Remarks on Fees Setting Principles in Public and Private Universities in Uganda


Mukwanason A. Hyuha

by

Prof. Mukwanason A. Hyuha
Centre for Critical Thinking and Alternative Analysis

Introduction

A university has four main functions: creation of new knowledge by extending frontiers of knowledge (through scientific research), dissemination of existing knowledge (via teaching/lecturing), preservation and storage of existing knowledge (through books, libraries, archives, etc.), and community outreach to assist the community at least in its vicinity. However, the major function that differentiates a university from primary and secondary schools, teacher training colleges or other non-tertiary education institutions is the scientific research whose main outputs include books, articles in recognised journals and patented innovations and products. A university without research is merely a ‘glorified secondary school’, and a university with minimal research is definitely weak, dangerously hovering on the brink of a bottomless abyss of oblivion.

Apart from student/staff ratios and related quantitative measures, a university’s ranking is determined by its research output. The more the research output, the higher will, ceteris paribus, be the ranking, and vice versa. For instance, given its research, Harvard University is highly ranked. Whereas in renown scientific journals, one will find numerous articles authored by Harvard University academic staff, one will find just a few articles contributed by Ugandan university academicians. The same applies to other scientific research products.

Research output speaks for itself; a university’s research output should be readily available in the universe, since a university is universal. Ugandan universities’ academic staff may indeed be engaged in numerous consultancies, but are these consultancies resulting in scientific output? Most consultancies are financially very lucrative but do not result in publications in recognised academic journals and other outlets. In the extreme, consultancies are only good from the pecuniary viewpoint; a consultant is contracted to write a report after “research” to show, say, that ‘A is equal to B’, this being a conviction of the “research” funder. After “research”, if the consultant concludes that ‘A is not equal to B’, he/she is likely to have serious problems with the purse-holder. The consultant even risks not being paid because of this ‘wrong’ conclusion! Hence, research output should not be measured by volumes of consultancies; definitely, ranking should not be based on consultancy output as a major factor.

For some time now, the issue of financing tertiary education through tuition and functional fees in public universities has evoked considerable debate in Uganda. This is one of the aftermaths of the introduction of private sponsorship schemes in Makerere University in the 1990s. In the good old days, university education was fully financed by the government However, as the number of eligible students increased, government found itself unable to cover all costs; it resorted to highering entrance requirements from one to two principal passes at the ‘A’ level. Eventually, Government had to yield to pressure from parents who continuously expressed interest to pay fees for their children not absorbed by government sponsorship. In 1993, private sponsorship schemes were, therefore, initiated by Makerere University. This was followed by similar schemes in other public universities, plus the founding, thereafter, of private universities.

Student Unrest over High University Fees

Subsequently, as attempts were made to increase fees, student strikes and related unrest emerged. Following unrest over allegedly excessive fees, debates on the issue of the appropriate level of fees in public universities emerged. Should the level of fees in Makerere be lower than or similar to that in a private university? If lower, how lower? What principles should guide fees setting in public universities, vis-a-vis purely private universities? The moral question is: Why should two students who both qualify to join a university (each with two ‘A’ level principal passes) pay different fees—a government-sponsored student paying zero fees, while a non-government-sponsored one in the same public university is paying high fees? This moral issue is even more serious when one realises that the zero-fees paying student is from a rich family that can easily afford the high fees, while the one facing the burden of ‘exorbitant’ fees is from a poor family (the wretched of the Earth, so to speak!).

This paper deals with this issue of fees in public universities. In particular, it highlights the fact that fees in public universities should be significantly different from those in private universities. Hence, comparing of fees in Makerere University with those in, say, Uganda Christian University (UCU) is technically wrong; it is like comparing apples with oranges.

Financing Higher Education in Uganda

Education is both an investment and a consumption good. The government and individuals buy education because they expect a future flow of goods and services. Education leads to creation of both individual and institutional capacities. First, it enables individuals to acquire knowledge, ingenuity and skills to perform various functions better than before and to become innovators and entrepreneurs (individual capacity building). Second, education leads to the production of high-calibre human resources for, inter alia, universities, secondary schools, and other tertiary education institutions—in addition to boosting research, knowledge dissemination and storage and community outreach. This is its role in institutional capacity building.

As a consumption good, individuals have to pay for the education they consume, just like they pay for other consumption commodities. Hence, individuals should contribute to payment for education in its individual capacity building function. However, for national institutional capacity building, the government must pay for education and the accompanying infrastructure. It is because of this reality that maskini (developing) countries the world over decided to fully pay for tertiary education right from the time they attained political independence. Non-tertiary education was regarded as a consumption good—hence, mutually paid for by government and individuals.

To date, this philosophy-cum-ideology on education in all maskini countries is still relevant and prudent. Given this viewpoint, university education should be financed by government and parents/guardians on a cost-sharing basis; in public universities, the government should, ideally, meet all costs. With good foresight and planning, this is still feasible.

Principles of Fees Setting in Public and Private Universities

There are three types of universities in Uganda: public universities (such as Makerere, MUST, Gulu, Lira, Busitema, etc.), faith-based universities (such as IUIU, UMU, UCU, Bugema, etc.), and purely private universities—founded by individuals and organisations (including KU, KIU, IUEA, St. Lawrence, etc.).

Ideally, the public universities should be fully funded by government through the taxpayer, and the faith-based universities should be fully funded by the concerned faiths through their ‘sheep’. The purely private universities should be funded by their owners (trustees) through user fees and other means at the disposal of the trustees. So, the three types of universities should be guided by different principles in fees setting. Whereas the public and faith-based universities should aim at breaking-even or, at best, generating small surpluses (not maximum profits), private universities should generate maximum profits for their shareholders.

