By Mari Booysen, Senior development manager, Massey University Foundation, New Zealand
It’s no secret that universities worldwide are grappling with ongoing challenges, compounded by the disruptions brought about by Covid-19. Attracting traditional sources of income has become increasingly tough. These sources, often categorised into various streams, include government funding, student tuition and fees (both local and international), research grants and contracts, philanthropy, investment income, commercialisation and technology transfer, and short courses.
While each country faces its own challenges, universities universally are dealing with a combination of lower student enrolments and retention, student dissatisfaction, lower levels of staff retention, issues of access and equity, increasing student debt, rising costs, and the ongoing need to embrace digital innovation and continuous transformation.
The South African context
In South Africa, universities rely on several traditional income sources, including government subsidies through block grants and earmarked funds, tuition fees, and third-stream income from gifts and donations, industry partnerships, contract research, consulting services, and short learning programmes. It’s clear that depending on a single revenue source is not sustainable Universities need to innovate their operating models and develop growth strategies to stay relevant and attractive without compromising excellence and quality. This balancing act demands considerable foresight.
Given dwindling government grants, the increasing demand for the National Student Financial Aid Scheme to support low-income students, the need to maintain acceptable throughput rates, the push for afordable education, and the rising cost of living, it’s urgent for universities to diversify their income streams and increase third-stream income. However, raising sufficient third-stream income to bridge the revenue gap requires significant investment. This brings us to the question: “Diversification and specialisation – at what cost?”
Philanthropy plays a critical role in this diversification. In South Africa, the legacy of apartheid drives philanthropy, with a strong focus on social justice and tackling inequalities. Corporate giving, often guided by Broad-Based Black Economic Empowerment (B-BBEE) policies, alongside personal contributions inspired by ubuntu (humanity towards others), aims for long-term, transformative change, particularly in education and poverty alleviation. This cultural context the way universities approach fundraising and
engagement with potential donors.
Investment and innovation
To generate more research income, a university must have highly rated faculty, state-of-the-art facilities, and notable global partnerships. Increasing funding from commercialisation activities requires transformational innovation and expertise. Maintaining a robust fundraising operation to attract philanthropic gifts and donations demands specialised skills and financial resources. Additionally, investing in an engaged alumni programme to drive gains requires considerable effort and resources.
In terms of the impact and usage of philanthropic funds, in New Zealand, these funds are often used to enhance the quality of education and research. This includes funding scholarships, research chairs, and specific projects that align with the donors’ interests. There is also a focus on infrastructure, with donations directed towards the construction of new facilities and modernisation of campuses.
South African universities, on the other hand, use philanthropic funds to address more immediate social needs alongside academic advancement. These funds are crucial for providing scholarships to disadvantaged students, supporting research in critical areas like public health, and contributing to projects that aim to reduce inequality and promote social justice. The impact of these donations is often felt directly in the communities served by the universities, making philanthropy an essential part of their mission.
The importance of fundraising and alumni relations within the context of third-stream income cannot be overstated. If a university today still does not invest in fundraising and alumni relations, whether centralised or decentralised, it needs to develop such a programme. Fundraising and alumni relations are crucial not only for financial gain, but also for the valuable networks and advocacy roles that position their alma mater at the forefront of students’ choices.
New Zealand perspectives
Similarly, New Zealand’s philanthropic landscape is shaped by its unique cultural values. Maori values like manaakitanga, which emphasises kindness, respect and generosity, and whanaungatanga, which highlights the importance of community and relationships, guide a community-focused approach to philanthropy. This includes a strong emphasis on cultural preservation, environmental conservation, and the wellbeing of Maori and Pacific Islander communities. Such values are central to how New Zealand universities engage with donors and secure funding, particularly for initiatives tied to environmental care and community development.
I can share some differences and similarities between the South African and New Zealand fundraising landscapes. New Zealand has eight public universities all ranked in the top 3% (600) universities in the world, which generated a consolidated income of over NZD$4 billion in 2023, equating to approximately R44 billion. In contrast, South Africa’s 26 universities generated over R500 billion for the economy in 2018.
Income streams in both countries are similar. In New Zealand, 42% of universities’ income comes from government tuition grants, 8% from Performance Based Research Funds (PBRF), and the remaining from the recently renamed Delivery and Qualification (DQ) funding. Student fees account for 28%, while the remaining 30% is generated through research, philanthropy, commercialisation, and other income. This breakdown varies for South African universities due to historical factors.
Fundraising income streams are also similar, with key sources including private philanthropy (family trusts and foundations, bequests, and individual giving), government entities, corporate donations, community trusts, and a few statutory trusts. All eight universities in New Zealand have separate charitable trusts registered with the New Zealand Charity Commission governed by independent boards of trustees. An attractive 33% of any donation can be claimed back from New Zealand Inland Revenue Services, though
this is not a key driver for philanthropy in the country.
The recent 2023 CASE Insights on Philanthropy in Australian and New Zealand Universities survey reveals that trusts and foundations are still the primary sources of funding for Non-Go8 institutions, making up 51.2% of the total. This category often includes private and family foundations, which reflect the philanthropic efforts of individual donors who have been “soft credited.”(Recognising other constituents for the same gift). Alumni and individual giving combined rank as the second-largest source of income at 25.7%, followed by contributions from corporations (13.2%) and other organisations (9.9%).
For Non-Go8 universities, 51% of committed funding is specifically allocated to research programmes and partnerships, while 26.8% goes towards student and staff bursaries and scholarships. These figures highlight subtle differences in philanthropic trends between New Zealand universities and those in South Africa, where corporate donations play a more significant role and are often directed towards less research-focused initiatives.
Insights for South African universities
For South African universities struggling to raise traditional fundraising income, I want to emphasise the following insights which may prove valuable:
In conclusion, the road ahead for universities may be challenging, but with a thoughtful, strategic approach to fundraising and alumni relations, there is a way forward. Diversifying income streams and investing in specialisation to build strong networks can provide the financial stability needed to continue delivering quality education. Whether in South Africa or New Zealand, understanding and leveraging the cultural and historical contexts that shape philanthropy can help universities build the relationships and secure the funding necessary for their future success. It’s a journey worth undertaking.
Mari Booysen is Senior Development Manager, Massey University Foundation, New Zealand, and the former Director of Advancement at the Tshwane University of Technology in Pretoria. Her background and understanding of both contexts enable her to compare university funding.
This article was first published in the 2024 Inyathelo Annual Report.
