Funding: The challenge that keeps leaders awake at night

Before I took the position of vice-chancellor at United States International University Africa (USIU-Africa), I had read and heard that generating and managing university finances are the proverbial challenges that keep university leaders awake at night.

I had written extensively on the financial, infrastructural and operational difficulties facing higher education institutions globally and in Africa, but I wished I had done more homework on USIU-Africa’s finances before assuming the position.

I was surprised by how small the budget was; it was several times smaller than the budget I managed as a college dean at a private university in California that was only slightly larger than USIU-Africa.

However, I was only too aware that the financial model of American higher education was broken, as evident in unsustainable student debt which in 2018 reached US$1.5 trillion, ensnaring 44.2 million borrowers, which was higher than credit card debt.

I found the financial models of many African universities, including those in Kenya, were not just broken, but faced an unmitigated disaster that, if not threatening their survival, severely undermined their quality.

This underscored the fact that higher education institutions globally have paid a huge price for neo-liberalism that gained ascendancy from the 1980s, in which education was devalued from a public to a private good. Historically, it is the poorer countries and social classes that bear the highest costs of capitalist restructuring.

This is the larger context USIU-Africa and other universities found themselves in.

Funding sources

Universities have seven major sources of funding, namely, government subventions, student tuition, auxiliary services, loans, income-generating activities, research grants, and philanthropic donations. All these streams are deeply strained and, for private teaching-intensive universities like USIU-Africa, some were not even available.

As I noted in my book, The Transformation of Global Higher Education, 1945-2015: “Together with the expansion of private higher education to meet rising demand, the balance between public and private sources of funding increasingly tipped toward the latter as institutions came to rely more and more on resources from students, parents, donors, and business. The mounting share of costs borne by private sources came to be known as cost-sharing.”

As a private university, USIU-Africa did not get public funding for operational or capital expenditures. In 2017, the government allowed publicly sponsored students to join private universities. We admitted about 140 such students but withdrew from the scheme a year later as the cost became unsustainable.

In my book, I identified five forms of cost-sharing: (i) the introduction or imposition of sharp increases in tuition fees; (ii) the establishment of dual-track tuition fees for different groups of students; (iii) the imposition of user charges for services that were previously free or heavily subsidised; (iv) the reduction in the value of student loans, grants, and other stipends; and (v) the diminution in the size of the public sector and official encouragement of the expansion of tuition-dependent private institutions, both non-profit and for-profit.

Dual-track tuition fees were widely adopted in East Africa and pioneered by Makerere University [in Uganda]. This is what came to be called parallel programmes in Kenya, in which government-sponsored students were charged lower tuition fees and self-sponsored students paid much higher rates. In effect, the latter subsidised the former.

Private institutions like USIU-Africa couldn’t benefit from this model which collapsed from 2016 as the number of qualifying students in the national examinations fell drastically and the market for self-sponsored students evaporated overnight. This is what sent many of Kenya’s public universities towards financial crisis and virtual bankruptcy.

Raising tuition fees was fraught at USIU-Africa. Understandably, students usually protested. Contrary to popular perception, most of our students came from public secondary schools, rather than the expensive elite private schools. At the same time, the gap between tuition and expenditure per student had risen to almost 15%, which we sought to close over several years.

A key challenge was the absence of well-targeted and well-managed financial aid programmes at national and institutional levels. Under my tenure, we continued the tradition of setting a sizeable portion of limited institutional funds for student aid. Students could also sign up for deferred tuition payment plans which allowed up to three instalments in a semester.

However, even that was not possible for some students, and we were often left with more than 10% of uncollected tuition, which over the years accumulated into hundreds of millions of shillings.

Students don’t live by academics alone

For many universities, auxiliary services provide a significant and reliable stream of institutional income. In our case, more than four-fifths of our revenues came from student tuition and fees. A little less than 10% came from auxiliary services, including the cafeteria, dormitories, and laundry, so there was considerable room for growth.

Surprisingly, the cafeteria was a money-losing venture and, in 2020, we decided to outsource food services, as had been done years before I joined.

Student accommodation fared a lot better. However, the hotels on campus could accommodate only 256 students. Not a single bed had been added since the early 1990s when the university was so much smaller; now, the hostels could barely accommodate 5% of the student population.

Discussions about constructing new hostels resumed during my tenure. The council, wary of debt, asked us to investigate various funding options, which we did. In the end, a European development agency was selected and the financials for the project were interrogated by a highly reputable accounting firm. An architect was chosen who prepared detailed designs.

However, the council regularly postponed giving the final go-ahead. Then the COVID-19 pandemic struck, and the project was suspended. In the meantime, a pioneering developer put up two state-of-the-art hostel blocks with 1,200-bed capacity close to the university.

One of my last public acts as vice-chancellor was the signing of a partnership between the university and the developer for the use of the hostels by our students.

The allure of entrepreneurship

One of the effects of structural adjustment programmes that were imposed with fundamentalist zeal in the 1980s and 1990s, Africa’s “lost decades”, was the fetishisation of the informal economy. It served as a camouflage for the failures of the state and capital to create and sustain gainful employment for the bulk of the working-age population.

The ethos of informalisation soon pervaded the universities as government officials and university councils urged them to become more entrepreneurial. This resulted in universities establishing enterprises often unconnected to their core mission as teaching and research institutions.

Some created businesses ranging from hotels, gas stations, shopping centres, and even mortuaries. Others embarked on renting out their facilities or creating branch campuses.

USIU-Africa had long resisted establishing branch campuses or commercial enterprises. The university took more seriously the importance of establishing quality continuing education programmes, especially professional executive education, which was eventually incorporated into the key performance indicators of each dean and school.

