South Africa's higher education sector plays a pivotal role in the nation's development, producing graduates who drive economic growth, innovation, and social mobility. Yet, sustaining this system amid rising enrollment, infrastructure needs, and economic pressures presents ongoing challenges. University funding in South Africa relies on a multifaceted model blending government support, student contributions, research income, and private sources. Understanding these streams is essential for students, academics, and policymakers navigating the landscape.

The Department of Higher Education and Training (DHET) oversees allocations through a sophisticated formula designed to promote equity, quality, and outputs. As enrollment surges—reaching nearly 1 million university students by 2026—this model faces scrutiny for adequacy. Recent budgets highlight commitments, but real-term growth lags inflation, sparking debates on sustainability.

Government Block Grants: The DHET Formula Explained

The cornerstone of university funding is the DHET block grant, distributed via a formula balancing teaching, research, and equity. Introduced in 2004, it comprises four sub-blocks:

• Teaching Inputs: Weighted by full-time equivalent (FTE) students across fields (e.g., higher weights for medicine, engineering). About 58% of block grants.
• Institutional Factor: Rewards historically disadvantaged institutions (HDIs) and size adjustments, up to 6%.
• Teaching Outputs: Based on graduate numbers, ~18%.
• Research Outputs: Publications, PhDs, innovations; ~14%.

In 2026/27, total block grants reach R44.6 billion, with teaching inputs at R27.3 billion. Penalties for data inaccuracies or enrollment deviations (up to 50% unit cuts) ensure compliance. Earmarked grants (~R4.5 billion) fund infrastructure, like new universities in Ekurhuleni (R240 million).

This formula incentivizes transformation—favoring African/Coloured students—but critics argue it underfunds research at top institutions like UCT and Wits.

NSFAS: Enabling Access for Millions

The National Student Financial Aid Scheme (NSFAS), funded by government, covers tuition, accommodation, and allowances for low-income students (household income < R350,000). In 2026, R54.3 billion supports over 1 million students across 26 public universities and 50 TVET colleges—20% upfront tuition advances aid cash flow.

Approvals hit 609,653 from 893,847 applications, with appeals ongoing. Coverage: full tuition for TVETs, comprehensive for universities. Yet, challenges persist: R14 billion deficit rumors, payment delays, fraud probes, and R1.1 billion student debt to unis. Reforms include auto-verification via SASSA/SARS and localized centers.

NSFAS transformed access post-#FeesMustFall, but sustainability questions loom as demand outpaces budgets.

Tuition Fees: Balancing Affordability and Revenue

Tuition forms the second stream, ~30-40% of income (e.g., UCT's fees grew 96% over 12 years vs. subsidies' 83%). Regulated fee caps (5-6% increases) prevent hikes, but unis warn of unsustainability amid staffing costs (68.5% at UCT).

Private contributions via NSFAS repayments and alumni donations supplement, though limited compared to US endowments. Fee-free rhetoric pressures, but models show full free education unaffordable without tax hikes.

Research Grants: Fueling Innovation

The National Research Foundation (NRF) awards ~R3 billion annually for competitive grants, prioritizing ratings (A1 top). Outputs like PhDs (weight 3) and articles (1) attract subsidies. International funders (e.g., EU Horizon, Wellcome Trust) add billions; UCT alone budgeted R1+ billion research income.

Challenges: HDIs lag due to capacity gaps; solutions include NRF's R1 billion Black Excellence scheme.

Third-Stream and Private Funding: Diversification Push

Unis seek 'third-stream' via contracts, IP commercialization, executive education. UCT's Research Contracts Office drives this; Wits excels in quantum via partnerships. Philanthropy grows—e.g., Oppenheimer Trust—but trails Ivy League.

International aid: Mastercard Foundation, Ford Foundation target equity. 2026 SETA levies (R31 billion) fund skills via unis/TVETs.

Infrastructure and Capital Funding

Earmarked Infrastructure Efficiency Grants (IEG, R1.5 billion 2026) prioritize HDIs, new unis. Underspending triggers cuts; quarterly audits enforce. New Ekurhuleni University gets R240 million, Hammanskraal R160 million.

Persistent Challenges: Deficits and Equity Gaps

Despite nominal rises (university subsidies R47bn 2025/26 to R49bn 2026/27), real per-student funding falls. 26 unis report deficits; UCT projects R85 million gap. NSFAS owes billions, delaying salaries. Enrollment boom (59.7% since 2002) strains resources; protests loom.

Equity: HDIs underfunded historically; formula aids, but outputs lag. Solutions: Efficiency plans, debt recovery, third-stream growth.

2026 Budget Highlights and Reforms

Budget 2026 allocates R50.5 billion universities, R54.3 billion NSFAS (up 5%). DHET total R121.6 billion. Reforms: NSFAS sustainability review, NATED phase-out for TVETs, War Room for issues.

Minister Manamela targets 235,000 first-year uni spaces; governance stabilized.

Case Studies: UCT and Wits Navigate Pressures

UCT 2026: Subsidy 39.7% (R1.991bn), staffing 68.5% costs. Sustainability plan: digitalization, procurement savings. Wits leads NRF ratings, quantum funding.

HDIs like Fort Hare face deeper crises; SAMRC rescue grants aid US cuts.

Towards Sustainable Funding: Solutions and Outlook

Proposed: Income-contingent loans, public-private partnerships, efficiency audits. Global models (Australia's demand-driven) inspire. With 856,000 matriculants 2026, balanced growth vital.

Stakeholders urge Treasury boosts; unis diversify amid fiscal constraints. Future: Tech-enabled delivery, industry ties for resilience.

Funding shapes SA's knowledge economy—equitable, innovative models ensure all access higher ed.

Photo by K. Mitch Hodge on Unsplash