Revenue sourcing for the financial sustainability of a university of technology: an exploratory study

Abstract

South African universities are facing significant financial challenges that threaten their sustainability. Factors such as reduced government funding, unpredictable tuition collection, and the need to generate additional revenue have become major concerns for universities. This study investigates the perceptions of academic and non-academic staff regarding revenue sourcing to enhance financial sustainability at a university of technology. Quantitative data was collected using a questionnaire. The findings show that the university is using a diversified revenue structure and that revenue sourcing is a financial challenge for the university. This implies that the university’s current revenue generation strategies are inadequate. The respondents perceived revenue sourcing as a financial challenge and that relying on a single source of revenue is not financially viable. Low research output was considered a barrier to financial sustainability and improving research output was identified as a means of improving financial sustainability. Respondents agreed that appointing staff members who could attract funding and improvements in the infrastructure of the university would assist in removing barriers to financial sustainability and increase income together with offering short courses. Recommendations suggested by the respondents to increase revenue included the need to diversify revenue sources and that offering new courses and using international collaborations and university segments to establish industrial partnerships would generate additional revenue.

Keywords:

• Financial sustainability
• universities of technology
• income streams
• South Africa

JEL CLASSIFICATION:

• I22 H52
• H27
• H83

Reviewing Editor:

• Anatoly Oleksiyenko, The Education University of Hong Kong Faculty of of Education and Human Development, Hong Kong

Subjects:

• Higher Education Management
• School Leadership
• Management & Administration

1. Introduction

In South Africa, universities' revenue consists of first stream income, second stream income, and third stream income. First stream income (revenue) includes government subsidies and grants, second stream income consists of tuition fees, while third stream income comprises income generated by the university through various business ventures such as commissioned research, donations, service rendering, sales, and investments (Wangenge-Ouma & Carpentier, 2018). Financial sustainability is critical for the growth and development of South African public universities (Wang & Jacob, 2023). While these institutions rely heavily on government funding, unpaid tuition fees have burdened universities with huge debts (Alstete, 2014; Crowther et al., 2018). Universities are now focusing on revenue generation strategies to ensure their financial sustainability (Crowther et al., 2018; Koornhof, 2020; Wadud, 2023).

Wangenge-Ouma and Kupe (2020) highlighted that South African universities have shown that they do not have reliable sources of income that could ensure they remain sustainable should any of their current revenue sources collapse. Furthermore, the declining South African economy has significantly impacted higher education financing (Yende, 2021) and tuition fee increments have made it difficult for the poor to afford higher education (Herbaut & Geven, 2020). The notion that education should be free has strained the university sector (Van Schalkwyk, 2021). Universities are therefore trying to source additional funds to bridge the income gap created by past inequalities and insufficient government support (Naidu, 2021; Yende, 2021). As successful entities or organisations have strategies to ensure adequate resources and strategies for their allocation (Sutton et al., 2021), it is essential for a university to ensure its future sustainability by proactively examining its current and future revenue sources.

Angori et al. (2023) argue that a response to the funding challenges should be to reduce reliance on state funding and expand third stream income. Revenue strategies to expand third stream income could include grants for commissioned research, industrial partnerships, donations, new course offerings, and intellectual property. These funding strategies may provide new funding models for the South African university sector. Ultimately, a combination of these revenue sources may be necessary for the financial sustainability of a university.

The objective of this current study is to explore the opinions of academic and non-academic staff at a university of technology on its revenue sources to enhance financial sustainability by asking the following questions:

1. Is revenue sourcing a financial challenge to the university?

2. What are the barriers to the university's financial sustainability?

3. How does each income stream (first, second, and third) contribute to the university's financial sustainability?

4. What strategies could be adopted to generate revenue?

This paper contributes to the limited research on the financial sustainability of universities of technology. The environment at a university of technology in South Africa is not the same as a traditional university where emphasis is placed on research and postgraduate studies. A university of technology focuses more on vocational studies and only recently has begun to emphasise research and postgraduate studies This study highlights the possible role of university staff members in ensuring the university’s financial sustainability and it assists university stakeholders in understanding the need for revenue sourcing and financial sustainability as the foundation of a sustainable university.

This paper is organised as follows. The next section presents the literature review and includes discussion on the theoretical framework that underpins this study. This is followed by the research methodology. After which, the results are presented and discussed. The paper ends with the conclusions, limitations and suggestions for further research.

2. Literature review

2.1. Theoretical framework

Several theories support revenue generation and financial sustainability. However, for this study, resource dependency theory was selected to guide the investigation.