We also established several centres and institutes that undertook lucrative projects, ranging from agribusiness to project impact evaluation and youth employability. The university also hosted the secretariat of the Carnegie African Diaspora Fellowship Program that I brought with me when I relocated from the United States.

Some of these programmes raised millions of dollars from foundations and research agencies in the Global North. However, they remained peripheral in the university’s overall budget.

Many reputable universities generate significant resources from research grants and contracts. Less so through technology transfer, even in the United States with its favourable policy environment. According to a World Bank report, income from technology transfer licences at Harvard University is equivalent to only 1% of annual fundraising receipts.

Government officials and university councils often implore universities to diversify their revenue through research. Yet, the national environment is often not conducive as research expenditures remain quite small.

In developed countries, sources of research funds are business, government, universities, and philanthropic foundations, in that order. In much of Africa, including Kenya, little research funding comes from the government or industry, and many universities don’t have research budgets worth talking about, so there’s excessive dependence on external donors.

In the 2015-19 strategic plan, raising research productivity at USIU-Africa was a priority. So, we restored the institutional research budget that had been suspended several years earlier, and progressively increased it over the years, although it remained quite modest. Nonetheless, it was gratifying for see some recipients leverage it for much larger external grants.

When one of our female scientists won a prestigious million-dollar grant in 2017, it was cause for celebration. I always publicly celebrated such faculty, including during commencement, to encourage others to follow in their footsteps.

In search of donors

Fundraising is grossly underdeveloped in most African universities, including in Kenya. It is a collective institutional enterprise that requires full commitment and participation of management, governing bodies, and faculty. Advancement is a long-term project and process that takes many years and even decades to bear fruit.

This is often not well understood among leaders and governing boards at many African universities. Low levels of philanthropy in African universities reflect weak national cultures of institutional philanthropy.

Philanthropy in Africa has been dominated by American and other foundations from the Global North. According to the report by the Council of Foundations, the State of Global Giving by US Foundations 2011-2015, international giving by American foundations between 2011-15 rose from US$7.2 billion to US$9.3 billion, for a total of US$34.5 billion, representing 27.1% of all giving.

Sub-Saharan Africa received US$9 billion (25.4% of total international giving) led by Nigeria, Ethiopia, South Africa, Kenya, and Tanzania. The bulk went to health (US$5.4 billion), agriculture and food security (US$2 billion), and economic development (US$1.5 billion). Education accounted for US$487.7 million, or (5.4%).

An encouraging development in recent years has been the growth of African foundations established by some of the continent’s wealthiest individuals and largest companies. This reflects the exponential growth of high net-worth individuals (HNWIs), those with net assets of more than US$1 million.

At USIU-Africa, we had several scholarship programmes sponsored by Kenyan, American and Zimbabwean philanthropists. In 2018, we introduced the Lending for Education in Africa Partnership Program, a fellowship programme designed to provide aspiring students with affordable financing and support them in their future job search. Our students could also access funds from the publicly funded Higher Education Loans Board.

Our greatest fundraising achievement during my tenure was with the Mastercard Foundation. The US$63.2 million grant launched in 2020 offers generous scholarships for 1,000 students from across the continent and disadvantaged backgrounds for 10 years.

Nevertheless, I remained concerned that we had more success with philanthropists in the Global North than locally. This was not from lack of trying. I spent a lot of my time cultivating HNWIs in Kenya, including several prominent billionaires. In my personal contributions, I tried to match what the council members had agreed to give in 2016 but, save for a couple, never did.

Outside the universities themselves, there is a need to create enabling conditions at the national level in terms of policy and legislation. As African governments increasingly recognise the important role philanthropy can play in fostering development, they are passing non-profit laws that affect the philanthropic sector.

However, in many countries, including Kenya, the legal status of philanthropic institutions is imprecise and there are few incentives for either corporate or individual giving.

Building fundraising capacity

At USIU-Africa, we worked hard to strengthen our fundraising capabilities and culture. In 2019, we sent the chief manager of advancement and head of alumni relations to Boston where they visited several universities for benchmarking.

In 2021, we procured a comprehensive advancement management system. In 2019, we launched an annual giving campaign. The number of internal university contributors rose from two to 294.

Most commendable was a programme established by an exceptional group of students called Educate Your Own (EYO). By 2021, they had raised funds to support 43 students.

EYO was an inspiration to us all. Members of management regularly made individual contributions and, for the graduating class of 2018, we collectively donated Ks1,000 (US$8.65) for each graduating student as seed funding for their future alumni giving. The advancement team also mobilised alumni whose giving began to rise.

Ironically, the weakest links in the university’s fundraising efforts were the board and council.

At several leadership retreats, management brought advancement experts from the Council for Advancement and Support of Education (CASE) in the US, the leading organisation in the field. This never translated into significant fundraising.

A most precious asset

Most significant for me was the decision to donate my entire personal library, comprising thousands of books, journals, reports, and my personal archives valued at about a million dollars, to the university towards the end of my tenure.

It was a gesture intended to demonstrate my commitment to advancement at USIU-Africa, students’ learning, African knowledge production, and to encourage others to do the same.

At the ceremony marking the donation, the chair of council flippantly stated that he wished I had given cash!

As a scholar, I was giving the most precious asset of my life, accumulated over four decades.

I was stunned.

Paul Tiyambe Zeleza is currently the North Star Distinguished Professor and Associate Provost at Case Western Reserve University, a private institution in Cleveland, Ohio, in the United States.

This commentary is the fourth of a series of reflections on various aspects of his experiences over six years as the vice-chancellor of USIU-Africa and reflects his personal opinions. The original article has been edited and shortened.