CORPORATE GOVERNANCE IN SOUTH AFRICAN HIGHER EDUCATION INSTITUTIONS
CORNELIE CROUS M.Compt (Cum Laude), CA (SA)
Submitted in the fulfilment of requirements for the degree Philosophiae Doctor (Auditing)
In the
School of Accountancy
Faculty Economic and Management Sciences
At the UNIVERSITY OF THE FREE STATE
Promotor: Prof D.S. Lubbe January 2017
DECLARATION
I, Cornelie Crous (UFS student number 1998049942), declare that the thesis that I herewith submit for the Doctoral Degree Philosophiae Doctor (Auditing) at the University of the Free State, is my independent work, and that I have not previously submitted it for a qualification at another Institution of Higher Education.
I, Cornelie Crous, hereby declare that I am aware that the copyright is vested in the University of the Free State.
I, Cornelie Crous, hereby declare that all royalties as regards intellectual property that was developed during the course of and/or in connection with the study at the University of the Free State, will accrue to the University.
20 January 2017
DEDICATION AND ACKNOWLEDGEMENTS
I dedicate this study first to my Lord God. Throughout this lonely journey, I know that it was only through His grace and love that I managed to succeed and persevere. Second, I would like to dedicate this study to three rather remarkable women, none of whom are still with us, but who were in my thoughts since day one. To my two late grandmothers, Ouma Rentia and Ouma Sarie, who have both been a tremendous example in perseverance and dedication throughout their lives. I know they would both be so excited that this study is at last completed. I miss them both so much and I wish I could share this with them. Then to Berna Ackerman, who has been one of my greatest supporters; who always encouraged me to focus and complete the study; and who never let an opportunity go by without asking how I was progressing and to offer a word of support. Tannie Berna, part of my success I attribute to you.
Since I can remember, I have wanted my own “rooi jassie”. I remember after attending a graduating ceremony when I was still a child, telling my Dad that one day I will be wearing my own red gown. This dream has at last realised. I could not have done this without the support, help and encouragement of so many people.
Prof Dave Lubbe, I have learned so much from you over the last eleven years we were colleagues as well as during this journey that I will never forget. I will always strive to be the best researcher I can be and to keep the standards you have ingrained in me, as high as I possibly can. Thank you so much.
To my Mom, Dad and Sister, you were the three most loyal supporters anyone can ask for. Thank you for putting up with the highs as well as the lows and for always offering to help with anything you can. I have indeed been blessed with the level of support that you have provided to me. I love you.
Prof Helena van Zyl and all the ladies at the University of the Free State’s Business School, thank you for putting up with me the last six months of my studies and for your kindness and support. You have a very special place in my heart.
Leandra Rykaart who has been helping me in printing the Annual Reports, thank you. You are always willing to print a document for me on short notice and I appreciate this so much. You are indeed my guardian angel.
Luna Bergh who has been my language angel. Luna, thank you for your support and the professional job you have done.
To the Postgraduate School and Dr Henriette van den Berg, at the University of the Free State, thank you for the financial support you have provided. Without this assistance, I would not have been able to complete this study and I will be eternally grateful to you.
Then to all the individuals who have helped me in any way in obtaining the Annual Reports for the empirical portion of my study. Al the time and effort you have put in have not gone unnoticed. I would like to specifically mention Louis Rossouw, Pieter du Plessis, Rekha Bennideen, Brenda Swart, Prof Carolina Koornhoff and Pearl Whittle.
In the words of Charles de Lint:
“I don't want to live in the kind of world where we don't look out for each other. Not just the people that are close to us, but anybody who needs a helping hand. I can’t change the way anybody else thinks, or what they choose to do, but I can do my bit.”
NOTES ON REFERENCE PROGRAM USED
The reference program, Zotero Standalone, was used to assist in the referencing in this document. The program allowed for different referencing styles as well as for the adjustment of the referencing styles to suit authors’ needs. The adjusted Harvard referencing style, developed by the Cape Peninsula University of Technology, was used in this document. This style allowed for the Reference List to be sorted into different groups of documents such as Books and Chapters in Books,
Magazine and Newspaper Articles, Journal Articles, Reports and Codes, Legislation, Statues and Court Cases, Websites and Documents, Conference Papers and other sources.
Where a certain chapter in a book is referenced in the Reference List, it is done by the use of the word “In”. See the example below:
Cloete, N. 2002. Policy Expectations. In Transformation in Higher Education: Global
Pressures and Local Realities in South Africa. Cape Town: Juta.
In the group Magazine and Newspaper Articles, either the hard copy, or an electronic copy of an article was obtained. The electronic copies were normally found on the newspaper or magazine’s website. Where the hard copy of a newspaper or magazine article was used, the source is indicated in the Reference List with the page number as follows:
Dodds, C. 2013. Jumping the gun to Seek Action against Zuma, Claims ANC.
Saturday Star. 4.
Where the article was obtained from the newspaper or magazine’s website, the URL of the article, as well as the date the article was accessed, is provided instead of the page number, and looks as follows:
Areff, A. 2015. English to be Main Language of Instruction at Stellenbosch
University. News24. Available from:
http://www.news24.com/SouthAfrica/News/ensglish-to-be-the-main-language-of-instruction-at-stellenbosch-university-20151113. Accessed on: 4 January 2016.
References in the group, Articles, contain the Volume as well as the Issue number where applicable. All references where there is no Issue number included, were published in journals that have only one issue per volume. No issue number was included. The two examples below demonstrate this principle. The first example contains a Volume and Issue, and the second example contains only a Volume number.
Armstrong, P. 1995. The King Report on Corporate Governance. The JBL Journal, 3(2): 65-70.
Barnea, A. & Rubin, A. 2010. Corporate Social Responsibility as a Conflict between Shareholders. Journal of Business Ethics, 97:71-86.
Where there are sources with the same author in the same year, the program automatically numbers them a, b, c etc. See the two examples below:
ANA Reporter. 2016a. Maimane Calls on Zuma for Probe Into ‘Ongoing Collapse’ at SABC. The Citizen: 3.
ANA Reporter. 2016b. Maimane Demands Details of Zuma’s Loan for Nkandla.
The Citizen. Available from:
http://citizen.co.za/1304444/maimane-demands-details-of-zumas-loan-for-nkandla/. Accessed on: 19 October 2016.
Sources with more than two authors are automatically abbreviation in the in-text reference to the name of the first author and the words “et al.” The Reference List then displayed all the authors. See example below:
In-text reference: (Mouton et al., 2012: 1215)
Reference List: Mouton, N., Louw, G.P. & Strydom, G.L. 2012. A Historical Analysis of the Post-Apartheid Dispensation Education in South Africa (1994-2011). International Business & Economics Research Journal, 11(11): 1211– 1222.
Where Zotero was used to add the reference of a source with two authors within a paragraph, the program used the symbol “&”. When the author of this study referenced the same source the word “and” is used. See example below:
Leedy and Ormrod define research as “the systematic process of collecting,
analyzing, and interpreting information … in order to increase our understanding of a phenomenon about which we are interested or concerned” (Leedy & Ormrod,
2014: 2).
All sources that are available on websites only are found under the heading “Websites”. If a source was available for download in document format from a website, the document was referenced under one of the other source groups; for example, Journal Articles, Reports, etc. Where information was referenced directly from the website, i.e. no document is available for download from the website, the source was included under the Website group in the Reference List. For example, the reference to the By-laws of the University of California Berkeley falls under the website category, as the By-laws are not available for download from the University’s website, and the information was therefore obtained directly from the Website. This reference falls under Websites and not under the Legislation, Statues and Court
Cases.
University of California Berkeley. 2016d. University of California Manual: By-laws of the Berkeley Division of the Academic Senate 2016 Version.
