Behind the university funding crisis

Belinda Bozzoli says core subsidy has consistently fallen in real terms in relation to student numbers, which have, in turn, risen dramatically

The University funding revolution is not happening

The South African government has, since 1994, rendered our Universities unsustainable as institutions of excellence and stability. By imposing a harsh, technocratic and underfunded financial regime upon them, it has all but guaranteed declining quality, and increasing dissatisfaction, some of it violent, amongst students and academic staff.

Universities are expensive to build, sustain and renew. The range of subjects and degree types they offer is enormous, with each degree syllabus requiring dozens of subjects to be taught, often using expensive equipment and facilities and always requiring access to the world’s knowledge.

Their staff should be highly qualified, able to write, teach and frequently update their own syllabi, as well as perform research  in line with international standards. This is not cheap. In addition, even the most modest Universities are required to fund research, if only for the benefit of the senior students who study there.

Research intensive Universities bear a much heavier responsibility and are expected to compete on the world stage alongside the great Universities of the world. This is an expensive undertaking.  Overall, a good 21st century University is like a small city, with a population, say, of 50-100,000 people, and a budget in the billions, rich in variety, creativity, and civic activity. But many of our Universities are not identifiably “of’ the 21st Century.

Many of them remain identifiable, instead, as creatures of the 1960s and 70s, the last period when significant funding was put into them. While huge, worldwide movements to reform, modernise and massively reinvest in Universities have been under way in Europe, Australia, the “Asian Tigers” and most of the BRICS, South African universities have not received extensive investments for decades. With some exceptions (usually the result of  substantial efforts at achieving international recognition by a few stellar individual academics) they remain parochial and modestly capable institutions, often out of touch with international trends.

Throughout the world today public Universities are funded from three forms of income which, even in emerging economies, allow them to perform all of these responsibilities perfectly adequately. They are state subsidies; student fees; and fund-raising – commonly known as “third stream income.” 

In situations where public Universities thrive, the state funding is the anchor of it all, with fees providing a supplement. Together they normally support the core costs of staff at  competitive salaries and in sufficient numbers to keep class sizes reasonable; core funding for learning resources, IT facilities, libraries, collections, and field sites; funds to enable the University to pursue research at an appropriate level, (depending on the type of University); sufficient funding to keep what fees it does charge at a reasonable level, adequate support to students who cannot pay fees; and funds to develop and renew infrastructure.

Added to this basic economic model is the third stream income which Universities are expected to raise from donors and partners. This income has a multiplicity of purposes. It supplies support for students as well as infrastructure; it can help elevate the research efforts of the University to far higher levels; and it can include donations directed towards the most socially enlightened aspect of Universities – their civic presence, often epitomised through their good works as well as their often incomparable collections of archives books, artefacts and art - depending upon the inclinations of the donors.

This three-stream model of funding is seriously awry in South Africa today.

The fundamental problem is that the anchor of it all, the Government subsidy, is extremely low in absolute terms, by world standards. South African university funding languishes at levels below those of dozens of emerging economies – at a mere 0.6% of GDP it is dwarfed by the levels in Saudi Arabia (2.3%), Russia (1.8%), Argentina (1.4%) and India (1.3%). Furthermore South Africa’s expenditure on Higher Education is a mere 12% of expenditure on Education as a whole, whereas for the rest of Africa it is 20%, for OECD countries it is a massive 23.4%, and for the rest of the world it is 19.8%.

To make it worse, the core subsidy for Universities has consistently fallen in real terms in relation to student numbers, which have, in turn, risen dramatically. This has skewed the entire model. The fall began under apartheid, when many free-thinking universities were regarded with suspicion, and continued apace under the ANC, which continues to choose to place nearly all of its education funding into schools (in a no doubt unconscious imitation of the World Bank’s structural adjustment programmes of the 1970s and 80s). 

At the same time the Government’s increasingly managerialist, controlling and centralising impulses have pushed Universities extremely hard on a number of fronts: 

Government has rapidly driven student numbers up, more than doubling them within twenty years

The increases in the number of students, many of which come from poor backgrounds and are unable to fund their tertiary studies, have put pressure on the National Student Financial Aid Scheme (NSFAS)

The technocratic “formula” used by government to allocate funds between Universities has, in this situation of financial scarcity, driven Universities to become more factory-like and less attractive to the best academic staff

Government funding provided very little or no support for infrastructure development or even proper maintenance, leading to the decline and decay of buildings, a datedness to key teaching and research infrastructure, and a lowering of morale (this has to some extent been rectified in recent years, but the backlog remains huge)

Government has sought to drive up research output and the numbers of postgraduate students in Universities, but has not properly funded these programmes


Universities have tried to deal with these pressures in a situation of falling income by increasing class sizes to unacceptable levels to save on employing more staff, putting up student fees, and raising third stream income. 

Fees, subsidy and third stream income have changed proportions accordingly.  Over the 20 years under consideration, subsidy has moved down from comprising 50% of University income, to the current 40%; fees have moved up from constituting 20% to now constituting 30%. And third stream income has remained steady at 30%.

There are several consequences:

- widespread and recurrent dissatisfaction amongst students. This has two causes: High failure rates  which  are exacerbated by the vast class sizes caused by a shortage of permanent staff positions; and enormous pressure on them and their families to pay higher fees;

- an unprecedented demand on NSFAS funding, a demand which has proved to be impossible for government to meet in the face of a declining economy and rising costs;

- The emergence of a stratum of students who are poor but not quite “poor enough” to be eligible for NSFAS. Non- payment of ANY fees by these students, and the racking up of substantial debts, has resulted, leaving Universities with an insoluble problem. They need the fees because subsidies have declined, but many students cannot pay them.

