Abstract
Education increases a person’s skills and competencies, thereby improving their efficiency and earning capacity while delivering economic benefits for both the country and society. For this reason, many developing countries including those in sub-Saharan Africa have increased their government expenditure on education. Research suggests that government expenditure can have a positive impact in various aspects, including economic growth, educational quality, graduate employment and access to higher education. However, a critical question remains: Does increased expenditure lead to improved student performance? The main objective of the study was to determine the effect of government expenditure on higher education, focusing on how it affects student performance. Student performance was operationalised as graduate outcomes, measured by the annual number of students graduating from public higher education institutions in South Africa between 1991 and 2021. Using secondary data from the Department of Higher Education and Training (DHET), the Department of Basic Education (DBE) and the World Bank, a multiple linear regression model with ARMA (1,2) was applied. The findings revealed a complex relationship: While government expenditure across all levels of education has a greater impact on student performance in higher education, there is a negative relationship between tertiary expenditure and graduate outcomes. These mixed results complicate the assumptions of human capital theory, which predicts positive returns from investment in human capital development, and are better explained through general systems theory, which views expenditure as an input that must be effectively converted, through institutional processes, into outputs.
Contribution: The study contributes to debates on education funding by demonstrating that expenditure does not yield improved outcomes and recommends that future policy focus on optimising resource use, targeting support to the most vulnerable students and strengthening monitoring systems.
Keywords: government expenditure; higher education; South Africa; student enrolment; student performance.
Introduction
This study aims to explore the impact of increased government expenditure on student performance. Government spending plays a critical role in shaping the quality and outcomes of higher education systems, particularly in developing contexts such as South Africa (Bawa & Pouris 2023; Sejake 2021). According to Becker (1964), education improves people’s skills and competencies and, in so doing, increases their earning capacity and productivity. Education is perceived to enhance national economic growth and individual development (Psacharopoulos & Patrinos 2018; Rahman 2023; Rani & Zaman 2018), foster the growth of an informed and engaged citizenry, advance knowledge to support progress, promote social justice and drive meaningful societal change (Khuluvhe & Netshifhefhe 2022; Mabizela & Mthembu 2025). Higher education institutions (HEIs) are central to this process, as they develop the human capital required to foster resourcefulness, economic growth and social welfare (Bawa & Pouris 2023; Psacharopoulos & Patrinos 2018; Sparks 2011). International frameworks, including Sustainable Development Goal 4 of the United Nations’ (UN) 2030 Agenda (UN 2015, as cited by Muzekenyi et al. 2023), emphasise the importance of providing inclusive, high-quality education and promoting lifelong learning opportunities for all.
Despite these global commitments, many developing nations, including South Africa, face challenges in adequately funding education because of underperforming economies, which are marked by sluggish growth and significant disparities in both income and educational achievement (Sejake 2021). Sub-Saharan African governments, on average, allocate around 5% of their Gross Domestic Product (GDP) to education, aligning with the Education 2030 Framework for Action (UNESCO 2015), with South Africa allocating approximately 6.5%, as of 2023 – placing it among the highest spenders globally, relative to GDP (World Bank 2025). This investment spans basic, secondary and tertiary education, with growing emphasis on equity and redress. Yet concerns remain about whether such substantial spending translates into measurable improvements in higher education outcomes.
Currently, there is an increasing requirement to account for the government’s expenditure in the higher education budget (National Student Financial Aid Scheme [NSFAS] 2019), with questions remaining about the efficiency and impact of this spending on actual student performance.
Is the assumption that increased government expenditure on higher education leads to improved student performance accurate? Or is the realised student performance in education a more complex phenomenon that depends on how these resources are allocated and utilised? These are the questions that this research study sought to explore in evaluating whether increased government expenditure leads to improved student performance. The next sections discuss the literature review, the methodology adopted, the results, the discussion and the conclusion of the study.
Literature review
This section presents a literature review on the higher education funding landscape in South Africa, student performance, the impact of government spending on student performance and challenges in the funding–performance nexus. The theoretical framework underpinning this study is also presented (Figure 1).
