Assessing the economic impact of a South African university campus

Abstract

Various data sources show that the economy of Potchefstroom in South Africa’s North West Province delivered consistently positive economic growth rates from 2002 to 2016. Even during times of recession, the local economy has shown resilience. The presence of the Potchefstroom Campus of the North-West University is one of the contributing factors to this positive growth trend. Over the years, the campus has increased its numbers of full-time contact students, employed more staff members and invested heavily in real estate infrastructure. Consequently, the residential land in suburbs surrounding the campus has undergone significant densification, while many new stores have been built to cater for the growing retail trade. A university campus is not only where teaching, learning and research take place and where ideas and talents are nurtured. It also plays an important role in stimulating the economic growth and development of its host city since it attracts a critical mass of staff and students who together have significant buying power. Yet the existing literature on the economic impact of university campuses in South Africa reveals that there have been few attempts to quantify this impact. This thesis addresses this gap by applying a mixed-method research approach to quantify the impact of the Potchefstroom Campus of the North-West University on the economy. Using the bill-of-goods method to identify university−sectoral linkages (a first for a study of this nature), the author is able to show that there are specific sectors that benefit more from university expenditure than others. Such sectors predominantly fall into the category of services, such as retail, business and financial services, transportation, communication and personal services. In terms of growth prospects, the retail and accommodation sectors, as well as business services are ahead of the rest as they are the natural beneficiaries of the university’s spending activities. In addition, by integrating the university−sectoral linkages with a social accounting matrix (SAM), the author is able to determine, in a quantitative sense, the economy-wide impact of a university’s operation. The SAM analysis highlights the clear benefit of the Potchefstroom Campus to the North West Province and the fact that the economic value of higher education institutions should be given greater attention. As the larger of the two North-West University campuses in the province, the Potchefstroom Campus has a significant multiplier effect throughout the provincial economy as a result of expenditure incurred by the university, its staff and its students. For example, every R1 million spent by the university contributes R0.61 million to provincial gross domestic product (GDP) and creates four new jobs. Also noteworthy is the fact that the university is a major employer, with the Potchefstroom Campus boasting a workforce in 2015 of more than 2 700 people. The campus acts as an economic anchor for Potchefstroom and also attracts consumers from outside the municipal area, who then spend locally. The positive spinoffs from this can especially be seen in the growth of the real estate sector. The author uses real estate demand modelling to quantify the impact of staff and student spending on the city’s real estate market, with the results of the modelling confirming that such spending has been a strong driver of new and/or expanded real estate developments in and around the city. The retail, residential and office real estate markets gain the most from staff and student expenditure. At present the staff and student population absorb approximately 25% of the existing retail stock in the city. If the Potchefstroom Campus continues to attract increasing numbers of students and staff over the next few years, the resultant spike in spending will translate into greater demand for residential, retail and office goods and services and associated real estate. The real estate modelling approach, in particular, has great potential among other universities in the country which are grappling with a changing policy environment and a growing demand for affordable and accessible higher education.