The final group of references in the Reference List, Documents, Conference Papers
and other sources, consist of sources that cannot be classified as Books and Chapters in Books, Magazine and Newspaper Articles, Journal Articles, Reports and Codes, Legislation, Statutes and Court Cases and Websites. The sources contained
in this section include, for example, documents that were obtained from the Internet - such a discussion documents, lecture notes or radio talks.
TABLE OF CONTENTS
DECLARATION II
DEDICATION AND ACKNOWLEDGEMENTS III
LANGUAGE EDITING CERTIFICATE V
NOTES ON REFERENCE PROGRAM USED VI
TABLE OF CONTENTS IX
LIST OF TABLES XX
LIST OF FIGURES XXIII
LIST OF ACRONYMNS AND ABBREVIATIONS XXIV
LIST OF APPENDICES XXX
SUMMARY XXXI
OPSOMMING XXXIV
CHAPTER 1– INTRODUCTION TO THE STUDY AND CHAPTER OUTLINE 1
1.1 INTRODUCTION AND BACKGROUND 1
1.2 DEFINING GOVERNANCE AND CORPORATE GOVERNANCE 12
1.2.1DEFINING GOVERNANCE 12
1.2.2DEFINING CORPORATE GOVERNANCE 16
1.2.3SIMILARITIES BETWEEN GOVERNANCE AND CORPORATE GOVERNANCE 17
1.3 RESEARCH PROBLEM 18
1.4 RESEARCH OBJECTIVE 20
1.5 RESEARCH METHODOLOGY, RESEARCH METHOD AND RESEARCH
DESIGN 20
1.5.1 INTRODUCTION 20
1.5.2 RESEARCH METHODOLOGY 21
1.5.3 RESEARCH METHODS 22
1.5.3.2 Qualitative research 23
1.5.3.3 Conclusion on research methods 23
1.5.4 RESEARCH DESIGN 24
1.5.5 RESEARCH DESIGN FOR THIS STUDY 25
1.5.6 LITERATURE REVIEW 25
1.5.6.1 Literature review - phase 1 27
1.5.6.2 Literature review – phase 2 28
1.5.7 EMPIRICAL STUDIES 34
1.6 CONCLUSION ON RESEARCH DESIGN 35
1.7 LIMITATIONS OF THE STUDY 35
1.8 PRACTICAL ETHICAL ASPECTS 36
1.9 OVERVIEW OF THE STRUCTURE OF THE STUDY 36
1.10 SIGNIFICANCE OF THE PROPOSED RESEARCH 38
1.11 CHAPTER CONCLUSION 39
CHAPTER 2 – CORPORATE GOVERNANCE BACKGROUND AND OVERVIEW 40
2.1 INTRODUCTION 40
2.2 THE HISTORY OF CORPORATE FAILURES, SCANDALS, COMPANIES AND
CORPORATE GOVERNANCE 41
2.2.1 INTRODUCTION 41
2.2.2 GENERAL DEVELOPMENT OF COMPANIES, CORPORATE FAILURES, SCANDALS AND
CORPORATE GOVERNANCE THEORIES 42
2.2.2.1 Introduction 42
2.2.2.2 Brief historical overview of companies and their governing bodies 43
2.2.2.3 Corporate failures and scandals 46
South Sea Company 1720 46
WorldCom 2002 48
Parmalat 2003 49
African Bank 2014 50
Nkandla 51
South African Airways (SAA) 52
South African Broadcasting Corporation (SABC) 54
2.2.2.4 Brief overview of the development of corporate governance 56
2.2.2.5 Agency Theory 57
2.2.2.6 Stewardship Theory 60
2.2.2.7 Resource Dependency Theory 62
2.2.2.8 Network Theory 63
2.2.2.9 Class Hegemony Theory 64
2.2.2.10 Stakeholder Theory 64
2.2.2.11 Enlightened Shareholder Theory 67
2.2.2.12 Conclusion on the development of corporate governance models 68
2.3 DEVELOPMENT OF CORPORATE GOVERNANCE IN THE UNITED
KINGDOM, UNITED STATES OF AMERICA AND SOUTH AFRICA 69
2.3.1 INTRODUCTION 69
2.3.2 DEVELOPMENT OF CORPORATE GOVERNANCE IN THE UNITED KINGDOM 70
2.3.2.1 The Cadbury Report (1992) 70
2.3.2.2 The Greenbury Report (1995) 72
2.3.2.3 The Hampel Report (1998) 73
2.3.2.4 The Combined Code (1998) and Internal Control Guidance for Directors
on the Combined Code: Turnbull Report (1999) 74
2.3.2.5 The Higgs Report (2003) 75
2.3.2.7 Revised the Combined Code (2003) 76 2.3.2.8 Internal Control: Revised Guidance for Directors on the Combined Code
(2005) 76
2.3.2.9 The Combined Code (2006 and 2008) 77
2.3.2.10 The Combined Code (2009) 77
2.3.2.11 The Stewardship Code (2010) 78
2.3.2.12 The UK Corporate Governance Code (2010) 79
2.3.2.13 The UK Stewardship Code (2012) 79
2.3.2.14 The UK Corporate Governance Code (2012 and 2014) 80
2.3.2.15 The UK Corporate Governance Code 2016 82
2.3.2.16 Conclusion on the development of Corporate Governance in the United
Kingdom 82
2.3.3 DEVELOPMENT OF CORPORATE GOVERNANCE IN THE UNITED STATES OF AMERICA 82
2.3.3.1 Introduction 82
2.3.3.2 Principles of Corporate Governance (1990) and Corporate Governance
and American Competitiveness (1990) 83
2.3.3.3 Business Roundtable Statement of Corporate Governance 85
2.3.3.4 The Blue Ribbon Commission 89
2.3.3.5 Sarbanes-Oxley (2002) 90
2.3.3.6 New York Stock Exchange (NYSE) Corporate Governance Rules 92
2.3.3.7 Council of Institutional Investors 94
2.3.3.8 Conclusion on the development of Corporate Governance in the United
Stated of America 95
2.3.4 DEVELOPMENT OF CORPORATE GOVERNANCE IN SOUTH AFRICA 95
2.3.4.1 King I (1994) 96
2.3.4.3 King III (2009) 101
2.3.4.4. King IV (2016) 102
2.3.4.5 Higher Education Reporting Regulations 105
2.3.4.6 Conclusion on the development of Corporate Governance in South
Africa 110
2.4 CHAPTER CONCLUSION 111
CHAPTER 3 – INTERNAL AND EXTERNAL GOVERNANCE OF UNIVERSITIES 113
3.1 INTRODUCTION 113
3.2 BRIEF DISCUSSION ON COMPENSATION OF NON-PROFIT EXECUTIVES 114 3.3 INTERNATIONAL MODELS ON INTERNAL AND EXTERNAL UNIVERSITY
GOVERNANCE 116
3.3.1 INTRODUCTION 116
3.3.2INTERNAL GOVERNANCE -SHARED GOVERNANCE MODEL 117 3.3.3. EXTERNAL GOVERNANCE – SOME APPROACHES TO STATE INVOLVEMENT IN
HIGHER EDUCATION 120
3.3.3.1 Introduction 120
3.3.3.2 The State Control Model, State Supervision Model and State
Interference 121
3.3.3.3 The Application of the State Supervision Model in South African
University Governance and the Cooperative Governance Philosophy 124
3.3.4 CONCLUSION ON INTERNAL AND EXTERNAL GOVERNANCE MODELS 127 3.4 INTERNAL AND EXTERNAL GOVERNANCE STRUCTURES USED IN
EUROPE 128
3.4.1 INTRODUCTION 128
3.4.2 EXTERNAL GOVERNANCE STRUCTURE IN EUROPE 130
3.4.3.1 Introduction 132 3.4.3.2 Internal Governance Changes in Germany, Italy, Romania, Lithuania and
Hungary 137
Germany 137
Sweden 137
Italy 138
Romania and Lithuania 138
Hungary 139
3.4.4 CONCLUSION ON INTERNAL AND EXTERNAL GOVERNANCE STRUCTURES USED IN
EUROPE 140
3.5 INTERNAL AND EXTERNAL GOVERNANCE STRUCTURES USED IN THE
UNITED STATES OF AMERICA (USA) 141
3.5.1INTRODUCTION 141
3.5.2EXTERNAL GOVERNANCE STRUCTURES IN THE UNITED STATES OF AMERICA 142 3.5.3INTERNAL GOVERNANCE STRUCTURES IN THE UNITED STATES OF AMERICA 145
3.5.3.1 Harvard University 150
3.5.3.2 Stanford University 153
3.5.3.3 University of California Berkeley 154
3.5.3.4 Massachusetts Institute of Technology (MIT) 158
3.5.4 CONCLUSION ON THE INTERNAL AND EXTERNAL GOVERNANCE STRUCTURES USED
IN THE UNITED STATES OF AMERICA (USA) 161
3.6 INTERNAL AND EXTERNAL GOVERNANCE STRUCTURES GOVERNANCE
STRUCTURES USED IN AUSTRALIA 163
3.6.1 INTRODUCTION 163
3.6.2 EXTERNAL GOVERNANCE STRUCTURES IN AUSTRALIA 164
3.6.4 CONCLUSION ON THE INTERNAL AND EXTERNAL GOVERNANCE STRUCTURES USED
IN AUSTRALIA 172
3.7 INTERNAL AND EXTERNAL GOVERNANCE STRUCTURES USED IN NEW
ZEALAND 173
3.7.1 INTRODUCTION 173