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FIGURE 1: Theoretical framework assessing government expenditure and student performance. |
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Higher education funding landscape in South Africa
Historically, South African HEIs have relied significantly on government funding, student fees and third-stream income (Universities South Africa 2016; Wangenge-Ouma & Cloete 2008). The funding of higher education in this country remains a critical and evolving issue, shaped by socioeconomic challenges, policy reforms and increasing demands for access to tertiary education (Ayuk & Koma 2019). Over the past decade, the sector has undergone significant transformation, particularly following the #FeesMustFall movement, which catalysed national debates on the affordability and accessibility of higher education. Since the implementation of the National Development Plan (NDP) 2030 (Department of Higher Education and Training [DHET] 2020), there has been a strategic focus on improving student throughput and success rates, partly through increased public investment. The expansion of funding under schemes such as the NSFAS aims to reduce dropout rates and promote equitable access.
The South African government remains the primary funder of public universities, through block grants and earmarked funding (DHET 2023). However, the adequacy of this funding has been called into question, especially in light of increasing enrolment numbers and inflationary pressures (Cloete 2024; Webster & Green 2024). In its 2024/2025 reports, the Council on Higher Education (CHE) highlights that while government subsidies have increased nominally, they have not kept pace with the real costs of delivering quality education. Despite its expansion, NSFAS has faced administrative and financial sustainability challenges, prompting calls for a more integrated and efficient funding mechanism (Rammbuda 2023). Similar concerns extend to the National Research Foundation (NRF), in collaboration with the Department of Science and Innovation (DSI), which introduced a tiered funding model that targets financial need and academic merit (NRF 2024).
These policy shifts underscore the South African government’s commitment to widening access and supporting student participation; however, the key challenge remains whether such investments are successfully converted into improved student performance. While funding reforms have expanded access, limited empirical evidence exists on whether these investments translate into higher graduation rates and successful completions. This creates a critical gap in understanding the effectiveness of government expenditure in shaping graduate outcomes at the system level.
Student performance
Student performance is widely referred to as the measurable outcomes of students’ academic activities, which are typically assessed through grades, standardised tests, course completion and other academic achievements (Kumar, Agarwal & Agarwal 2021). Factors influencing student performance include teaching and learning resources, instructional quality and the academic learning environment (Organization for Economic and Cultural Development [OECD] 2018). However, definitions vary considerably across studies, complicating consensus and limiting comparability. In this study, student performance is operationalised as graduate outcomes, measured by the number of students completing degrees annually at public higher education institutions in South Africa.
Student performance is shaped by a combination of individual, institutional and socioeconomic factors. Socioeconomic background also plays a significant role, with students from disadvantaged backgrounds often facing challenges that can hinder their academic progress (DesJardins & McCall 2014). To address these challenges, equitable access to resources and support services is essential (Elliott & Lewis 2015). Despite policy interventions to address inequality, systemic challenges such as language barriers, financial constraints and digital divides continue to hinder equitable student success (Chiramba & Ndofirepi 2023).
Although theoretical frameworks such as Bloom’s Taxonomy (ed. Bloom 1956) and Tinto’s Model of Student Retention (Tinto 1975) have long guided understandings of academic performance, they do not directly address the funding and performance relationship. Moreover, human capital theory (Becker 1964) has reinforced the value of student achievement in contributing to national economic growth, particularly in developing contexts such as South Africa. However, the extent to which government expenditure translates into higher graduate outcomes in South Africa remains underexplored. This underscores the need for empirical analysis of the funding–performance nexus at the national level.
Impact of government spending on student performance
Government spending on education is widely recognised as a critical driver of student performance and broader socioeconomic development (Institute for Policy Research 2017; Runde, Bandura & McLean 2023). In South Africa, the relationship between public investment in education and student outcomes has been the subject of extensive research, particularly in the context of post-apartheid reforms and persistent inequality (Kohler 2025; Rammbuda 2023). The effectiveness of public expenditure also depends on institutional governance and the equitable allocation of resources (Public Admin Institute 2023). Universities with financial sustainability tend to deploy government funds more effectively to fulfil their mission, goals and objectives, thereby enhancing learning environments and academic outcomes (Khumalo & Schutte 2025). A study by Wildschut, Megbowon and Miselo (2020), analysing data from two South African universities, found a moderately positive and statistically significant relationship between NSFAS funding and student academic performance. Students who received financial support tended to achieve higher average scores, which suggests that financial relief may reduce stress and improve focus on academic work (Wildschut et al. 2020). Similarly, Kohler (2025) found that increased educational attainment, supported by public funding, leads to improved labour market outcomes, particularly for lower-income groups. This suggests that government expenditure on education not only enhances academic performance but also contributes to long-term socioeconomic mobility.