Price determination in any firm is highly dependent on the basic objectives or philosophy of the firm. That is why there are vast differences amongst prices set by monopolies, oligopolies, firms in competitive markets, firms in socialist countries, and so on. Comparisons may, therefore, not be useful unless one takes into account the underlying philosophy or ideology of a firm.

I expect governments in maskini countries to offer education as an investment, since there is a high, statistically significant correlation between education or skilled labour and development. A government firm should, therefore, aim at just offering an essential service as the basic ideology. Of course, it should not be a loss-making firm; it should at least break-even. It is actually commendable if the firm makes a small surplus, which can be ploughed back to expand the firm. Definitely, the firm should not aim at profit maximisation. I place a public university in this category. This is why I expect the costs of operating a public university to be borne by the sole shareholder (government). If a government is no longer able to do so, it should privatise the firms it is unable to cater for with regard to at least fixed costs.

Thus, a public firm’s ultimate philosophy is to produce and offer a good or service at the lowest possible price, so that the product is affordable by the firm’s clients. The firm may generate a surplus for ploughing back for continued growth; the firm may even afford to operate at the break-even point in order to offer an affordable product to its clients. Note that surplus generation is definitely not based on the principle of profit maximisation.

However, non-charitable private firms normally aim at making not just a surplus but at least a (normal) profit. The firms essentially offer a service or produce a good or service in the process of their maximising profits; philanthropy does not come into the picture. If the firms could generate maximum profits without producing any good or service, they would be fine for costs of production would then be almost zero. Private universities are in this category. They have no godfather (government) to meet some of their operational costs, yet they need to generate profits for shareholders, not just break-even; they are in business to maximise their shareholders’ earnings.

Let F = fixed costs, D = development and other non-recurrent expenditure, W = wages and salaries, E = expendables (pen, paper, etc.), A = extra allowances for teaching non-government-sponsored students, P = profit, S = a surplus (S < P), and u = unforeseen expenses. In a public university, fees setting should be based on a cost-plus pricing principle; fixed and related non-recurrent costs and wages and salaries must be financed by the government. The total variable costs plus a given mark-up (i.e., ‘W’ + E + A + S + u) should be divided by the number of students to arrive at the fees payable by each student—where ‘W’ is the wage bill of part-timers teaching on the programme.

For the day programmes with private sponsored students, the numerator should exclude F, D and W, since these were already met by the government; these programmes have to run whether or not private students are admitted to the programmes. For the purely private programmes (e.g. evening programmes), again not all fixed costs should be included in the numerator; fees should be set such that they cover all programme costs plus a mark-up to take care of a surplus required to contribute to the infrastructure of the university. This surplus should ideally be re-invested for the continued sustainability of the private sponsorship scheme.

This implies a subsidy for the non-government sponsored students, since their parents and guardians (through taxation) contribute to paying for the fixed and other costs at the public university. This subsidy is also justified because, after all, government was supposed to cater for all who qualified to join the university.

For a private university, the numerator is total costs (F + D + W + A + E + P + u). Therefore, prices set by private firms are perfunctorily expected to be higher than those at non-profit-maximising firms in similar enterprises, including universities. In general, it is, therefore, wrong to compare fees in Makerere University with those in private universities in Uganda. Fees in one private university can, however, be compared with those in another private university in the same country.

A faith-based university should set fees almost as the public university does, as it has a godfather (the ‘sheep’) to cater for some of the costs, and it embraces philanthropic objectives. If no godfather, then its fees setting mechanism should be similar to that of a purely private university.

Increasing of Fees over Time

Prices—including fees—should not automatically increase periodically. Justification for raising fees must be based on sound reasons, like inflationary pressures, need to improve quality of education, or need to boost efficiency across the board. It should not be based on just statements that fees in private or foreign universities are higher, or just statements that the fees have remained constant for a long time, or on similar flimsy arguments. The fees in Kenya, Tanzania, UK, USA and/or any other foreign country need not be similar to those in Uganda in view of differing income, productivity, inflation, and poverty levels. Besides, one still needs to grapple with the issue of the degree of efficiency in revenue collection and resource deployment so as to determine whether or not a given fees structure is optimal or otherwise.

As I stated in an article in the Saturday Monitor newspaper of March 22, 2008, when we started the private sponsorship schemes in Makerere, we used these principles in setting fees for different programmes. Makerere’s setting of fees for students was not based on the ‘market place’.

Concluding Remarks

This paper uses simple economic principles to lay out foundations for setting tuition fees in public and private universities in a maskini country. It is argued that the principle of cost-plus pricing should be used to set fees in public universities and, possibly, in faith-based and other universities that embrace philanthropy. The purely private universities should use the principle of profit maximisation, as they will then maximise their shareholders’ return on investment.

In view of differing pricing mechanisms, fees in public universities should be lower than those in private universities across various study programmes. Further, in view of these differing mechanisms and philosophies, it makes little sense to compare fees in public and those in private universities in the same country. And, given dissimilar income, productivity, efficiency, cost of living and poverty levels across countries, comparison of fees across countries also tends to be futile. Besides, one should always base fees increases over time on sound (economic) reasons, not on a flimsy reason like ‘fees have remained unchanged for a long time’.

Thus, to increase fees in Makerere and other public universities, one should look at these issues. This means that serious studies and sound analyses must be undertaken before final decisions are made. Short of this, fees setting will be based on arbitrary considerations—considerations that are bound to generate more student unrest on a sustainable basis in future.

Finally, it is imperative that government observes equity in student sponsorship. All who qualify to join a public university should be treated equally in terms of paying, or not paying, fees. My long-held conviction is that government sponsorship should be abolished, in favour of a loan system for all. This would go a long way in dealing with inequity and the moral issue raised earlier.

December 10, 2019.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: