This text is primarily written to be used for reference, particularly for entrepreneurs/investors who wish to participate in student accommodation. It is very important to note that the information here is accurate on the date which it was published. Practices and statutory provisions change frequently, and it is the responsibility of interested parties to keep up with those changes, rather than the author of this text.
NB: Please check the updates at the bottom of this article before reading further. (Aug 2024)
This text should contribute to the E and the L to the entrepreneur’s or investor’s PESTEL analysis.
There is a persisting demand for student accommodation that is a result of growth in access to education that has outpaced infrastructure growth. This applies to both Universities and Colleges.
For its part, within the prevailing fiscal environment, the Department of Higher Education and Training (DHET) has budgeted for infrastructure for Universities and Colleges.
Colleges
For the Colleges, the government has budgeted R4.9 billion, for the 4 years, from 2018 to 2021, for infrastructure. Due to the backlog in infrastructure maintenance, the bulk of the amount will be spent on refurbishments and maintenance of existing infrastructure. The remainder of the amount will prioritise the expansion of core infrastructure such as lecture rooms, workshops, and laboratories. There is unlikely to be much spending on new student accommodation for Colleges.
Given the limited College provided accommodation, most students rely on private accommodation providers. Students who are funded by NSFAS have specific amounts allocated to them for accommodation;
Urban colleges = R24 000
Semi-rural colleges = R18 000
Rural colleges = R15 000
(These are amounts per year, pro-rata the trimester or semester)
These amounts are reviewed from time to time, but continuously require a delicate balance between the number of students who need funding, the rental rates in different locations and the limited government budget in a constrained economy.
To ease the administrative burden, the authority on what accommodation to use is left to the individual student who has to contract with their landlord. The Colleges largely do not get involved in that aspect.
Those who may wish to provide student accommodation for College students should understand that the Department and Ministry are not necessarily party to the decisions about accommodation.
This is the case at the time of writing/publication of this text. This emphasis is important because things might have been done differently in the past, and might be done differently in future.
Universities
Most universities provide limited students accommodation in their own residences. Since their infrastructure is mostly well maintained, it is possible to use some of their infrastructure budget allocation to build additional students’ residences.
This will be done by the universities themselves, hence there would be a limited role for private accommodation providers in this regard.
The current practice is that universities provide their own accommodation. For students who cannot be accommodated in university residences, some universities provide a list of accredited private accommodation providers. This would be private accommodation that the university would have assessed and approved them as meeting the required students accommodation standards. NSFAS funded students who choose to use that accommodation are covered by NSFAS.
The NSFAS students usually get cover not exceeding what they would have paid at the university’s own residences.
Students may still use unaccredited private accommodation providers at their own risk, and would not be covered by NSFAS as their accommodation would not be known whether it meets the required standards.
As it is evident, the decision about students accommodation is largely made at Universities, not at the DHET nor Ministry.
Even where the University has to build student housing, the funding is transferred from DHET to the University, which will then make decisions about where the accommodation will be constructed, by which construction company. The Ministry or DHET does not participate, except for monitoring that the process and the project is done as it should.
This is the case at the time of writing/publication of this text. This emphasis is important because things might have been done differently in the past, and might be done differently in future.
There are entrepreneurs, and aspirant entrepreneurs, who are keen on constructing students’ villages in order to assist Universities and Colleges to accommodate more students. They have various proposals for creating students centres with various recreational facilities, while others have innovative proposals on using modern modular building methods for efficient space use or environmentally friendliness.
Unfortunately, the entrepreneurs get frustrated by unclear processes on how to bring their brilliant ideas to fruition to solve a clearly evident problem. Most of the time the entrepreneurs/investors wish someone, in the form of the Ministry, Department or University, to guarantee that they will get a return from their investment through assurance that students will use their accommodation.
This text tries to clarifies a few things for the benefit of those entrepreneurs;
- Meeting the Ministry or the Department is NOT a step in bringing the brilliant ideas to fruition.
- If you build a 10 or 3000 bed building next to a University, which meets the set standards of student housing, the University may, or may NOT, approve that private accommodation for use by their students. If approved, the students MIGHT use it, and the entrepreneur may get their return, IF the bursaries of those students pay accordingly. The emphasis here is that the entrepreneur will have to be comfortable to take the risk without guarantees.
- Similarly, if you build a 10 or 3000 bed building next to a College, the students of the College may, or may NOT, choose to use that accommodation. There is (currently) no mechanism to guarantee a market for the investor/entrepreneur.
- This text intentionally provides information for use in calculating potential income for an entrepreneur depending on where the accommodation would be, and for which students would it be provided for between Colleges or Universities, using the 2019 figures.
The reason the entrepreneur/investor, or their funder, wants the guarantee so much, is probably the same reason the government should not provide it.
Such a guarantee would, inadvertently, imply that if a University is struck by lightening and not in operation for 3 years while being refurbished, the entrepreneur should be assisted by government to get their returns. In government that is called wasteful expenditure, and the money is now recovered from the salary of the person who commits government to such costly decisions. If that is a ridiculous analogy, why then is the entrepreneur so afraid to go ahead with their investment without a guarantee?
For entrepreneurs/investors who may be interested in further reading, government has had lessons with the Renewable Energy Independent Power Producer Programme (REIPPP), and the Gautrain, among other projects where the risk was thought to be worth sharing with investors. Brilliant innovative solutions to very serious problems usually have intrinsic risks, that an entrepreneur should be willing to bear on their own, just as they would the dividends.
It very important to note that the information here is accurate on the date which it was published. Practices and statutory provisions change frequently, and it is the responsibility of interested parties to keep up with those changes, rather than the author of this text.
UPDATE 1 (Aug 2021): While no university was struck lightening as speculated in the original article, there was a Covid-19 pandemic that peaked in 2020 and resulted in extended closure of universities and remote lectures. It did create difficulties for students accommodation providers, as their tenants studied remotely. It is good that government, and tenants, were not obligated to pay for empty rooms. Entrepreneurs should be willing to take great risks, for potentially great returns.
UPDATE 2 (Jan 2023): NSFAS has started piloting direct accreditation of student accommodation providers. Please contact NSFAS directly for more details or visit https://www.nsfas.org.za/content/studentacom.html
UPDATE 3 (Feb 2023): The 2023 NSFAS Guidelines introduced an annual R45 000 cap for the accommodation allowance for all students regardless of whether it is university or private accommodation. See https://www.nsfas.org.za/content/policies.html
UPDATE 4 (Aug 2024): NSFAS was undergoing Student Accommodation Roadshows across all provinces in August and September 2024. The Roadshows cover latest developments, which essentially replace most of what is covered in the article. While it is important to go through this article to understand the background, a sequel to this article is available on this link.