According to resource dependency theory, the sustainability of an organisation relies on multiple sources, also known as stakeholders (Lewis, 2017). This theory aligns with this research as previous studies have indicated that the financial sustainability of a university depends on multiple sources (Crowther et al., 2018; Wangenge-Ouma & Carpentier, 2018). The government plays a crucial role in financing South African universities, highlighting a significant resource-dependent relationship between the government and these institutions (Naidu, 2021). Similarly, the impact of tuition fees on a university's financial sustainability signifies a dependency relationship between universities and students. Third stream income also establishes a dependency relationship between universities and stakeholders. These dependency-based relationships align with the context of resource dependency theory.

The control and power dynamics in higher education institutions are gradually shifting from government support dependency to the privatisation of power (Daviet, 2016; Githaiga, 2022). As government support for public universities continues to decline, the potential for privatisation and the intervention of the private sector in exerting control over these institutions is increasing (Akomolafe & Aremu, 2016). While the university in this study is explored as an organisation, the government remains the primary influencer of the university education system. Daviet (2016) argues that education is a public necessity, and it is the government's responsibility to ensure adequate funding for the sector. Although government support is decreasing in public universities, it still serves as the central financing tool for these institutions (Ashwin et al., 2018). As public institutions, university control and authority are highly influenced by the government, whose authority supersedes that of the university management. Revenue sourcing and diversification offer a solution to offset declining government subsidies. However, if private stakeholders invest more resources in universities than the government, it may influence and lead to the privatisation of control.

The survival of an organisation is measured by the adequacy of its resources. Public universities rely on a complex relationship among various sources of financing. The government is the primary stakeholder in financing South African public universities, while students and their families are primary but secondary stakeholders. The private sector contributes to university funding through third stream income. This financing structure, where multiple stakeholders contribute to a particular project, is known as a diversified financing structure (Carr, 2019; Githaiga, 2022). All these stakeholders in universities are interdependent, highlighting a dependency relationship among them, which is outlined by resource dependency theory (Delke, 2015).

This underlines the diverse interests of various parties in financing public universities and demonstrates the organisations' dependency on resource transfers. To achieve financial sustainability, universities must acquire resources from different sources and depend on collaboration with other organisations. Therefore, resource dependency theory can explain the context of this research regarding the sourcing of revenue for a university of technology's financial sustainability.

2.2. Revenue sources

Universities are facing tough competition in retaining and maintaining their revenue sources (Saraite-Sariene et al., 2020). Higher education institutions still rely heavily on government support and tuition income (Wangenge-Ouma & Carpentier, 2018). This means that universities often face operational and financial uncertainties due to decisions made by the government (Universities South Africa [USAF], 2017). The interventions made by the government in response to the students' demands for free education in 2015/16 left universities burdened with financial challenges. Despite efforts to collect student debts, institutions still face challenges due to past imbalances and student poverty, often ending their financial years with significant amounts of uncollected debts (Pells, 2017).

To address the issue of revenue sources, diversification into other income streams has been identified as a solution, as a single source of income is not entirely reliable (Githaiga, 2022; Oketch, 2016). However, reliance on third stream income also increases universities' dependency on the private sector (Compagnucci & Spigarelli, 2020; Wadud, 2023). Although South African universities are cautious about this revenue source, there has been a steady growth in third stream income by universities although this growth rate may be limited due to competition between universities (Wangenge-Ouma & Carpentier, 2018). Universities have undertaken various strategies to increase their income sources, such as increasing research output, undertaking paid research projects, and endorsing service tendering and contracts (Bayuo et al., 2020). While researchers agree that third stream income is the future of funding for universities, it also increases resource dependencies (Akomolafe & Aremu, 2016; Ekpoh & Okpa, 2017).

The literature suggests that both the government and higher education institutions need to work together to bridge the financial gap and strengthen these institutions’ financial status (USAF, 2017). While the government's funding model encourages universities to increase research output and student throughput, universities of technology face challenges in these areas (Msiza, 2019; USAF, 2017).

Several studies have investigated universities' strategies for revenue sources. Crowther et al. (2018) compared South African universities of technology to internationally acclaimed hotel schools and identified best financial management practices. The study found that hotel schools can generate more revenue to contribute to overall university financial sustainability. Factors such as student drop-out rates and student debt were identified as hindrances to the financial sustainability of these university segments. The study recommended marketing strategies, increasing offerings such as online classes and short courses, to benefit the financial sustainability of these segments and the university. Swart et al. (2018) found that some South African universities have used property holdings as a means of generating additional revenue. Reputation and ranking were also identified as key factors for maintaining teaching standards and research capacity. External partnerships were considered a means to generate additional revenue for the university. Bansi (2019) examined the low rate of innovation commercialisation and the factors impeding commercialisation at South African universities. Bansi (2019) found that universities did not prioritise commercialisation, did not have a commercial market focus, and lacked research and commercialisation capabilities and strong interactions with industry. These factors impede the expansion of revenue sources for South African universities which need to focus on alternate sources of revenue.

