Over the next year South Africa's National Commission on Higher Education will investigate ways of transforming the sector in line with new national goals, with crucial implications for the country's 21 universities.

The commission's task, the first official inquiry into the whole of South African education, will be to define a role for universities in developing the new South Africa and to tackle, among other things, thorny issues such as university funding, governance, autonomy, demography and student finances.

After a year it will submit policy proposals to the minister of education which will map out the future of higher education.

One of its first priorities will be to look into a new university funding system. Larger sums of public money will be channelled to universities which were financially disadvantaged by apartheid, and funding will be used as an incentive for universities to do what the government wants.

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This will be bad news for historically white universities which ignored the Mass Democratic Movement's demands to open up to black students. But it will be welcomed by historically black and "open" universities such as Wi****ersand and Cape Town, which have suffered financially from their commitment to equity.

A new subsidy model would almost certainly abandon the current system of awarding block grants to universities, with which they can do what they want, and might opt for a phased-in, United-Kingdom style model in which the state contracts institutions to deliver education to a certain number of students in certain fields.

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This would enable the government to set national goals for the composition and specialisation of the country's future qualified workforce, and use funding as a tool to achieve them.

So, for example, the University of the Wi****ersand might be awarded a contract to teach 20,000 students 40 per cent African, 50 per cent female and 30 per cent on science and technology courses.

The university would be free to enrol as many students as it likes, of any race or gender and in any subject, but it would not receive money for students who do not fall within the contract conditions.

Such a system would not, it is argued, destroy academic freedom, since universities would retain the right to determine, on academic grounds, what would be taught at a university, to whom it would be taught and by whom. But it would make this freedom more practically difficult to sustain.

Universities currently receive around two-thirds of their funds from the government. If they were to enrol "uncontracted" students their fees would increase to around three times their present levels: say from Pounds 1,000 to Pounds 3,000 a year for an arts course.

A large, "white" university such as Pretoria would have to choose between changing the character of its student body, charging a proportion of students high fees, raising substantial extra funds from private sources or a combination of the three.

The big problem for the government will be to establish fairly rapidly a vast national student loan scheme able to fund an increasing number of students from poor families.

The R20 million (Pounds 3.7 million) it granted this year to cover unpaid fees hardly scratches the surface of student debt. Last year students owed around Pounds 23 million, and "black" institutions were the worst hit. Around 50,000 students have not been able to pay all their fees.

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An estimated Pounds 100 million a year would be needed to fund student loans -- a quarter of the total subsidy payment to the higher education system -- and it would be several years before the government began to recoup the money through student repayments, possibly using a system of graduate tax.

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If the commission chooses such a funding model it would not be deviating from international practice. And it would be heading in the direction suggested in this July's controversial World Bank report, Higher Education: The Lessons of Experience.

The report recommended far greater private financing of higher education, including setting up private universities, higher tuition fees and loans for students. South African universities are fairly far down this road, having already achieved the Bank's goal of institutions generating 30 per cent of their income from non-government sources.

These ideas are among many which will be looked at in the commission's complex inquiry. The idea of a national commission on higher education is not new. It was mooted in the African National Congress's A Policy Framework for Education and Training, published in January this year, and formalised in the government's White Paper on education and training.

The white paper spells out the areas to be covered by the commission in fair detail, though the rest of its coverage of higher education is inadequate at best and alarming at worst; far from getting its own division in the new-look department of education and training, higher education is to be relegated to one of many programmes in one of three divisions.

The commission, the paper says, "will be asked to investigate the entire sector, its identity, goals, demography, problems, structure, funding, governance, management, planning, programmes, size, qualification structure, articulation, intellectual and development role, and more, and make specific proposals to the minister of education on the way forward."

The stakes are extremely high. The government pumps around Pounds 350 million a year into higher education with nearly half a million students. Unsurprisingly, aspects of the commission, which will get underway by the end of the year, have already met with opposition.

The committee of university principals is challenging the commission's terms of reference, which were "transported" from the ANC's Framework vision, saying that the commission should be empowered to create its own vision of higher education, and that it presupposes the erosion of university autonomy.

This, the argument goes, would be counter to the interim constitution. Some institutions may be prepared to challenge the commission in South Africa's new constitutional court.

The Universities and Technikons Advisory Committee (AUT) which advises the minister, supports the commissions' terms, which refer to creating a planned, high-quality system with links to the reconstruction and development programme, and is race and gender sensitive.

The AUT believes concerns about university autonomy are unfounded.

Meanwhile, education minister Sibusiso Bengu has set up an ad hoc higher education committee to deal with the pressing issues of university transformation and student finances, that have been disrupting campuses recently.

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The committee has been asked to "give direction" to universities that are not transforming themselves quickly enough into more representative, accountable and democratic institutions.