Stellenbosch University (SU) has a significant impact on the economy of the Stellenbosch region.
This is one of the major findings of a recent study by the Bureau for Economic Research (BER) at SU. (Click here for statistics and interesting facts)
The aim of the study was to give a credible assessment and measurement of the economic contribution of the University to the economy of the Stellenbosch Municipal area. An Economic Impact Assessment (EIA**) was done using the University's operating and capital expenditure as well as spending by staff and students as an estimate of the initial impact of SU.
A descriptive analysis of spin-off companies and businesses and the role of SU as an anchor institution was also provided to give some indication of the non-quantifiable economic benefits of the institution.
“SU is part of the fabric of Stellenbosch and it would be difficult to imagine the region without the University," says Prof Johann Kirsten, Director of the BER. “In fact, the study found that the economic impact of the University on output is estimated to be R5 112 million in 2016." (R5 644 million* in 2018.)
61% Student expenditure
He explains that this figure includes all sales and transactions that were triggered by the initial injection of expenditure. “The majority of this comes from student expenditure (61%), followed by staff expenditure (23%), and SU's creditor payments (14%) and diverse payments (2.5%). The presence of SU also generates R1 108 million in labour remuneration (whish equates to SU creating more than 21% of the formal work opportunities and 8,7% of the informal opportunities) and sustains 13 406 jobs (or fulltime job equivalents) in the local economy."
To put the magnitude of the impact of SU in perspective, more than 15,5% of production (or output) and more than 18% of gross value added generated in the municipality, is stimulated by the presence of the institution. In essence then almost one fifth of perceived economic activity in the region can be traced back to the activities of the University and its people.
“The more than 13 000 jobs (or fulltime job equivalents) in the region sustained by the University, is more than 17% of total local employment (or income received by the jobs), says Kirsten. “These estimates, however, understate the total impact of the SU as they only pertain to the local benefits. SU has close links with the rest of the province and country. For example, only a portion of the creditor payments made by SU were made to local companies, while the rest generates large economic benefits outside the region – which was purposefully not captured by this study."
He adds that this in no ways means that the University does not favour local suppliers, rather that many are national companies with only a limited presence in the town and isolating where the money went is not possible (for example Telkom or a national bank). These jobs include those directly at the University (the more than 3500 staff members included) but crucially also those that are linked to spending at local businesses for example, resulting from the increased activity.
“Nonetheless, at a local level, the benefit of having an institution such as SU in Stellenbosch is very significant and extends beyond the direct economic benefits and fundamentally uplifts and enhances the Stellenbosch community," adds Kirsten.
Although not quantifiable in monetary terms, SU could also be described as a so called anchor institution, which stimulates additional benefits in the region. Examples for these include research centre STIAS, the University's technology transfer company Innovus, Maties Sport and the US Woordfees. The value of such institutions cannot adequately be expressed in short-term economic terms. Their value spreads much further into broader society and effects the very nature of the environment and people's lives.
“There are considerable intangible benefits of having a university present, such as the promotion of spin-off companies as well as other cultural and socio-economic benefits. Overall, the economic benefits of a university stretches beyond the primary role of being a knowledge centre and driving force of innovation within a region," says Kirsten.
Adds Prof Stan du Plessis, Chief Operation Officer of Stellenbosch University: “It is clear that the benefit of having an institution such as SU in Stellenbosch is very significant and extends beyond the direct economic benefits and fundamentally uplifts and enhances the Stellenbosch community. Not only is the University labour intensive in that it creates more wealth than its relative size, but it acts as catalyst in luring investors, entrepreneurs and business leaders alike while also actively contributing to Stellenbosch as Knowledge Region. Of equal importance however is that the study reveals that the University is indeed the kind of university SU aspires to be: Africa's leading research-intensive University, globally recognised as inclusive and innovative, where we advance knowledge in service of society.
*The research was conducted during 2017 using 2016 actual values. To arrive at 2018 Rand values the final consumer price index for 2017 was used plus the BER estimated CPI for 2018.
**More information on the EIA
An EIA is a quantitative tool to calculate the economy-wide benefit of SU, as the initial spending by the institution is only the tip of the iceberg. The so-called economy-wide impact (or total economic impact) of an institution includes the direct, indirect and induced impacts, which are trigged by the initial spending of the institution.
For staff and students, surveys were employed to determine the total expenditure and to estimate the proportion of the expenditure occurring within the Stellenbosch region for both local residents as well as staff and students residing outside of the region. For university expenditure, the location of the supplier also had to be determined in order to exclude suppliers from outside the region.