Ekpoh and Okpa (2017) examined the diversification of funding sources and the accompanying challenges by surveying academic staff from four federal universities in South Nigeria. Their findings revealed that diversified sources of income, such as consultancy services, commercial ventures, and part-time degree offerings, were key to ensuring financial sustainability. They recommended third stream income as the ideal revenue source to bridge funding gaps in higher education institutions and emphasised the need for strict regulations on financial resource management. In India, universities are still highly reliant on government funding, and accessing alternative revenue sources remains a challenge in their revenue generation strategies (Panigrahi, 2018). Chumba et al. (2019) assessed the effect of financial investment strategies of universities in Kenya on their financial sustainability. The study found that universities' investment strategies were primarily focused on real estate, while consultancy strategies relied on specialised experts in different fields. The study highlighted the importance of embracing various resource strategies to boost financial sustainability.

The findings from these studies indicate differing perceptions and strategies regarding the financing of universities. Financial sustainability is better guaranteed by the availability of resources and maximisation of savings. However, relying on a single source of financing is not prudent, as different sources present different challenges. Government grants (first stream income) can be unpredictable and tuition fees (second stream income) are uncertain. Therefore, by diversifying its revenue sources to third stream income sources, a university's financial sustainability could be improved.

The underlying challenges to the different revenue generation methods used by universities are discussed next.

2.3. Challenges of revenue generation

Revenue from tuition fees (second stream income) is causing much controversy due to the growing student debt (Yende, 2021). While universities aim to meet enrolment targets to enhance revenue from tuition fees, students' debts increase proportionally (Yende, 2021). Moreover, government support for students from middle-class and poor families is insufficient to cover all those in need (Muller, 2018).

Government block funding (first stream income) to universities has introduced inequalities among higher education institutions (Wangenge-Ouma & Carpentier, 2018). The current funding model disadvantages new and emerging institutions due to its formula based on categories such as research output, staff-student ratios, and student enrolment (Lourens, 2016). Emerging institutions struggle to match the research outputs of well-established universities due to limited budgets. While this model is debatable, it has prompted universities to make efforts to meet the National Development Plan 2030, which aims for 1.6 million enrolments in universities by 2030 (South African Government, n.d.). Universities have increased student enrolment, encouraged postgraduate studies, and encouraged staff to obtain postgraduate qualifications to attract government funding through block grants.

Ekpoh and Okpa (2017) examined the challenges associated with diversification of revenue sources in South Nigeria. Their findings indicated that challenges included fund mismanagement, poor staff attitudes, increased student enrolment affecting staff-student ratios, and a lack of entrepreneurial culture. In South Africa, Crowther et al. (2018) identified student dropout rates and student debt as factors affecting the financial sustainability of university segments. In Iraq, Almagtome et al. (2019) explored the relationship between financial sustainability and accountability under university autonomy. The study revealed that financial deficits in the university's financial position were due to unregulated financial and administrative authorities. Chinyoka et al. (2020) examined challenges to revenue generation among state universities in Zimbabwe. The authors highlighted macroeconomic factors, such as politics and regulatory laws, as funding challenges. Other challenges included infrastructural development and facilities not adapting to the growth in student enrolments. Leadership was found to be a barrier to addressing these challenges, as it is a crucial parameter for efficient resource acquisition and management. Regulation by law was among the suggested solutions for addressing these factors.

In the African context, the findings of Ekpoh and Okpa (2017), Crowther et al. (2018), Almagtome et al. (2019), and Chinyoka et al. (2020) were similar, concluding that university management and adherence to regulations hinder sufficient revenue generation. Recommendations were made for strict adherence to regulations and management accountability. These challenges may be applicable to the university of technology in which the current study took place. The growth in student enrolments, coupled with increasing student debt and the lack of government funding for infrastructure development, are scenarios observed in many South African higher learning institutions.

3. Methodology

3.1. Research design

This study adopted a quantitative research approach. This approach allowed the researchers to use quantitative data to describe and establish numerical associations among the research variables, leading to verifiable outcomes (Bloomfield & Fisher, 2019). The study used a survey research instrument to gather data on the opinions of non-academic and academic staff members at a university of technology regarding its funding requirements and financial sustainability,

3.2. Population and sampling technique

The target population for this study were staff members who possessed knowledge and expertise on revenue sources and financial sustainability of the university of technology located in the province of KwaZulu-Natal, South Africa. The population thus included non-academic staff in managerial positions at the university, departmental heads as well as the administrators of finances in the finance department. Academic staff from the Accounting and Management Sciences cluster were targeted as they had the necessary financial knowledge and expertise to answer the research questions. As a result, a population of 122 academic staff and 93 non-academic staff were purposively sampled (Sileyew, 2019).