Notwithstanding the preceding arguments, the relationship between government expenditure on higher education and student performance is complex rather than straightforward. Studies reveal mixed results: in some contexts, additional funding improves student outcomes, while in others, inefficiencies and allocation issues weaken the effect (Curs, Bhandari & Steiger 2011; Marginson 2019; Orduz 2022).
Challenges in the funding–performance nexus
Despite sustained government expenditure, South Africa continues to face challenges in translating educational investment into consistent academic success. Disparities persist in student performance across institutions. Research by Wangenge-Ouma and Cloete (2022) highlights inefficiencies in funding mechanisms and a mismatch between expenditure and educational outcomes. The CHE and other policy bodies have called for more performance-based funding models and improved accountability mechanisms to ensure that spending leads to measurable improvements in student outcomes (Kohler 2025). Recent scholarship advocates for performance-based funding models that incentivise institutions to prioritise student success metrics such as graduation rates and employment outcomes (CHE 2024). However, the urge to adopt performance metrics also raises concerns about equity, as historically disadvantaged institutions may struggle to compete with these metrics. Rural-based and historically disadvantaged institutions still struggle with infrastructural deficits, and this has a negative impact on student engagement and achievement (Wangenge-Ouma & Cloete 2022). This underlines the need for integrated funding strategies that align financial aid with holistic student development.
These challenges highlight the central problem in the funding–performance nexus: investment alone does not guarantee improved outcomes. Structural constraints, governance inefficiencies and inequitable capacity across institutions can dilute the effectiveness of expenditure. This makes it essential to empirically assess whether increased government spending leads to improved graduate outcomes.
Theoretical framework
This study is underpinned by human capital theory, formalised by Becker (1964), a Nobel Prize-winning economist, and the general system theory (Von Bertalanffy 1968), which together provide a comprehensive perspective through which to assess the relationship between government expenditure and student performance.
Human capital theory conceptualises education as an investment that enhances individual productivity and income-generating potential (Oketch, 2014). According to Becker (1964), education increases a worker’s skills and competencies, thereby improving their efficiency and earning capacity. This theoretical framework laid the foundation for economic models that link educational attainment to labour market outcomes (Becker, 1964; Psacharopoulos & Patrinos 2018). The core principles of the theory rest on several assumptions (Becker 1964; Olaniyan & Okemakinde 2008):
- Education is an investment in human capital, much like investing in physical capital.
- Individuals and society incur tuition, time and opportunity costs and expect returns (higher earnings, increased productivity).
- The rate of return to education can be calculated similarly to financial investments, enabling cost-benefit analyses of educational policies.
However, while human capital theory is focused on individual productivity and income-generating potential, it does not fully explain or translate government expenditure into student performance. The biologist Von Bertalanffy, in 1968, developed the general systems theory to understand how systems conceptualise organisations as an open system that converts inputs into outputs through interconnected processes. General system theory has been widely applied in multidisciplinary fields as it was developed, including in educational research. For example, Mania-Singer (2017) employed a systems theory approach to conceptualise the role of district central offices as systems within broader systems of education, showing how leadership and resource flows influence school-level improvement. Similarly, Adams and Lanford (2021) applied open systems theory to higher education, illustrating how universities interact dynamically with external environments such as funding agencies and international partners to shape institutional practices and outcomes.
In the African context, Mwambi (2020) applied general systems to education, emphasising that higher education institutions function as systems where human and physical resources, policies and processes interact to produce learning outcomes. Thus, suggesting that higher education institutions are open systems in which inputs such as funding, infrastructure and student enrolment are converted through processes including teaching, learning and institutional practices, into outputs, student performance, graduation rates and skills development.
The following hypotheses were formulated for this study:
- Null hypothesis: Increased government expenditure on education has no positive effect on student performance in higher education institutions.
- Alternative hypothesis: Increased government expenditure on education has a positive effect on student performance in higher education institutions.