Government believes that third stream income should compensate for its own shortcomings. This is nothing less than disingenuous, as it is quite obvious to all those involved in the sector that this funding stream is expensive to create and maintain, particular in nature and limited in scope.

In response to the dire shortages of funding, some Universities have successfully elevated their levels of third stream income. But even the most successful of these have found this type of funding irregular, very limited in times of economic recession, and, most important of all, does not cover basic costs.

No funder will pay for basic academic or administrative salaries for example, or  the electricity, security, student transport, maintenance, rates, subscriptions and IT bills Universities are responsible for, or indeed their many other basic costs. Donor funding is often vanity funding. It is project-based, time bound and fickle. It favours “add-ons”.

Successful Universities in South Africa might manage to fund specific research entities, often not those most in need of funding, on outside money – but these tend to exist alongside other poorly funded, struggling research entities and teaching departments. Many of them eventually run out of funds, at which point they have to be taken into the University’s main budget – the alternative being to deteriorate or close down. One or two smart “prestige” buildings might be built using donor money, but they will stand alongside run-down and decrepit facilities, with all the resentments that this is bound to create, while their maintenance and renewal falls to the University’s own account.

US Universities calculate that for each dollar raised, a University is liable for 70 cents in overheads. Sometimes the overheads exceed the raised amount. Third stream income is no panacea.

Even large, wealthy funders are very unlikely to assist, say, the protest-ridden University of Fort Hare rectify its huge budgetary shortcomings. Small, time-bound project funding is the most that University can expect.

As a result of the low levels of, and decline in,  state subsidies, Universities which have failed to raise significant third stream income and whose student populations are drawn almost entirely from poorer students, have only survived on the basis of substantial student indebtedness. Indeed, many have now moved clearly into the realm of unsustainability, and lurch from crisis to crisis, with constant student protests and a government which berates them for charging high fees, for failing to “manage” their students, and for not raising enough money to fill the gaps. 

The Minister of Higher Education and Training, Blade Nzimande, recently set up a committee to report to him on the state of funding of Universities and the best way to address the problems in this field – problems which everyone even remotely connected to Universities knew existed.  This was an overdue and bold move. He invited senior and experienced people in the field to be on the Committee. The man who was to become Deputy President, Cyril Ramaphosa, chaired it.

When the Committee reported back in 2012 it surprised and impressed, with its broad vision and careful work on everything from students to staff, from equipment to buildings. Its recommendations included:

- that overall levels of funding need to be increased to come into line with international levels which would, in effect, mean at least a doubling of the block grants allocate to Universities

- that the system should be much more clearly and definitively differentiated, and levels of funding adjusted according to each level’s mission

- that the National Student Financial Aid Scheme was underfunded, and should receive ongoing “steep” increases 

However our unimaginative Minister remains in denial about the scope and depth of the problems pointed out in this  report, and shows very little inclination to implement its findings beyond undertaking some tinkering with the existing funding formula. 

Treasury, in turn, has turned its nose up at the report. The complexities uncovered by the committee have proven too much for a Government unable or unwilling to embrace the high powered and expensive nature of the 21st Century University.

This is exacerbated by the disastrous split in function between the excellent but tiny Department of Science and Technology, which does use its extremely limited budget to pursue 21st-century type projects, and the Department of Higher Education and Training, which sees its function as being almost entirely to “produce skills” in ever greater numbers. This split leads to buck-passing of the responsibility for modernisation and overhaul of the system.


University funding is controversial in many societies today. “Too much” financial support for them does not suit populist or right wing governments in particular – in the former case, they are seen as elitist institutions, In the latter case they are viewed, quite incorrectly, as an extension of bloated welfare systems.  Under the ANC-led government we fall into the former category, with President Zuma himself berating the University sector for being “too expensive”. In the US, Tea Party influence has pushed certain states into the latter category, so that state funded Universities find themselves experiencing sudden and often drastic cuts. A milder version of this exists in Tory Britain.

These are retrogressive ways of regarding the University sector, which is in fact a fundamental ingredient of development and economic stability in any contemporary political economy.  This is not because what is done in Universities can always be traced directly back to immediate skills needs. Of course some of it can – Universities produce the professionals without whom society could not survive. But they have another purpose: at their best, Universities are crucibles of creativity – the sine qua non of the post-industrial world. 

Targeted investments in the billions by governments in Universities elsewhere have focussed on the needs of the so-called “knowledge economy”. This post-industrial economic form has its roots in extremely high levels of teaching and research, as embodied in the remarkable Indian Institutes of Technology, the ubiquitous Science and Research Parks throughout Asia, and so on.

Other African governments have begun to embrace these ideas. Our government, caught up as it is in patronage, and the mediocrity it engenders, has failed entirely to grasp this particular challenge. If the state continues along its current path of declining real subsidies, most of our Universities are doomed to mediocrity. With one or two exceptions, they appear destined to move ever closer to becoming teaching factories, ironically just as the National Party, in designing universities for the “homelands”, envisaged them to be. They are also doomed to constant struggles to make ends meet as class sizes rise and numbers of proper, full-time teaching and research posts stagnate. Fees will continue to go up, NSFAS will continue to struggle to cover them, student protests will remain frequent and often violent, while indebtedness will blight the lives of the poorest. This vicious cycle must end.

Belinda Bozzoli MP is DA Shadow Minister of Higher Education and Training.

A shortened version of this article first appeared in the Financial Mail.