3.3. Data strategy

This study collected primary data using a questionnaire that was designed using Likert-scale type questions. The questionnaire comprised two sections: the first section collected background information, while the second section consisted of statements aimed at answering the research questions of the study. The Likert-scale response options ranged from 1 = strongly disagree to 5 = strongly agree.

3.4. Distribution of the questionnaire and response rate

Before collecting the data, the questionnaire instrument underwent pretesting to ensure the reliability and validity of its outcomes. It was also checked by a staff member who was experienced in questionnaire design. The questionnaire was distributed online to the 215 selected participants using the QuestionPro^® software. Participants were provided with a link to the survey via email. The email also included a letter that explained the nature and purpose of the research and requested the participants to sign a letter of informed consent or click the ‘agree’ button on the provided link. To boost the response rate, telephone calls and emails were used to contact participants directly to remind them to answer the questionnaire. Out of the 162 questionnaires returned, 144 were deemed usable, resulting in an overall response rate of 67%, which was considered acceptable (Kadam & Bhalerao, 2010). Sixty-nine responses were received from academic staff (57% response rate) and 75 responses were received from non-academic staff (81% response rate).

3.5. Validity and reliability

Reliability was enhanced by maintaining a concise focus on the research area, which increases the likelihood of obtaining similar outcomes in future related studies. Pretesting was conducted to ensure that the constructs being measured were presented accurately. Furthermore, the reliability of the research questions was confirmed through the Cronbach α test. All the measurements fell within the acceptable range for Cronbach’s α test except for one item in the section on second stream income which was subsequently removed from the analysis.

3.6. Ethical considerations

The primary data were collected after ethical clearance had been obtained from the Faculty Research Ethics Committee. A gatekeepers’ letter was obtained from the Research Office to conduct the study in the institution. In addition, participants were informed of the nature of research, and their anonymity was assured. Data was only collected after informed consent was obtained from the participants.

4. Results and discussion

This section begins by discussing the background information on the respondents, followed by the presentation of the findings related to each research question.

The background information showed that out of the 144 respondents, 66 were male and 78 were female. Notably, 84% of the respondents hold higher degrees, such as a master's degree or a PhD, while 1% hold a national diploma, and the remaining respondents have bachelor's or honours degrees. The respondents' years of experience were concentrated around the 10-year mark, indicating that they have sufficient knowledge of the university's operational policies and teaching and learning procedures to be able to provide valid responses to the questionnaire.

To further ensure that the respondents could provide informed opinions on the variables being studied, they were asked about their knowledge of the university's revenue sources and financial sustainability. The results of this question are presented in Table 1.

Table 1. Knowledge of revenue sources and financial sustainability.

		Poor	Moderate	Satisfactory	Good	Advanced	Total	Mean (m)	SD
Revenue sources	N	–	9	28	91	16	144	3.79	0.72
	%	–	6.3	19.4	63.2	11.1	100.0
Financial sustainability	N	–	11	25	96	12	144	3.76	0.71
	%	–	7.6	17.4	66.7	8.3	100.0

Table 1 presents the respondents' varying levels of knowledge regarding revenue sources and financial sustainability. None of the respondents selected ‘poor’ as their response. Most respondents (74.3%) indicated that they possessed good or advanced knowledge of revenue sources, while a similar percentage (75%) expressed the same level of knowledge concerning financial sustainability. Consequently, the respondents showed sufficient knowledge regarding the revenue sources and financial sustainability of the university enabling them to provide reliable answers to the study's questions.

In the following sections, the opinions of the respondents, which they indicated using a scale of strongly disagree (1) to strongly agree (5), are discussed using the means of their responses as the point of reference. In addition, their responses were also sorted into two subgroups, non-academic (69 respondents) and academic staff (75 respondents). Thereafter a Mann-Whitney U test was performed to see if their opinions differed depending on their roles within the university. Only statistically significant differences are reported upon in ensuing discussion.

4.1. Revenue sourcing as a financial challenge

To answer the first research question, respondents were asked to provide their opinions on whether revenue sourcing presented a financial challenge to the university. The responses to this question are summarised in Table 2.

Table 2. Revenue sourcing as a financial challenge.

Statements	Level of disagreement		Neutral	Level of agreement		Mean (m)	SD
	Strongly disagree	Disagree		Agree	Strongly agree
	%	%	%	%	%
Revenue sourcing is a financial challenge for the university.	0.0	16.0	7.6	72.2	4.2	3.65	0.80
Financing university through a single source revenue (that is, either first, second or third stream income) is a financially sustainable decision.	54.9	18.1	4.2	15.3	7.6	2.03	1.38

Table 2 reveals that, on average, the respondents perceived revenue sourcing as a financial challenge for the university (m = 3.65), with 76.4% of the respondents agreeing with this statement. The respondents, on average, also indicated that relying on a single source of revenue is not a financially sustainable decision (m = 2.03) as they disagreed with this statement. These findings align with previous studies suggesting that a diversified revenue structure is crucial for the financial sustainability of universities (Crowther et al., 2018; Naidu, 2021; Xie et al., 2022; Yende, 2021).

