Business Unity SA (Busa) says free higher education is not sustainable and business cannot carry its costs alone, given the low levels of economic growth.
Free higher education has been central to the debate on transforming the private sector, with many contributors pointing out that the private sector remains one of the key beneficiaries of university graduates.
Busa on Thursday made a submission to the fees commission, in which it said the economy had to grow in order to provide support to the call for free higher education.
The economy had recorded 0.3% growth in 2016, below the Treasury and the South African Reserve Bank's estimates.
"We need a broad social consensus that addresses the challenges in basic and higher education systemically, supports institutional structures and makes the space for the private sector to draw the skills that are needed to power the economy," Busa said in its submission.
Statistics SA's fourth quarter Quarterly Labour Force Survey 2016 showed that there was a direct correlation between levels of education achieved and labour market absorption.
At 37,1%, youth unemployment is 10,6 percentage points higher than the national average - a situation analysts have characterised as untenable and a "ticking time bomb". Unemployment among graduates is 7%, but 59% among youth who do not have matric.
Increasing taxes has been put on the table as a mechanism to fund free higher education.
Busa supports the government reprioritising funds for education, but says business cannot afford an additional financial burden without this having a negative effect on the sustainability of enterprise operations and employment.
Busa called for an overhaul of the National Student Financial Aid Scheme and a realignment of Sector Education and Training Authority training and systems.
Business, according to Busa, had also contributed R17bn towards skills development through the skills development levy.