3.7.2 EXTERNAL GOVERNANCE STRUCTURES IN NEW ZEALAND 174 3.7.3 INTERNAL GOVERNANCE STRUCTURES IN NEW ZEALAND 176
3.7.3.1 Short-term changes to governance 177
3.7.3.2 Recent changes to University and Wānanga governance 179
3.7.4 CONCLUSION ON INTERNAL AND EXTERNAL GOVERNANCE STRUCTURES USED IN
NEW ZEALAND 183
3.8 INTERNAL AND EXTERNAL GOVERNANCE STRUCTURES USED IN SOUTH
AFRICAN HIGHER EDUCATION 183
3.8.1. INTRODUCTION 183
3.8.2EXTERNAL GOVERNANCE STRUCTURES IN SOUTH AFRICA 184 3.8.3INTERNAL GOVERNANCE STRUCTURES IN SOUTH AFRICA 185
3.8.3.1 Council and Standing Committees 186
3.8.3.2 The Senate 193
3.8.3.3 The Institutional Forum (IF) 198
3.8.4CONCLUSION ON THE INTERNAL AND EXTERNAL GOVERNANCE STRUCTURES USED
IN SOUTH AFRICA 202
3.9 CHAPTER CONCLUSION 204
CHAPTER 4 – THE DEVELOPMENT OF A FRAMEWORK AND THE EMPIRICAL
RESULTS 207
4.1 INTRODUCTION 207
4.2 LIMITATIONS AND PRACTICAL PROBLEMS REGARDING THE EMPIRICAL
4.3 FRAMEWORK FOR CORPORATE GOVERNANCE COMPLIANCE OF SOUTH
AFRICAN UNIVERSITIES 212
4.3.1 INTRODUCTION 212
4.3.2 KING IV ADDITIONS TO DISCLOSURE FRAMEWORK 219
4.3.2.1 Minimum content that Universities should include in the Annual
Reports 220
4.3.2.2 Performance Assessment 221
4.3.2.3 Report of the Chairperson of the Council 221
4.3.2.4 General disclosure aspects in terms of Council 222
4.3.2.5 Composition and functions of the Council 223
4.3.2.6 Remuneration Committee composition and functions 225
4.3.2.7 Finance Committee composition and functions 227
4.3.2.8 Planning and Resource Committee composition and functions 227
4.3.2.9 Council Membership Committee composition and functions 227
4.3.2.10 Audit Committee composition and functions 227
4.3.2.11 Governance of Information Technology (ITa) 228
4.3.2.12 Stakeholder relationships (worker and student participation) 228
4.3.2.13 Report on the assessment of and the exposure to risk and the
management thereof 229
4.3.2.14 Conclusion on King IV Additions to Disclosure Framework 229
4.3.3 INTERNATIONAL ADDITIONS TO DISCLOSURE FRAMEWORK 229
4.3.3.1 Introduction 229
4.3.3.2 Minimum content that Universities should include in the Annual
Reports 230
4.3.3.3 Report of the Chairperson of the Council 231
4.3.3.4 Statement on governance 232
4.3.3.6 Remuneration Committee composition and functions 233
4.3.3.7 Finance Committee composition and functions 234
4.3.3.8 Planning and Resource Committee composition and functions 234
4.3.3.9 Council Membership Committee composition and functions 234
4.3.3.10 Audit Committee composition and functions 235
4.3.3.11 Risk Committee composition and functions 236
4.3.3.12 Governance of Information Technology (ITa) 236
4.3.3.13 Council statement on sustainability 236
4.3.3.14 Report of the Senate to Council 237
4.3.3.15 Report on the assessment of and the exposure to risk and the
management thereof 237
4.3.3.16 Conclusion on International Additions to Disclosure Framework 238
4.3.4 CONCLUSION ON THE DEVELOPMENT OF THE FRAMEWORK 238 4.4 BACKGROUND ON STATE SUBSIDIES, CLASS FEES, STUDENT NUMBERS, STUDENT DEBTS AND UNVERSITY RESERVES OF SOUTH
AFRICAN PUBLIC UNIVERSITIES 238
4.5 RESULTS OF SOUTH AFRICAN UNIVERSITIES’ COMPLIANCE WITH THE
PROPOSED FRAMEWORK 247
4.5.1 INTRODUCTION 247
4.5.2MINIMUM CONTENT THAT UNIVERSITIES SHOULD INCLUDE IN THE ANNUAL REPORT 253
4.5.3 PERFORMANCE ASSESSMENT 257
4.5.4 REPORT OF THE CHAIRPERSON OF THE COUNCIL 261
4.5.5 STATEMENT OF GOVERNANCE 268
4.5.6 GENERAL DISCLOSURE ASPECTS IN TERMS OF THE COUNCIL 271
4.5.7 COMPOSITION AND FUNCTIONS OF THE COUNCIL 275
4.5.9 FINANCE COMMITTEE COMPOSITION AND FUNCTIONS 296 4.5.10 PLANNING AND RESOURCE COMMITTEE COMPOSITION AND FUNCTIONS 301 4.5.11 COUNCIL MEMBERSHIP COMMITTEE COMPOSITION AND FUNCTIONS 305
4.5.12 AUDIT COMMITTEE COMPOSITION AND FUNCTIONS 308
4.5.13 RISK COMMITTEE COMPOSITION AND FUNCTIONS 318
4.5.14 GOVERNANCE OF INFORMATION TECHNOLOGY (ITA) 321
4.5.15 CONFLICT MANAGEMENT 325
4.5.16 STAKEHOLDER RELATIONSHIPS (WORKER AND STUDENT PARTICIPATION) 329
4.5.17 CODE OF ETHICS 333
4.5.18 COUNCIL STATEMENT ON SUSTAINABILITY 337
4.5.19 REPORT OF THE SENATE TO COUNCIL 341
4.5.20 REPORT OF THE INSTITUTIONAL FORUM 345
4.5.21 VICE-CHANCELLOR REPORT ON ADMINISTRATION AND MANAGEMENT 347 4.5.22 REPORT ON INTERNAL ADMINISTRATIONAL STRUCTURES AND CONTROLS (SYSTEM
OF INTERNAL CONTROLS) 350
4.5.23REPORT ON THE ASSESSMENT OF THE EXPOSURE TO RISK AND THE MANAGEMENT
THEREOF 356
4.5.24 THE STATEMENT OF THE CHIEF FINANCIAL OFFICER (CFO) AND THE CHAIRPERSON OF THE FINANCE COMMITTEE OF THE COUNCIL ON THE ANNUAL FINANCIAL
REVIEW 364
4.5.25 REPORT ON TRANSFORMATION 368
4.5.26 CONCLUSION ON THE RESULTS OF SOUTH AFRICAN UNIVERSITIES’ COMPLIANCE
WITH PROPOSED FRAMEWORK 371
4.6 CHAPTER CONCLUSION 372
CHAPTER 5 – CONCLUSIONS AND RECOMMENDATIONS OF THE STUDY AND
RECOMMENDATIONS FOR FURTHER RESEARCH 376
5.2 THE DEVELOPMENT OF CORPORATE GOVERNANCE THEORIES, CODES
AND REPORTS 378
5.3 INTERNAL AND EXTERNAL GOVERNANCE STRUCTURES IN HIGHER
EDUCATION INSTITUTIONS 382
5.3.1 INTRODUCTION 382
5.3.2 EXTERNAL GOVERNANCE STRUCTURES 382
5.3.3 INTERNAL GOVERNANCE STRUCTURES 384
5.4 THE DEVELOPMENT OF THE FRAMEWORK 387
5.5 FINDINGS, RECOMMENDATIONS AND LIMITATIONS 387
5.6 SIGNIFICANCE OF STUDY 393
5.7 FURTHER RESEARCH 393
5.8 CONCLUDING REMARKS 394
REFERENCE LIST 396
BOOKS AND CHAPTERS IN BOOKS 396
MAGAZINEANDNEWSPAPERARTICLES 401
JOURNALARTICLES 412
REPORTSANDCODES 420
DISSERTATIONSANDTHESIS 436
LEGISLATION, STATUTES AND COURT CASES 439
WEBSITES 442
DOCUMENTS, CONFERENCE PAPERS AND OTHERS 452
APPENDIX A 455
LIST OF TABLES
Table 1.1 - Top Ranked Universities 2013 to 2016 32
Table 3.1 - Internal governance bodies in public and state-dependent Higher
Education in Europe, 2006/2007 133
Table 3.2 - Composition of South African University Councils according to Institutional Statutes and Council Committees 188
Table 3.3 - Composition of South African University Senates according to
Institutional Statutes 194
Table 3.4 - Composition of South African University Institutional Forums
according to Institutional Statutes 200
Table 4.1 - Total national average on governance compliance 251 Table 4.2 - National averages on Minimum Content to be included in the
Annual Report 254
Table 4.3 - National averages on Performance Assessment to be included in
the Annual Report 259
Table 4.4 - National averages on the Report of the Chairperson of the Council
to be included in the Annual Report 262
Table 4.5 - National averages on the Council Statements in terms of Governance to be included in the Annual Report 269 Table 4.6 - National averages on General Disclosure in terms of the Council