The results of the Mann-Whitney U test comparing the means of the two sub-groups. revealed statistically significant differences in their perceptions in both statements. Non-academic staff showed stronger agreement with the first statement (m = 3.89) compared to academic staff (m = 3.38) (Z score = −3.978, p = 0.001). Regarding the second statement, the mean for non-academic staff was 1.65, while the mean for academic staff was 2.43 (Z score = −4.165, p = 0.001). These results indicate that non-academic staff were more aware of the university's financial challenges which is not surprising considering their involvement with the university's finances and their awareness of budget shortfalls. Academic staff, primarily focused on teaching and learning, may only become mindful of budget shortfalls if the shortfalls directly impact the courses for which they are responsible.

4.2. Barriers to financial sustainability

The second research question explored barriers to the university's financial sustainability. Respondents were asked to provide their opinions on various statements related to potential barriers. A summary of their responses is shown in Table 3.

Table 3. Barriers to financial sustainability.

Statements	Level of disagreement		Neutral	Level of agreement		Mean (m)	SD
	Strongly disagree	Disagree		Agree	Strongly agree
	%	%	%	%	%
The knowledge and skills of university management are barriers to university revenue generation strategies.	2.1	46.5	3.5	33.3	14.6	3.12	1.21
Low research output, is among the reasons for low state funding, through block grants.	1.4	5.6	5.6	82.6	4.9	3.84	0.65
The university’s postgraduate students complete their degrees within the minimum timeframe which enhances research output.	1.4	43.8	6.3	43.8	4.9	3.07	1.06
University staff have adequate knowledge to generate additional strategies for revenue sourcing.	1.4	8.3	11.8	67.4	11.1	3.78	0.80
University staff have adequate resources to generate additional strategies for revenue sourcing.	2.1	9.0	6.9	76.4	5.6	3.74	0.78
The university can improve its infrastructure and thereby increase student enrolments.	2.1	3.5	2.1	77.1	15.3	4.00	0.71
The university can attract personnel with experience in attracting funding for the university.	1.4	2.1	5.6	84.7	6.3	3.92	0.57

Note: p < 0.001 for all statements.

Table 3 shows that most respondents identified low research output as an important barrier to the university's financial sustainability (m = 3.84)). Respondents were relatively neutral in their opinions on statements suggesting that the knowledge and skills of university management are barriers to revenue generation strategies (m = 3.12) and that postgraduate students completing their degrees within the minimum timeframe enhances research output (m = 3.07). The last four statements in Table 3 indicate that, on average, respondents agreed with the statements, suggesting that the staff or the university possesses adequate knowledge (m = 3.78), resources (m = 3.74), the ability to improve infrastructure to increase enrolment (m = 4.00), and the ability to attract experienced personnel who can attract funding (m = 3.92). These findings support the notion that the current state funding model disadvantages universities of technology while benefiting more well-established institutions which already have research-intensive strategies (Lourens, 2016).

An analysis of the two subgroups (non-academic and academic) revealed a statistically significant difference in their perceptions for only one statement in Table 3 using the Mann-Whitney U test. The non-academic staff disagreed with the statement that postgraduate students finish their degrees within the minimum timeframe (m = 2.65). In contrast, the academic staff showed some agreement with this statement (m = 3.52) (Z score = −4.929, p = 0.001). Non-academic staff may be more aware of the financial implications of postgraduate students taking too long to complete their degrees as it would affect the university's subsidy income, i.e. first stream income. Academic staff, on the other hand, may have a more positive outlook and believe that agreeing with the statement would reflect poorly on their supervision of the students.

4.3. Evaluation of each income stream

The third research question examined the respondents’ opinions on the contribution of each income stream (first, second, and third) to the university's financial sustainability. Different statements were used to probe each income stream. These results are presented in Tables 4–6.

Table 4. First stream income.

Statements	Level of disagreement		Neutral	Level of agreement		Mean (m)	SD
	Strongly disagree	Disagree		Agree	Strongly agree
	%	%	%	%	%
Revenue generated from state subsidy is sufficient to maintain the university’s financial sustainability.	2.1	51.4	6.3	36.1	4.2	2.89	1.06
The university’s throughput rate is continuously increasing to enhance revenue generated from the block grants.	1.4	0.7	5.6	84.7	7.6	3.97	0.53
The university could generate more income from increasing its research outputs as per the block grants.	0.7	0.7	0.7	84.7	13.2	4.09	0.47
The university has the necessary student support mechanisms to improve throughput rates and thereby generate more revenue from the block grants.	1.4	3.5	6.9	75.7	12.5	3.94	0.68
The earmarked grants contribute adequately to the overall university development and standards for meeting targets.	0.7	1.4	10.4	79.2	8.3	3.93	0.55

Note: p < 0.001 for all statements.

