Reassessing public expenditure priorities: The case of education in South Africa

This paper highlights one of the central challenges facing the present South African government ‐ meeting the strong demands for increased and more equitable provisions of education and maintaining fiscal discipline. This task need not be daunting, as theory and evidence suggest that there is considerable scope for rationalising the existing state provision of social services in South Africa to make them more equitable and efficient. We employ an economic theory of clubs and argue that the provision of basic education should be prioritised while the subsidisation of sophisticated and higher levels of education should be reconsidered. More specifically, the qualitative upgrading of basic schooling deserves more priority from the state while subsidies to exclusive schools and to university students need review. Such rationalisations should encourage sustained economic growth and enable the state to meet its RDP objectives without compromising its commitment to fiscal discipline. However, to achieve this the state will have to resist the strong pressures for the continued provision of services which bestow large private benefits on privileged groups.