Research methods and design
The study, which was quantitative in nature, employed a multiple regression analysis to examine the relationship between government expenditure and the performance of students in HEIs in South Africa. Regression analysis allows for control over various factors that may influence student performance, thereby providing a more nuanced understanding of the impact of government expenditure (Gujarati 2004; Marill 2004). This statistical method enables the identification and isolation of key variables. Consequently, regression models offer valuable insights for policymakers seeking to allocate resources more efficiently and design evidence-based interventions (Hoxby 2000; Psacharopoulos & Patrinos 2018). Recent studies underscore the utility of multivariate regression analyses in evaluating educational funding effectiveness, particularly in the context of post-pandemic recovery and digital learning disparities (UNESCO 2022; Van Broekhuizen & Van der Berg 2021).
Variables
The analysis incorporates a range of variables to capture the complexity of the relationship between government expenditure and student performance in higher education.
The dependent variable, student performance, was operationalised as graduate outcomes, measured by the total number of students who graduated annually from public HEIs in South Africa between 1991 and 2021. This operationalisation captures system output over time, though it is recognised that student performance can also imply other measures such as exam marks or throughput rates. While this measure was useful in determining the general overview of student output, it is important to acknowledge its limitations. Factors such as changes in enrolment and the time required to complete degree programmes and meet academic standards can influence the number of graduates, without necessarily reflecting changes in student performance. To mitigate this concern, student enrolment figures were included in the model as a control variable, ensuring that increases in graduate numbers could be distinguished from system expansion effects. Thus, it afforded a more limited view of the progress and accomplishment of students and perhaps did not encompass the learning process in HEIs to the extent it could; a more detailed measure of student performance, such as graduation rates or time-to-degree, would provide a more comprehensive understanding of student outcomes. However, obtaining such detailed data can be challenging
The independent variable includes government expenditure on tertiary education as a percentage of GDP, representing the proportion of GDP allocated to higher education. While government expenditure as a percentage of GDP is widely used in education finance research (Psacharopoulos & Patrinos 2018; World Bank 2025), we acknowledge that per-student public expenditure may provide a more accurate measure of the resources available to individual students. Future research should incorporate this variable to provide direct insights. Government expenditure on tertiary education as a percentage of GDP variable indicates the level of financial resources allocated to higher education institutions in South Africa. Control variables include government expenditure on education as a percentage of GDP, GDP growth, inflation rate, lending interest rate, employment-to-population ratio, student enrolment in higher education and matric pass rate. The data for this study were extracted from three reputable and comprehensive sources for the period 1991–2021 (see Table 1).
Data reliability, validity and estimation methods
In this study, secondary data were obtained from reputable sources, including DHET, the World Bank and the Department of Basic Education (DBE), as highlighted in Table 1. To ensure data quality, several measures were implemented. Data-cleaning techniques, such as outlier detection, were employed to address missing values and inconsistencies. In addition, cross-referencing and statistical checks were conducted to verify the accuracy of the data.
While these sources are generally reliable, it is important to acknowledge potential limitations. For instance, data on government expenditure may not always be consistently reported. To mitigate this, the researchers focused on data sources that are considered reliable and representative. By triangulating data from multiple sources and implementing thorough data-cleaning and validation procedures, the researchers aimed to enhance the reliability and validity of the findings.
To assess the relationship between government expenditure and student performance, a multiple linear regression model was employed through ordinary least squares (OLS) – a common statistical technique in social science research (Gujarati 2004), which is appropriate for testing linear relationships between variables. This approach, as outlined by Rajkumar and Swaroop (2008), allows for the control of various compounding factors such as socioeconomic status and institutional characteristics (Hoxby 2000). However, given the time-series nature of the data (1991–2021), diagnostic tests were performed to assess key assumptions. The Breusch–Pagan test confirmed the absence of heteroscedasticity, while the Augmented Dickey–Fuller test confirmed stationarity. The Durbin–Watson statistic revealed autocorrelation, which was further addressed by applying an autoregressive moving average (ARMA [1,2]) model. This ensured that temporal dependencies and serial correlation were accounted for, enhancing the robustness of results.
Validity was reinforced by including a broad set of control variables (GDP growth, inflation, employment-to-population ratio, lending interest rate, enrolments and matric pass rate), thereby reducing omitted variable bias. Reliability was strengthened by the use of official longitudinal datasets covering three decades, which provide consistent and comparable measures over time.