Table 4.7 - National averages in terms of composition and functions of the Council to be included in the Annual Report 277
Table 4.8 Disclosure of Minimum Committees 280
Table 4.9 - Constituency Groups – Absenteeism from more than 50% of
Council and Committee meetings 283
Table 4.10 - National averages in terms of the Remuneration Committee composition and functions to be included in the Annual Report 288 Table 4.11 Payments to independent Council members for travelling and
attendance of meetings 294
Table 4.12 - National averages in terms of the Finance Committee composition and functions to be included in the Annual Reports 298 Table 4.13 - National averages in terms of the Planning and Resource
Committee composition and functions to be included in the Annual
Report 303
Table 4.14 - National averages on the Council Membership Committee composition and functions to be included in the Annual Report 307 Table 4.15 - National averages on the Audit Committee composition and
functions to be included in the Annual Report 310 Table 4.16 - National averages in terms of the Risk Committee composition
and functions to be included in the Annual Report 319 Table 4.17 - National averages on the Information Technology Committee (ITa)
composition and functions to be included in the Annual Report 323 Table 4.18 - National averages on Conflict Management to be included in the
Table 4.19 - National averages on Stakeholder Relationships to be included in
the Annual Report 330
Table 4.20 - National averages Code of Ethics to be included in the Annual
Report 335
Table 4.21 - National averages the Council Statement on Sustainability to be
included in the Annual Report 338
Table 4.22 - National averages on the Report of the Senate to Council to be
included in the Annual Report 343
Table 4.23 - National averages on the Report from the Institutional Forum to be
included in the Annual Report 346
Table 4.24 - National averages on the Vice-Chancellors Report to be included
in the Annual Report 348
Table 4.25 - National averages on the Report on internal administrational structures and controls to be included in the Annual Report 352
Table 4.26 - National averages on the Report on the assessment on the exposure of risk to be included in the Annual Report 358 Table 4.27 - National averages on the Statement of the Chief Executive Officer
and the Chairperson of the Finance Committee to be included in
the Annual Report 365
Table 4.28 - National averages on the Report on Transformation to be included
LIST OF FIGURES
Figure 1.1 - Research design for empirical study 25
Figure 3.1 - State Control, Supervision and Interference 121 Figure 4.1 - Example of form used to capture minimum content to be
included in Annual Reports 215
Figure 4.2 - Income from class fees and state subsidies 240 Figure 4.3 - State subsidies, fee income and student numbers 242
Figure 4.4 - Student debt and provision for bad debts 244
Figure 4.5 - University Reserves 245
Figure 4.6 - NSFAS budget allocation to Universities vs. student numbers 246
LIST OF ACRONYMNS AND ABBREVIATIONS
ABA - American Bar Association
AFT - American Federation of Teachers
AGB - Association of Governing Boards
ALI - American Law Institute
ANA - Annual National Assessment
ANC - African National Congress
AQA - Academic Quality Agency
ARWU - Academic Ranking of World Universities
AT - Austria
BBC - British Broadcasting Corporation
BCCI - Bank of Credit and Commerce International
BE - Belgium
BE de1 - Belgium – German-speaking Community BE fr1 - Belgium – French Community
BE nl1 - Belgium - Flemish Community
BG - Bulgaria
BRT - Business Roundtable
CACG - Commonwealth Association for Corporate Governance CACS - Chancellor’s Advisory Committee on Sustainability
CAICFA - Committee on Audit, Internal Control and Financial Accountability
CARE - Compliance, Accountability, Risk and Ethics Committee
CEO - Chief Executive Officer
1
CEPD - Centre for Education Policy and Development CERC - Compliance and Enterprise Risk Committee
CFO - Chief Financial Officer
CHE - Council for Higher Education
CHET - Council for Higher Education Transformation CII - Council of Institutional Investors
CISPC - Campus Information Security and Privacy Committee
COO - Chief Operating Officer
COPE - Congress of the People
CPUT - Cape Peninsula University of Technology CSR - Corporate Social Responsibility
CUT - Central University of Technology
CY - Cyprus
CZ - Czech Republic
DA - Democratic Alliance
DE - Germany
DHET - Department of Higher Education and Training
DK - Denmark
DoE - Department of Education
DUT - Durban University of Technology
ECGI - European Corporate Governance Institute
EE - Estonia
EL1 - Greece
ES1 - Spain
EUA - European Union Association
FR - France
FRC - Financial Reporting Council
FSA - Financial Services Authority
FTSE - Financial Times Stock Exchange
GAAP - Generally Accepted Accounting Practices HEI - Higher Education Institution
HEQC - Higher Education Quality Committee HESA - Higher Education South Africa
HU - Hungary
IE - Ireland
IF - Institutional Forum
IFC - International Finance Corporation
IFP - Inkatha Freedom Party
IFRS - International Financial Reporting Standards IIA - Institute of Internal Auditors
INED - Independent Non-Executive Director
INT - International
IOD - Institute of Directors
IODSA - Institute of Directors South Africa
IRGS - Information Risk Governance Committee
IS - Iceland
ITa - Information Technology
ITb - Italy
JSE - Johannesburg Securities Exchange
KPI - Key Performance Indicator
LSE - London Stock Exchange
LT - Lithuania
LU - Luxembourg
LV - Latvia
MIT - Massachusetts Institute of Technology
MT - Malta
MUT - Mangosuthu University of Technology
NASDAQ - National Association of Securities Dealers Automated Quotations
NCHE - National Council of Higher Education
NDP - National Development Plan
NEPI - National Education Policy Investigation
NL - Netherlands
NMMU - Nelson Mandela Metropolitan University
NO - Norway
NQF - National Qualifications Framework NSFAS - National Student Financial Aid Scheme
NWU - North-West University
NYSE - New York Stock Exchange
NZQA - New Zealand Qualifications Authority
OBE - Outcomes-based Education
OECD - Organisation for Economic Co-operation and
Development
PCAOB - Public Company Accounting Oversight Board
PL - Poland
PT - Portugal
PWC - PricewaterhouseCoopers LLP
RHODES - Rhodes University
RO - Romania
RSA - Republic of South Africa
SA - South Africa
SAA - South African Airways
SABC - South African Broadcasting Corporation SADTU - South African Democratic Teachers Union SAHO - South African History Online
SAICA - South African Institute of Chartered Accountants SAQA - South African Qualification Authority
