The impact of government expenditure on student performance: Evidence of graduate outcomes in South African higher education institutions

Education increases a person’s skills and competencies, thereby improving their efficiency and earning capacity while delivering economic benefits for both the country and society. For this reason, many developing countries including those in sub-Saharan Africa have increased their government expenditure on education. Research suggests that government expenditure can have a positive impact in various aspects, including economic growth, educational quality, graduate employment and access to higher education. However, a critical question remains: Does increased expenditure lead to improved student performance? The main objective of the study was to determine the effect of government expenditure on higher education, focusing on how it affects student performance. Student performance was operationalised as graduate outcomes, measured by the annual number of students graduating from public higher education institutions in South Africa between 1991 and 2021. Using secondary data from the Department of Higher Education and Training (DHET), the Department of Basic Education (DBE) and the World Bank, a multiple linear regression model with ARMA (1,2) was applied. The findings revealed a complex relationship: While government expenditure across all levels of education has a greater impact on student performance in higher education, there is a negative relationship between tertiary expenditure and graduate outcomes. These mixed results complicate the assumptions of human capital theory, which predicts positive returns from investment in human capital development, and are better explained through general systems theory, which views expenditure as an input that must be effectively converted, through institutional processes, into outputs. Contribution: The study contributes to debates on education funding by demonstrating that expenditure does not yield improved outcomes and recommends that future policy focus on optimising resource use, targeting support to the most vulnerable students and strengthening monitoring systems.