African HE needs new and sustainable funding models

The University of Pretoria (UP) in South Africa is to host policy discussions later in 2025 to explore alternative and sustainable funding models for the public university sector in South Africa as it seeks to find solutions to problems it says reflect the broader challenges faced by universities across Africa.

Professor Kolawole Samuel Adeyemo, the director of the Centre for the Advancement of Sustainable Higher Education Futures (CASHEF) at UP, told University World News that despite recognising the crucial role of higher education in economic development, many African governments do not allocate sufficient funding to support the sector’s expansion and growth.

He said underfunding impacts on the ability of universities to attract and retain top academic talent as well as constraining research capacity and teaching quality, ultimately affecting the calibre of graduates.

Adeyemo, who said the university is yet to come up with exact dates when the discussions will be held this year, added that, despite significant increases in higher education funding since 1994 in South Africa, concerns persist regarding the return on investment and the sustainability of free higher education.

He also said the landmark policy on the National Financial Aid Scheme (NSFAS), South Africa’s funding scheme for students who need financial support to study, which resulted in some modifications being introduced in 2018, is a subject of ongoing debate among academics and policymakers.

“The sustainability of the student funding model introduced in 2018 [when it switched from a loan to a bursary scheme] has faced challenges, including policy shortcomings and concerns regarding the equitable distribution of funds,” he said.

“CASHEF recognises the urgency of this issue and plans to host policy discussions in 2025 to explore alternative and sustainable funding models for the public university sector in South Africa. South Africa’s experience highlights many African universities’ broader challenge: ensuring equitable and sustainable access to quality higher education amid limited resources and systemic constraints,” he added.

“Addressing these challenges requires a multifaceted approach, including: diversifying funding sources, exploring alternative funding mechanisms such as public-private partnerships, philanthropic contributions, and alumni donations.”

He also said there is a need to improve the efficiency of funding allocations by enhancing the transparency and accountability of funding processes to minimise waste and ensure equitable distribution as well as promoting institutional efficiency and cost-effectiveness by implementing measures to improve operational efficiency and reduce administrative costs.

Adeyemo said universities are increasingly exploring alternative revenue streams, such as offering short courses, establishing businesses or diversifying into areas like hospitality and healthcare.

While these ventures can provide much-needed financial support, they also carry inherent risks, he added.

He warned that there is a concern that the pursuit of profit could overshadow the core academic mission of universities, particularly in environments with high levels of corruption and poor governance.

Dramatic increase in spending suggested

But, amid the underfunding, what is the way out for African universities?

Ali-Mohamed Sinane, a programme specialist at the UNESCO Multisectoral Regional Office for West Africa in Dakar, Senegal, told University World News that the question of financing higher education was part of discussions that took place during the Continental Education Conference 2024 held in Nouakchott, Mauritania from 9 to 11 December.

At the event, African ministers and international experts exchanged information about successful national approaches and new funding tools to fund quality education sustainably.

Sinane said a virtual presentation by an American economist, Professor Jeffrey Sachs, who is the Director of the Center for Sustainable Development at Columbia University, in which he argued that African countries need to invest 10% to 15% of GDP in education, rather than the traditionally recommended 4%-6%, sparked important conversations about rethinking funding models to meet the continent’s educational needs.

Sinane said Sachs also proposed future earnings-based funding and international tax arrangements for educated professionals working abroad.

“Sachs’ suggestion [to invest 10% to 15% of GDP] was met with a mix of enthusiasm and cautious optimism. Many participants, including education ministers and international experts, appreciated his bold vision and the emphasis on significantly increasing investment in education.

“They recognised the potential of such investment to transform educational outcomes and drive economic development across the continent. However, there were also concerns about the feasibility of implementing such high levels of investment, given the current economic constraints faced by many African countries,” said Sinane.

He said the proposal on future earnings-based funding and international tax arrangements was viewed by conference participants as promising, but ideas that required careful planning and coordination to be implemented effectively.

A hybrid model?

Professor Célestin Monga, a former senior economic adviser at the World Bank as well as a former vice president and chief economist at the African Development Bank Group who now teaches public policy and economics at Harvard’s Kennedy School of Government, also shared some of his views on possible alternative higher education funding models with University World News.

In an analysis by Monga titled, ‘How to Finance Higher Education in Africa’, he said a hybrid funding model may be best suited for the continent, given Africa’s rapid demographic growth, weak public finances and low private incomes.

According to him, there are three possible revenue sources: tuition fees, government support and universities generating their own income. He spoke about all three of these options.

He said fees-based systems such as in Australia, the United Kingdom and the United States, which depended on a mix of public and private student loans, could be justified in Africa on the basis of tertiary education’s high returns but, given high delinquency rates and the lack of reliable national credit-reporting systems, African financial institutions are reluctant to set up effective credit lines for students. As a result, Africa has tried, but failed to implement this model.

“Governments can provide support in the form of land, capital grants for infrastructure, direct budget allocations for recurrent expenditures, subsidies for scholarships, and low-interest-rate loans. Lastly, colleges and universities can generate their own funding through endowments, fundraising campaigns, and income earned from research, patents and consultancy services,” he wrote.

In terms of government support, Monga said prospects of making the model work are low, as African taxpayers are already heavily burdened.

On the third option, he said colleges and universities can tap into their endowment revenues as in the US where elite institutions admit students without knowledge about an applicant’s abilities to pay for their education, and scholarships are provided to those who cannot afford the cost.

He said this is feasible only when schools have large endowments, most often built from grants, capital gains from assets, research and consulting income, alumni donations, and philanthropic initiatives.

“Given the high demand for higher education, the rapidly growing student population, and most governments’ limited fiscal space, a mix of several funding streams represents the best chance to provide young Africans with access to quality colleges and universities. Such a hybrid model would combine public and private financing,” he said.

“To complement these measures, national, regional, and international development banks – such as the African Development Bank Group – could establish and invest in educational endowments. Africa’s resource-rich economies could allocate a percentage of their revenues to university endowments.”

HE as a public good

In an interview with University World News, Professor Ahmed Bawa of the Johannesburg Business School at the University of Johannesburg, South Africa, told University World News that there was no substitute for government funding of higher education and that governments should see higher education as an investment rather than expenditure.

He said education, in general, and higher education, in particular, must be taken as a public good that produces knowledge and solves problems.

He said that, while private universities can operate in societies, it must be noted that, in the pursuit of profit, countries can end up with a system which is divided on the grounds of economic well-being when universities must be seen to be producing greater equity in society.

“Education is a public good in itself because it contributes to building democracy. It contributes to producing knowledge for society so it’s a public good in itself. But what it also does [is that] it produces public goods, it produces professionals, experts who serve society. We have to think of the role of the university or the role of higher education as producing public goods. So if that’s the case, if we accept that, then higher education has to be primarily funded out of the public purse,” he noted.

“In other words, if you want to build a better society, you have to build higher education. We can think of other ways of generating income for higher education through fees [and] generating income through setting up businesses, but all of that can only be an addition to what is coming from the public purse,” Bawa emphasised.