SCIE - Science Citation Index-Expanded
SE - Sweden
SEC - Securities Exchange Commission
SI - Slovenia
SK - Slovakia
SPU - Sol Plaatje University
SRC - Student Representative Council
SSCI - Social Science Citation Index
TEAC - Tertiary Education Advisor Committee
TEC - Tertiary Education Commission
TUT - Tshwane University of Technology
UCT - University of Cape Town
UFH - University of Fort Hare
UJ - University of Johannesburg
UK - United Kingdom
UKZN - University of KwaZulu-Natal
UL - University of Limpopo
UMP - University of Mpumalanga
UNISA - University of South Africa
UNIVEN - University of Venda
UP - University of Pretoria
US - University Stellenbosch
USA - United States of America
UWC - University of the Western Cape
VUT - Vaal University of Technology
WITS - University of the Witwatersrand
WSU - Walter Sisulu University
LIST OF APPENDICES
APPENDIX A - Comparison between the 2007 and 2014 Reporting
Regulations 455
APPENDIX B - Comparison between the 2007 and 2014 Reporting Regulations, King III and proposed King IV
disclosures 483
Use of numbers in the study: All numbers under 100 in this study are written out, except when then the numbers are used as: Principle Numbers in Corporate Governance Codes; Chapter Numbers; By-law Numbers; Section Numbers; Percentages; Scores in terms of the framework; as part of calculations; and within tables.
Cut-off date for this study: Due to the late submission of some of the 2015 Annual Reports to the Department of Higher Education and Training, and the problems experienced in obtaining these Reports, the cut-off date for the empirical study was 30 November 2016.
SUMMARY
Several Universities in South Africa, namely the Tshwane University of Technology (TUT), the Walter Sisulu University (WSU), the Central University of Technology (CUT) and Vaal University of Technology (VUT), were placed under administration since 2011 because of poor administration and governance. Examples of the poor administration and governance practices include, among others, the appointment of Vice-Chancellors with questionable qualifications, the payment of exorbitant remuneration to Vice-Chancellors, malfunctioning of the Councils and accusations and rumours of corruption in the National Student Financial Aid Scheme (NSFAS). The continued national student protests in 2015 and 2016 calling for free and quality higher education have placed renewed focus on the problems experienced by Universities. The soundness of the application of corporate governance principles at Universities, therefore, needed to be investigated. Because of this need, the application of corporate governance principles at South African Universities was addressed in this study.
The Regulations for Reporting by Public Higher Education Institutions of 2014 require Universities to disclose their application of the King III principles in their Annual Reports. Although these disclosure requirements provide detail disclosure guidance, no international best practices were included. No tool, instrument or framework could be found to test the Universities’ compliance with the Reporting Regulations and King III principles, which further necessitated this study. By using a qualitative research design, this study used a literature review to develop a framework. The framework was based on the guidance in the Reporting Regulations (which contains the principles of the King III Report), international best practices, and the King IV Report. The framework could be used to determine the level of compliance of disclosures found in the South African Universities’ Annual Reports. Although the implementation date of the King IV Report is 1 April 2017, some Universities were proactive in the application of the principles contained in the King IV Report. The developed framework, therefore, includes additional disclosures, contained in the King IV Report, that were excluded from the Reporting Regulations, as a proactive measure in assessing the disclosure of King IV principles in the Annual Reports of the South African Universities.
This framework was used in the empirical portion of the study to analyse the Annual Reports of the South African Universities for the 2011 to 2015 financial years. A total of 113 Annual Reports were analysed against the framework. The framework included 536 items based on the Reporting Regulations of South Africa; 140 items related to the changes from King III principles, as contained in the Reporting Regulations, to the King IV Report; and sixty items based on international best practices.
Findings of the study suggest that some Universities in South Africa are proactive in the implementation of the King IV Report, although the implementation date of this report is only 1 April 2017. The disclosures of the South African Universities’ application and compliance with corporate governance principles, according to both South African and international best practice, are lacking in detail. The absence of detail disclosures leads to the concerns about the disclosure practices at these Universities as well as the Universities’ commitment to transparency and accountability. The problems experienced in obtaining the Annual Reports of the Universities raise additional concerns in terms of the Universities’ commitment to transparency and accountability. These problems raise concerns as the Universities are largely funded by state subsidies, which make the Annual Reports of each University information that should be publicly available.
The results of the application of the framework clearly indicate that South African Universities need to address the quality of the information contained in their Annual Reports. The Council and Committee members need to be better informed of what their duties and functions are in terms of the disclosures in the Annual Reports. Universities should also ensure that the individual, or group of individuals responsible for compiling the Annual Reports is fully aware of the details that should be included in the Annual Reports.
The framework developed in this study can be used by the Department of Higher Education and Training, external auditors of the Universities as well as the Universities themselves, to determine the level of compliance with the disclosure recommendations for Annual Reports. It may further be used as a rating system to rate the South African Universities with regards to the application and disclosure of
application of corporate governance principles, or as a warning system to indicate shortages in the corporate governance practices of Universities.
