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Managing capital investments at South African private universities

Naidoo, Moonsamy (2011) Managing capital investments at South African private universities. Problems and Perspectives in Management, 9 (1). pp. 85-94. ISSN 1727-7051 (print) 1810-5467 (online)

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Abstract

Private universities in South Africa face the daunting task of securing funds to meet their short-term operating costs and their long-term investments in capital projects. The purpose of the paper is to investigate the process in which private universities make capital investment decisions against the backdrop of direct competition from government funded public universities. A theoretical and empirical study was carried out in this investigations. A brief overview of the higher education market in South Africa is presented and a review of the literature on capital investment decisions and techniques is undertaken. A research questionnaire was send out in November 2005 to forty-five registered private universities focussing amongst other things on appraisal techniques used in capital investment decision- making and sources of long-term funds. The study revealed that more than half of the respondents never used the simpler discounted payback method, instead relying heavily on the more complicated method of internal rate of return and net present value. Further to this, private universities were reluctant to invest in capital projects, and cautiously invested in short-term less risky capital projects. It was not surprising to note that private universities relied solely on student fees, bank loans and donors as their main source of funds, as they received no funding from the government. There is a perceived gap with the practise at private universities and the theory. This study will prove to be useful to prospective foreign countries that wish to invest in private universities in South Africa and other emerging economies.

Item Type: Article
Uncontrolled Keywords: ResPubID24182, capital investment decisions, private universities, source of funds, appraisal techniques, payback, internal rate of return, net present value
Subjects: Faculty/School/Research Centre/Department > School of Economics and Finance
FOR Classification > 1501 Accounting, Auditing and Accountability
SEO Classification > 9305 Education and Training Systems
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Depositing User: VUIR
Date Deposited: 03 Sep 2012 07:06
Last Modified: 14 Jan 2015 05:07
URI: http://vuir.vu.edu.au/id/eprint/9356
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