Ethical considerations
Ethical clearance exemption to conduct this study was obtained from the Stellenbosch University Research Ethics Committee at Stellenbosch University (No. 28199).
Results
Descriptive statistics
Table 2 presents the summary statistics of the variables in this study, which encompass student performance, government expenditure on higher education, overall government expenditure on education, real GDP growth rate, inflation rate, lending interest rate, employment-to-population ratio, enrolment ratio in higher education and matriculation pass rate.
| TABLE 2: Descriptive statistics of key variables (1991–2021). |
Table 2 shows steady increases in graduate numbers and enrolments, alongside relatively stable government expenditure as a share of GDP.
Student performance, as measured by the total number of graduates, displays a range from 62 511 to 237 882, with a standard deviation of 54 497.01. Student enrolment increased from 430 000 to 1 094 808 between 1991 and 2021, indicating disparities across different years. Nonetheless, both student enrolment and performance improved gradually, showing steady expansion of the higher education system. While this growth reflects improved access, the slower pace of student performance growth relative to student enrolments points to a persistent throughput challenge.
Government expenditure on higher education and overall government expenditure on education show constrained ranges, indicating stable investment levels over the period analysed (see Figure 2). This suggests that funding was not volatile, yet the moderate gains in graduate output imply that the system may not have fully translated financial inputs into stronger performance outcomes.
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FIGURE 2: Student performance and government expenditure, South Africa (1991–2021). Investment levels remained stable, and student performance (graduate numbers) showed gradual growth. |
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The growth rate of South African GDP has remained volatile over the past few years and was at its lowest point at −6.3% to a maximum of 6%, with Southern African economies experiencing fluctuations in the numbers because of a series of considerations such as economic and trade shocks and economic rebounds. These fluctuations reflect macroeconomic instability, which may indirectly affect higher education by constraining state resources and influencing student affordability. During the same period, the lending interest rates fluctuated greatly, ranging between 7% and 22%; this affected government expenditure and may have served as a constraint on students attending HEIs. High borrowing costs may have limited access to financial support for students, potentially constraining participation and completion rates.
Finally, the considerable fluctuation in student enrolment figures indicates differing levels of educational demand during various intervals, as highlighted in Figure 3. In this figure, ‘population’ refers to the total South African population reported by the World Bank. It is included to provide context on how enrolments and performance trends relate to broader demographic changes over time. The matric pass rate showed an upward trend in the long run. It can indicate better pre-university education that might have a positive effect on students accessing higher education, which could explain student enrolment growth but not necessarily improvements in completion efficiency.
Inferential statistics
In testing the assumption, which focused on the effect of government expenditure on student performance, the initial tests revealed that only government expenditure on tertiary institutions and overall government expenditure on education had statistically significant relationships with students’ performance. The other independent variables, such as GDP growth rate, inflation rate, lending interest rate, employment-to-population ratio, student enrolment and matric pass rate, did not significantly predict the level of student performance (F[8,16] = 38.299; p < 0.05). This suggests that although macroeconomic and educational indicators shape the broader higher education environment, they do not directly explain variations in graduate outcomes once government expenditure is considered.
By employing the Augmented Dickey–Fuller (ADF) test, it was found that the data possessed non-stationarity; hence, some of them may tend to change over time. This was important in the modification of the model and was done to contain these temporal dependencies. The Breusch–Pagan test confirmed that the variance of errors in the introduced regression model was constant, thus providing reliability to the results obtained.
To refine the model, an ARMA (1,2) model was incorporated to address the serial correlation found in the residuals. The findings revealed that government expenditure on tertiary education and on education in general, which had significant positive coefficients, directly affected student performance when controlling for the presented autocorrelative impacts. Specifically, the AR1 coefficient (0.99; p < 0.01) reflected a positive autocorrelation; the MA1 of −1.06; p < 0.01 and MA2 of 1.00 outlined that current residuals depended on previous residuals and/or affected students’ performance outcomes in complex ways.
Using the regression model for the selected variables, the R-squared value of 0.29 (see Table 3) reveals that 29% of the variation in student performance was accounted for by the model, implying that other unobserved variables may also have played a role in explaining graduate outcomes. This highlights the complexity of the funding–performance relationship and suggests that investment alone is insufficient to account for changes in student performance.
