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As universities remodel as businesses, they need to be wary of losing core mandates

Prof Tshilidzi Marwala is the Vice-Chancellor and Principal of the University of Johannesburg, a member of the Namibia 4IR task Force and the author of ‘Leadership Lessons From the Books I Have Read’. He is on Twitter at @txm1971. He recently penned an opinion piece published by Daily Maverick on 05 September 2021.

Recently, I read with keen interest about the acquisition of 10% of Dis-Chem’s shares by a consortium led by the Royal Bafokeng in a black economic empowerment (BEE) transaction. These shares were acquired at a 17.5% discount. The consortium included GloCap Empowerment Private Equity Fund, Zungu Pharmaceuticals (part of Zungu Investments Company) and Temo Capital.

What is intriguing about this transaction, and in fact transactions of this nature, is the absence of universities. For some strange reason, universities in South Africa are not considered businesses and do not view themselves in this manner either. Yet, universities are effectively businesses with vice-chancellors serving as chief executive officers (CEOs).

As a 2003 Organisation for Economic Co-operation and Development (OECD) report asserted, “around the world, higher education is under pressure to change. It is growing fast and its contribution to economic success is seen as vital. The universities and other institutions are expected to create knowledge; to improve equity; and to respond to student needs – and to do so more efficiently.”

In 2008, the University of Johannesburg (UJ) and a consortium that included the Vuwa Investment Group acquired a stake in City Lodge. This transaction has resulted in a flow of resources to the university that has been used to expand its educational footprint. From this transaction, 50,000 current students benefit, and every four years, a new 50,000 students join the benefit line. The educational outcomes of these benefits will reverberate throughout our political, social and economic lives for many years to come. This demonstrates just how universities operate as businesses.

Harvard University in the US serves as a noteworthy case study highlighting this phenomenon. Harvard University has an endowment of $41.9-billion. This is approximately 15 times the size of the annual budgets of all our public universities combined. It is said that Harvard’s endowment is so vast that they have their own asset management function to manage this vast wealth. Harvard has also produced many people who have founded large corporates, such as Microsoft’s Bill Gates and Facebook’s Mark Zuckerberg.

Whether these vast endowments are the cause of its students founding large conglomerates is an issue that is difficult to establish. But there is the consistent observation that rich universities are producing graduates who are founding large corporates.

Another interesting example is Stanford University. Founded by a parent of a deceased Harvard student, it has become a leading university, particularly from a technological standpoint. From its labs came companies such as Yahoo!, Google, Sun Microsystems and LinkedIn. The endowment of Stanford is $29-billion. Some of its former students include the likes of Elon Musk and Sergey Brin. Against this context, a pertinent question we must ask is why South African universities have not followed a similar trend.

Some universities have in fact established commercialisation companies. For example, the University of the Witwatersrand has established a commercialisation company called Wits Enterprise, UJ has a UJ Invent company, and the University of Pretoria has Enterprises UP. However, these companies have not been integrated into the business world as separate business entities. Part of the reason for this is that many of them are led by people with limited high-level commercial experience. Furthermore, they have not been able to take the risks that normal companies are able to take. The result is that they have not grown to be sufficiently big to become significant economic players.

Another hurdle we face is a limited venture capital space in South Africa. When technology is discovered in South Africa, the normal model followed is to register a domestic patent, then the World Intellectual Property Organisation patent, then the US Patent and then an attempt is made to sell the patent to a US company. This is because companies in the US have the capital and the risk to implement intellectual properties.

The problem with this model is that the idea is almost always sold at a discount. The inventor ultimately loses on the potential proceeds that will come out of the scaling up in the manufacturing, and the loss of potential jobs is extensive.

Additionally, there is limited movement between universities and businesses. There has to be a view towards creating a symbiotic relationship. People who work at universities should be in the industry on sabbaticals, as consultants, board members, etc. People from the business world must be at universities as council members, advisers, and lecturers. Projects that happen in universities must increasingly be cocreated with stakeholders such as businesses. Universities must set up labs inside corporates, and corporates must set up labs in universities.

An example of this is Samsung, which has set up a lab specialising in new innovations at a university called the Korean Advanced Institute of Science and Technology.

As universities make the shift to operating more like businesses, we must be cautious that they do not lose their core mandates. There is a real danger that if universities follow an entirely corporate mandate, they can lose focus on activities that extend beyond monetary value. Professor Joshua Mok Ka-Ho articulates the danger of universities acting “less as critics of society and more as servants responding to the needs of society, being at a crossroads between the alleged democracy of a whimsical collegiality and the problematic efficiency of hard-nosed managerialism”.

Accordingly, universities may lose core objectives such as intellectual pursuit, knowledge discovery and transmission, enquiry and discourse. What sets universities apart is that they can pursue ideas that have no potential monetary value for no other reason than academic value. Though we are pushing for a more business-like approach, we must also fight against the proverbial corporatisation of higher education, which would entail a narrow focus on profit-making.

As US Supreme Court Justice Felix Frankfurter argued in Sweezy v New Hampshire, “in a university knowledge is its own end, not merely a means to an end”.

These are values that are required for any nation to thrive in the Fourth Industrial age, and as we make our universities more business-like, we ought to strengthen these values.

The views expressed in this article are that of the author/s and do not necessarily reflect that of the University of Johannesburg.

Related: Business is war: A 10-point economic battle plan for South Africa

Prof Tshilidzi Marwala
Prof Tshilidzi Marwala Vice- Chancellor & Principal of the University of Johannesburg
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