Table 5. Second stream income.

Statements	Level of disagreement		Neutral	Level of agreement		Mean	SD
	Strongly disagree	Disagree		Agree	Strongly agree
	%	%	%	%	%
Revenue generated from tuition fees is sufficient to maintain the university’s financial sustainability.	2.8	41.7	4.9	44.4	6.3	3.10	1.11
The university always meets its enrolment targets.	0.0	8.3	11.8	71.1	9.7	3.81	0.72
The university could generate more income from tuition fees if it increases its student intake.	0.7	4.9	3.5	80.6	10.4	3.95	.53
The tuition fee freeze had a significant impact on the university’s financial sustainability.	0.0	38.2	19.4	34.7	7.6	3.12	1.01
The annual increase of tuition fees is still an effective mode of increasing revenue from second stream income.	0.0	9.0	6.3	77.1	7.6	3.83	0.69

Note: p < 0.001 for all statements.

Table 6. Third stream income.

Statements	Level of disagreement		Neutral	Level of agreement		Mean (m)	SD
	Strongly disagree	Disagree		Agree	Strongly agree
	%	%	%	%	%
Revenue generated from third stream income is sufficient to maintain the university’s financial sustainability.	3.5	63.9	6.3	22.9	3.5	2.59	0.99
University segments are offering short-courses and certificates to enhance the university’s financial sustainability.	0.0	3.5	3.5	77.8	15.3	4.05	0.57
The university has strategic teams working with donors to attract more funds from donor funding.	1.4	1.4	29.9	57.6	9.7	3.73	0.71
The university is offering commercialised services to the external community.	0.7	5.6	15.3	70.1	8.3	3.80	0.70
The university has adequate research contracts contributing to the enhancement of third stream income.	2.1	23.5	16.0	46.5	11.8	3.42	1.04
The university has investment portfolios aimed at greater returns.	0.0	3.5	7.6	78.5	10.4	3.96	0.57

Note: p < 0.001 for all statements.

The respondents’ opinions on first stream income, defined as any income or grants received by the university from the government, are presented in Table 4.

The results presented in Table 4 revealed that, on average, the respondents disagreed with the statement that the revenue generated from only state subsidies is sufficient to maintain financial sustainability (m = 2.89). However, they agreed, on average, that the university is improving its throughput rate (m = 3.97) and that it could generate more income by increasing research output (m = 4.09). These findings support the suggestions of Klofsten et al. (2019) and Compagnucci and Spigarelli (2020) to enhance revenue generation strategies by focusing on increasing research output and the throughput rate. The respondents also agreed, on average, that the university has the necessary student support mechanisms to improve throughput rates (m = 3.94) and that earmarked grants contribute to university development and standards (m = 3.93). As shown in Table 4, the respondents believed that the university has sufficient student support mechanisms for enhancing its revenue, although they were aware of the impact of low research output and the knowledge and skills of university management. An analysis of the opinions of the two subgroups, non-academic and academic staff, to all the statements in Table 4 using the Mann-Whitney U test, revealed no statistically significant differences in the perceptions of the two subgroups.

The respondents’ opinions on second stream income, defined as any income received from tuition fees, are presented in Table 5.

Table 5 shows that, on average, the respondents were mostly neutral in their opinions regarding whether tuition fee revenue is sufficient to maintain the university's financial sustainability (m = 3.10). However, there was support for the idea that increasing enrolments would lead to higher tuition fees (m = 3.95), indicating a belief that expanding student numbers can boost revenue. The respondents also expressed agreement that the annual increment of tuition fees is an effective way to increase revenue for the university (m = 3.83). Similarly, they believed that the university consistently meets its enrolment targets (m = 3.81). On the other hand, the respondents were mostly neutral in their views on the significant impact of the tuition fee freeze on the university's financial sustainability (m = 3.12).

The subgroup analysis comparing non-academic and academic respondents using the Mann-Whitney U test revealed a statistically significant difference in their perceptions for one statement. Academics showed some agreement with the notion that tuition fee revenue is sufficient to maintain the university's financial sustainability (m = 3.48), while non-academics disagreed with this statement (m = 2.75) (Z score=-3.974, p = 0.001). This suggests that academics may prioritise teaching and learning and consider tuition fees the more crucial source of revenue when compared to other sources.

The respondents' opinions on third stream income, defined as any other form of income apart from first- or second stream income, are presented in Table 6.