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FIGURE 3: Relationship between student performance, enrolments and total national population of South Africa (1991–2021). |
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| TABLE 3: Regression results of government expenditure and student performance (1991–2021). |
Lag effects matter: The strong autoregressive (AR) and moving average (MA) components indicated that both past performance and past shocks significantly influenced current student performance (AR1 coefficient = 0.99, p < 0.01; MA1 = –1.06, p < 0.01; MA2 = 1.00). This highlights the path-dependent nature of student performance, where past patterns of success and disruption strongly shape present results.
Contrasting spending effects: Tertiary education expenditure had a negative and significant effect on student performance (b = −38 646.78, p = 0.03). This could indicate that tertiary-level spending may not be directly translating into improved student outcomes – possibly because of inefficiencies, delayed effects or targeting issues. Overall education expenditure had a positive and highly significant effect (b = 13 901.96, p < 0.01), suggesting that general investment across the education sector more directly benefited student performance. These results appear inconsistent with the predictions of human capital theory (Becker 1964), which posits that higher investment in education should yield improved performance and returns. However, the findings may reflect inefficiencies, misallocation or delayed effects of tertiary-level expenditure. By contrast, investment across the entire education system appears to strengthen foundational skills, better preparing students for success at the tertiary level.
Overall, these findings point out a significant theoretical insight: while human capital theory provides a rationale for why educational investment should enhance productivity, the negative relationship observed at the tertiary level suggests that resources are not always effectively converted into outcomes. General systems theory (Von Bertalanffy 1968) helps explain this disconnect by framing higher education as an open system in which inputs (funding) must be transformed through institutional processes into outputs (student performance). Inefficiencies or weaknesses in these processes may disrupt the expected input–output relationship, thereby explaining why higher spending at the tertiary level does not always translate into improved performance.
Discussion
The findings reveal that student enrolment and performance in South African universities have improved gradually from 1991 to 2021. The considerable fluctuation in student enrolment figures indicates differing levels of educational demand during various intervals (see Figure 3). This underscores the significant output of South Africa’s higher education system, reflecting the country’s ongoing efforts to enhance educational attainment and address inequalities and skill shortages in diverse sectors. As Wolhuter (2023) reports, South African higher education has encountered a period of rapid growth, especially since 1994. Bawa and Pouris (2023) state that there are more than one million students at South Africa’s 26 public universities: this signifies a 21% participation rate of 18–24-year-olds and the delivery of over 200 000 graduates annually (Bawa & Pouris 2023).
Government expenditure on higher education and its overall expenditure on education show constrained ranges, indicating stable investment levels over the period analysed (see Figure 2). The 2007–2008 global financial crisis had a notable impact on the South African economy, including employment levels, as nearly a million jobs were lost in 2009 (Rena & Msoni 2014). Khuluvhe and Netshifhefhe (2022) reported that tertiary education spending, as a share of GDP, rose from 0.7% in 2011/12 to 1.3% in 2020/21. During the same period, its share of total government education expenditure grew significantly – by 7.1 percentage points – from 11.9% to 19.0%. Therefore, the significant share of GDP allocated to the education sector highlights its vital role in South Africa’s economy (Muzekenyi et al. 2023). As reported by the National Treasury of the Republic of South Africa (2023), government expenditure on higher education is planned to increase gradually over the foreseeable future. Admittedly, declining funding for public higher education in its entirety has been reported of late (Mabizela & Mthembu 2025; Serfontein 2025).
The growth rate of South Africa’s GDP has remained volatile over the past few years experiencing fluctuations in the numbers because of a series of considerations, such as economic and trade shocks and economic rebounds. These fluctuations are indicative of overall economic trends that may have had an impact on both government expenditure and student performance. For example, according to Statistics South Africa (Stats SA 2022), the country’s economy contracted by −6.3% in 2020, largely because of the coronavirus disease 2019 (COVID-19) pandemic and associated lockdowns. This figure represents the country’s worst annual economic performance in over 90 years. However, this severe contraction was followed by a partial rebound in 2021, with real GDP growth of around 4.9%, as the economy reopened and global demand picked up (Stats SA 2022). During the time frame of this study, lending interest rates fluctuated greatly, ranging between 7 and 22%, which would have affected government expenditure and may have prevented students from pursuing higher education.