Key words: Corporate governance, South African Universities, Annual Report disclosure, Higher Education, Reporting Regulations, International Best Practice, King IV Report, King III Report
OPSOMMING
ʼn Aantal Suid-Afrikaanse Universiteite, naamlik die Tshwane Universiteit van Tegnologie (TUT), die Walter Sisulu Universiteit (WSU), die Sentrale Universiteit van Tegnologie (CUT) en die Vaal Universiteit van Tegnologie (VUT) is sedert 2011 weens swak administrasie en beheer, onder administrasie geplaas. Voorbeelde van die swak administrasie en beheer is onder andere die aanstelling van Visie-Kanseliers met twyfelagtige kwalifikasies, die betaling van buitensporige vergoeding aan Visie-Kanseliers, wanfunksionering van Rade en aantygings en gerugte van korrupsie met betrekking tot die Nasionale Studente Finansiële Hulp Skema (NSFAS). Die voortslepende nasionale studente betogings van 2015 en 2016 wat oproepe van gratis en gehalte hoëronderwys laat hoor, het hernude fokus op die probleme wat deur Universiteite ondervind word, geplaas. ʼn Ondersoek na die grondige toepassing van korporatiewe beheerbeginsels deur Universiteite is daarom ook nodig. In die lig van hierdie behoefte verleen hierdie studie aandag aan die toepassing van korporatiewe beheerbeginsels aan Suid-Afrikaanse Universiteite. Die 2014 Regulasies vir Verslagdoening deur Openbare Hoër Onderwys Instellings vereis van Universiteite om hulle toepassing van die King III beginsels in hul Jaarverslae te openbaar. Alhoewel hierdie openbaarmakingsvereistes gedetailleerde riglyne bevat, is geen internasionale beste praktyk ingesluit nie. Geen hulpmiddel, instrument of raamwerk kon gevind word om Universiteite se voldoening aan die Verslagdoeningsregulasies en King III beginsels teen te meet nie, wat hierdie studie verder genoodsaak het. Hierdie studie benut ʼn kwalitatiewe navorsingsontwerp, saam met ʼn literatuuroorsig om ʼn raamwerk te ontwikkel. Die raamwerk is op die Verslagdoeningsregulasies (wat die beginsels van King III vervat, insluit), internasionale beste praktyke en die finale King IV Verslag gebaseer, wat gebruik kan word om die vlak van voldoening aan openbaarmakingsvereistes van Suid-Afrikaanse Universiteite, te bepaal. Alhoewel die implementeringsdatum van die King IV Verslag eers 1 April 2017 is, was sommige Universiteite pro-aktief in die toepassing van die beginsels soos vervat in die King IV Verslag. Daarom, as ʼn proaktiewe maatstaf vir die assessering van King IV beginsels in die Jaarverslae van Suid-Afrikaanse Universiteite, sluit die raamwerk wat ontwikkel is, addisionele
openbaarmakings ingevolge die King IV Verslag, wat nie in die Verslagdoeningsregulasies ingesluit is nie, in.
Hierdie raamwerk is tydens die empiriese ondersoek in die ontleding van Jaarverslae van Suid-Afrikaanse Universiteite vanaf 2011 tot 2015 finansiële jare, gebruik. Altesaam 113 Jaarverslae is ontleed ingevolge die raamwerk. Die raamwerk bestaan uit 536 items met betrekking tot die Suid-Afrikaanse Verslagdoeningsregulasies; 140 items met betrekking tot veranderinge tussen die King III (soos vervat in die Verslagdoeningsregulasies) en King IV Verslae; en sestig items gegrond op internasionale beste praktyke.
Die bevindinge van die studie dui aan dat sommige Suid-Afrikaanse Universiteite proaktief is in die toepassing van die finale King IV Verslag, alhoewel die implementeringsdatum eers 1 April 2017 is. Die openbaarmaking van die Suid-Afrikaanse Universiteite se voldoening aan korporatiewe beheerbeginsels, volgens beide die Suid-Afrikaanse Verslagdoeningsregulasies en internasionale beste praktyke, ontbreek ten opsigte van detail. Die afwesigheid van detail openbaarmaking wek kommer oor die openbaarmakingspraktyke van hierdie Universiteite sowel as die Universiteite se toewyding tot deursigtigheid en aanspreeklikheid. Die probleme wat ervaar is met die verkryging van die Jaarverslae van Universiteite het addisionele kommer rakende Universiteite se toewyding tot deursigtigheid en aanspreeklikheid na vore laat kom. Die probleme is kommerwekkend aangesien Universiteite grootliks deur staatsubsidies befonds word, wat beteken dat die inligting in die Jaarverslae van elke Universiteit, openbare inligting is.
Die resultate van die raamwerk dui duidelik aan dat Suid-Afrikaanse Universiteite aandag moet verleen aan die gehalte van inligting wat in hulle Jaarverslae behoort vervat te wees. Die Raad- en Komiteelede behoort verder ook beter ingelig te wees rakende hulle pligte en verantwoordelikhede met betrekking tot openbaarmaking in die Jaarverslae en die individu, of groep individue, wat verantwoordelik is vir die samestelling van die Jaarverslae behoort ten volle ingelig te wees rakende die detail wat in die Jaarverslae ingesluit behoort te wees.
Die raamwerk wat in die studie ontwikkel is, kan deur die Departement van Hoër Onderwys en Opleiding, Universiteite se eksterne ouditeurs asook die Universiteite self gebruik word ten einde die vlak van nakoming van die openbaarmakingsvereistes in Jaarverslae te bepaal. Dit kan verder ook gebruik word as ʼn graderingstelsel om die Suid-Afrikaanse Universiteite ten opsigte van hul toepassing van korporatiewe beheerbeginsels te gradeer, of as ʼn vroeë waarskuwingstelsel aan Universiteite oor tekortkominge in hulle korporatiewe beheer praktyke.
Sleutelwoorde: Korporatiewe beheer, Suid-Afrikaanse Universiteite, Jaarverslae openbaarmaking, Hoër Onderwys, Verslagdoeningsregulasies, Internasionale Beste Praktyke, King IV Verslag, King III Verslag
CHAPTER 1– INTRODUCTION TO THE STUDY AND
CHAPTER OUTLINE
1.1 INTRODUCTION AND BACKGROUND
Governance in Higher Education Institutions in South Africa has been under the spotlight for several years (Goldstone, 2007: 2; Macfarlane, 2012: 14; Ncana, 2010: 4; Ratshitanga, 1998: 10) (for this study, the term Higher Education Institution refers to publicly funded University, and the term University will be used throughout the study when referring to a Higher Education Institution). The aspects addressed in a number of reports and articles on Universities, include maladministration (Ramothwala, 2013: 10; Van Rooyen, 2012: 4; Whitfield, 2012: 8), poor leadership (Macupe, 2012: 7), abuse of power (Ramothwala, 2013: 10) and poor governance (Macupe, 2012: 7; Williams, 2012: 4).
Because of maladministration and poor governance, the South African Minister of Higher Education placed several Universities under administration, and several reports by these administrators were published in the Government Gazette. In 2011, two reports were published; one on the Tswhane University of Technology (TUT) (Nzimande, 2011: 2–8) and the other at the Walter Sisulu University (WSU) (Ncayiyana, 2011: 3–34). In 2012, reports were issued on the Central University of Technology (CUT) (Smith, 2012: 1–37) as well as the Vaal University of Technology (VUT) (Sikhakhane, 2012: 3–54). Allegations in these reports boiled down to maladministration and poor governance. An example of poor governance and maladministration is the appointment of the Vice-Chancellor at TUT during an irregular Council meeting (Kloppers-Lourens, 2011: 3), and the same individual whose doctoral qualification was questioned in several articles (Kloppers-Lourens, 2011: 3; Magome, 2011a: 3; Magome, 2011b; Mthembu, 2011: 6). The Vice-Chancellor at TUT allegedly obtained the degree from the St. George’s University International, an institution not recognised by the South African Qualification Authority (SAQA) (Kloppers-Lourens, 2011: 3). Despite the Council’s knowledge about the non-accreditation of the degree, the person was appointed as Vice-Chancellor at TUT (Kloppers-Lourens, 2011: 3). Klopper-Lourens (2011: 3) is of the
opinion that the remuneration received by the particular Vice-Chancellor amounts to R2.2 million, for a position “obtained fraudulently”, which is a misappropriation of funds. The irregular appointment of senior staff like the financial executive by the Vice-Chancellor at TUT (Rademeyer, 2011: 7) raised further concerns. Two of the four Council members who were appointed by the Minister of Higher Education and Training at TUT resigned because of these irregularities (Kloppers-Lourens, 2011: 3; Rademeyer, 2011: 7). The two Council members were quoted to say the reason for their resignation was that they were no longer prepared to be associated with the fraudulent and unprofessional behaviour of the Council (Rademeyer, 2011: 7). In a report from the independent assessor into the affairs of WSU, the stakeholders of the University asked for the Council to be dissolved due to poor governance. In a similar report on VUT, a lack of understanding of the role of the Council was identified by the appointed administrator as an aspect of concern (Ncayiyana, 2011: 7–8). In a report on the state of affairs at CUT, a serious breach of good corporate governance principles by this University was identified (Smith, 2012: 10).
