Assessing Financial Sustainability in South African Higher Education: A Comparative Study of Historically Disadvantaged and Advantaged Institutions Through Ratio Analysis

Abstract

South African public universities are expected to fulfil multiple mandates simultaneously: widening access, supporting national development goals, and maintaining financial stability, even as the economy stagnates and public funding remains constrained. This study examines how universities cope financially under such pressure, with a specific focus on the divide between historically disadvantaged institutions (HDIs) and historically advantaged institutions (HAIs). While much has been written about access, equity, and the politics of higher education funding, less attention has been directed at comparing the financial positions of these two groups using standardised, longitudinal financial data. This study addresses that gap by assessing financial sustainability through ratio analysis over a five-year period (2019–2023), interpreted through the lens of Resource Dependence Theory (RDT). The study adopted a quantitative, longitudinal approach. Audited financial statements for 2019 to 2023 were collected from four public universities (two HDIs and two HAIs), with institutional identities anonymised. From those statements, standard financial ratios covering liquidity, solvency, efficiency, and profitability were calculated. These ratios were then compared across institutional types and over time, with RDT providing a theoretical framework for interpreting the patterns of financial dependence and vulnerability that emerged. Overall, the results point to a consistent difference between the two groups. The HDIs exhibited weaker liquidity, higher leverage, and less ability to generate surpluses that could be used for reinvestment patterns that link closely to ongoing dependence on state subsidies and student financial aid. The HAIs, by contrast, demonstrated stronger balance sheets and more diversified income, although their indicators also declined over the period. The COVID-19 pandemic intensified these disparities, particularly where institutions lacked reserves or flexible revenue sources. The study concludes that improving financial sustainability requires action at two levels. Universities need to strengthen financial governance and reduce over-reliance on a narrow set of income sources where possible. However, policy-level reform is also necessary, because historical resource imbalances still shape present-day financial outcomes. Without targeted interventions including revised funding formulas, infrastructure support, and capacity-building for income diversification the financial gap between HDIs and HAIs is likely to persist and potentially widen.