The findings of this study indicate an unexpected result that shows a complex relationship between government expenditure in higher education and student performance. Based on the regression results, there is not sufficient evidence to reject the null hypothesis. The results suggest a statistically significant and negative relationship between government expenditure on education and student performance in higher education. The findings are supported by NSFAS (2019), which found that, overall, students tended to perform worse academically – a negative trend that is especially evident among students who receive funding from that entity. Although this analysis was done on male students, it implies that current funding strategies might not be generating the best outcomes and might challenge the efficiency and effectiveness of spending on tertiary education. As Rammbuda (2023) reports, despite substantial government funding, higher education remains marked by persistent inefficiencies and inequalities. The R-squared of 0.29 also suggests that variables other than government expenditure in higher education are affecting or influencing student performance.
In this study, student performance was measured by graduate outcomes, specifically the annual number of graduates from public HEIs. While this provides a useful system-level indicator of output, it does not capture other dimensions of performance, such as exam marks or throughput rate. While the regression model included several macroeconomic and educational controls (such as GDP growth, inflation, employment and matric pass rates), a particular concern was the risk of conflating graduate numbers with system expansion. To address this, student enrolments were included as a critical control variable, ensuring that increases in graduate numbers could be distinguished from growth in intake. This strengthens confidence that the expenditure effects reported reflect changes in performance relative to system size. These economic and educational indicators on student performance may be indirect or affected by other factors not accounted for in this analysis.
This finding implies that the allocation of resources may not be fully aligned with initiatives that have a direct impact on academic success. For example, as reported in Albertus and Makoza (2025), NSFAS has been marred by allegations of mismanagement and corruption, although the organisation asserts that it has made progress in meeting its mandate. Furthermore, concerns over the reliability and long-term viability of NSFAS as a student financial aid system have heightened tensions among key stakeholders in higher education, including universities, government, students and the broader society (Rammbuda 2023). In recent years, inefficiencies in NSFAS administration have led to reports of students lacking access to housing, food and essential study materials (Tshikalange 2025). Accommodation providers have also faced serious financial difficulties because of delayed payments from NSFAS, resulting in students being evicted or forced to live in unsafe environments (Wolhuter 2023). In addition, despite the support provided by NSFAS, many students remain unfunded and may be forced to leave university programmes without completing their studies while simultaneously being burdened with debt (Albertus & Makoza 2025).
The existing literature often highlights that higher education expenditure, particularly in the South African context, does not always target academic support services as effectively as needed. This is supported by research indicating that non-academic expenses or larger institutional costs may reduce the resources allocated for improving direct student outcomes (Fomunyam 2018; Ušpurienė et al. 2017; Wangenge-Ouma & Cloete 2008). The rise in tuition fees beyond inflation has become a global trend, frequently acknowledged by students, governments and scholars, yet the underlying causes have received limited attention (Serfontein 2025). Fomunyam (2018) also notes that resources may not necessarily be properly targeted towards academic support services. Further, the literature confirms that when non-academic costs are incurred, or if institutional costs are higher, they might reduce the amount of funding available to improve student performance (Ušpurienė et al. 2017; Wangenge-Ouma & Cloete 2008).
The findings of this study contradict those of various other studies: Rahman (2023) found that government expenditure on education has a significant and positive effect on primary and tertiary education achievement although there was an insignificant negative effect on secondary education achievement. A study by Orduz (2022), which examined educational spending in Colombia, found that increased per-student expenditure improved standardised test results and the probability of entering higher education. However, the effectiveness of this spending was significantly influenced by the administrative structure, with decentralised municipalities utilising resources more efficiently than centralised ones. Curs et al. (2011) reported that, in the United States, the impact of public higher education expenditure on state economic growth was not uniformly positive. Their findings suggest that, in states with a higher proportion of private HEIs, increased public spending did not correlate with economic growth, highlighting the importance of considering the broader educational ecosystem.
Nevertheless, the importance of investment in higher education should not be underestimated. As Bawa and Pouris (2023) argue, beyond its many intangible benefits, the higher education sector plays a vital role in the economy, making a substantial contribution to national revenue. It should thus be regarded as a strategic investment, rather than merely an expenditure (Bawa & Pouris 2023; Mabizela & Mthembu 2025). In a study by Luthuli (2017), the benefit of investment in education was emphasised, as a positive correlation was found between government expenditure and the development of human capital.
