The role of funding composition on efficiency in public universities in South Africa

Nkohla, Tumi Vuyolwethu https://orcid.org/0000-0003-2426-9509

Title: The role of funding composition on efficiency in public universities in South Africa
Creator: Nkohla, Tumi Vuyolwethu https://orcid.org/0000-0003-2426-9509
Subject: Education, Higher -- Finance
Date Issued: 2020-08
Date: 2020-08
Type: Doctoral theses
Type: text
Identifier: http://hdl.handle.net/10353/20373
Identifier: vital:45659
Description: Studies on the relationship between funding and efficiency of public universities in South Africa were triggered mainly by the decline of government spending on public universities while the enrolment of financially needy students is increasing. This increase is a product of government’s initiatives to redress the imbalances in access and success caused by the apartheid regime. However, the government seems to be grappling to strike a balance between its initiatives and funding. While the government’s HE transformation initiatives are appreciated, public universities are caught in a dilemma: their revenue is no longer sufficient for the operations given the increase in the number of unfunded and financially constrained students. It is with this background that the study evaluates the efficiency of public South African universities for the period 2009–2016 and how funding composition affects their efficiency. The study contributes to the existing literature in various ways First, a recent study on this subject matter found a decline in the average technical efficiency (TE) score of the South African public universities from 83percent in 2009 to 78percent in 2013. However, the study did not include non-academic staff among other input variables that are assumed to potentially influence performance outcomes of the universities. We therefore developed an argument that a biased conclusion on the subject matter is likely, if academic staff are assumed to dominate efficiency of public universities in South Africa while the efforts of non-academic staff are not considered. Using a Data Envelopment Analysis (DEA) model, the findings of this study revealed that over the study period the average TE of public universities in South Africa increased from 91percent to 95percent. These results suggest that academic and non-academic staff can be deemed as mutually inclusive variables and therefore neglecting either of them can lead to biased estimated average TE scores. The efficiency levels provided in this study can be used as performance benchmarks for identifying potential improvements required to reach a satisfactory level of efficiency. Second, the literature argues that different streams of revenue utilised for funding universities’ activities can provide alternative incentives which might have an impact on efficiency. However, none of the studies examined comparatively the impact of different revenue streams on the efficiency of the public universities in South Africa. Using a fixed-effects regression model, this study found that only traditional universities’ efficiency can be affected by student fees and private income, while government funding does not seem to bear a significant impact on the efficiency of all universities irrespective of their category. Precisely, student fees enhance the efficiency of traditional universities while private income is deleterious on the efficiency of the traditional universities. The study concluded that traditional universities use students’ fees efficiently to deliver quality academic services in a bid to safeguard their reputation and image while revenue from private funders is not efficiently utilised due to the principal-agent problem. In terms of state funding, it was concluded that government spending on public universities is yet to reach a minimum threshold level at which it can contribute significantly to the efficiency of the universities. Third, recent literature used Stochastic Frontier Analysis (SFA) efficiency scores to determine the drivers of efficiency of public universities in South Africa. Although SFA can control for the stochastic error component in the econometric estimation, the model imposes several theoretical assumptions in the production function which may lead to biased estimations. As a result, several studies on efficiency analysis of Higher Education Institutions (HIEs) around the globe have reverted to using DEA. Using DEA efficiency scores and a Tobit model, this study found that that quality of staff, government funding, student fees, private income, and GDP per capita are positive factors of efficiency while the share of non-white to white staff was found as the determinant of inefficiency. It was concluded that adequate funding and proper management of income by the universities, economic growth and employment of highly educated academic staff can increase efficiency levels of public universities in South Africa, whereas an increase of non-white to white staff in South African public universities is a threat to the universities’ efficiency. Overall, the findings of this study suggest that a cost-sharing framework is inevitable in the South African higher education (HE) system, particularly now that the government is heavily burdened due to the prevailing economic turmoil in the country. As a results, private funders and parents and/guardians are encouraged to honour their portion of obligations with universities. Due to limited funding across all sources, efforts dedicated to strengthen managerial competencies of public universities in South Africa can eliminate the principle-agent problem and therefore promote managerial efficiency. The South African government is encouraged to support its transformation initiatives on HEIs with adequate funding, otherwise the initiatives need to be revisited and revised to suit the current economic environment. Revision of these initiatives may include adjustment of the education standards such that state funding can be allocated to deserving students in terms of both finances and students’ performance starting from matric.
Description: Thesis (PhD) -- Faculty of Management and Commerce, 2020
Format: computer
Format: online resource
Format: application/pdf
Format: 1 online resource (186 pages)
Format: pdf
Publisher: University of Fort Hare
Publisher: Faculty of Management and Commerce
Language: English
Rights: University of Fort Hare
Rights: All Rights Reserved
Rights: Open Access

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