Table 6 presents the overall views of the respondents regarding financial sustainability and revenue generated from third stream income. The respondents indicated that they believed the revenue from only third stream income is insufficient to maintain the university's financial sustainability (m = 2.59). The respondents also acknowledged that the university already offers short courses and certificates (m = 4.05), provides commercial services to external communities (m = 3.80), and has strategic teams dedicated to attracting more donor funds (m = 3.73). Furthermore, the respondents supported the statement that the university has investment portfolios aimed at generating greater returns (mean = 3.96). However, there was less support for the statement suggesting that the university has adequate research contracts to enhance revenue from third stream income (m = 3.42), indicating room for improvement in this area. Based on these results, it can be concluded that the university recognises the importance of attracting revenue from third stream income. An analysis of the two subgroups (non-academic and academic) showed no statistically significant differences in their perceptions regarding any of the statements.

4.4. Revenue generation strategies

The final research question probed the respondents’ opinions on revenue generation strategies. Several strategies were listed, and respondents could indicate their level of agreement with the statements. While an attempt has been made to categorise the strategies into the income streams they would affect, it must be noted that the effect of one strategy may affect more than one income stream. These results are shown in Table 7.

Table 7. Revenue generation strategies.

Statements	Level of disagreement		Neutral	Level of agreement		Mean (m)	SD
	Strongly disagree	Disagree		Agree	Strongly agree
	%	%	%	%	%
Diversify revenue sources to address the university’s financial sustainability.	0.0	2.1	4.2	29.9	63.9	4.56	0.68
First stream income
Implement new course offerings.	0.0	1.4	1.4	50.0	47.2	4.43	0.60
Use international collaborations to enhance the research output.	0.0	0.7	0.7	50.0	48.6	4.47	0.55
Improve staff qualifications to increase research output.	0.0	0.7	0.7	76.4	22.2	4.20	0.47
Second stream income
Expand infrastructure to increase student enrolments.	0.0	3.5	3.5	76.2	16.8	4.06	0.58
Attract international students.	0.7	2.1	7.6	81.3	8.3	3.94	0.55
Invest in student support mechanisms to increase throughput rates.	0.7	1.4	4.2	66.4	27.3	4.18	0.64
Third stream income
The university has necessary strategies and skills to enhance revenue from third stream income.	0.0	27.8	15.3	50.7	6.3	3.35	0.96
Use university segments as essential pillars for generating additional revenue strategies for the university.	0.0	2.8	2.1	84.7	10.4	4.03	0.49
University segments to partner with industry and conduct a need analysis to identify possible short courses.	0.0	0.7	3.5	81.9	13.9	4.09	0.44
Offer commercialised research to the external community as a model for sourcing more funds.	0.0	0.7	12.5	79.9	6.9	3.93	0.47
Include consultancy and professional services in the university’s commercial ventures to the external community.	0.0	5.6	55.6	31.9	6.9	3.40	0.70

Note: p < 0.001 for all statements.

Table 7 shows that, on average, the strategy to diversify revenue sources to address the university's sustainability received strong support (m = 4.56). The strategies aimed at enhancing first stream income, such as implementing new course offerings (m = 4.43), improving research output through international collaborations (m = 4.47), and enhancing staff qualifications (m = 4.20), were also well-supported. While the strategies to enhance second stream income received slightly less support, their mean ratings were still clustered around 4.00. To enhance second stream income, respondents believed that investing in student support mechanisms would increase throughput rates (m = 4.18), attract international students (m = 3.94), and utilising infrastructure expansion would enhance student enrolment and revenue (m = 4.06).

Regarding third stream income, the respondents held neutral opinions about the university's strategies and skills to enhance revenue from this source (m = 3.35), as well as the inclusion of consultancy and professional services in the university's commercial ventures (m = 3.40). However, they agreed that the university should offer commercialised research to the external community (m = 3.93) and supported the strategy of identifying university segments as essential for generating additional revenue (m = 4.03). The respondents also agreed that industrial partnerships could help identify possible skill gaps and implement offerings to address this need (m = 4.09).

Overall, the findings indicate that the university has already implemented various strategies to improve its financial sustainability. However, the respondents emphasised the need to diversify revenue sources and utilise international collaborations, new course offerings, university segments, and industrial partnerships to generate additional revenue. Furthermore, the improvement of infrastructure and the implementation of further student support mechanisms were identified as necessary. Staff members were also encouraged to improve their qualifications. When analysing the two subgroups (non-academic and academic), statistically significant differences in perceptions were found for three statements. Non-academic staff showed stronger support for diversifying revenue sources (Z score = −2.336, p = 0.020), for implementing new courses (Z score = −2.461, p = 0.014), and for utilising international collaborations to enhance research output as revenue generation strategies (Z score = −3.117, p = 0.002). This suggests that non-academic staff may be more aware of the financial benefits associated with these strategies and place greater emphasis on them to promote sustainability.

