UP spending contributes R39bn to South Africa’s economy

Posted on November 01, 2018

The University of Pretoria (UP) and its value chain contributed R39 billion to the South African economy through the procurement of goods and services in 2016.

In a recent study titled The contribution of the University of Pretoria to the South African economy, independent research company Quantec Research found that in 2016 UP had a student body of 48,900 contact students, and employed about 6,700 people. Its employment constituted 0.5% of total employment in Tshwane. UP, its suppliers and their suppliers added R7,6bn (or 7%) to Tshwane’s GDP.

Further, the university made a significant contribution to the national economy through its capital expenditure, the payment of tax, employment of staff, the use of suppliers and subsequent employment creation, as well as the consumption expenditure by students, leading to an ultimate contribution of R39bn to the South African economy.

According to Johan Riekert of Quantec Research, UP “is a major employer in the Tshwane region, and contributed 1.5% of the highly skilled employment base in the city.”

The total formal jobs supported by UP’s operations and student expenditure amounted to 10,561 jobs in 2016, of which around 55% were highly skilled jobs, 41% skilled and semi-skilled jobs, and 4% unskilled jobs. The operations of UP and its suppliers, as well as the purchases by households deriving their income from these institutions, supported 27,300 jobs in Gauteng and 43,400 in South Africa.

The study was based on an input-output model, which represents the interaction between industries, households and government in the South African economy. The model simulates the multiplying effect of each R1,00 spent by UP as it cycles through the economy. In this way the impact of UP and its suppliers (direct and indirect effects) and household spending by people involved with these institutions (induced effects) on output, employment and taxation can be quantified.

UP and its suppliers contributed R7,9bn to household income in Tshwane in 2016; while the Gauteng-wide impact was R11,5bn; and as well as being R16,59bn of the total South African domestic household income.

“If all direct, indirect and induced effects are added, the Tshwane-wide impact of all UP activities are measured around R8,9bn or 8,1% of Tshwane’s regional GDP. This means that for every R1,00 spent by the University, R1,93 was added to the Tshwane region, due to direct, indirect and induced effects of UP’s operations,” said Riekert.

The study indicated that UP employees use their salaries and wages to purchase goods and services from other business, which in turn make purchases and employ other people who also spend their salaries and wages throughout the regional, provincial and national economies. Student expenditure amounted to an estimated R6,95bn (an estimated monthly spending of R10 000 per month), of which 14,5% was on products and service in the wholesale, retail, catering and accommodation sector.

UP spent R647,6 million on new buildings as well as improvements to existing buildings; while it directly paid R1,2bn in tax in the form personal taxes paid on behalf of employees, along with the taxes paid by students on goods and services like fuel levies and some corporate taxes. It received just over R2bn in government subsidies and grants that year. “When UP’s entire value chain is added, the University is a net tax contributor – when the University’s economy-wide tax impact is considered, UP’s value chain generated more tax than the value of the government’s subsidies,” said Riekert.

The report cited statistics from the Department of Higher Education and Training (DHET) that from 2001 to 2016, UP cumulatively contributed 10% of all graduates in South Africa; 23,8% of Gauteng-based and 33.9% of Tshwane-based graduates. Riekert said “When considering this in the long-term, the University has contributed significantly to the knowledge base of South Africa. Graduates from the UP between 1930 and 2016 account for 18.5% of all living graduates in Gauteng; and 12.5% of all graduates nationally.”

In 2016 it awarded 8.9% of the total number of degrees granted in South Africa in that year. Of this, it produced 8,9 % of qualifications in the scarce skills areas of science, engineering and technology.  It also produced 11,5% of postgraduate qualifications in that year.

“Cumulatively, UP supplied 4% of Gauteng’s formal workers, which means that UP graduates represent 13,7% of the highly skilled workforce in Gauteng and 7,7 % of the highly skilled workforce in South Africa,” said Riekert. Furthermore, in 2016 more than 63% of UP’s staff held doctoral degrees. Its staff profile transformed from 41.3% black staff in 2012 to 52,5% in 2016, according to the DHET figures. Black students in 2016 made up 53.6% of the student population with 45.3% being African.

“The change in demographic composition of the student body is perhaps testament to the University’s commitment to transformation and building a more inclusive tertiary education sector which is more reflective of the South African population” said Riekert.   

He explained that while the University does contribute significantly to the regional and national economy, its impact is more far-reaching. In the long-term, UP also contributes to the knowledge base (human capital) of South Africa and the social capital (physical, intellectual and cultural resources) of the country. Both the human and social capital is vitally important for a thriving, diverse society.


- Author Primarashni Gower

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