Conclusion
The higher education funding landscape in South Africa is at a crossroads. While significant strides have been made in expanding access, the sustainability and equity of funding mechanisms remain pressing concerns. The analysis revealed a complex relationship between government expenditure on education and student performance in South Africa. Even though increased government expenditure on education is commendable, the findings showed that the existing strategy might not fully leverage its potential. Investments in education, especially at the general level, showed a clearer link to improved outcomes. However, tertiary expenditure may need closer scrutiny to ensure effectiveness and alignment with performance goals. The findings suggest that certain government expenditures may not lead to improvements in student performance; thus, future reforms must balance financial viability with the imperative of inclusive, high-quality education.
These findings complicate the assumptions of human capital theory (Becker 1964), which predicts straightforward positive returns to investment. The South African evidence suggests that inefficiencies, misallocation and structural inequalities can undermine the effectiveness of expenditure. By contrast, general systems theory (Von Bertalanffy 1968) provides a more nuanced explanation, viewing expenditure as an input whose effectiveness depends on institutional processes that transform resources into outcomes. Together, these frameworks highlight that investment is necessary but not sufficient for improving student performance.
The government should research potential strategies by which it can enhance the efficiency of its expenses. Firstly, a critical evaluation of the allocation of financial resources needs to be conducted for funds to be directed to programmes and activities that enhance student performance. Secondly, improving the quality and organisation of education, or the education system at the secondary educational level, will enable learners to acquire the necessary groundwork for being admitted to HEIs. Thus, investment in student support services, faculty development and institutional resources can enhance educational results and student success. If these ideas are applied, policymakers will be able to fashion ways of improving the delivery of higher education in South Africa. While government spending on education in this country has a demonstrable positive impact on student performance, the relationship is mediated by factors such as institutional efficiency, socioeconomic context and the quality of implementation. Future policy should focus on optimising resource use, targeting support for the most vulnerable students and strengthening monitoring systems to ensure that investment translates into academic success.
While the sources used to collect the secondary data for this study are generally reliable, it is important to acknowledge potential limitations. For instance, data on government expenditure may not always be consistently reported. In addition, when this study was conducted, data from 2022 to date were unavailable. Furthermore, the study was limited to universities in South Africa, and the operationalisation of performance as graduate outcomes does not capture other dimensions such as throughput rates, exam results or time-to-degree. Future research should study control variables on the relationship between government expenditure and student performance, such as GDP growth, inflation rate, lending interest rate, employment-to-population ratio, student enrolment and matric pass rate. These economic and educational indicators on student performance may be indirect or affected by other factors not accounted for in this analysis.
Acknowledgements
This article includes content that overlaps with research originally conducted as part of Ms Mitchelleen Daleta Mohlala’s master’s thesis titled ‘Return on education investment: A case of student support in higher education’, submitted to the Faculty of Economic and Management Sciences, Stellenbosch University, in 2023. The thesis was supervised by Prof. Charlene Gerber. Portions of the analysis and discussion have been revised, updated and adapted extensively for journal publication. Prof Charlene Gerber supervised the first author during the formal studies but did not take part in writing and reviewing the manuscript and does not wish to be one of the authors.
Competing interests
The authors declare that they have no financial or personal relationships that may have inappropriately influenced them in writing this article.
CRediT authorship contribution
Mitchelleen D. Mohlala: Conceptualisation, Methodology, Formal analysis, Investigation, Writing – original draft, Visualisation, Project administration, Software, Data curation, Resources, Writing – review & editing. Ronny Shibiti: Writing – review & editing. All authors reviewed the article, contributed to the discussion of results, approved the final version for submission and publication and take responsibility for the integrity of its findings.
Funding information
This research received no specific grant from any funding agency in the public, commercial or not-for-profit sectors.
Data availability
The data that support the findings of this study are available from the corresponding author, Ronny Shibiti upon reasonable request.
Disclaimer
The views and opinions expressed in this article are those of the authors and are the product of professional research. It does not necessarily reflect the official policy or position of any affiliated institution, funder, agency or that of the publisher. The authors are responsible for this article’s results, findings and content.
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