that “parallelism” has entrenched inequality rather than reduced it.
The same is true in tertiary education. Restricting NSFAS funding to public institutions while excluding accredited private providers that often deliver more cost-effective and employment-oriented programmes reinforces inequality rather than addresses it. If equity is the objective, funding should follow outcomes and students, not institutional categories.
Digital and AI transition
Higher education must embrace the digital and artificial intelligence (AI) transition. AI is not a passing trend; it is a structural disruptor with profound implications for teaching, learning, assessment and institutional productivity. At school level, the lack of classroom connectivity renders initiatives such as “unplugged coding” largely symbolic. At tertiary level, policy discourse remains dominated by concerns about academic integrity and risk mitigation.
These concerns are not trivial, but they miss the larger point. The central question is how digital tools and AI can be harnessed to improve learning outcomes, reduce costs, increase scale and enhance staff productivity. From a fiscal perspective, failure to do so is not merely conservative; it is irresponsible.
Strengthened technical institutions, credible employer partnerships, performance-linked funding and serious digital infrastructure are not optional reforms.
If education is genuinely South Africa’s most powerful long-term economic lever, the budget speech must reflect this reality not only in headline allocations but also in how funds are targeted, conditionalised and evaluated. The real issue is how intelligently and selectively we invest. In a low-growth, high-unemployment context, education expenditure must be treated as productive capital, judged by its contribution to employability, productivity and institutional capability.
The upcoming budget therefore represents an opportunity to reset the logic of education spending: fewer initiatives, clearer priorities, stronger accountability and deeper alignment with the demand side of the economy. Strengthened technical institutions, credible employer partnerships, performance-linked funding and serious digital infrastructure are not optional reforms.
They are prerequisites if education is to shift from being a cost centre to becoming a growth engine. Without such a shift, South Africa will continue to under-leverage one of the key policy domains capable of addressing inequality, unemployment and long-term competitiveness simultaneously.
• Schreiner is head of business studies at Cornerstone Institute.