It is evident from the above-mentioned reports that there is a problem with governance at the Universities referred to above. These reports raise the need for an investigation into the effectiveness of governance principles at Universities in South Africa. It is, however, not only the Universities that were placed under administration that are experiencing governance problems. Another example is the resignation of a Council member at the University of the Free State (UFS) in 2014, possibly due to irregularities and un-procedural actions of the University management (Burger, 2014: para. 1).
Other problems have plagued South African Universities over the past few years and included rumours of corruption with the National Student Financial Aid Scheme (NSFAS), student unrest and poor quality students coming from the school system (Editorial, 2015b: 1; Goosen, 2015: para. 1-14; Heard, 2015: para. 1-12; Herman, 2015: para. 1-9; Kekano, 2015: para. 1-8; Lund, 2015: para. 1-22; Ramphele, 2015: para. 1-9; Vilette, 2015: para. 1-9).
Because of the level of poverty in South Africa, funding for Higher Education for certain poor students was provided by the National Student Financial Aid Scheme (NSFAS) (ANC, 2007: 74). This financial aid was recently in the news for alleged corruption (Editorial, 2015b: 1; Goosen, 2015: para. 1-14; Heard, 2015: para. 1-12; Herman, 2015: para. 1-9; Kekano, 2015: para. 1-8; Lund, 2015: para. 1-22; Ramphele, 2015: para. 1-9; Vilette, 2015: para. 1-9). In March of 2015, students marched to the Minister of Higher Education and Training’s office to demand the write-off of student debts as well as the abolishment of all student fees (Editorial, 2015b: para. 3-4). As a result of this march, the Department of Higher Education and Training admitted the NSFAS fund was flawed and a spokesperson for this department said: “[w]e know that NSFAS is not sufficient to cover everyone and
again there is an element of corruption and fraud that we are going to make an announcement soon for a forensic investigation around NSFAS because a lot of [m]oney we are convinced gets diverted by University … [c]ertain officials divert this money through corrupt means and ends up not going to the poor child” (Editorial,
2015b: para. 6-7). The NSFAS spokesperson also indicated the scheme welcomes the probe as “[t]here is a lot of corruption in the institutions; officials are working with
the students to defraud the system” (Heard, 2015: para. 2; Ramphele, 2015: para.
3). The probe also brought to light that there are insufficient funds in the scheme to support all students and excludes most of the students who are poor (Editorial, 2015b: 1; Goosen, 2015: para. 4; Ramphele, 2015: para. 8).
One cause quoted for insufficient funds in the NSFAS scheme is the poor repayment of funds provided to students. In the 2013/2014 financial year, only 30% of students owing the scheme repaid their debt (Lund, 2015: para. 7). The recovery rate of similar international financial aid funds is around 60%-70% (Lund, 2015: para. 6). Additionally, the Financial and Fiscal Commission warned that the NSFAS funds only have sufficient funds to assist 50% of students who qualify for the funding, and requested the government to assist in increasing NSFAS funds (Lund, 2015: para. 7). Allegations against Universities about the misuse of the NSFAS funds were also made. These allegations included Universities providing falsified student numbers, documentation and funds, which were fuelled by the difficulty to obtain reliable information on, among others, student numbers from Universities (Kekano, 2015: para. 5; Vilette, 2015: para. 2).
Because of the problems with poor recovery of outstanding NSFAS loans and insufficient funding, students launched the #FeesMustFall campaign in October 2015 - which shut down academic activities for more than a week at some Universities (Heard, 2015: para. 10). The protest actions began at WITS, spread to some of the other Universities in South Africa and escalated to a march to the Union Buildings in Pretoria on 23 October 2015 (Subramany, 2015: para. 10).
This campaign called for a zero per cent increase in University fees for 2016 and some students called for free Higher Education (Vilette, 2015: para. 9). This is not surprising as the African National Congress (ANC), at their 2007 Annual National Conference, resolved to implement free Higher Education to “all undergraduate
students” in South Africa by 2014 (ANC, 2007: 74; Munusamy, 2015: para. 9). The
call for zero increase in University fees flared up again in September of 2016, when University students refused to accept the decision from the Minister of Higher Education and Training to allow Universities to increase fees for 2017 by a maximum of 8% (Pather, 2016: para. 8; Nicolson, 2016: para. 3; Staff Reporter, 2016h: para. 6). The protest actions during 2016 have led to most of the Universities in South Africa shutting down from the end of September (News Team, 2016: 1; Nicolson, 2016: para. 4; Staff Reporter, 2016g: para. 1; Swanepoel, 2016: 6), protests turning violent and burning of University property (Staff Reporter, 2016d: para. 1; Kekano, 2016: para. 1; Reuters, 2016b: para. 1) and staff members at one University being held hostage (Van der Merwe, 2016: para. 1).
The result of the zero increase in fees in 2015 is a shortfall of R2,3 billion for South African Universities (Editorial, 2015a: 1) in 2016. The South African government agreed to help fund the increase but requires the Universities to contribute as well, from their reserves, towards funding the shortfall (Editorial, 2015a: 1). Even though the government is willing to assist, they place the blame for the fee crises at the door of the Universities for “unilaterally deciding” on the increase of fees (Hunter & Nkosi, 2015: para. 5). In 2016, the National Treasury said it was working with the Department of Higher Education and Training and other departments to find the R2.5-billion needed to address the shortfall of University fees for the 2017 financial year (Nicolson, 2016: para. 12).
The Director of the Centre for Higher Education Transformation also blamed the Vice-Chancellors of the Universities for not putting sufficient pressure on the government to increase subsidies. This is evident from the fact that almost half (49%) of University budgets in 2000 constituted government subsidies, while only 40% of funding were received from government funds in 2015 (Nkosi, 2015a: para. 9). The Higher Education and Training Department, in turn, admitted to the underfunding of Universities, but put the blame for the shortage of funds on the weakening economy (Nkosi, 2015a: para. 16).
The call for free Higher Education continued with the 2016 student protests (Pather, 2016: para 1; Staff Reporter, 2016g: para. 28; Glum, 2016: para. 4). As mentioned earlier, the creation of the NSFAS was the first step in free education for undergraduate studies for the poor (ANC, 2007: 74; Badat, 2010: para. 18). In 2012, the Minister of Higher Education and Training tabled a report on the possibility of free Higher Education containing recommendations which would make free Higher Education possible (Wesi, 2015: para. 1-4; Wesi & Mathebula, 2015: para. 1-4). The recommendations in this report were not implemented. After the renewed student protests in 2016, the Minister of Higher Education and Training again stated that free Higher Education will not be happening soon, and that poor students in South Africa already receive alleviation from fees in the format of NSFAS funds (Stuurman, 2016: para 2).
Calls were even heard for graduates who earn above a certain level to contribute towards the NSFAS funds to help increase the shortage of funds (Badat, 2010: para. 23). Another argument is to allow free Higher Education for students and to let students repay their studies once they start earning above a certain level (Hull, 2015: para. 16). These payments can be seen as a form of graduation tax and can be accelerated as the graduate’s remuneration increases with the understanding that if a graduate does not obtain a certain level of remuneration, the fees will be for the
“public account” (Hull, 2015: para. 16). The Minister of Higher Education and
Training also called for the rich to be taxed to pay for free Higher Education for the poor (Essop, 2015: para. 9) and this call was echoed by the student movement in 2016 (Nicolson, 2016: para. 16). None of these proposed plans for funding for free Higher Education has been implemented, and funding for Higher Education,
therefore, remains a problem for South Africa, and there seems to be neither an easy solution nor consensus regarding the source of funding.
