An Analysis of the Financial Sustainability of Public Universities in South Africa

Lungelo Mjabulisi Khumalo; Daniel Schutte

doi:10.18096/TMP.2025.01.02

Authors

Lungelo Khumalo North-West University https://orcid.org/0000-0002-1088-2583
Daniel Schutte North-West University https://orcid.org/0000-0001-7283-247X

DOI:

https://doi.org/10.18096/TMP.2025.01.02

Keywords:

Financial sustainability, financial ratios, higher education, National Student Financial Aid Scheme, South Africa public universities

Abstract

Purpose of the study: The purpose of this study is to analyse the financial sustainability of South African public universities from 2017 to 2021. The paper, therefore, seeks to analyse how these universities manage their resources amidst increasing student enrolment, increased costs, and limited state support.

Design/methodology/approach: The study follows a qualitative methodology. The research paper uses calculated and analysed financial ratios to analyse various aspects of financial sustainability, together with a methodical assessment of existing literature and a content analysis of the annual audited financial statements of 23 different public universities.

Findings: The research indicates that while several public universities have improved their financial stability over time, the extent of this improvement varies among universities. While some universities exhibit a high level of financial management, at the same time, others are exposed to financial risks. The improvement in reserve ratios also points towards better financial planning; however, the increasing operational costs, specifically those of personnel, are a cause for concern. The complex relationship between state support, own funding, and operational efficiency has been highlighted, besides pointing to an orientation towards innovative funding solutions for enhancing financial sustainability and education quality.

Recommendations/value: To secure financial sustainability, universities must adopt robust risk management strategies, improve liquidity by managing debt more effectively, and shift towards more diversified funding sources. Additionally, aligning financial strategies with operational efficiency will be crucial in maintaining educational quality amid growing fiscal pressures.

Managerial implications: The findings of this study have significant managerial implications for the contemporary field of higher education management. The findings underscore the urgent need for national policy reforms to ensure predictable and equitable funding allocations. Government should reassess the sustainability of current NSFAS funding models. Furthermore, policies promoting third-stream income generation such as research commercialisation and public-private partnerships should be prioritised to reduce reliance on government grants. Strategic policy alignment is essential to ensure that higher education institutions remain financially viable while fulfilling their social mandate of access and quality education

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