To summarise the findings of this study, the respondents perceived revenue sourcing as a financial challenge and that relying on a single source of revenue is not financially viable. Low research output was considered a barrier to financial sustainability and improving research output was identified as a means to improve first stream income. Appointing staff members who could attract funding and improvements in the infrastructure of the university would assist in removing barriers to financial sustainability. Increasing student numbers together with expanding infrastructure and attracting international students was identified as a means of increasing second stream income and offering short courses as one of the ways of improving third stream income. However, these strategies are negated by the historical imbalances of the past and the poverty of the students who enrol in this institution of technology causing difficulties in fee collection (Muller, 2018). The findings indicated that the university is attracting third stream income to meet the revenue gap. This means the university is becoming more reliant on the business sector (Compagnucci & Spigarelli, 2020). The results of this current study support the literature that there is no single source of revenue that is completely reliable (Oketch, 2016). Therefore, diversification of revenue sources is the primary solution for to improve the financial sustainability of higher education institutions (Bayuo et al., 2020; Masaiti, 2015; Saudi, 2019).

5. Conclusions, limitations and future research

This study research explored the perceptions of university staff regarding revenue sources and financial sustainability. The results confirm that staff, especially non-academic staff, view revenue sourcing as a challenge. Factors such as revenue sourcing, low research output, management skills and knowledge, and postgraduate completion rates were identified as the main factors affecting university funding. The findings also highlight that none of the revenue streams alone can ensure financial sustainability, emphasising the importance of diversifying these streams. The results reveal that there are differing contributions of the three revenue streams to financial sustainability and underscore the need to use university segments, international collaborations, and industrial partnerships to generate additional revenue. The study suggests that university management should leverage the knowledge and skills of experienced staff members as drivers of revenue sourcing. It is crucial to focus on promoting timely undergraduate and postgraduate student completion, motivating active research participation among postgraduate students, and encouraging staff members to improve their qualifications. These factors will enhance revenue from state subsidies and tuition fees, respectively.

These results also have implications for resource dependency theory which argues that the sustainability of an organisation relies on multiple sources of stakeholders (Lewis, 2017). The revenue generation strategies discussed in Section 4.4 underlines that there is no one single revenue stream which leads to financial sustainability and that the financial sustainability of this university of technology depends on multiple sources of income. The government continues to play a major role in financing the university, and there is a dependency relationship between the university and its students. The need to expand third stream income also establishes a dependency relationship between the university and the stakeholders in third stream income generation.

A limitation of this study was the challenge of separating the income streams into distinct categories, given their interdependence. For example, increasing the number of postgraduate students not only raises tuition fees but may also lead to an increase in government subsidies and research output. Furthermore, the study only surveyed staff members, providing opinions at a specific point in time and neglecting the perspectives of other university stakeholders. The study only used quantitative data with limited statistical analysis and no interviews were conducted. Adding a qualitative element to the study may have enabled a richer analysis of the data. Additionally, the study focused on only one university of technology, limiting the generalisability of the results to other institutions.

Future research could employ longitudinal approaches to provide comparable information on the subject and include multiple universities in South Africa and abroad to enhance the generalisability of the findings. The research only used quantitative data and future research could consider conducting interviews to gain a deeper understanding of the revenue challenges facing universities in South Africa.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Xolani Minenhle Ngcobo

Xolani Ngcobo is a PhD Candidate at the University of KwaZulu-Natal. He completed his Master of Accounting at the Durban University of Technology. His thesis “Exploration of revenue sources for financial sustainability of public universities in KwaZulu-Natal: A case study of Durban University of Technology” was awarded cum laude.

Ferina Marimuthu

Professor Ferina Marimuthu is the Head of Department of Financial Accounting at Durban University of Technology.Following a successful career in the tertiary sector with over two decades background in the accounting discipline, combined with a PhD in Finance which examined capital structure and financial performance of South African state-owned entities, have equipped her with fingers on the pulse.Ferina takes a keen interest in learning materials development and adding value to students’ learning experience in the classroom and has authored and edited several books in the accounting discipline as well as reviewed textbooks for international publishers. This has been the impetus for her active involvement in research in the fields of accounting and finance.

Lesley June Stainbank

Professor Lesley Stainbank is an honorary research professor at the Faculty of Accounting and Informatics, Durban University of Technology. Lesley’s main role is in the supervision of masters and doctoral students. Her research interests include accounting education and corporate governance. Her recent project’s include ‘The adoption of IFRS for SMEs in Africa.’ Amongst her many accolades is being declared as South Africa’s most published researcher in the discipline of accounting, as revealed in the research study titled: “A Profile of Accounting Research in South African Accounting Journals”, which appears in the latest volume of the South African journal Meditari Accountancy Research (MEDAR).