Additional to the problems created by the national call for free Higher Education is the issue surrounding the language policies and the removal of statues at Universities. In 2015, two South African Universities, Stellenbosch University (US) and the University of the Free State (UFS), changed their parallel medium language policies. The US was the first to start the process, and the UFS followed suit (Areff, 2015: para. 1-21; Burger, 2015: para. 1-13; Lotriet, 2015: para. 1-7; Petersen, 2015: para. 1-15; Quintal, 2015: para. 1-20). Both institutions are in the process of formalising a new policy, but the Councils of these institutions decided to change to English as the primary educational language with support in other languages such as Afrikaans, Xhosa and Sesotho (Areff, 2015: para. 3; Burger, 2015: para. 9; Quintal, 2015: para. 20). Contrary to the decisions of these two institutions to change to English medium institutions, the North-West University (NWU) is considering a parallel medium policy as their Council regards mother tongue education as a constitutional right (Burger, 2015: para. 9).
In July of 2016, a full bench review by the Free State High Court set aside both the Senate and Council of the UFS’s decision to change its language policy (Free State High Court, 2016: para. 59). The decision included an order of costs, forcing the UFS to pay their own as well as all the applicants’ legal costs. The judges found the UFS failed to comply with the following aspects of the Ministry of Higher Education and Training’s policy on language (Free State High Court, 2016: para. 40):
Acknowledge Afrikaans as a language of scholarship and science;
Support for the retention of Afrikaans as a medium of academic expression; and
Support the Ministry’s position that the sustained development of Afrikaans is the responsibility of not only some Universities.
Non-compliance with the language policy of the Department of Higher Education and Training (DHET) is a clear indication of the non-compliance of the UFS with the principles of good corporate governance (see Chapter 2). The main reason
provided by the UFS for the change in the language policy was that the current language policy created racial segregation and the offering of courses and material in English was of a poorer quality than those offered in Afrikaans (Free State High Court, 2016: para. 47). The High Court did not accept this as a valid reason. The bench of judges said the change in language policy indicated the University implied that it would “rather offer the poorer quality tuition to all students than make efforts
to improve the quality of tuition offered in English classes”. The judgement further
acknowledged the demand for Afrikaans and English classes came from all race groups and that the argument of racial segregation due to language was unsupported (Free State High Court, 2016: para. 49–50). After the July judgement, the UFS decided to implement its new language policy in 2017. On 12 September 2016, a full bench review of the Free State High Court ordered the UFS not to implement the policy before their appeal to the Constitutional Court and the Appeals Court was completed (Solidariteit, 2016: para. 1). On 29 September 2016, the Constitutional Court denied the UFS’s application for an appeal to the decision of the July 2016 judgement. The Court’s refusal was based on the finding that it was not in the interest of justice to hear the appeal. The UFS, however, obtained permission to appeal the July judgement in the Supreme Court of Appeals (Van Rooyen, 2016: 1).
In November 2016, the Supreme Court of Appeals of South Africa overturned the High Court’s July 2016 judgement and ruled in favour of the implementation of the UFS’s new language policy (Staff Reporter, 2016h: para. 1; Petersen, 2016: para. 1; Loader, 2016: para. 1). Although the finalisation of the appeal is only expected early in 2017, the Supreme Court of Appeals ruled the new policy could be implemented in 2017 (Petersen, 2016: para. 5; Loader, 2016: para. 5). The ruling was based on the finding that Afriforum could not prove that Afrikaans speaking students would suffer “irreparable harm” with implementing the policy (Petersen, 2016: para. 7; Staff Reporter, 2016h: para. 3). The policy will be piloted in 2017 with first-year students in the Law, Health Sciences and Humanities faculties (Loader, 2016: para. 5). The remainder of the faculties will continue with the Afrikaans-English policy until 2018 when the new policy will be phased in (Loader, 2016: para. 5).
Apart from the call from students to remove Afrikaans as an educational language, students have also demanded the removal of colonial statues from campuses. The students felt the statues were an indicator of the inequality they had experienced (Bonorchis, 2015: para. 4; Subramany, 2015: para. 13). The statue of Cecil John Rhodes, located on the main campus of the University of Cape Town (UCT), was the first statue removed in 2015 while other statues - Paul Kruger, Queen Victoria, Mahatma Gandhi, J.G. Strydom, Fernando Pessoa and Sarah Baartman - was defaced by green paint (Bonorchis, 2015: para. 1; Baily, 2015: para. 1). The removal of the Cecil John Rhodes statue was said to be a part of a bigger concern of students about the poor level of transformation in Higher Education in South Africa (Baily, 2015: para.6; Baloyi & Isaacs, 2015: para. 3).
It is, however, not only the Universities in South African that are dealing with poor governance issues. The South African school system has been fraught with problems of its own. Less than 50% of children who enter grade one, matriculate (Modisaotsile, 2012: 1). The reason quoted for the poor success rate of these children are uninvolved parents, weak and uneducated governing bodies, poor literacy, numeracy, language and mathematical skills and the lack of leadership (Modisaotsile, 2012: 1; www.leader.co.za, 2011: para. 13). Modisoatsile (2012: 2) further states the following are problems in South African education (Nkosi, 2016: para. 11; DoE, 2009: 1–3; Holborn, 2013: para. 7 and 11; Smuts, 2014: para. 5; Dirks, 2013: para. 3; Spaull, 2013: 12):
Poor quality of education;
Class sizes of thirty-two children per class; Poor literacy skills;
Poor numeracy skills; Poor teacher training; Unskilled teachers;
Lack of commitment of teachers; Poor support for learners at home; and Shortage of resources.
The problems in terms of poor education, poor facilities, overcrowded classrooms and inadequately trained teachers represent one of the causes of the 1976 student uprising (Tracey, 2015: para. 3; SAHO, 2016: para. 12; BBC, n.d.: para. 9). The problems identified during the Sharpeville and Soweto student uprisings still exist (CEPD, n.d.: 1). This is evidenced by a statement made by the Minister of Basic Education in a parliamentary briefing that “[t]he diagnostic test of the [National
Development Plan] said 80% of the schools were dysfunctional” (Wilkinson, 2015:
para. 8). The functionality of schools is measured by matric results for secondary schools, and the results of Annual National Assessment (ANA) (Wilkinson, 2015: para. 13). In 2015, the South African Democratic Teachers Union (SADTU) called on its members to boycott the ANA’s as a measure to force the Education Department to respond to the teachers’ concerns of being undermined (Nkosi, 2015b: para. 6; SADTU, 2015: para. 1; Editorial, 2016a: para. 1).
Although the South African matric pass rate has shown remarkable results, that is 75.8% in 2014 and 70.7% in 2015 (Quintal, 2016: para. 1), it is important to note the percentage is calculated on the number of candidates who sat for the exams and not the number of candidates who were enrolled for matric (Molefe, 2015: para 6; Rusznyak, 2014: para 3). To improve matric results, underperforming schools have discouraged weaker students from writing the matric exams (Rusznyak, 2014: para. 4). Rusznyak (2014: para. 9-10) further indicates that the focus on knowledge was diminished by the introduction of the new school system, Outcomes-based Education (OBE), and that focus was placed on the student and his or her opinion and called for a democratic relationship between student and teacher. Teachers were discouraged from using textbooks in this new system, and students were discouraged to read (Rusznyak, 2014: para. 9). The result was that students barely moved beyond what they already knew (Rusznyak, 2014: para. 9; Mouton et al., 2012: 1215) and students did not reach their individual potential (Ashton, 2008: para. 17).
Research has also shown that the strongest grade six students have scored higher in a standardized mathematics test than the weakest grade six teachers, thus reiterating the problem of poorly qualified teachers (Rusznyak, 2014: para. 16; Spreen & Vally, 2010: 47; Zille, 2013: 14; John, 2013: 21; Kahn, 2011: 9). The poor
